Progressives and the Minimum Wage: A Missed Opportunity

December 4, 2014
By Oren M. Levin-Waldman, Ph.D.

It is commonplace to think of progressive policy as that which assists the poor and the downtrodden. Progressive politicians have historically been in the forefront of labor legislation favoring worker rights, minimum wage laws, anti-poverty programs, civil rights, women’s rights, and more recently environmental protection.

Progressives were also in the forefront to achieve good government based on the application of scientific principles of management and staffed by those who had credentials and ability. Moreover, they espoused efficiency, not only in economic production, but the delivery of public goods and services. It is ironic, then, that Progressives miss an opportunity when they argue for increases in the minimum wage today.

We routinely hear the Progressive argument for a minimum wage on the grounds that it will assist the working poor. All of this is true, but the arguments for increasing the minimum wage would be stronger still, and perhaps even catch the attention of those in the executive suite, if couched in the traditional progressive language of efficiency.

The classic efficiency argument in favor of the minimum wage during the early part of the Twentieth Century was made by Sidney Webb, who argued that better paid workers are better able to maintain themselves, and therefore become more productive. Their productivity will increase because their morale will improve, and they will want to work harder because they feel better about their work. But it will also increase because better maintained workers can bring new energy to their work. As a result of this increased productivity, the overall efficiency of the firm will improve. This efficiency argument came to be known as the "Webb" effect.

Webb also argued that higher wages would give employers incentive to invest in the human capital of their workers. Now they will provide them the training that ensures greater productivity, if for no other reason than to justify the higher wage. Here Webb appears to have been alluding to the work of the father of scientific management: Frederick Winslow Taylor. Taylor believed that through the application of scientific principles of management, not only would firms become more efficient, but society as a whole would prosper.

Because Taylor talks about management, it has been commonplace to assume that Taylor was anti-worker. But a careful reading of Taylor suggests that his principles of scientific management intended to increase efficiency entailed the implementation of the Webb effect. In his most famous writing, The Principles of Scientific Management written in 1911, Taylor argues that the principal object of management should be to secure maximum prosperity, coupled with the maximum prosperity for each worker.

In other words, it is management’s responsibility to take workers who naturally tend to laziness and are otherwise second-class workers and transform them into first-class, or the highest class of workers that they can be. To do this, management must provide their workers with the resources for this transformation to occur. In order to get workers to demonstrate initiative, managers must give workers some special incentive that extends beyond that which is given to the average of the trade. In other words, if the average among low-wage workers could be said to revolve around the statutory minimum wage, then managers who seek to obtain more from their workers must in fact pay more.

Taylor reasoned that the general adoption of scientific management would in the future double the productivity of the average man engaged in industrial work. Moreover, society as whole will benefit from these measures because their adoption will result in the elimination of wage disputes between management and workers. And it would also foster intimate cooperation between managers and workers, which in turn will reduce friction and discontent.

Consequently, society would prosper because the low cost of production accompanying a doubling of output would enable companies who adopt this management to compete far more effectively than before. It means an increase in prosperity and a diminution in poverty, not only for those workers, but for the whole communities in which they live. At the same time, it becomes clear that if workers are not transformed into first class workers, the fault really lies with management. By extension, it is then the fault of businesses and their management that society is not a high-wage society.

Of course, the common criticism of the minimum wage revolves around the argument that low-skilled workers simply are not worth the higher wage. And yet, in his observation of 600 shovelers at Bethleham Steel Company, Taylor only met that criticism head on:

…the average man would question whether there is much of any science in the work of shoveling. Yet there is little doubt, if any intelligent reader of this paper were deliberately to set out to find what may be called the foundation of the science of shoveling, that with perhaps 15 to 20 hours of thought and analysis he would be almost sure to have answered as the essence of this science. On the other hand, so compellingly are the rule-of-thumb ideas still dominant that the writer has never met a single shovel contractor to whom it had ever occurred that there was such a thing as the science of shoveling. This science is so elementary as to be almost self-evident.

The low-skilled work of the shoveler is no different from the low-skilled work of the hamburger flipper, but Taylor is telling us that through scientific management, this low-skilled worker can be made more productive.

The real question is why Progressives have lost sight of these arguments. By ignoring them and only appealing to the moral argument of paying liveable wages, they perhaps feed into the critics’ argument that low-wage workers are not worth more. But they are worth more because productivity will increase due to the payment of an efficiency wage.

December 4, 2014

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