People tend to look at this issue backwards. Here's how I look at it:
Take an arbitrary year -- say, 1969. Minimum wage was $1.60/hr then; adjusted for inflation, that would be equivalent to roughly $8.90 today. And this is
only taking overall inflation into account. If you factor in more "end-user" metrics like the CPI, the discrepancy is even greater, as several of the larger costs accounted for by the CPI (e.g., medical, housing, and tuition costs) have far outpaced general inflation. But ignoring these other issues and sticking with the strict inflation-adjusted figures cited:
The $1.60/hr paid to an employee in 1969 was, obviously, a certain percentage of a company's income (both gross and net). By all accounts, corporate revenue has skyrocketed, far outstripping inflation. Profits have also increased exponentially, both in absolute terms and as a percentage of total revenue. Let's assume (again arbitrarily) that the average minimum-wage-paying company's total expenditure on wage-based labor was 15% of revenue in 1969. Seeing as how profits -- and profit margins -- have greatly increased, how can it be argued (economically, not philosophically -- save it, Randroids
) that wage-based labor costs have to
shrink as a percentage of overall revenue and/or profits? Why should it not still be 15% of the now-larger pie the companies are eating? Why should the price of goods increase along with a mimimum wage correction when, even if it's increased to $8/hr, it will still be less as a percentage of revenue than what companies paid 35 years ago? I have never heard an adequate response to this question based on "traditional" economics. In fact, I feel that it is not answerable economically in the traditional sense (more on this below), but only philosophically. And when we delve into
that realm, we find that the considerations of those who would perpetuate the status quo are both fundamentally illogical and nigh on inhumane. The system they advocate -- one of increased economic stratification and marginalization, where the bulk of the populace is increasingly unable to meet their most basic needs and is seeing their standard of living eroded annually -- is ultimately unsustainable.
The reason I put "traditional" in quotes above when asking for an economic explanation is because I am well aware that in the speculative economic paradigm we operate under, pressure is continually exerted on companies to maximize profits by investors whose sole motive is to increase the value of their shares. Thus, under such a system, it is perfectly understandable why a company would seek to reduce labor costs (as a percentage of revenue) even as its profits skyrocket: margins must perpetually increase in order to sate the rapacious appetites of shareholders. Labor costs make an easy target, because workers have little clout; such "savings" on labor are typically no longer achieved in the traditional manner (streamlining processes, economies of scale, increased mechanization etc.), but rather realized through outsourcing, the employment of illegal immigrants, and via organized campaigns by business consortiums to stagnate wages at the federal level.
It is for this very reason -- the pressure exerted by speculators -- that I personally believe that the entire speculative economy must be dismantled in favor of greater private ownership of companies. Private ownership, though fraught with the potential for its own abuses, does not exert the same pressures on businesses that a speculative market does. I fully believe that the speculative economy is one of the biggest con jobs ever perpetrated on the people of the world. It can only lead to certain ends, none of which are pleasant. The benefits of the speculative market (e.g., capital-raising) can be had through less socially harmful means. Note that this has nothing to do with
capitalism, per se, only with the investment paradigm. They are
not one and the same, despite seeming to be inextricably linked presently.
At the very least, there needs to be greater governmental regulation of corporate practices; there needs to be a point where "enough is enough" (re: profits). Ultimately, however, corporate insatiability is an outgrowth of a much larger societal issue: the lack of temperance. We had a speculative economy in the 60's as well, but its inherent ills have become exacerbated as our culture has changed. There was greater private ownership back then, too, which provided some balance. Believe it or not, there was a time when ostentatious wealth and disproportionate compensation was frowned upon, even in economic circles, and that was because the culture -- corporate, societal -- was different. The prevailing culture helped to rein in the excesses of the system. When those social proscriptions dissolved, there remained no effective check on wealth accumulation, and greed increasingly became justified under all sorts of clever guises until the present day, where it is essentially what actuates the system. Corporate social responsibility has become an afterthought, and when such concerns
are brought to the fore, it is only in the most superficial and self-serving way.
In 50 years, we'll look back and wonder how we ever thought that the current features and trends in our economy and society at large would be sustainable in the long term. We're being hoodwinked.
