Tag Archives: Minimum wage

Taxes & Profit

Thief (soundtrack)

Thief (soundtrack) (Photo credit: Wikipedia)

One of the rather useful aspects of philosophy is that it trains a person to examine underlying principles rather than merely going with what appears on the surface. Such examinations often show that superficially consistent views turn out to actually be inconsistent once the underlying principle is considered. One example of this is the matter of taxes and profits.

One of the stock talking points in regards to taxes is that taxes are a form of theft. The rhetoric usually goes something like this: taxes on the successful/rich/job creators is taking the money they have earned and giving it to people who have not earned it so they can get things for free, like food stamps, student financial aid and unemployment benefits.

Under the rhetoric seems to be the principle that taking the money a person has earned and giving it to those who have not earned it is theft and thus wrong. This principle does have considerable appeal.

This principle, obviously enough, rests on the notion that earning money entitles the person to that money and that not earning the money means that a person is not entitled to it. Simple enough.

A second stock talking point in regards to wages for workers, especially the minimum wage, is that the employers are morally entitled to (attempt to) make a profit and this justifies them in paying workers less than the value of their work.

Not surprisingly, those accept the first talking point also accept the second. On the face of it, they do seem consistent: the first says that taxes are theft and the second says that employers have a right to make a profit. However, these two views are actually inconsistent.

To see this, consider the principle that justifies the claim that taxing people to give stuff to others is theft:   taking the money a person has earned and giving it to those who have not earned it is theft and thus wrong.

In the case of the employer, to pay the worker less than the value of his work is to take money the worker has earned and to give it to those who have not earned it. As such, it would also be theft and thus wrong.

At this point, it might be objected that I am claiming that an employer making a living is theft, but this is not the case. The employer is, like the worker, entitled to the value of the value she contributes. If she, for example, provides equipment, leadership, organization, advertising, and so on, then she is entitled to the value of these contributions.

Profit, then, is essentially the same thing as taxing a person to take their money and give it to those who have not earned it. As such, it should be no surprise that I favor justice in regards to both taxes and wages.

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Minimum Wage VI: Subsidizing

McDonalds-Brentwood

McDonalds-Brentwood (Photo credit: Wikipedia)

One common way to argue against not raising (or even just eliminating) the minimum wage is to build a case based on claims about those who work such jobs. For example, one approach is to argue that the people on minimum wage are mainly high school and college kids who are just earning spending money. As another example, it is often claimed that minimum wage jobs are temporary jobs for most workers—they will spend a little while at minimum wage and move up to better pay. While these claims are true in some cases, the reality is rather different in general. For example, the average age of fast food workers is almost thirty—they are not just school kids. Also, a significant number of people get stuck in minimum wage jobs because there is nothing else available.

As an aside, even if it were true that all those working such jobs were just earning spending money or were going to move on up, it would not follow that the minimum wage should be lower or eliminated. After all, the fairness of a wage is distinct from the motive of the person working for the job or what they might be doing next. For example, if I am selling my books to get money to buy running shoes rather than on survival necessities, it would seem odd to claim that I am thus obligated to lower my prices. Likewise, even if a kid is earning money to spend on video games rather than for putting food on the table, it would seem odd to say that she is thus entitled to less pay for the work she does.

Getting back to the main focus of this essay, the reality is that many of the folks who work minimum wage jobs are working the jobs primarily to pay for necessities and that many of them are stuck in such jobs (in large part to the current economic situation).  The reality also is that a minimum wage job will typically not provide adequate income to pay for the necessities. Interestingly, some corporations recognize this. McDonald’s, for example, generated a brief bit of controversy with its helpful guide for employees: the corporation advised employees in minimum wage jobs to have another job.

Given the gap between the actual cost of living and the pay of a minimum wage job, it is not surprising that quite a few of the folks who work for minimum wage avail themselves of state support programs, such as food stamps (which now goes by other names) and Medicaid. After all, they cannot earn enough to pay for necessities and certainly prefer not to starve or end up on the streets (although some are malnourished and struggling with housing). While one narrative about such people is that they are living easy on federal support, the reality is rather different—most especially for the working poor who have families, for those who are endeavoring to attend college or who hope to start a business.

Obviously enough, one large source for the funds for these programs is the taxpayer. That is, those who pay taxes are helping to subsidize those who received state support while working minimum wage jobs. However, there seems to be another equally plausible way of looking at the matter: the taxpayers are subsidizing those who pay minimum wage to their employees. That is, these employers can pay their employees less than what they need to survive because other people pick up the tab for this, thus allowing the employers to increase profits. If this is correct, those of us who pay taxes are involved in corporate socialism.

