In his new book The Vanishing Middle Class, MIT economist Peter Temin provides a short and accessible take on this country’s deeply unequal economy, which he argues now represents two different Americas. The first is comprised of the country’s elite workers: well-educated bankers, techies, and other highly skilled workers and managers, members of what he calls the “finance, technology, and electronics sector” (FTE)—the leading edges of the modern economy. A fifth of America’s population, these individuals command six-figure incomes and dominate the nation’s political system, and over the past half-century, they have taken a greater and greater share of the gains of economic growth. The other America, what he calls the “low-wage sector,” is the rest of the population—the dwindling ranks of clerks, assemblers, and other middle-income workers, and an expanding class of laborers, servers, and other lowly paid workers.
A protester-made statue with the Spanish words "dignity" and "fight" stands outside the Chicago Board of Trade building following a march in favor of a higher minimum wage. Scott L, via Flickr
A protester-made statue with the Spanish words “dignity” and “fight” stands outside the Chicago Board of Trade building following a march in 2015 in favor of a higher minimum wage. Scott L, via Flickr
This weekend, low-wage workers from around the country will be arriving in my city, Richmond, to make a case for increasing the minimum wage. It’s the first-ever national convention for the Fight for $15 movement, which in the past few years has launched wide-ranging strikes and protests to raise awareness about how a $7.25-an-hour wage—the current federal minimum—just doesn’t cut it for many workers struggling to make ends meet for themselves and their families.
There’s a long line of economic arguments in favor of, and opposed to, increases in the minimum wage. Among other things, opponents say it will raise prices for consumers, cause employers to slash jobs or cut back on workers’ hours, and put many companies out of business. Advocates say it will help the economy by giving workers more money to spend in their communities, encouraging the unemployed to seek out work, and reducing the stress and anxiety the working poor deal with, as well as their reliance on government benefits.
As important as the economic impacts of this policy are, however, it’s even more important to consider its cultural and moral implications. After all, that’s what drives much of the widespread public support for increasing the minimum wage, even among people who have never heard of, say, the elasticities of labor supply and demand. Many Americans just don’t think it is right that people who work hard should have to struggle so hard.
To be sure, the research on the minimum wage gives us little reason to despair—or cheer—over its impact on the economy. The most rigorous studies seem to suggest that it doesn’t make a big difference in terms of employment and growth. A 2014 open letter signed by 600 economists, including seven Nobel laureates, advocated raising the minimum wage to $10.10, noting that the “weight of evidence” showed “little or no negative effect” on employment for minimum-wage workers. Meanwhile, the increase would lift wages for them and likely “spill over” to other low-wage workers, too, possibly stimulating the economy to a “small” degree, the economists wrote.
Most recently, a University of Washington study of the increase in Seattle’s minimum wage to $11—on its way to $15 in 2017—tried to sort out the impact of the wage hike alone, sifting away the effects of other changes in the economy occurring at the same time. It found mixed results. A bit higher wages, but a bit fewer hours. Somewhat less employment, but no increase in business closings.
Make of these studies as you will, but it’s hard to argue that the sky is falling down in places where wage policies have changed. And while a higher minimum wage will give low-wage workers fatter paychecks, it obviously cannot, by itself, pull the working class out of its decades-long malaise of stagnant wages and growing insecurity.
These economic analyses provide important context, but the policy question really boils down to one of values. America has always prided itself for being founded on principles rather than a single cultural persuasion, and Americans have held onto few principles as steadfastly as the value of hard work. An honest day’s toil should get you by. And yet we have millions of Americans who work full-time and are still in poverty. We have millions working at global corporations like Walmart and McDonald’s that pay their workers so little that their business models rely on government to pick up the tab—by providing Medicaid, food stamps, refundable tax credits, and the like.
Adapting our laws and our economy to match our principles will take time. With any change, there will be some who gain, and some who lose out, more than others. But overall society will be better off—and it’s not just because some people will make more than they used to.
When we pay living wages, the culture changes, too. As Katherine Newman found in her classic study of fast-food workers, No Shame in My Game, part of what makes it hard to take a low-wage job is not that people don’t want to work—it’s that society has such disdain for those making chump change behind a McDonald’s counter or in a Walmart stockroom. (This is also one reason that immigrants—who aren’t under the same sorts of social pressures as the native-born—will do the poorly paid jobs others won’t.)
