Thursday, January 30, 2014

Minimum Wage: Marx Answers Paul Ryan!

The President announced on Tuesday, in his State of the Union address, that he will increase the minimum wage for federal contractors to ten dollars and ten cents. He wants, he said, to “give America a raise.” Raising the minimum wage appeals to those who “do not understand economics,” the former Representative Ron Paul argued recently: if you make it costlier for companies to employ each person, you lower the demand for workers and kill jobs. Representative Paul Ryan offered another view: “I think it’s inflationary,” he said. If you raise wages, companies’ costs go up, and then they raise prices to compensate.

These two arguments—which, combined, suggest that raising wages for the poorest winds up hurting the poorest—are very old. So old that in June of 1865, in London, Karl Marx interrupted work on “Das Kapital” to refute them.

Marx’s target was John Weston—who, as it happens, was a devoted socialist, like Marx. In May, 1865, Weston had given a lecture that argued against any strikes or agitation to raise wages. He seemed to believe, like Paul does, that paying workers more would force companies to employ fewer people. Like Ryan, he assumed that the prices of goods would rise when wages rose. Why look for higher wages if they would only make jobs more scarce and raise the price of bread?

Marx delivered two lectures to the International, in June. They were eventually published as a pamphlet, “Value, Price, and Profit”—a polemic so succinct and sharp that it makes you wish that Marx could return as a blogger.

Continue reading at The New Yorker  ...