It could be countered that the taxpayers are not subsidizing the employers, such as McDonald’s. After all, the money for Medicaid and such are not going to the corporation, but to the workers. The obvious counter is that while this is technically true, the taxpayers are still contributing to sustaining the work forces for these employers, thus subsidizing them and allowing them to page sub-survival wages.

It could also be contended that the employer has no obligation to pay workers enough to survive on without the addition of state support. After all, there are plenty of poor people and if some cannot survive on minimum wage, then economic selection will weed them out so that those who can survive on less will take their place in the economic ecosystem. This, of course, seems rather harsh and morally dubious, at best.

Another counter is that the poor are to blame for their wages. If they had better skills, more talent, better connections and so on, then they would not be receiving that minimum wage but a better salary. As such, while it might be unfortunate that the poor are so badly paid, it is their own fault and hence their employers owe them nothing more. If the state wishes to help them out, that is hardly subsidizing the companies—they would, or so they might say, pay more for a better class of worker.

This has, obviously enough, all the moral appeal of a robber saying that it is the fault of her victims that they were not able to resist her crimes.

Overall, it does appear to be clear that the taxpayers are helping to subsidize those on minimum wage. While we could decide to let the poor slip deeper into poverty that would seem to be a wicked thing to do. It does seem to be reasonable to shift more of the cost to the employers who benefit from the work of the employees. After all, many corporations that are based on minimum wage workers have been making excellent profits—at the expense of the workers and the tax-payers.

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Minimum Wage V: Taxes & Wages

Money cash

Money cash (Photo credit: @Doug88888)

In the United States, there is considerable intersection between the class of people who oppose minimum wage and the class that opposes taxes. In some cases, both of these views can be grounded on a consistently applied principle. For example, those who favor a minimal (or non-existent) state will note that both views are well grounded on the idea that the state should not impose on the citizens. In other cases, though, the reasons presented for these views seem to be at odds. In this short essay I will consider this matter. For simplicity’s sake, I will just stick to discussing earned wages and stay away from such things as inheritances, lottery winnings, and such.

I have conservative friends on Facebook and, when the issues of taxes heats up, I get to see various postings that claim taxes as a form of theft. When the issue is more specifically about taxes being used (or increased) to pay for government services such as welfare, the stock line is that such taxes are wrongfully taking money from the rightful owner and giving it to people who do not deserve the money because they have not earned it. Interestingly, many of the quoted sources are wealthy people who are dismayed at being compelled to pay taxes. This view seems to rest on two important assumptions. The first is that the people who are being taxed have earned (in the moral sense) their money and thus are entitled to keep it. The second is that the people who are imposing the taxes and the people who get the money have not earned it and thus are not entitled to it.

The basic principle at work here does, on the face of it, seems reasonable enough: people are justly entitled to what they have earned and not entitled to what they have not earned. This, in turn, seems to rest on what appears to be a principle that people are entitled to the value they create. After all, there has to be some foundation for the claim that an income is earned and thus justly belongs to a person. The mere fact that a person gets the money is, obviously, not automatic justification that it is earned in the moral sense and that they are thus morally entitled to the income.

In the case of taxes, the folks in question obviously get that principle: they believe it is their right to keep their money and it is not right for other people to get, via taxes, what they have earned. This is, as noted above, apparently based on a principle that people are entitled to the value they create. This is certainly appealing—if I have created the value, then that value is justly owed to me. However, it would also seem to follow that I owe payment for value received. Such, when I receive the goods and services of the state, then I am obligated to pay for their value—otherwise I am stealing from others and violating my own principle. But if my taxes are simply being taken from me and given to others, then it would seem that I am being robbed—the value I have earned is being taken from me, not to pay for the goods and services I use, but to simply give handouts to those who have not earned it. This seems to be clearly wrong.

At this point, it might be wondered what this has to do with wages. Fortunately, the answer is straightforward. If the principle is accepted that a person is entitled to the value s/he has created (and thus earned) and that for someone to take from that person is theft, it would follow that an employee is entitled to the value s/he has created. For the employer to take that value for himself/herself would be the same as if the employer was receiving money taxed from a worker and just given, unearned, to him or her.

It might be countered that the employer earns what s/he receives by the value the employer contributes. The obvious reply is that this claim is true—but this would entail that the employer is not entitled to profits acquired by underpaying employees or overcharging customers. Either approach is like the employer being taxed so that the money can be given to people who have not earned it.