In the research for my book about the long-term unemployed in America and Canada, I came across one man out of work for more than a year after the car-parts plant that employed him shut down. He had avoided having to live on the street by moving into his mom’s house. When I spoke to him, he had just given away his last unemployment check to his daughter so that she could have something of a normal Christmas.
“I’m forty-three years old and living off my mother,” he told me. He was ashamed about accepting his family’s help, but he felt he had to do it. What he wasn’t willing to do, though, was work at a fast-food restaurant. He had put in twelve years at a respectable job, he pointed out. “I don’t want to throw on a goofy hat.”
If we believe that certain jobs are so undignified that we won’t even pay someone a decent wage to do them, then we shouldn’t be surprised that people with a decent amount of self-respect won’t do them. Opponents of raising the minimum wage seem to be blind to this. They talk about the economic pros and cons of wage laws as if those were the only things that matter. But people in the real world don’t just have balance sheets, they also have pride.
If you don’t think that making economic policy based on principle is realistic, then consider the extent to which it has already occurred—in the direction of greater income inequality. In 1965, CEOs made 20 times more than a typical worker, according to the Economic Policy Institute; in 2014, they made 300 times more. Part of this shift was due to global competition and changes in labor and financial markets, but some of it can be linked to the dwindling sense of obligation that those at top now have toward their workers, as Mark Mizruchi and other scholars have noted.
As many of today’s corporate leaders see it, making obscenely larger amounts of money than their employees do is no longer cause for guilt. The boardroom culture tells them they deserve it. And so they continue to push for changes in tax laws to make sure the economy’s outcomes reflect their own principles of self-profit.
Indeed, in other rich countries with different social norms, the gap between CEO and worker pay is nowhere near as extreme—and the minimum wage tends to be much higher, too. These countries have clear notions of what’s fair and appropriate to pay for a day’s work, and they have chosen to pursue practices and policies in line with those beliefs.
Even those of us who want government to do more for the working poor often forget the importance of this broader cultural context. Yes, we should take advantage of targeted, technocratic solutions such as earned-income tax credits that make low-wage work pay better. But it should trouble us that these policies often amount to having the government subsidize employers who refuse to foot any extra labor costs. Furthermore, having a company pay a higher wage and having the government supplement that wage are very different things. Or at least they are when we look from the vantage point of flesh-and-blood human beings—as opposed to that of the rational-actor stick men in economic models. We brag about our paychecks, not our tax credits.
What we pay those at the bottom also has something to say about the dignity and connectedness of our society as a whole. If every wage is a living wage, those of us who are more fortunate won’t be living in such a different world from those sweeping our floors and serving our food. An entry-level job won’t be such a laughable and undignified proposition that a kid in a poor town or neighborhood won’t even consider taking it over a flashier (and deadlier) gig on the corner. If we think people are worth more than a pittance, they will act that way—and treat others that way.
In a sense, it’s fitting that Richmond, the former capital of the Confederacy, a city with a history of stark racial and economic inequalities, should host the Fight for $15 convention. The old plantation-based economy disappeared not because it wasn’t profitable. It disappeared because it wasn’t just. If we truly believe in our values, we should make our economy reflect them.
Here is a short piece I wrote recently for a Zócalo Public Square discussion on the question “Is Rising Inequality Slowly Poisoning Our Democracy?” The discussion included experts from the Brennan Center for Justice, Cato Institute, Economic Policy Institute, and Georgetown University Center on Poverty and Inequality.
When Michael Young coined the term “meritocracy” half a century ago, he meant it to be an insult, not an ideal. In his view, a society where only the best and brightest can advance would soon become a nightmare. Young predicted that democracy would self-destruct as the talented took power and the inferior accepted their deserved place at the bottom.
Of course, the world we live in today is still no meritocracy. If most Americans are expected to go it alone, without the help of government or unions, elites continue to block competitors and manipulate the rules—as Wall Street did in spectacular fashion in the lead-up to the 2008 financial crisis.
