Thursday, July 29, 2004

Column 8: What's Good For The Syndicate

Another rip on corporations. I swear, after this one I'll leave those poor mistreated billionaires alone for a while :-)

For me, the most memorable character in Joseph Heller's masterpiece novel Catch-22 was mess-officer-turned-black-marketer Milo Minderbinder. His sleazy schemes to control all the supply lines of the war led to some ridiculous - and sometimes downright horrifying - consequences. He bombed his own troops in Bologna to offset his losses in Egyptian cotton. He even took morphine from an airplane first-aid kit for his black-market activities. And he justified it all in the public interest: "What's good for the Syndicate," he would say, "is good for the country." "Everybody has a share."

While modern corporations are by no means as sleazy as Milo's Syndicate, they bear one striking responsibility - they claim that what's good for them is good for the country. They ask for tax cuts in the name of "economic growth." And, like Milo, they really don't care who they step on to get ahead.

Economic growth - that concept has become the Holy Grail of American politics. We are used to measuring every move we make for its possible economic effects, and if there's even a shadow of a possibility that the policy will hinder economic growth, we discard it. We deny our laborers a more realistic minimum wage because of our fear of stifling the economy. We fear the higher taxes on the wealthy necessary to pay for better health care, education, and job training for the potential workforce, because they might, possibly, hurt our precious economy.

Yes, the market is worth protecting. But we must not forget our social conscience as well. We understand that we have a duty to protect the economy, but do we not also have a duty to provide people with the best social services possible? Do we not have the responsibility to give all our children the education they need to realize their true potential, and to give those on welfare the job training necessary to bring themselves out of poverty?

And why are we so scared of hurting our economy? We fear the miniumum wage increase because of possible negative effects on employment. But after the last minimum wage increase in 1996, jobs were actually created rather than destroyed. Economists such as David Card and Alan Krueger have demonstrated that the minimum wage has no negative effect on employment, and indeed might even boost employment. Right now, a worker laboring full-time at the minimum wage makes 60% of the poverty level. This is pathetic. No one should work full-time and still be unable to pull themselves out of poverty. The cornerstone of the capitalist system is the assurance that hard, honest work can earn someone a comfortable life - we must ensure that this opportunity exists for everyone. And yet, we still decide to side with the corporations even on this issue - what's good for the Syndicate, after all, is good for the country.

As a capitalist society, we must ensure that everyone has an opportunity to make an honest living and contribute to the economy. More importantly, as a society we have a responsibility to care for those who are less fortunate. It is a failing of our society that one-fifth of Americans live in poverty - it is a drag upon our potential as a nation, our prosperity, and our freedom. In the words of John Edwards, it doesn't have to be this way. If we stop pandering to our poor mistreated corporations, we can fix these problems. It is a matter of some debate whether government or the market is the correct tool to use to fix these problems, but whatever solution path we choose, we must remember that what's good for the Syndicates is not always good for the country. We must not sacrifice our social conscience at the altar of economic growth.


Mike said...

Of course, Clevinger was dead - which was the major flaw in his philosophy.

Anonymous said...

Would a minimum wage increase hurt corporations or small business owners? I don't know, but I'd bet it's the latter.

Part of the reason Krueger and Card find no significant effect is pure politics. Politicians tend to let the minimum wage lag behind the market clearing wage so that they when they do raise it they can take credit for helping workers without having to face backlash from employers. In many areas the law the law therefore has very little effect. If raised too high too quickly (i.e. if leftist politicians stood up and fought back) the unemployment predicted by basic economics would surely manifest itself.

That said, I have no idea if raising the current minimum wage would be a bad thing or not. Here are a couple of interesting articles and blog posts on the topic:

Economist Steven Landsburg agrees with Card and Krueger but draws a different conclusion than you do. He says a fairer way of accomplishing the same thing would be an earned income tax credit.

Brad DeLong is skeptical, noting that the administrative costs of the EITC may be too large.

Tyler Cowen agrees that the effect on employment may be small, but warns that employers may recoup their losses by spending less on improving working conditions.

Finally, Tim Lee hypotheses that measurable short-term effects of the minimum wage are a different story from unmeasurable long-term effects.

Anonymous said...

Oh, and that last comment was from me. As if that wasn't obvious :)

-- Jacob

Mike said...

As far as minimum wage increases are concerned, I quote the late great McWatt: "Oh well, what the hell?"