Published on February 19th, 2015 | by Jonathan Chenjeri0
Minimum Wage and Democracy
The federal minimum wage is a contentious issue among American policy makers. The minimum wage, in effect a subsistence wage, under the capitalist firm does not consider healthcare costs, and other human needs beyond sustenance. The current federal base of $7.25 is unacceptable, as are small hikes in state wages adjusting for inflation. One reason is that the minimum wage has “significantly less purchasing power than 1968’s $1.60, which would be the equivalent of $10.74 today.”3 The worker, without capital and property, only has their labor-power to sell in the market economy. Furthermore, human capital in the United States today comprises not only the bones, muscles, and brains of the worker, but their education as well. When individuals with college degrees continue to make a minimum wage1, that training is not accounted for in the market, as is claimed by classical economists.2 The proliferation of college training programs in the computer sciences, for example, panders to the desires of companies already in business – the aim being a well trained workforce.3
Increased wages support the financial stability of low-wage workers. Trish Kahle notes that nearly 40 percent of American workers earn less than $15.00 an hour, as demanded by modern worker movements, while many economists consider a low-wage under $13.83 per hour.4 However, a minimum wage alone will not help this situation, as such is intended as a subsistence wage for entry level workers. The present moment also challenges the structural relationship between work and capital. Focusing on money alone is too narrow because money is simply a socially accepted commodity that exchanges for other commodities, and a method of allocating goods and services. While an increased wage may serve many, cash is only a temporary answer. It reflects a mystified goal that masks rational interests and needs with irrational consumerism and superficiality.
In instituting a minimum wage, under the present system, it is fitting to consider the effects on genuinely small businesses, not those defined by the United States’ Small Business Administration (SBA) as having less than 500 employees).5 Much smaller businesses that employ four or six people and manage on the minimum wage require appropriate wage scales. These small businesses could be put out of business with a $15.00 minimum wage. Such a wage may help some, while adding others to the unemployed pool.
Such intense regulation of capitalist enterprises addresses faults within the capitalist arrangement of the firm, and thus the interaction with society and politics. A new organization of the firm is needed, as well as the reconsideration of dominant values that guide culture and politics. Nonetheless, to properly account for social ills of low-wage work, and the cost of living, a more precise measure must be formulated.
To lay the foundations of democracy in all aspects of life, the institution of the minimum wage may need to be gradually abandoned, and replaced with person-to-person negotiation and democratic decision-making. Monetary compensation in today’s market economy is necessary to exchange for the means of subsistence. However, it is often conflated with other interests if many channels of decision-making are used. Such wage negotiations would take place between employer and employee, where the former would urge for the lowest wage, and the latter, the highest, each in their own self-interest. When each is aware of the social reality of work, and are informed, these conditions may foster a rational wage agreement.
Such an arrangement may be better formed within a worker-owned, or managed cooperative. This would leave behind the capitalist notion of ‘private property,’ which in this sense mystifies the reality of the social nature of any productive process. A firm collectively owned, sometimes called a “worker-owned cooperative,” determines production and revenue together by debate and vote. Elected boards of directors sometimes guide these decisions. The practices of democratic cooperatives may be aligned to address current issues of concern, such as the minimum wage. Were a $15.00 minimum wage able to work for businesses in certain regions (as counties and states experience unique challenges and variables), those employed in production and distribution should articulate wage demands. This would weaken the grip of impetuous consumption and the profit motive upon wage determination.
Given the current situation, four recommendations are urged. First, an institutional redefinition of the size of businesses needs to be implemented. Rather than an average of 500 employees, small businesses might de defined as having less than 50 employees; or alternatively to average on the basis of market share. The Small Business Administration (SBA), for example, varies in their standards regarding employees or annual revenue6. A moderate business size may be between 50 to 250 employees. Large businesses would be designated by the current rules, although these are hypothetical numbers would, of course, require fine-tuning.
Second, once the sizes and variables of industry (seasonal work, or other natural fluctuations) are considered, constructing a relative base wage for businesses may provide consistency. Hypothetically, the minimum wage for ‘small’ businesses might be $12.50 per hour, for ‘moderate’ sized businesses $15.00 per hour and for larger businesses $17.00 per hour. Many large businesses offer benefits to employees that are not explicitly revealed in the set wage, such as “paid-time-off” or medical insurance. A paid wage of $9.00 per hour may cost an employer $11.50 per hour when benefit costs are considered. Care would be taken not to mistakenly leave the costs of these benefits out of wage negotiations.7
In addition, a tax-incentive program should be offered for businesses that negotiate wages with individual workers, with associations or other relevant groups. The negotiating parties may choose to have fluctuating wages determined with respect to periodic business income. Tax breaks for businesses may help decrease the need for welfare programs, thereby diminishing the need for untidy state-control.
Finally, the growing awareness of worker-owned cooperatives may inspire new and interesting business models. Recent studies suggest improved efficiency and resilience when cooperative business models are employed.8 Investing in and creating supportive institutions for establishing cooperatives may provide consistent steps toward political and economic democracy. These recommendations for democratic wage negotiations, which might apply equally to both domestic and foreign labor contracts, can remove the “middle-man” so common in capitalist corporations, businesses and the state.9
- Fox, Jane Emily. (2014). “260,000 graduates in minimum wage jobs.” Retrieved online at http://money.cnn.com/2014/03/31/news/economy/minimum-wage-college-graduates/.
- Smith, Adam. (2005). An Inquiry Into The Nature and Causes of the Wealth of Nations. The Electronic Classics Series. Retrieved online at http://www2.hn.psu.edu/faculty/jmanis/adam-smith/wealth-nations.pdf.
- Aldous, Vickie. (2014). “SOU reboots its computer science program.” Mail Tribune. August 9, 2014.
- Kahle, Trish. (2014). “The political economy of low-wage labor.” International Socialist Review, Quarterly Journal of Revolutionary Marxism. Issue 95: 1-20.
- Beesley, Caron. (2012). “What is a Small Business? What You Need to Know and Why.” Retrieved at https://www.sba.gov/blogs/what-small-business-what-you-need-know-and-why.
- Small Business Administration. (2014). “Small Business Size Standards Table.” SBA. Retrieved at https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
- Pagliery, John. (2013). “You earn 70k but you cost your boss 88k.” Retrieved at http://money.cnn.com/2013/02/28/smallbusiness/salary-benefits/.
- Roelants, Bruno; Dovgan, Diana; Eum, Hyungsik, Eum, and Terrasi, Elisa. (2012). “The resilience of the cooperative model.” Retrieved at http://www.cecop.coop/IMG/pdf/report_cecop_2012_en_web.pdf.
- Once Again Nut Butter. (2014). “Nicaragua Coops.” OANB. 2014. Retrieved at https://www.onceagainnutbutter.com/nicaragua-coops.