There was what many people might think a hideous article in the Financial Times over the weekend. It had the title 'Raising the minimum wage is the wrong way to deal with low pay'. I have already discussed some aspects of this issue this morning so I will not do so again here. What I want to do is highlight the suggestion made in the article that the solution to the problem of low pay is, at least in part, in the author's opinion, better education. However, they went on to say:
We do not have to educate everybody. It would be enough if a portion of the lowest-paid employees gained new skills. These newly proficient workers would gain directly, through higher wages and better employment prospects. But the people left behind would benefit indirectly, too. There would, after all, be fewer of them — and, facing less competition, each would command a higher wage.
This is a deeply telling and troubling paragraph in its own right.
First, note that there is a decision to be made to train some and not others in society. Who is to make that decision, I wonder? Is it to be based on aptitude at a very young age? Are we to then choose who will and will not win in a wage economy soon after infancy? And who will make that decision? Right winders normally say the state should not choose winners and losers and that the market should? What is the agency to be in this case? Will it be ability to pay? Everything else in this logic is about money, after all?
Second, note that the authors assume a neat easy relationship between training and reward. Would they like to tell all new graduates of this link? It is naive in the extreme to think it exists.
But most of all what is repugnant about this thinking is the commodification of us as people that it implies. We are to be treated as mere factors of production fitting into the grand scheme of things in which some will be rewarded well and others not nearly so much. With out fate apparently ordained or chosen for us. There is a natural supremacist argument lurking just below the surface in such claims. They don't even seek to pretend otherwise, suggesting, quite openly that some should be 'left behind'.
Down this route is fascism, I think. This is not economics. This is a prescription for social engineering for an apparently pre-destined elite already in existence who will bestow the favour of training on others as they see fit so long as they fit into the ruling decision makers' scheme of things. I have rarely read something so hideous in a mainstream paper.
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Particularly as important decisions as to aptitude are made irrespective of gender at a stage where girls are more advanced then their age peer males, who only really start catching up at around 16-18. Oops, Sky, back to ground floor.
There are currently large numbers of skilled but un(der)employed workers. Why is that FT magic not already creating jobs with “higher wages and better employment prospects” that those people can do? Government policy and rhetoric are directed at people who are, or could be employed – in reality or in David Freud’s fantasy world. That is not where the problem lies.
See it the positive way. The neolibs are running out of arguments. It’s in the FT, so this is the best they can offer.
Intellectually you must be quite desperate to buy this.
This is quite unusual for the FT and of course these two writers are from the USA Chicago school of economics. I can assure you that if this type of article appeared often subscribers would melt away like snow in the desert. Generally the FT has a broader and mixed number of contributors who do not legitimate the vast inequalities of that very unequal, troubled and sad society.
Not that unusual, sadly. See http://www.ft.com/cms/s/0/4c62ddaa-e698-11e3-9a20-00144feabdc0.html?siteedition=uk#axzz3AC16RHm3 Equality lacks relevance if the poor are growing richer by Deirdre McCloskey.
I ignored that one
I think this may be policy
I guess you have noticed, Richard, that I normally only comment on Tax Research in areas involving business and finance, where my knowledge lies, but this FT article does require thought.
Some will say that life is like a game of chess but anyone from any background can acquire the skill to win. I would relate it to Snakes and Ladders where chance plays a large part with some getting the normal board and others getting a board with only snakes or only ladders. Then we have a further category (Eton springs to mind) where no board is required – just the pass key to the executive lift straight to the top floor.
This writer puts his cards firmly on the table and is declaring that regardless of what happens, he will be secure and will be able to sit in judgement of others and this brash confidence only comes from generations of inherited wealth, not from dealing with the battles to build up a secure future.
Has anyone looked at the effects in Seattle of raising the minimum wage to $15/hr? Apparently the economy is booming!
http://www.vox.com/xpress/2014/8/13/5998255/nick-hanauer-plutocrats-inequality?utm_medium=social&utm_source=twitter&utm_name=share-button&utm_campaign=vox&utm_content=article-share-top
What’s virtually certain, Mary, is that this Chicago School chap won’t have looked at it.
Richard described the quoted paragraph as “troubling” in two different ways. A third way in which it is troubling is that it reveals that these so-called scientists of neoliberal economics are really theologians – they argue supposedly logical sequiturs from dubious premises and at no point investigate the evidence of lived lives in the real world.
I’ve spoken often of the coming neo-feudal state before, but this is something worse, something straight out of Huxley’s “Brave New World”, with people graded alpha to epsilon, even before they’re born.
I regret to say that, unless the bulk of people wake up now, they will wake up to find themselves enslaved members of a corrupt elite, which bids fair to be even worse than a neo-feudal state, but a “Brave New World” state, if commentators like this one in the FT are indicative to the underlying trend.
And I equally regret to say that we may need to progress beyond civil disobedience – a bare minimum, that must be systemic to the whole corrupt system – and take to the streets with strikes, demonstrations, and active opposition.
Armed struggle? I hope and pray not, but the powers that be are consistently both ripping us off, and taking the mick, treating us like expendable cannon fodder. Remember, the Tories have promised to repeal the Human Rights Act if they win in 2015, and replace it with what? Almost certainly, with rights commensurate with status: rights if you support their Party and class, duties if you don’t. So it may come to that – the need for armed struggle.
I tremble for the country and society my daughter and her generation are inheriting.
I think the phrase “there would, after all , be fewer of them” tells us all we need to know about the intent of the authors of this article. In one disgusting phrase we can extrapolate the eugenisist, the devaluing of human worth, the monetizer of human worth and the reduction of human value to that which can be wrung through the casino cash tills of the finance sector.
