New York Times Op-ed columnist Paul Krugman wrote about the necessity – and the viability – of Barack Obama’s proposal in his State of the Union address that the minimum wage in the US be raised from $7.25 to $9. Krugman, who says that in real terms the current US minimum wage is lower than it was in the 1960’s, believes it can work and must happen, and won’t affect employment figures. Gerhard Bosch, Professor of employment and economic sociology at Duisberg-Essen University, has said the same thing. I think Obama's idea is a grand one.
Businesses, of course, always say that hiking wages will lead to unemployment because they won’t be able to afford to employ as many. People like to point to Germany as a prime example of how letting the market regulate wages is good for the economy. But since the mid 1990’s things have been getting worse for some in Germany. Currently 1.4 million get less than €4 an hour, 1 million are on short-term contracts and 7 million earn £323 a month part-time, with no other job. Germany is doing well but not all its people are. Get your head around that one.
Here’s why I believe wages have to be regulated: you can’t rely on people to do the honorable and sensible thing where money is involved. Self-interest will always govern. It’s honorable to recognize that a business is a symbiotic relationship between management and worker. Without either the business fails.
But the west has grown a culture that exploits the varying degrees of ignorance and low entitlement of the lower and middle classes. As sectors of society, in all countries, they haven’t known they had rights, they can’t see how much power they held in their hands, they let themselves be taken hostage. If you don’t work for peanuts I’ll fire you, because somebody else will take the job.
When you have low entitlement you let yourself be exploited and it becomes so uncomfortable that you do something about it. And it is true that since the industrial revolution people in the working and middle class the world over have become increasingly aware of their power and their rights.
But not enough to have prevented this huge imbalance in society despite regulations that haven’t addressed what boils down to unfair reward for output. It’s why we have ultra poor and ultra rich. There’s nothing right or rational about it. And with huge corporations and the stock market being a big factor in economies now, the problems are getting bigger. Large businesses want to keep their profits as high as possible because people are investing in them on the stock exchange. People who never ever have to think about the workers whose lives are being sacrificed so they, the traders, can make a buck without lifting a finger.
Small business owners need to compete with giant businesses and if they pay the kind of wages that workers actually deserve there’ll be no money to reinvest, to grow, to keep the cash flow flowing.
I’m not suggesting communism or even socialism. But I can see that all these years of what does really amount to exploitation of workers’ ignorance of what an important role they play in anybody’s business has led to. Societies with three sectors – upper class, middle class and workers - that are fast dissolving into two, the rich and the poor. The rich are increasingly making their money off the stock market. The more they do, the less businesses want to pay decent wages.
It’s an unreal situation and the result is that first world countries have reached or are slipping dangerously close to third world realities. No economy can survive in that state. If things aren’t getting better they’re getting worse, because nothing stays the same.
The people who have slipped out of the middle class, and the workers who are getting poorer, get demoralized because, that’s right; they’re human beings, not economic statistics. They realize that their sense of honor and dignity, wanting to play their part, was just horribly exploited. They get angry. They riot. They refuse to work. They’ve got nothing to lose, so there’s nothing to exploit.
Eventually we’ll have a world where there aren’t any more workers and middle class people to create the fundamental engine without which there is no stock market.
