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Conservative Philosophy and the Working Poor

The question whether people who work full time should still be poor includes opposing views about minimum wage laws. Representing conservatives on the issue is the economist Glenn Hubbard, a scholar at the American Enterprise Institute and Dean of the University of Columbia School of Business. On the NewsHour on January 8, 2014, Hubbard spoke of the "war on poverty "as having achieved some success" and of his wanting us to do better. He added:

I guess I wouldn't think the things like supporting higher minimum wages are the answer. I don't think that provides employment. We do need to support skills for people coming in. And we need to support their incomes, things like the Earned Income Tax Credit. If we as a society want to provide better opportunities for work, we need to pay for it. Neither side of the aisle [in Congress] is in my view bold enough on this.

The Income Tax Credit fits the conservative approach to a lot of problems: tax reduction. The issue of dividing wealth does not. Conservatives cling to the philosophy that wages should be a matter for employers to decide based on the free market: the employer paying as little as they must to get the help they need and what's good for the employers is good for all. The poor have no power on their own in bargaining with employers for a better income, and conservatives are unenthusiastic about the state being a force on behalf of the working poor. Hubbard said that raising the minimum wage would lower profits and be a disincentive for job creation. Those who support raising the minimum wage argue that higher wages are good for business in that it adds to people being able to pay for things.

This is basically a philosophical issue rather than economic science. Both sides use their own calculations to support their values and big picture of the world. The issue of which government should administer the minimum wage, the federal or state government, is not currently in play. Liberals see the government as representing the citizenry and as enforcers of what's good for society. Conservatives like to quote Ronald Reagan, who said government is the problem. As many of us have often heard, they believe that the best of all possible worlds rises from an individualism: the motives of owners of businesses (the risk takers) having their power over wages unfettered.

A word in favor of government over individualism. Government enforces laws against the slavery in the interest of society as a whole, and opposition to slavery is now a common part of our culture. A couple of centuries ago there were a lot of individualistic risk takers who saw slavery as in their interest. Today's working poor are, of course, better off than slaves, but for the citizenry in general the question remains whether we should tolerate the poverty that now exists for the working poor.

My bias is with the working poor. When I was an apartment manager in Oakland, California, in the early 1990s I was collecting rent from women who got up early every weekday morning and went to work. They were living frugally and at the end of every month they could hardly manage to pay me what they owed in rent. They were weary in spirit while I was living comfortably rent-free with a small income and leisure enough to work on a history website.

The building owner, by the way, was an intelligent and measured person, a nice guy, taking in rent what the market allowed. That's how one made it in real estate. Being against employers paying emplyees only what the labor market allows doesn't mean one is against the market working elsewhere in the economy. Rent control or the government setting prices for consumer goods is something else. We have, however, those who think in black and white, in absolutes, and see denial of market determinants anywhere in the economy, no matter how limited, as socialism pure and simple.

Copyright © 2016 by Frank E. Smitha. All rights reserved.