It could be countered that the employer-employee relation is different because of things like market forces, abundance of laborers and so on. As such, an employer can justly pay an employee less than the value the employee creates by his/her labor because of these factors. The obvious counter is that an analogous argument could be made regarding taxation—that the various complex economic factors warrant taking money by taxes to give the money to those who have not earned it.

Thus, those that argue against taxes by contending that they have a right to what they have earned must extend the same principle to the wages of workers. They, too, would be just as entitled to what they have earned. So, if taxation is theft, so is underpaying workers. As such, the minimum wage should be the value of what the worker creates. Anything less that allows the employer to steal from the worker would be theft.

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Minimum Wage IV: The Value of Work

Forex Money for Exchange in Currency Bank

Forex Money for Exchange in Currency Bank (Photo credit: epSos.de)

Some folks labor for minimum wage (or less) while a very few receive millions per year in compensation for their work. Many people are somewhere in between. However much a person makes, there is still the question of whether she is earning what she deserves or not.

This question falls, obviously enough, within the realm of moral philosophy and, more specifically, the subset of moral philosophy that is economics. After all, this is a matter of value and a matter of what a person should be paid.

On the face of it, the easiest and seemingly most sensible approach would be to answer the question by determining what value the person contributes and set that as the compensation the person deserves. To use a simple example, to determine the value added by a Big Burger employee to a Big Burger would involve subtracting out all the other contributions to the value of the burger, ranging from advertising costs to raw material costs. Naturally, the cost of managing the person would also be subtracted out. Since Big Burger employees are paid hourly wages and work with more than just burgers, the deserved wage would involve some estimations and calculations involving the average productivity of the worker. Other situations (such as those of salaried workers or self-employed people) would require appropriate modifications, but the basic idea would remain the same in that a person would presumably deserve to earn compensation based on the value she adds.

This would certainly seem to be a fair approach. If a person is paid more than the value of his work, then he would seem to be engaged in theft. If a person is paid less than the value of his work, then he would seem to be the victim of theft. Naturally, there can be obvious exceptions. For example, a person might help out a friend or charity by doing work at a rate far lower than she actually deserves without it being theft. As another example, a person might decide to help someone out by paying him more than his work is actually worth. This would be charity rather than theft.

On the idea that a person should earn what she deserves, then the idea of minimum wage would seem to not apply in a meaningful way. After all, the minimum wage and the maximum wage would be the same in this case, namely the value of the person’s contribution. Thus, perhaps the law should be that people must be paid what their work is worth. In some cases, a fair wage would be less than the current minimum wage. But, in most cases it would certainly be higher.

An obvious problem with this is the difficulty of determining the value of a person’s work. One aspect of the problem is practical, namely sorting out all the costs involved and determining what the person in fact contributes in regards to value. This is mainly an accounting problem, presumably solvable with a spread sheet. The second aspect of the problem is were value theory really enters the picture, namely sorting out the matter of assessing worth. That is, determining what should go into those cells on the spreadsheet. For example, what value does a CEO or university president actually contribute via their leadership? As another example, what is the real value an artist adds to the paint and canvas she is selling for $45,000? This area is, to say the least, a bit fuzzy. There is also the fact that people would tend to overvalue the value of their own work and generally undervalue the work being done for them.

The minimum wage could, then, be seen as a rather weak guard against work being grotesquely undervalued. By setting a minimum, this means that people will (in general) at least get some of the value of their work. However, it certainly leaves considerable room for greatly underpaying workers relative to what their work is actually worth.

The stock counter is that such matters get sorted out by “market forces.” That is, people whose work is more valuable can command better wages while people whose work is less valuable will command lower wages.

The obvious reply to this counter is that the alleged market forces tend to result in most people being underpaid and some people being compensated far beyond their actual contributions, even accepting the fuzziness of value. In fact, the underpaying of most is what is needed for the few to have such generous compensation. After all, if people were paid based on the value of their work, then there would be no fair way to profit off this work. For example, if Bob contributes $50 of value per hour to my widgets, I would need to steal from Bob to make a profit off his labor.  As another example, if a CEO contributes $100,000 in value to the company, but is compensated with $10 million, then he is stealing the value generated by others.

It might be said that this is all fair because people agree to this system of value. However, this does not seem to be the case: people seem to agree to it in the same way that people agree to a dictatorship: they just go along because the people on the top and those who support them have the power to hurt them.

