Gordon Fitch:
>>> . . . In practice, when the relatively
>>> poor start to get more money, the better-off, who have more
>>> power than they do, can be expected simply charge them and
>>> each other more until the wage change is absorbed by inflation.
>>> And this is what we seem to observe. It seems like a cruel
>>> joke, in fact, but "only the poor will suffer, and they're
>>> used to it."
Max Sawicky:
>>> Is this statement founded on some heretofore secret
>>> evidence, or were we just feeling frisky today?
Gordon Fitch:
> >What's secret about it? Is the minimum wage not absorbed by
> >inflation? Do most people not charge as much for the goods
> >and services they offer for trade as they can? Do some
> >people not have more power than others? This doesn't seem
> >like very frisky theorizing to me, tediously leashed to
> >observation as it is. You should see _frisky_ sometime.
Doug Henwood:
> The minimum wage wasn't raised during the 1980s, and real wages at
> the low end declined. It was raised several times in the 1990s, and
> real wages at the low end rose (helped, of course, by a tight labor
> market, which helps everything). Correlation isn't causation, but
> still...
Max Sawicky:
> You said minimum wage increases *cause* inflation.
> That is not true. It is true that legislated
> minimum wage changes have been outstripped by
> inflation.
Actually, I don't think the minimum wage laws affect things very much one way or the other -- I probably should have preceded my little theory with a warning about its probable irrelevance. But onward.... It seems reasonable to think that there's a "natural" minimum wage, which is the level below which it's no longer worthwhile to go to a job, and one can do better scavenging, stealing, begging, getting on Welfare, and so on. If the law reflects this level or deviates below it very much it's clearly irrelevant, so the only case in which my frisky theory would become seriously operative would be if the law set the minimum wage well above the natural level. Then I believe you'd see a lot of jostling for income, mostly in the form of raising prices, which, it is reasonable to believe, would come out generally in favor of the better-off, just as my theory predicts. In short, I don't think you can cure the essential defects of capitalism with palliative regulation, although you may mitigate them for awhile -- say, in advance of an election or to avert a passing crisis.
"Tom Waters" <tjwaters at earthlink.net>:
> I think there is empirical evidence that this does not happen. Look at
> EPI's web page.
You get some funny things if you go through Google for "EPI".
On trying "minimum wage inflation" I did get a few pages, mostly complaining that the _minimum_wage_ has not kept pace with _inflation_ while denying that raising the minimum wage causes unemployment. The last seems to be pretty widely attested, so I would ask, Why? In dumb theory, when one raises the price of a commodity, one ought to expect to see a decline in demand. My answer: employers believe they can jack up prices and cut costs without decreasing employment, that is, they can operate inflation to their benefit, or at least sufficiently well to maintain their position, for at least small increments in wage costs.
Again, I think it's also probable that any causal link between increases in the minimum wage and inflation is lost in effects of other influences and noise -- the inflation occurs regardless of whether the minimum wage increase contributed to it and its influence become imperceptible. Once the inflation occurs, the increase no longer exists, so it ceases to have any effect on things.
> Also, Marx's law of value predicts that changing wages (the
> value of labor-power) will not change the value of money (labor
> itself crystallized in the form of a universal commodity).
Was Marx speaking about the same sort of set-up as we have today? It seems to me that money was constituted differently in the 19th century -- it was less an overt construction of the government, winking in and out of existence without even having to be printed, and was still held to have magical, arcane qualities like intrinsic value, especially gold, still glistening with the divine afflatus of Juno Moneta (the mint was in the basement of her temple at Rome, under her throne).
In any case, changing wages will not _directly_ alter the value of money; first, the change has to work its way. When I mentioned the Labor Theory of Value it was because it seems to me that a dollar is now worth as much labor (or labor power) as it will command, which is a measure of its effectiveness in exchange for non-abstract commodities, which are produced through labor. Given a state of zero inflation and a short enough time span to make technological change non-significant, a certain quantity of dollars will continue to equal a certain quantity of material commodities; the (exchange) value of these commodities will be determined by the labor necessary to (re)produce them; the dollars will therefore be matched to the labor implicit in the commodities. If, on the other hand, the dollar is made to vary with respect to the commodities it matches, just so, the labor associted with the dollar will vary; if the ability of the dollar to command commodities or the labor implicit in them declines, we have inflation. In the case of raising the minimum wage, should it be actually effective, the change would work its way upward as the better-off, more powerful classes compensated for increased labor costs among the lower orders, and _then_ the changed wage would result in a changed value of money.
It's true the government could raise the minimum wage and at the same time force the dollar to represent the same amount of material commodities, in effect extracting the raise from other parties, but I have an idea that the "economy" (that is, the actual ruling class of the State) would not like this at all and would punish the governors, most likely by removing them from office as rapidly as possible, because this would hurt them, and they have more power (as mentioned above) to obtain the government's interest and indulgence than the poor.
In a future edition, perhaps I'll talk about how the minimum wage laws serve the ruling class by distracting the poor from revolution, or at least unionization, by making them think that the government's taking care of them when in fact it's just taking them. Or have you all heard that one before?