“In the year 2023, in the richest country in the history of the world, nobody should be forced to work for starvation wages… If you work 40, 50 hours a week, you should not be living in poverty. It is time to raise the minimum wage to a living wage.” Bernie Sanders, May 4, 2023
This is Sanders’ argument for raising the minimum wage from its current level of $7.25 an hour to $17.00. But the whole premise is wrong. Virtually no one today is earning the minimum wage. Even if they did, they wouldn’t be poor. And that’s been true for some time.
In 2018, Goodman Institute Senior Fellow Peter Ferrara showed that it is impossible to work 40 hours at the current minimum wage and still be poor – regardless of how many children you are supporting. That’s because of two Republican tax measures: the Earned Income Tax Credit and the Child Tax Credit.
Writing at Forbes a year ago, John Goodman noted that fast-food workers were earning an average pay nationwide of $17.20 – without any assist from government.
The forces of supply and demand seem to work just as well for the labor market as they do in the markets for other goods and services.
3 thoughts on “What Bernie Sanders Gets Wrong About Wages”
Bernie also seems to believe that one’s income ought to be a function of one’s effort. In effect, pay should depend on one’s input, not on one’s output. I doubt that works.
Are products sold by describing how hard the people worked who made the product? Or by describing the product’s value to the buyer i.e., benefit > cost? This does not mean that effort and output are unrelated. But it’s the product – the output – that sells. Sales are the source of revenues, and revenues are the source of workers’ wages.
It should be obvious that companies must compete not only to sell their products, but also to hire high-performance employees. Any organization that treats its employees poorly will not easily attract high performance employees. If its product quality suffers so will its sales, internal costs, and revenues. It’s all interrelated. But it starts by persuading buyers to buy products that have value to the buyers.
In the 1970s I was a guest at a Whirlpool employee meeting, where an Exec VP told a large audience “If people don’t buy our products, we don’t have jobs”. He did not say “If we don’t work hard, we don’t have jobs. He didn’t have to. Everyone there knew exactly what he meant. I don’t recall seeing Bernie Sanders in that audience.
Actually during the 1970’s Bernie Sanders was studying Karl Marx, who did believe in a Labor Theory of Value.
I don’t have the chops to know what is right. My own observation is that incomes are mainly determined by bargaining power. If the workers who clean streets, wash dishes, and change bedpans have strong unions, they can be paid decently for their efforts. Otherwise they are left at the mercy of labor supply and demand.
“they can be paid decently for their efforts”
It’s not the “paid decently” part that I doubt. It’s the notion that effort alone is enough to create a product that anyone will voluntarily buy. That’s the part I doubt.
Never forget a market is the meeting of a willing buyer and a willing seller. If one party is unwilling, there’s no deal. If some third party intervenes to force a deal when one party is unwilling, one of the parties is forced to accept something they don’t want.
I doubt that works.