A Splash of Cold Water

The demand for those who live by wages, it is evident, cannot increase but in proportion to the increase of the funds which are destined for the payment of wages.
Adam Smith. (1723–1790). Wealth of Nations.

In the summer of 1794, I wrote the following words to criticize the American supporters of the disastrous French Revolution and the subsequent Reign of Terror: “They do not consider what can be done, but they think what ought to be done. They have no calculating principle to direct them to discover whether a reform will cost them more than it is not. They do not set down to count the cost; but, the object being as they think desirable, the means are totally disregarded.”

Alas, while the events behind the thought have changed, the words are still equally true, and a testimony to the inability of politician to puzzle out the impact of the laws they devise.

As a Labour Day Hymn, Rep. Matthew Patrick wrote for Cape Cod Today an editorial piece on the necessity for raising the Massachusetts minimum wage. While the entire piece can be read here (the Porcupine does not quote out of context!), these excerpts from Rep. Patrick truly caught his eye.

“Massachusetts’ minimum wage currently stands at $6.75 per hour, providing a full-time worker with an annual salary of just $14,040, well below the inflation-adjusted salary earned by minimum wage workers in the 1960s and 1970s and thousands of dollars less the amount needed to make ends meet in Massachusetts today. A bill before the Legislature (House No. 3782) would bring the minimum wage, in stages, to $8.25 per hour by 2007 and guarantee annual cost of living adjustments in the future.”

So – the end result of the legislation is to perpetuate the status of the Massachusetts minimum wage as highest in the nation. We will return to this thought.

"Robert J. Haynes, President of the Massachusetts AFL-CIO, praised legislators for their support of a higher minimum wage and urged the Legislature as a whole to act as soon as possible to boost the wage standard and protect it against inflation…According to the Massachusetts Budget and Policy Center, a public policy think tank, raising the minimum wage to $8.25 per hour would directly increase the wages of approximately 261,000 Massachusetts workers, with many others experiencing indirect increases in their pay."

That ‘indirect’ increase is the reason for joy in the councils of the AFL-CIO, who more commonly think of minimum wage workers as unorganized 'scabs'. You see, many Union contracts – some signed and binding for years - have provisions in them that call for the Union wage to be a certain percentage above minimum, with COLA’s to follow. Voila! A boost for the boys without even sitting down at the table!
Rep. Patrick again:

"The first minimum wage of any kind in the United States was enacted by the Commonwealth in 1912. The Massachusetts minimum wage was last increased in 2001, but, because it is not automatically protected against inflation, it has lost more than fifty cents of its purchasing power since then. Raising the minimum wage to $8.25 per hour would give the Commonwealth the highest rate in the nation; in indexing its minimum wage to inflation, Massachusetts would join four other states – Washington, Oregon, Florida, and Vermont – that either currently follow that practice or will begin to do so over the next several years."

I am speechless at the lack of foresight demonstrated by a person sent to Boston to represent the best interests of his constituents, some of whom must be small business owners. Is even the pretense of higher wages being recognition of greater skill or greater commitment to work to be abandoned in favor of an automatic reward regardless of merit? We will set aside the fact that on Cape Cod, virtually every job pays more than minimum wage, and most of those jobs are held by students and summer workers. Let us return to our earlier thought and concentrate on this indexing provision.

After we implement the highest minimum wage in the nation, is it wise to ensure it will remain so? For the last few years, under the control of Chairman Allen Greenspan, interest rates and inflation have been kept at very low levels. But can you remember the last big energy crisis that hit the nation when OPEC was formed? Interest rates of 21% were commonplace. A home mortgage at 18% was considered a bargain. At a time when the nation’s energy supply has suffered a cataclysmic disruption, is this the time to shackle ourselves to an unforgiving formula which virtually guarantees that small businesses will have to dismiss some workers in order to pay exorbitant raises to others in the event of an almost certain spike in the Consumer Price Index? Once it is in place, what politician would dare even mention that this automatic increase might be unaffordable and an inhibitor of small business? No matter how true that might be, it would become a sacrosanct ‘right’ to a higher wage so fast your head would spin.

During the brief period that Rep. Patrick was a businessman, he did not offer health insurance to his employees as it was too expensive for the business. Is that experience so long ago for him, that he cannot remember meeting a payroll? Now that his current job has automatic raises indexed into it, has he forgotten that not all businesses can merely pick the pockets of the citizens with mandatory taxation?

“They do not set down to count the cost; but, the object being as they think desirable, the means are totally disregarded.” Sadly, 211 years later, the words are equally true.