Celebrated French economist Thomas Piketty argues that even when—or especially when—the market operates efficiently, inherited wealth becomes an ever more potent force within the economy, slowly strangling the opportunities for ordinary individuals to advance.
Nevertheless, the myth of meritocracy tells us that the rich are rich because they—like Young’s talented ruling class—are smarter and better. They worked their way up. They are the “makers” growing the economy. Anyone who can’t do it on his or her “own” is just a “taker,” suckling on the government’s teat.
I found hints of this viewpoint when I interviewed the long-term unemployed for my book. Some felt enormous shame and blamed themselves for their inability to land another job. Often, the sense of failure had a negative impact on their personal relationships and their belief that they had something at all to contribute to society.
Preserving our democracy will require forceful government regulation and strong unions. Such approaches have their own flaws, but there is no other way to restore balance to an economy and society increasingly under the sway of an elite class.
Beyond that, we need to tackle head-on the culture of judgment, materialism, and ruthless advancement used to justify extreme inequality—and temper it with a measure of grace.
Captain Phillips Directed by Paul Greengrass
Columbia Pictures. PG-13. 2 hours, 14 minutes.
Captain Phillips, the new film based on a real-life encounter between an American commercial-shipping crew and Somalian pirates, opens with the titular character in Vermont, driving to the airport with his wife. Richard Phillips expresses concern about the state of the shipping industry, sunk by the global recession that struck a year earlier.
On the other side of the globe, Muse, a poor Somalian fisherman forced into piracy by his own economic woes, wakes up to news that the local warlord has demanded that his village capture another ship, or suffer violent consequences. Muse joins a crowd of hungry men on the beach jumping and shouting at a young pirate captain to give them a spot on his crew.
The angular fisherman-turned-pirate is an obvious foil for Phillips, their stories — and those of their first-world American and desperate Somalian crews — woven together through crosscut scenes. This parallel storytelling guides much of the film, emphasizing the economic anxieties shared by the men even as it highlights the brutality of the Horn of Africa’s most chaotic state. (The film is based on a book that the real-life Captain Phillips wrote, a memoir of the 2009 piracy attack he survived.)
Somalia’s recent history of civil strife makes it the global poster child for a failed state. The country’s last functioning government dissolved in 1991 when the Cold War ended. The civil war that followed degenerated into a free-for-all of sectarian bloodshed, first pitting political factions and, eventually, tribal clans. In recent years, the economic situation has deteriorated to the point that the installation of ten miles worth of solar-powered street lights in the capital of Mogadishu last May was a cause for celebration among the beleaguered population.
Basic statistics about today’s Somalia — unemployment numbers, literacy rates, total population — are currently unknown, although two relatively stable, if unrecognized, governments have sprung up in the northern part of the country, at the tip of the Horn of Africa. In one of the breakaway states, known as Puntland, many former fishermen during the recession years began raiding the busy commercial-shipping lanes in the Gulf of Aden. The Somalians claimed they took to piracy because international companies used the waters as a chemical dumping ground or overfished, as the film references. In a nod to Somalia’s fractured state, the pirates call themselves the Coast Guard when approaching their prey; Muse compares the ransom money they demand to taxes for passing through Somalian waters.
In a meeting after their first encounter with the Somalian pirates, the crew argues with Phillips. One sailor, a twenty-year veteran sailor, says he didn’t sign up to fight pirates. Phillips points out that each crew member knew the ship’s route before signing up for the voyage, and each knew the dangers of the Somalian waters. When the crew insists that they evade the pirates by heading further out into the ocean, Phillips tells his men that switching the course would slow down the trip and cost the company money. If they don’t like it, he tells them, they can go upstairs to his office and sign the paperwork to quit their job — and go home with the rest of the crew anyway when they reach their destination, Kenya.
Later on the in the film, a wounded pirate cries to Muse that he never planned on being hurt. The Somalians were supposed to capture the ship, hold it for ransom, then get paid and leave. Muse shouts at him that anything can happen on the job. Piracy, like capitalism, isn’t for the weak.
The comparisons continue. Everyone — American or Somalian — hates their boss. After Phillips and his crew escape the pirates thanks to a sputtering motor, Muse wants to chase them. The pirate captain refuses after their radios pick up Phillips “requesting an air strike” from the Navy.