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Minimum Wage III: Theft & Value

Thief II: The Metal Age

Thief II: The Metal Age (Photo credit: Wikipedia)

Imagine Sam has pulled up to the drive through window at Big Burger and rather than pay the full price for his order, he tosses a handful of change into the window, grabs the bag from the distracted Burger minion and zips away on his moped. This would, of course, be regarded as theft and the police would arrest Sam for his hamburgerlary.  The prevention and punishment of theft is generally regarded as a legitimate function of the state and few people regard this as a form of oppression or an overreach by Big Brother. If Sam protested that as an agent of the invisible hand he had paid what he regarded as the fair market value of the burger, then it would seem likely that this would have no effect.  After all, he is supposed to pay the full value of the burger.

Now, imagine that Big Burger makes part of its profits by paying its workers rather less than the value they contribute to the raw materials. Big Burger would seem to be stealing from its employees in roughly the same manner as Sam. That is, Big Burger is paying them less than the full value of their labor.

The Burger Boss would naturally reply that the situation is different: Sam is robbing Big Burger because there is no agreement between him and Big Burger for Sam to pay less than the value of the burger. However, the employees of Big Burger agree to accept less than the value of their work and thus it is not theft.

The Burger Boss might then bemoan the fact that there is a limit to how low he can pay his Burger minions, namely the minimum wage. Surely, he might say between tears, he is being cruelly oppressed by the state by this imposition on his free choice.

Someone with socialist leanings might respond by saying that the minimum wage would seem to be aimed at preventing employers from stealing (too much) from employees. The idea is that they are forced to pay at least a minimum for work done. This, it might be claimed, is similar to what the law does for Big Burger: just as Sam cannot pay less than the price of the burger without being a thief, Big Burger cannot pay less than a minimum wage without being a thief (or a bigger thief).

Burger Boss could weep that this is unfair, that his workers should be paid less because they produce less value than the minimum wage. This, it must be admitted, is potentially a fair point. After all, if it is accepted that a person should be paid based on the value he contributes (which is so often claimed when defending the top salaries of the “top talent”), then a person who actually did produce less value in his work than the minimum wage would be effectively robbing his employer.

However, if the principle of paying a person what he is worth holds true for paying a person less, then the same principle would need to hold when it entails that a person should be paid more. Interestingly, the “top talent” and their ardent supporters seem to fully embrace this principle when it comes to generous compensation for the top people, such as CEOs. However, their grasp of this principle seems to fail when they examine the pay at the opposite end of the hierarchy. But, to be fair, it can be rather hard to see things that are so far away from a person’s own location. In any case, it seems to be capitalism when the people at the top are paid what they are (allegedly) worth, but socialism when the people at the bottom ask to be paid closer to what they are worth.

Getting back to the minimum wage, it seems that people who are paid the minimum wage generally contribute more value than they are paid.  To use a specific example, McDonald’s enjoyed billions in profits last year. This would seem to indicate that even if the CEO is truly magic with money, the workers are creating considerably more value than they are being paid. If this was not the case, then the corporation would not have this sort of profit. Unless, of course, it can be shown that the bulk of the profit was created by other means—which seems unlikely. As such, it would seem that in many cases the minimum wage is actually considerably lower than the value generated by the workers.

As noted above, theft from businesses is illegal and the state uses its coercive power to prevent or punish such thefts. This is seen as a legitimate function of the state. What a minimum wage does is a similar thing—workers can only be legally robbed so much. That is, they have to be paid at least a minimum wage, even if that wage is significantly lower than the value of what the worker contributes.

This seems problematic. After all, it would be like allowing people to only steal so much. Imagine of people were allowed to steal from businesses, but could only steal so much. This would be a “maximum theft” rule, which would be somewhat analogous to a minimum wage. That is, both rules would set something of a limit on how much could be taken without compensation.

While the state does not allow a maximum theft rule, just as the state needs to protect employers from what is regarded as theft, so the state has to protect workers from what would also be theft.

Burger Boss might argue that employment exists in a special realm, distinct from that of all other human relations. So, while stealing from someone (especially a corporation) would be wrong, it is fine in the case of stealing value from an employ.

The usual argument is that employers do not owe the workers a job and they can thus pay as they wish within the working of the free market. On the one hand, this could be seen as true: Big Burger does not owe Sally a job and it could be said that Big Burger does not owe Sally a fair wage that is proportional to the value she contributes.

However, this would seem to suggest that Sally does not owe Big Burger and presumably does not owe Big Burger a fair price—so if Big Burger can work a way to pay Sally less than her work is worth, Sally would seem to have the same right to get a Big Burger for less than its value. While Burger Boss would regard Sally as a thief, Sally would certainly think the same of Big Burger.

This could be seen as the free market: every party is trying to get one over on everyone else. However, when this takes place in a more general setting, it is seen as approaching the state of war rather than being what is expected of civil society. As such, it would seem that if it would be wrong for Sally to steal from Big Burger it is wrong for Big Burger to steal from Sally.

