THE PASSIONATE POLITICAL ECONOMY
OF THE MINIMUM WAGE

At this writing, in early January 2007, the Democrats have just "taken power" in Washington. News commentators glow with pride reflecting on the maturity with which peaceful transitions take place in the United States. They then promptly interview newly elected Democrats eager to assure the country's real rulers that nothing drastic will be done, especially about the war and occupation in Iraq — despite massive and growing popular opposition. On the domestic front, the Democrats have promised to pass — finally — an increase in the federal minimum wage rate from $5.15 to $7.25 per hour. (The increase may already be in effect by the time this appears in print.) In real terms, a minimum wage of $7.25 is actually about 20% less than its maximum level, achieved in 1968. This has not stopped Republicans from staunchly opposing any increase, on the stated grounds that a higher minimum wage rate would lead to loss of low-wage jobs and higher unemployment among low-wage workers.

Republicans this time are slyly supporting the measure, having attached to it the unconscionable repeal of the estate tax — a tax that is paid only by multimillionaires. And so the Washington con game continues. Meanwhile, Democrats advance humanitarian and empirical arguments for the increase. Data do indeed show that minimum wage laws, when they have been promulgated at either the state or federal levels, do not appear to have had significant negative impacts on employment and earnings, but the results are sensitive to context, i.e., whether the economy was in an expanding or contracting phase at the time. One would want to ask the Dems, and their economists: what if there were a significant positive correlation between the minimum wage rate and unemployment? Would this mean that nothing could be done to alleviate poverty among full-time employed workers? As always, the two sides in the mainstream debate share a superficial understanding based on the inviolability of the core relations of irresponsible domination that define capitalist labor markets. The task of political economy, as we often try to show in these pages, is to penetrate to the deeper reality behind the surface manifestations of those relations.

In what follows I will outline a conceptual grid, tracing the various causal impacts of an increase in the minimum wage. The goal is only to help organize our thinking; I will not try to determine the actual relative importance of the different causal links. We proceed from the market level of perception — where social relations are occluded and represented by their outward market forms — and move from there to the political economic level. Within each level, we will also mark a progression from a partial to a systemic view, the latter being more comprehensive in tracing out causal relationships.

Beginning, then, at the partial-market position, we look only at minimum-wage workers, and consider them only as sellers of labor p0wer. We conclude, predictably, that forcing a rise in the price of their labor will lead employers to cut back on hiring, either by eliminating service jobs entirely or by automating certain functions. The conclusion is inescapable: a higher minimum wage rate reduces demand for unskilled labor, and consequently increases the unskilled unemployment rate. The effect on the absolute earnings of unskilled workers, as the textbooks tell us, depends on the elasticity of demand for low-wage labor, but it is widely suggested that the impact on employment, especially over time, is significant, especially for minorities, immigrants, teenage workers, and women. This is the core of market-logic denial: "the market," apparently, does not love low-wage workers. (God, however, according to my favorite Republican Abe Lincoln, did: "He made so many of them.")

While remaining at the market level, however, we can proceed to the systemic view. We note that a rise in the minimum wage rate both decreases demand for and employment of unskilled labor, and increases demand for and employment of skilled labor. The increase in demand for skilled labor may then simultaneously increase employment and the wage rates of skilled workers (one can, of course, look at relations among multiple categories of skilled workers, rather than treating them as a single entity). The result, for a significant increase in the minimum wage, is a change in the skilled-to-unskilled ratio, i.e., the skill mix of the labor force. The effect on total employment is uncertain: unemployment may grow among unskilled workers but decline at higher skill levels. Market logic still dictates, however, that if overall wage rates are higher, then overall employment will fall. Even here, however, one may count among the possible benefits of the minimum wage increase the improvement in the skill mix of jobs, and what this might portend for opportunities and desires among low-wage workers to upgrade skills and acquire additional education and qualifications.

To really begin to grasp the potentials of a sustained and significant increase in the minimum wage rate, however — and provided the increase is real, i.e., the money wage increases faster than the price level — we must move on to the political economic level, where new causal horizons appear. The partial view at this level first allows us to recognize the ever-present slack in the labor force, Marx's "industrial reserve army." There are reserves of un- and under-utilized labor and therefore unrealized output in normal conditions in capitalist economies. These reserves, only partially captured in official unemployment statistics, play crucial roles in enabling surplus extraction and providing the means by which the economy makes structural corrections that it otherwise would not handle well. So aggregate demand for output plays a role, and here we admit Keynes into our club of political economists (where he, in fact, belongs). A rise in the minimum wage provides a powerful stimulus to effective demand for consumer goods, especially as saving is negligible at lower levels of income, and therefore causes a fall in overall unemployment. Thus, whatever the impact of the change in the skill mix on unemployment rates in various categories for a given level of effective demand, the rise in the minimum wage rate contributes to an increase in overall demand for labor, including unskilled labor, and there is no presumption that the combined effect on unskilled labor will be negative.