“I may be skinny, but I’m not a coward,” Muse snaps — a remark that provokes a particularly violent kind of work disagreement.
Later in the movie, Muse (played by first-time actor Barkhad Abdi) brags to his captive that he and his fellow pirates recently netted a six-million-dollar ransom for a Greek ship. Phillips, nicknamed “Irish” by the pirates, asks why Muse is still in the piracy business. The Somalian replies that their bosses have bosses, and — much like the American sailors — low-level grunts like him must pay their dues.
But that fact of life also says something about the key difference between the two crews. The Americans benefit from the safety net of union-bargained contracts and a stable legal system to see them enforced. When the Somalians disagree over business decisions, they don’t sit around a table with lawyers and discuss their options. They pull out guns and threaten each other with death.
Somalia hasn’t changed much since 2009, when the film takes place. The United Nations-recognized government controls little territory outside of Mogadishu. With piracy down thanks to an increased international naval presence, Somalians have lost one more option for gainful employment. Young men join tribal militias or the Islamist insurgency. Gun-shy Somalians working at the bazaar live in constant fear of suicide-bomb attacks. Even subsisting off food rations and other international aid comes with its risks: UN personnel have been accused of child abuse and other sex crimes.
In film’s final scenes, with the US Navy drawing near, a battered Phillips pleads with Muse. “There’s got to be something other than being a fisherman and kidnapping people,” he says.
“Maybe in America, Irish,” Muse replies. “Maybe in America.”
Tony Cella is a freelance reporter who has covered crime and grime in Los Angeles, New York City, and the Kenai Peninsula, Alaska. Email: tonycella37@gmail.com
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Over the last thirty years, Americans have seen an infusion of market thinking into areas that were previously governed by collective ethics and morality. Today, the drive to make a profit dictates the way we view things like health, education, national security, criminal justice, environmental protection, and even procreation. In What Money Can’t Buy: The Moral Limits of Markets, Harvard University professor Michael J. Sandel argues that markets have become detached from morals, and that it’s time we reconnect them. The book is an engaging exploration of where to draw the line between having a market economy and being a market society.
In the introduction, Sandel makes it clear that providing definitive answers to the questions he raises is not his intention. Instead, he views himself as the kickstarter of a much-needed, public debate on markets and morality, and offers a philosophical framework in which we might have the conversation. The inquisitive title of Sandel’s book reinforces this position. For now, his focus is on highlighting the questions we haven’t been asking over the last three decades, but probably should have been.
So, what does economics have to do with morality? Since he’s the expert, I’ll let Sandel explain:
“Some of the good things in life are corrupted or degraded if we turn them into market commodities,” Sandel argues.
If the role of markets were simply to allocate goods, Sandel would be hard-pressed to find an ethical objection to using an economic rationale to solve all our problems — but, he explains, the reach of markets goes beyond goods allocation to express and promote attitudes toward whatever is being exchanged. It is our job as members of a just society to interrogate what those attitudes are, and whether they reflect the values we want to promote in our culture. If we determine that the values are out of sync with the ethical standards of our culture, then we need to regulate the markets to avoid the unintentional promotion of morally questionable social norms.
For many Americans, regulation is a dirty word. But Sandel asks us to consider the idea of regulation in the context of the parameters we’ve already placed on things that currently cannot be bought and sold, such as human beings and civic duties. For example, it is illegal in the United States to sell one’s vote in an election or a child through adoption processes. These boundaries were not established by the rules of economics; they were established by our moral compass as citizens in a participatory democracy.
So, what values do our markets presently exude? And are we satisfied with that? Because Sandel isn’t. He believes we need more robust engagement in civic discourse around these issues.
“When we think of the morality of markets, we think first of Wall Street banks and their reckless misdeeds, of hedge funds and bail-outs and regulatory reform,” he writes. “But the moral and political challenge we face today is more pervasive and mundane — to rethink the role and reach of markets in our social practices, human relationships, and everyday lives.”
As funny as it is intellectually engaging, What Money Can’t Buy is an excellent point of entry for those concerned with addressing the challenges of markets and morality. It will augment your view of laissez-faire economics and what is a stake in our society if we don’t intervene.
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