The stock counter is that Sally chooses to work for Big Burger and thus consents to hand over her value for less than it is worth. Now, if this were a free and un-coerced choice, then that would be fine. However, this is clearly not the case: Big Burger tends to have the coercive edge over those who work for it.

 

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Minimum Wage II: Freedom & Coercion

As I noted in my previous essay on minimum wage, one stock argument against minimum wage is based on liberty and rights.

Money

Money (Photo credit: 401(K) 2013)

The basic idea behind this line of reasoning is that an employer should have the right to set wages and that the state is wrong to use its coercive power to compel a minimum wage. A rather key assumption here is that such coercion is wrong. This assumption should be kept in mind for what follows.

Those who oppose increasing (or even having) a minimum wage often like to appeal to the notion of the free market of employment. The basic idea is that businesses should be free to offer pay as they see fit. Workers can then consider the pay being offered by each employer and refuse to work for a low-paying employer and instead elect to work for one who pays more. For example, if Big Burger is paying $7.25 an hour and this is not to Sally’s liking, she can keep walking past Big Burger and find a job with better pay—perhaps the CEO position at Big Burger for $7.25 million a year.

Naturally, Sally will face some reasonable limits here—there will be jobs that she is not qualified for. For example, if Sally is fresh out of college with a degree in chemical engineering, she will not be able to get work as a lawyer or doctor. But, it is often claimed, she is free to find any job she is qualified for via the workings of the free market.

Alternatively, Sally can create her own business (Sally’s Sandwiches perhaps) and endeavor to get the income she desires. Naturally, Sally will also face limits here based on her abilities. She will also face the obstacles put in place by the government, or so the narrative goes. However, Sally is supposed to have a shot at being the next billionaire—or so the stories go.

On this view, the situation is rather rosy: Sally and her fellows are free to seek their desired employment and potential employees are free to offer what they wish, with no coercion being used against anyone. Alas, the government tinkers with this beautiful scenario of freedom by compelling employers to (generally) pay a minimum wage. Such coercion, as noted above, is assumed to be wrong: the powerful state is pushing around the weaker businesses and leaving them no choice in regards to the lowest wage they can legally pay.

While this tale is appealing to certain folks, it is not just the state that has coercive power. In the case of jobs, the employers often enjoy considerable coercive power. Going back to the example of Sally, it is true that she is free to walk on past Big Burger and other places that are paying the lowest wages. However, it would seem that she only has a meaningful freedom if there are other jobs available that pay better. Otherwise her freedom is a matter of wo

rking for the lowest wage or not working at all.

It could be replied that she is still free—after all, there would seem to be no coercion or compulsion at play here: she can take the job or not. If Sally is financially independent or is supported by someone else (such as her parents), then she would not be coerced—she would not need the job and is thus free to accept or reject employment as she desires. However, if Sally actually needs a job to pay for food, shelter and other necessities, then she would seem to be in a situation that involves coercion.

The obvious counter is that she is not being coerced by Big Burger or their fellows. After all, they did not create a world in which people need to purchase the basic necessities in order to survive. And, one might add, Sally could avail herself of welfare—at least until her benefits run out. Even then, there is always private charity. Sally could even attempt to create her own business, although this would be difficult and she would likely be competing against well established and well-connected corporations.  As such, Sally is still free and Big Burger is merely offering her one choice among many. So, since Sally can chose to be unemployed, it would seem to follow that she is not being coerced by Big Burger or their fellows.

If Sally elects to take the job, then she has chosen to accept the low pay and is thus not coerced in this scenario either. After all, it is her choice.

Interestingly, Sally’s scenario is analogous to that of the employer that is required to pay minimum wage. An employer is free to decide to not pay minimum wage. This could be done by deciding not to hire anyone, by deciding to not have a business or by deciding to simply pay below that wage. A business could also decide to leave and go somewhere that has no minimum wage—just as Sally could move away from an area in search of a job. So, employers are as free as Sally—they have choices, although there may be no good ones.

It might be countered that the employer is not free—there would clearly seem to be compulsion at play here. However, those who enforce the law could say that they did not create a world in which people have to pay a minimum wage any more than Big Burger created a world in which people have to pay for necessities.

So, since a business owner can chose to not pay minimum wage, it would be the case that she is not coerced. As with Sally, if a business owner elects to pay minimum wage, then she has chosen this and thus is not coerced. After all, it is her choice. Just as it was Sally’s choice to accept or not accept a low paying job despite it being the only sort of job available.