We have, however, one more progression to make: to the systemic view at the political economic level. This, I believe, gets us to the real heart of the matter.

Raising the minimum wage rate is not merely a technical matter of altering optimal purchase rates of a commodity — labor power — in a market. It plays a significant role in shaping the general balance of class forces, by decreasing what Bowles, Gordon and Weisskopf call the "cost of job loss" — the threat to employed workers while bargaining over wages and conditions and terms of work at all levels of skill and remuneration.¹ This is the real source of the consistent opposition to minimum wage legislation from the "business community" — Republican hijinks with the estate tax notwithstanding — and not their crocodile concern for the well-being of low-wage workers. A higher minimum wage, if enforced, leads to conditions in which the overall rate of exploitation can be forced downward. In some circumstances, this may encourage increased technical change, output and productivity, the fruits of all of which will be hotly contested. In other circumstances, it may result in crisis. Importantly, however, raising the minimum wage opens up potentials for new achievements in security, living standards and working conditions for workers across the board, not just in the low-wage sector. Here we have the real reason why, in contrast to the business community, the "worker community" has a clear and consistent interest in a strong social and legislative thrust to raise the minimum wage, in real terms, absolutely and in relation to the overall mix of wage rates.

But the central point, at the systemic political-economic level, may lie even deeper. It is not just a matter of increasing the real minimum wage. It is a matter of doing this legislatively, i.e., by overtly political action. Here, and to the extent that it enters into working people's consciousness, we find the deepest potential (from our standpoint) and threat (from the capitalist standpoint). By intentional action, we raise up the life conditions of those on the lowest rung of the ladder. If we succeed, we not only accomplish that specific goal; we also instill consciousness of the general possibility of setting social goals, developing working-class organizational and social capacities, and acting politically to transform society in a positive direction. (Note how far we have come, in a few paragraphs, from the elasticity coefficient of labor demand curves!)

This is, of course, only an entry-level exercise in the political economy of the minimum wage (and of associated demands). We can however draw a few broad conclusions.

First, like every such demand, raising the minimum wage is not a panacea. Nothing in a capitalist society can be relied on to "solve" the crises resulting from social-economic tension or remove the core antagonism that vitiates this form of society. The benefits from raising the minimum wage can only accrue through wider struggles, and by extending their range and depth. (There are no panaceas or final solutions in a socialist society either; transcending capitalism, however, removes one systematic layer of obstacles to human development.)

Second, a thorough political economic consideration of the minimum wage issue allows a deeper question to poke through: what are the incentive effects of changing the remuneration ratios of labor at different skill and education levels — in the direction of greater equality — in different social contexts? Here we encounter yet another aspect of neoliberal mythology: inequality is sacrosanct, and any attempt to reduce it inevitably leads to inefficiency, stagnation, and decline. The socialist vision, by contrast, ultimately understands that continuing technical progress — still a crucial foundation for possibilities in human development — rests on ever more principled forms of incentive and interaction, and that invidious and significant distinctions among income levels increasingly become counterproductive. If these distinctions are nevertheless essential for maintaining capitalist power and prerogatives, it is the latter that need to come under our spotlight, instead of serving as the unstated and unassailable basis and outer limit of policy debate.

Finally, the struggle for, and opposition to, minimum wage legislation make clear, once again, that among working people the welfare of those with the least is the test of the welfare of all. This is the hardest lesson to learn, and the most valuable. We are like a team of mountain climbers, roped in together and working our way up a steep rock face. I can secure an advanced position, but it is no better than the position of the climber farthest back, and it is in the interests of the entire group to help that climber advance. In the long learning of that lesson we discover the "passionate possibilities" (to borrow Marx's memorable phrase, source of the "passionate" in this essay's title) of progress beyond current conditions of alienated labor and working poverty.