This article is zombie economics at its best and real world economics at its worst. has anyone noticed , particularly over the last four years that just when you think the race to the bottom has been reached, a trap door opens to reveal hidden depths. This article throws open another trap door revealing the floor we’ve reached as a false one and the degree of depravity we can sink to even deeper.
“First, note that there is a decision to be made to train some and not others in society. Who is to make that decision, I wonder? Is it to be based on aptitude at a very young age?”
I haven’t read the FT article, but why “at a very young age”? Why not simply as part of the wider education process that takes place from birth and continues throughout our normal working lives?
Surely the real point to be made is that any (effective) training is a good thing, and in which case of course: if there is a higher demand for those less well trained (due to lower supply), the pressure on those wages will undoubtedly be up; ie the opposite of what we have currently?
I think this is advocacy for 11+ style exams, at least, and segregated education
I may be wrong, but it feels that way. The tone very strongly implies it. The suggestion that the change is later in working life appears remote
I think you are naive to think training the sole determinant of ability to secure a wage level
“I think this is advocacy for 11+ style exams, at least, and segregated education
I may be wrong, but it feels that way. The tone very strongly implies it. The suggestion that the change is later in working life appears remote”
Richard, you may well be right. I couldn’t tell, as I didn’t read the FT article itself (paywall).
“I think you are naive to think training the ‘sole determinant’ of ability to secure a wage level”
Obviously, I don’t believe that for a second!? It’s just one determinant, and an important one?
At the end of the day I am not sure it is even an important one
There are so many things that cannot be taught that by the time a person reaches adulthood are of substantial influence on how a person’s work opportunities pan out
I do not for a moment understate the importance of training but a great deal of training has as its primary goal the creation of uniformity of approach when it is flair that many employers seek
“but a great deal of training has as its primary goal the creation of uniformity of approach when it is flair that many employers seek”
I agree, that’s a very fair point.
Oh yes! The naivety of the straightforward ‘hard work = success’ trope is staggering, but an extremely attractive and convincing idea that has persisted for centuries. Beyond the subtle but pervasive influence of the old boys network in populating the upper-echelons of society, there is the brutal reality of our jobs market which rubbishes the notion that we all can attain equal wealth through equal effort.
Firstly, we can’t all be CEOs of FTSE 100 companies (etc.) because there aren’t the vacancies. The top slice of society is a thin one, and there’s no room for millions of people to climb there. The second reason we can’t all be CEOs of FTSE 100 companies is that society would fall apart if we were. We can’t all be CEOs of FTSE 100 companies, we can’t all be consultants and lawyers; we need cleaners, secretaries, nurses, nursery staff, binmen, builders, engineers, and the rich tapestry of skills and jobs that are essential for our society to function.
We don’t celebrate or value all of the types of work and workers half as much as we should. As that old socialist rogue Adam Smith put it:
“This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments.”
Low-paid workers are necessary; the question is how much it is necessary to pay them.
Likely to be quoted in a blog soon – thanks!
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2014/08/heritability-inequality.html
Good one
Hmmm…. I’m reluctant to accept that ‘intelligence’ is as heritable as assumed in this article. Much more of what we call ‘intelligence’ (often limited to combinatorial mental functions)has a cultural basis. Have a look at Steven Rose and Richard lewontin’s ‘Not in your Gene’s’,, It is by no means established that ability is inherited in this way.
However, luck inequality, is a real issue. I have often thought that we should reverse the conventional logic and pay people more for jobs that are inherently less satisfying! Those who show greater abilities to do complex tasks have not earned that capacity so why should it attract reward? Those abilities should be used to serve society, not be a ground for extracting from it. Why do people with abilities arrogantly assume that they should be richly rewarded for something that is already a reward? This illogic defeats me.
I incline to the luck argument
“Those who show greater abilities to do complex tasks have not earned that capacity so why should it attract reward?”
Utter nonsense.
Your logic is a short step to slavery.
Respectfully, a great deal of that capacity arises because they climb on the shoulders of others
Simon was alluding to that fact
It is you who was writing nonsense in both your second and third paragraphs
Murphy (Kevin, no relation to Richard presumably!) and Topel are well known right-wing US economists and Republican sympathisers – their article is awful even *on its own terms*. I noted at least 3 misleading or erroneous statements:
1) They state that the UK’s economy is now larger than before the crash – this is true, but population has expanded substantially since 2008, hence GDP per head (surely a more realistic measure of living standards than aggregate GDP, although highly flawed itself) is still significantly lower. Some “recovery”…
2) their supply and demand analysis assumes the UK is a closed economy – but in fact, in an open economy competitive model the wage rate will depend on the *global* supply of labour at different skill levels so changes in the supply of skilled and unskilled workers in the UK have almost no impact on wages. Note that I think this model is complete rubbish and wouldn’t defend it for a second – I’m just pointing out that K. Murphy and Topel don’t even understand neoclassical economics properly, let alone anything else. Their article is much worse than even someone like Tim Worstall would write.
3) the vast majority of work that has been done on minimum wage increases in the UK and US has failed to find any adverse impacts of the minimum wage on employment. The same is true of most of the work I’ve seen for various EU countries. Lower employment rates for young people in the Eurozone than in the US and UK are much more likely to be the product of harsher fiscal austerity (due to the insane policies of the ECB) than they are anything to do with labour market regulation.
All in all, a truly terrible article!
Thanks Howard
The writers are from the discredited Chicago School of Economics. Say no more.