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Minimum Wage I: Arguments Against

Minimum Wage In Paraguay, one simple figure

Minimum Wage In Paraguay, one simple figure (Photo credit: WageIndicator – Paulien Osse)

The United States government, like many other government, sets a minimum wage. This is the lowest (with some exceptions) that an employee can be paid per hour. There is considerable debate regarding the minimum wage ranging from disputes over the exact amount of the wage to arguments over whether there should be a minimum wage at all.

Some arguments over the minimum wage are grounded in concerns about economic facts. For example, there is some dispute about the economic impact of the minimum wage. Some contend that increasing it would increase inflation (which would presumably be bad) while some claim that increasing it would boost the economy by increasing spending. In terms of what should be done, these disputes fall nicely within the realm of consequentialism. That is, settling them involves sorting out the facts about the consequences. There would also be some moral aspects to the matter as well, such as sorting out the positive values and negative values based on who they impact and how.

Other arguments about the minimum wage are more ideological in nature and have minimum (or no) connection to matters of economic facts. These arguments tend to be philosophically interesting because of the strong connection to matters of morality.

One argument against the minimum wage is based on the notion that it causes a culture of dependency that interferes with the mobility of labor. The idea, at least as presented in various talking points in the more conservative media, is that a higher (or any) minimum wage would encourage people to simply stick with the minimum wage job rather than moving upwards in the economic hierarchy.

On the one hand, this has a certain appeal. If a person believes that she is earning enough and making a comfortable living, then she might very well be content to remain at that job.

On the other hand, there seem to be some rather obvious problems with this argument. First, unless the minimum wage were increased dramatically, it seems unlikely that anyone would be able to make a comfortable living on such a wage. It also seems unlikely that most people would be content to simply stop at the minimum wage job and refuse opportunities for better employment. People generally stick with minimum wage jobs because they cannot find a better job not because they think they are making quite enough. I would not claim that it is impossible for a person to live what he thinks is a comfortable life on minimum wage nor that a person might be content to just stick with such a job. However, such a person would be an unusual exception rather than one among a vast crowd.

Second, this sort of reasoning seems to be based on the problematic principle that it is necessary to pay people poorly in order to motivate them to move up the economic hierarchy. One problem with this principle is that it would warrant paying people poorly all the way up the economic ladder so as to allegedly motivate them. After all, if people are content to coast at minimum wage, then they would surely be willing to coast if the pay was better. This would thus seem to entail that only the topmost position in a hierarchy should not pay poorly since there would be nothing above that position and hence no need to motivate a person to move beyond it. Interestingly, this does seem to match the nature of CEO salaries—it is common for the CEO to make many times what lesser employees make. Since the number of topmost positions is rather limited, this would seem to be rather unfair. In fact, if this principle is pushed, it would seem to point towards having one position in total that has good pay—thus motivating everyone to attempt to get that one position.

Another problem with this principle is that it seems to be untrue. As a matter of fact, people do attempt to get higher paying jobs when they are available, even if their pay is not poor. People mostly seem to stick with a minimum wage job or a lower paying job because they cannot find one that pays better (there are, of course, other reasons).

As a final point, the idea that paying people to do work creates a culture of dependency seems to indicate the view that the workers are mooching or sponging off the employer. This is, obviously enough, absurd: the worker is getting paid for work done which is the exact opposite of mooching.

A second ideological argument is based on the notion of liberty and rights. The idea is that employers are having their liberty (or rights) violated by being forced by the state to pay a minimum wage.

This line of reasoning does have a certain appeal. After all, people (and corporations are the best sort of people) have rights to liberty and property. If the state tells employers that they must pay a certain wage, the employers are being denied their right to liberty via the coercive power of the state.

There are at least two obvious responses to this line of reasoning. The first is that workers are also people and hence would also have rights, including property rights to their labor. These rights can be used to argue for a minimum wage (or more)—after all, theft of labor would seem to still be theft.  The second is that being part of a society involves, as Locke and Hobbes argued, giving up some rights. While some employers would like the liberty to pay whatever they wanted (which might be nothing—slavery was and is rather popular), it makes sense that such complete freedom would not be consistent with society. Having a civil society, as Hobbes argued, does require the coercive power of the state. As such, the fact that the state is imposing on the liberty of the employer does not automatically entail that this coercion is wrong. The stale also imposes on the liberties of those who would like to steal and kill and these impositions are hardly wrong.

The obvious reply is to contend that while the state has a legitimate right to limit some liberties, this right does not extend to coercing job creators into paying at least a minimum wage. This cannot, of course, be simply assumed—what is needed is an argument that employers should have the liberty to pay as they please. Even if such a liberty is assumed, surely it would have at least some limit. At the very least, it would seem that an employer has to pay more than nothing. Then again, some might like to see slavery put back on the table. There is much more to be said about minimum wage and more essays will follow.