-----------------<>--------------------

IN THIS ISSUE

The contributions of Soviet-era Russian psychologists and linguists to the general study of consciousness, ideology and individual personality are well established; one thinks of Pavlov, Bachtin, Vygotsky, Luria, Porshnev. There is a tendency, however, of obvious political functionality, to separate this scientific practice from the Marxist tradition, in Russia and elsewhere. In "Vygotsky and Lenin on Learning: The Parallel Structures of Individual and Social Development," Wayne Au traces several illuminating correspondences between the former's theory of learning and the development of conscious awareness in individuals, on the one hand; and the latter's conception of political consciousness and its emergence and growth in the working-class movement, on the other. The simple-yet-profound insight that individual learning and acquisition of self-consciousness are profoundly social processes involving interaction with others (Vygotsky's "more capable peers") casts new light on the long-standing thorny debate concerning Lenin's What Is to Be Done?, and how the issue of revolutionary consciousness-from-without (i.e., from outside of the working-class movement as such) should be interpreted (see Alan Shandro, "'Consciousness from Without': Marxism, Lenin and the Proletariat," S&S, Fall 1995, and an ensuing discussion, Fall 1997).

Capitalism has a tendency to gnaw away at its own foundations. A central component of capitalist reproduction, as classically analyzed by Marx in Capital I, ch. 6, is the spontaneous, individual production, by the worker, of the commodity that she brings to the market, labor power. But present-day capitalism increasingly succumbs to temptation, and absorbs this crucial production sphere into its own apparatus of control. It does this by surrounding consumption with a vast array of service contracts, interconnected webs of obligation and institutions that consciously seek to influence and direct social reproduction and enhance worker productivity. In his essay "Producing Labor Power," John McDermott traces the evolution of this major change, and asks to what extent it represents a qualitative shift in the nature of the capitalist mode of production as such. (See also his Economics in Real Time:A Theoretical Reconstruction, University of Michigan Press, 2004.)

Continuing investigations in our pages by Euclid Tsakalotos (Summer 2004), and drawing on a wide range of literatures, Juan Carlos Pozo and Luis M. Pozo ("Paradoxes of the Market Wars") look at the neoclassical hero, homo economicus ("rational economic man"). We seem to be caught between two strategies: either we attack the dehumanizing effects of rampant individualism and "disembedded" markets, and thus implicitly accept the neoclassical depiction of reality; or we deny the validity of this view of reality, and thus lose the force of the critique! Is there a way out of this impasse? Can neoclassical theory be wrong and capitalism humanly destructive, at the same time? One hopes so, but this will take more than a mere rhetorical affirmation; the devil, as they say, is in the details.

Finally, we are pleased to present two review articles. The first is from the inexhaustible repertoire of Paul Buhle: "The Left in American Comics: Rethinking the Visual Vernacular." Superman began as a fighter for the downtrodden and oppressed! His journey to defense of truth, justice and :"the American Way" (whatever that is), was determined by ownership of the means of popular-cultural production, and the cold war. It was a joy for this reader to learn about the profound left influence and role in the production of U. S. comic book culture — a staple of my childhood, and, I imagine, those of many readers. The point is not just name-dropping, or point-scoring. Nor is it some magical creative property of the left. Rather, creativity in all cultural fields goes along with social and moral perceptiveness, and that leads people leftward. It is, presumably, not that leftists are smarter and more creative than other people. Smart and creative people tend — not invariably, of course — to embrace humanity, and therefore the left. All the same, in periods such as the present when we on the left can feel isolated and ineffectual, recuperating our cultural history and contributions takes on a great and useful meaning.

S&S Editorial Board member, historian and long-time political activist Mark Solomon rounds out the issue with his appreciation of Eric Hobsbawm's memoir, Interesting Times: A Twentieth Century Life. Hobsbawm, now approaching 90, has long been one of Britain's most creative and influential Marxist historians and political thinkers, although he has endured more than his share of barbs, from both sides, for insisting on combining sharply critical perspectives with continuing commitment to the British, and world, communist movements. Solomon lauds Hobsbawm's "dream of an inclusive revolutionary movement, shorn of provincialism and narrowly defined identity politics."

D. L.

________________
1. Samuel Bowles, David M. Gordon, and Thomas E. Weisskopf, Beyond the Waste Land: A Democratic Alternative to Economic Decline (Garden City, New York: Anchor Press/Doubleday, 1983). See also Thomas Weisskopf, Samuel Bowles and David M. Gordon, "Two Views of Capitalist Stagnation: Underconsumption and Challenges to Capitalist Control," Science & Society, Fall 1985.