A Living Wage (Glickman, part 2)

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The previous post discussed how Lawrence Glickman links the demand for a living wage to the historical transformation of the US economy. As independently owned and managed farms and businesses became less common, American workers had to rethink their hostility to working for wages. Increasingly they pinned their hopes for freedom and independence on better wages instead of on control over their own labor. The labor movement called for a high American standard of consumption supported by a living wage, at least for white males.

An idea whose time had come

By the end of the nineteenth century, this idea was gaining support beyond the labor movement itself. “Religious reformers were the first group outside of the labor movement to call for a living wage, beginning with Pope Leo XIII’s encyclical of 1891.” The Pope declared it a “dictate of nature more imperious and more ancient than any bargain between man and man.” In 1906, the Catholic priest and social activist John Ryan, published A Living Wage, which also made a distinction between prevailing market wages and ethical wages based on natural moral law. Prevailing wages were partly determined by the relative power of capital and labor, so were unlikely to reflect the true value of workers or their work. [On a personal note, my father told me that when he studied economics at a Catholic college in the 1930s, his ethics professor argued for the moral responsibility of employers to pay a living wage.]

States began passing minimum-wage laws in 1912, and the platform of the Democratic Party began calling for a federal minimum wage in 1916. From organized labor’s point of view, the minimum wage was exactly that, only the lowest point on the “spectrum of conceivable living wages,” but it was a start.

Opposition to higher wages was still intense in the early 1900s. The opposing arguments were partly economic, based on the idea that the wage set by the market represented the real value of labor. But this easily became a moral argument: since the worker’s labor was only worth what the market said it was worth, any demand for more was an immoral attempt to get something for nothing. Another argument was that any interference with the labor market violated the principle of freedom of contracts. A market wage represented an agreement between two free parties, but a legally mandated minimum deprived employers of their right to bargain freely with workers. It was this last argument that most impressed the Supreme Court when it declared minimum-wage laws unconstitutional in 1923. [It probably didn’t occur to justices to worry about whether the individual worker really had much freedom to bargain with a powerful employer.]

By the 1930s, support for a living wage became stronger, as economists, politicians and the general public came to associate low wages with economic depression. President Roosevelt stated it bluntly in 1938: “We suffer primarily from a failure of consumer demand because of lack of buying power.” With the productive capacity of the nation expanding, not to raise wages made it impossible for workers to buy enough goods to keep the factories humming and the labor force employed.

I don’t recall Glickman telling this part of the story, but the Supreme Court reversed itself in 1937 and upheld a state minimum-wage law. Interestingly, this happened because a certain Justice named Roberts departed from his usual practice of voting with the four most conservatives justices (perhaps setting a precedent for the Affordable Care Act!). This decision marked the end of an era in which the Court had generally resisted government efforts to regulate industry.

In 1938, Congress passed the Fair Labor Standards Act, which set a national minimum wage and a standard work week of forty hours beyond which overtime must be paid. Perhaps just as important, although not discussed by Glickman, the National Labor Relations Act of 1935 gave workers the right to organize and bargain collectively. A combination of union organizing and government support helped millions of workers achieve a higher standard of living and move into the middle class.

An idea whose time has gone?

Because Glickman is concerned primarily with the rise of the living wage as an idea, he ends his story in the early twentieth century with its partial implementation. He does not address the question of why the struggle for higher wages became so much harder in the latter part of the century, or why the very term “living wage” went out of fashion. I’ll just mention a few of the many developments that impeded or even reversed the progress that workers had been making:

  1. Runaway inflation not only eroded the buying power of wages, but it also reduced popular support for wage increases, since high wages could be blamed for inflation.
  2. Globalization undermined the argument for a distinctly “American standard” of wages. Employers could justify low wages in order to keep their companies globally competitive, or replace well-paid US workers with lower-paid foreign workers.
  3. New technologies reduced the demand for unskilled labor and the market price of that labor.
  4. Globalization and automation led to job losses in the highly unionized manufacturing sector, while employment in the less unionized service sector expanded. The decline of unions reduced the workers’ political clout too, since the labor-friendly Democratic Party had relied heavily on unions for its grass-roots organizing.
  5. The decline of the patriarchal, male-breadwinner family undermined the argument for a “family wage.” In theory, wages could be lower if families were accustomed to relying on multiple earners, but households with only one earner lost ground.
  6. The struggle for higher wages focused increasingly on racial minorities and women, who had been largely excluded from high wages in the past. Many white males felt threatened, however, and became more interested in holding on to what they had than advancing the cause of labor in general. They abandoned their traditional Democratic allegiance and voted Republican in large numbers, especially in the South, helping insure that public policy would tilt toward business and away from labor. The labor movement eventually paid a price for once thinking of the living wage as only a white man’s wage.

A new interest?

The recent attention focused on economic inequality suggests that the issue of just wages may once again move center stage. At the low end of the income scale, increases in the minimum wage have failed to keep up with inflation. In today’s dollars, the original minimum of about $4 an hour increased to over $10 in the 1960s before falling back to $7.25 since then. Meanwhile, incomes in the middle have largely stagnated while incomes at the top have increased dramatically (especially after-tax incomes because of large tax cuts for the wealthy).

Thomas Piketty observes that in the US recently, “income from labor is about as unequally distributed as has ever been observed anywhere,” with the top tenth of workers receiving 35% of the total and bottom half of workers only 25%. Income from investments is even more uneven, since the share of wealth controlled by the richest tenth has risen to over 70% in recent decades. The distribution of total income is a combination of the distributions of both labor income and investment income. The share of total income going to the top tenth fluctuated in the range of 30-35% between 1950 and 1980, but has gone up to 45-50% since 2000. So 15% of the national income has been transferred to the top tenth from everybody else. (See my discussion of Piketty’s Capital in the Twenty-First Century, especially part 3.)

In our new Gilded Age, with the rich living in increasing luxury while so many others can barely scrape by at all, the stage may be set for a new national discussion of a living wage.

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