 

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CEO Compensation

One side effect of the economic meltdown was the creation of the loose Occupy Wall Street movement. This had the interesting effect of getting some attention paid to economic issues, such as income disparity and class issues. This attention revealed that there is significant disparity between (to use the terminology of the occupy movement) the 1% and the 99%.

As I noted in a previous essay, there has been considerable disparity between the income increases of the various classes in the United States. The after-tax income of the top 1% in the United States increased 275% from 1979 to 2007. In contrast,  the top 20% (excluding the top 1%) had a 65% increase in earnings. Those in the bottom 20% also saw an increase, but this was only 18%. As might be imagined, this has created some concern.

The disparity becomes even more extreme if one examines the income of CEOs relative to the workers. One well paid CEO, David Simon, received a pay package worth over $137 million in 2011. The national median salary is $39,312. Doing the math, that means that a person earning the media salary would need to work 3,489 years to earn what Simon received. Someone who is earning the current minimum wage of $7.25 per hour would need to work 9,095 years and 11 months to earn what Simon earned last year. Of course, Simon’s pay is above average, so it would be fairer to compare the median CEO salary with the national median salary.

The median CEO salary as of May, 2012 is $9.587 million per year. A minimum wage worker would only need to work 636 years to earn that much while a person making the national average salary would need a mere 244 to match the one year income of the average CEO. Interestingly, while many workers are facing salary cuts, the average compensation for CEOs increased by 6% from 2011 (and there had been an increase from 2010 to 2011). While there is considerable debate over how to determine the value of a person’s work, accepting that this disparity is just would require accepting that the average CEO is equivalent in productivity to 636 minimum wage workers and to 244 average workers. As anyone who has every worked knows, people do vary in productivity because of skills, talents, motivation and so on. For example, one roofer might put in a roof faster and better than another and thus she would be more productive. It is even easy to imagine one worker being equivalent to many workers in terms of productivity (and this is sometimes demonstrated when people are fired and other people are forced to do these jobs as well as their own original jobs). However it seems unlikely that CEOs are the economic equivalent of superheroes and thus can produce 244 times what an average worker can produce. As such, this would seem to indicate a clear injustice in regards to the pay of those who work for the companies with well paid CEOs.

One obvious reply is that while it would be absurd to claim that one CEO can do the work of 244 average workers, it could be argued that they actually generate value equal to (or greater than) 244 workers. After all, the value of what is produced can vary greatly. To use an obvious example, when I painted houses for money, I was paid much less than I am paid as a professor. However, this is because the service I offer as a professor has more value than that of the services I offered as a painter. In part this is due to the economics of scarcity: almost anyone can work a paintbrush, but few people can teach critical thinking or ethics at the college level. In part the difference is due to the fact that when I painted, the result was just a painted house. When I teach, the result is often a person with a college degree who goes on to get a job (or create them) and contribute to society. As such, by creating more value as a professor, I thus justly earn better pay than I did as a painter. Provided that the value I produce as a professor is proportional to the pay, then the disparity between the pay of Mike the painter and Dr. LaBossiere the professor would be just.

Turning back to the CEOs, if the average CEO is able to produce 244 times the value of the average worker, then the pay disparity would be justified. While this might strike some as unlikely, it does not seem impossible. After all, the writer Suzanne Collins has made vastly more than I ever will as a writer because her book outsell mine to some absurd degree. My books in turn outsell some other authors’ books. However, the disparity does (in general) seem fair. After all, if I could write like Collins and was able to make the right connections, then I could also be a very successful author instead of a low-end scribe. As another example, the author and speaker Sarah Palin vastly out earns me. This is because many people want to buy her books and want to hear her speak. While I do sell a few books, people generally only come to hear me speak because their grades depend on it. And sometimes not even then. As such, the income disparity between myself and Palin could be regarded as just. After all, if I could only write and speak as well as she, then I surely could earn a comparable income.

In the case of the CEOs it could be thus argued that they are like the better authors-what they produce is vastly more valuable than what other workers produce and hence they justly earn their vast incomes. As such, all a defender of disparity would need to do is make a reasonable case that CEOs do generate value proportional to their compensation and that the same is true of the average workers (and minimum wage workers).

Of course, it might be countered that the ability to create such  great value depends on an economic and political system that is rife with injustice. To use an analogy, a skilled thief might “earn” much more than an unskilled thief, however it would be odd to say that the better thief has justly “earned” her wealth. The obvious counter to defend the disparity is to show that the economic and political system is just and, as such, the disparity in compensation is warranted rather than being based on exploiting an unjust system.

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Corporations & Bad Spouses

Factory 1

Image via Wikipedia

Among certain folks it is received wisdom that businesses have been going overseas because the United States (and other Western countries) imposes onerous taxes and environmental regulations. Some folks even note that American and other Western workers are paid more than workers in certain other countries, such as China.

To remedy this problem a standard proposal (endorsed, for example, by Michelle Bachmann) is to lower taxes and reduce (or eliminate) regulations. Politicians, including Bachmann, generally do not talk about lowering wages. After all, “if I am elected I will see to it that you make less money” is hardly winning rhetoric. In contrast, claiming that Americans or other Westerners are losing jobs to other countries because “the government” is driving away companies with regulations and taxes is a smart approach from a rhetorical standpoint. After all, Americans and some other Westerners tend to think poorly of their government (which is made up, ironically, of people we picked) and Americans often look at taxes and regulations in a negative light, seeing them as impositions on freedom.

This proposal does, obviously enough, have some merit. If corporations could get the same conditions here that they enjoy elsewhere, they would probably be more inclined to stay here. It is, however, important to dig a bit deeper here.

In general, it would seem that corporation are not sending jobs overseas because they would go out of business if these jobs remained here. After all, there are business that do quite well despite operating entirely or largely in the United States. This is hardly shocking since corporations are generally adept at reducing their taxes (see, for example, GE) and circumventing even the rather limited regulations that exist (see, for example, how “constrained” coal mining companies are in West Virginia). While they do have to pay a minimum wage, this wage is fairly, well, minimum.

The main reason that corporations go overseas would not seem to be survival or even because they cannot make a profit in the United States. Rather, they go overseas because they think they can make even more of a profit than they can here. Given that some other countries have lower taxes, laxer regulations and far lower wages, it is easy to see why other countries can be more appealing. However, it is important to note that these corporations re not having their jobs forcible driven from the United States. Rather, the decision makers are electing to send jobs overseas so as to increase profits. While this might seem to be a minor point, it is actually rather significant.

To use an analogy, imagine that Bill is telling a sob story about how he was “driven out” by his wife, Sally,  cruelly limiting his freedom and now he is “forced” to hang out with a girlfriend because she allows him to do what he wants. You ask Bill about her cruelty and he lists her crimes: she made him pay some of the household bills, she would not let him dump the oil from his truck in the flower garden, she made him pay for some of the expenses relating to the children and so on. Inquiring about his new girlfriend, you learn that she lets him dump his truck oil in her yard and while she does expect some gifts, he doesn’t have to do anything for her kids and so on. In this case, one should be inclined to think that Bill was not driven out. Rather, he chose to leave because he wanted to get away with more and do less. Now imagine that Bill’s buddy Sam goes to Sally and says that Bill will come back if she stops “taxing and regulating” him. Otherwise, Sam says, Bill will have no choice but to stay with his current girlfriend (at least until she wises up and “drives him away”). Sally, it would seem, would be foolish to take Bill back under those conditions. After all, he just wants to get away with things at her expense while pretending that it is her fault. The same would seem to apply to corporations.

In essence, corporations and their allies who argue that taxes must be lowered and regulations reduced so that jobs will remain here (or return) are arguing that the rest of us need to bear the cost of ensuring that corporations get the profits that they want. After all, if corporations pay less taxes then the rest of us need to pay more to make up for that shortfall. Alternatively, there would have to be spending cuts-and it is rather obvious who would bear the burden of those cuts (hint: not the corporations). Also, if the regulations are reduced (Bachmann wants to eliminate the EPA, for example), then the rest of us would be harmed by what those regulations were intended to prevent. For example, allowing more pollution means that we would probably suffer more health problems and would thus be paying more in medical expenses. To preempt a possible attack, I am not saying that all taxes are fair or that all regulations are good. Rather, my view is that corporations (like Sally’s husband) should contribute to the society in which they exist (and benefit from) and that at least some regulations do protect us from harms.

In sum, the proposals to lower taxes and reduce regulations so as to keep jobs here seems to be largely an attempt to shift costs to the rest of us so that corporations can make more profits. I have no objections against corporations making money. I do, however, object against being forced to bear the costs of their profits. They need to carry their own weight and act in responsible ways. That is, pay taxes and live within the laws as the rest of us do (or are supposed to do).

But maybe there is some merit to this approach and I should give it a try: “Buy my latest book or I’ll be forced to go to some other country.”

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