Education

The Low-Wage Labor Market and the Failure of Management

April 30, 2014
By Oren M. Levin-Waldman

A common criticism of increasing the minimum wage is that minimum wage workers simply aren’t worth more than they are receiving. They simply lack the skills required to command higher wages. Or if it isn’t a matter of skill, it is a question of quality. Low-wage workers, in other words are simply poor quality workers.

Therefore, it is incumbent upon them to improve themselves so that they can become higher quality workers and give back value to their employers. Instead of forcing employers to pay higher wages for poor quality, low-wage workers should simply be encouraged to return to school so that they can acquire the necessary skills to function in the modern economy.

To a certain extent, this line of thinking reflects a classical managerial tradition based on the writings of Frederick Winslow Taylor, otherwise known as Taylorism. Taylor who wrote in the late 19th Century was often considered to be the father of scientific principles of business management. Based on time motion studies of how workers worked, especially in the nation’s emerging factories, he argued that a general set of management principles could be developed. His most famous contribution to the management cannon is, of course, the carrot-and-stick approach. Figuring that workers would respond positively to rewards and negatively to punishment, they could be whipped into becoming more productive.

In the grand scheme of things, this was merely an application of utilitarian principles to management. After all, the 18th Century British philosopher Jeremy Bentham noted that there were two sovereign masters of the universe: pleasure and pain. We seek to maximize our pleasure while minimizing our pain. This observation led to two fundamental maxims: the first maxim in politics was that a government responsive to the will of the people would seek to achieve the greatest happiness for the greatest number of people. And the second maxim in economics that firms would seek to maximize their profits and minimize their costs while consumers would seek to maximize their utility while minimizing their costs. This, of course, became the definition of efficiency that we are all familiar with: producing more for less.

Applied to the worker, Taylor argued that if workers were offered inducements like more pay, leisure time, and other benefits they would produce more and add to the efficiency of the firm. But if they were lazy, they would be punished by being docked or even terminated. And yet, there was more to the Taylorite argument than simply offering carrots and sticks. Contrary to popular managerial misconception, Taylor wasn’t saying that it is necessarily O.K. to fire unproductive workers. Rather, it was management’s responsibility to make them productive.

Taylor also observed that there were two types of workers:“first-class” workers and “second-class” workers. The first-class worker was naturally the high quality worker who was driven to achieve success. But the second-class worker was either lazy, lacking in ability, or simply needed motivation. Taylor actually argued that it was management’s job to take the second-class worker and transform that person into a first-class worker. A manager who could not do this was simply not a good manager.

American industry, especially in the global economy, has taken the path of least resistance. It is easy to get rid of the second class worker, and instead of offering carrots to get increased output from workers, that can be achieved simply through the threat of being fired. Or as Marx rightly noted, a capitalist system relies on an industrial reserve army of labor — a massive presence of unemployed — in order to discipline workers. At the same time, the classical view of workers as merely being factors of production also meant that they no longer had to be viewed as individual beings capable of human agency. They became as interchangeable as the pieces they were assembling on the line in the factory, which also meant that could just as easily be discarded..

Were we to heed Taylor’s exhortation that manager have a responsibility to make first-class workers out of second-class workers, it should become obvious to all that to cavalierly assert that low-wage workers are simply not worth more because they are low quality is in fact a contradiction of the Taylorite principles that management would have you believe that it is adhering to. To not pay low wage workers more on the grounds that they aren’t worth it effectively absolves managers of their responsibility while shifting the burden onto society’s most vulnerable.

Let’s concede for a moment that these critics may be right that they are not worth more. Instead of thinking selfishly about how they can continue to lower costs off the backs of workers, who lack individuality because they are interchangeable parts, they should ask how can we all work together to make for a more prosperous economy. That is not going to happen by paying low wages. Perhaps low-wage workers are second-class because they are underpaid. Management could just as easily respond to calls for an increase in the minimum wage by investing more into the human capital of their workers so that they will become first-class and offer greater value in exchange for the higher wage.

Clearly if we are going to employ a carrot-and-stick approach, it needs to be applied to managers as well as workers. In part, Taylor was assuming that managers needed to understand that if they could not make their workers into first class workers, it was really their jobs on the line. To simply claim that low-wage workers aren’t worth more, is to let the managers off of the hook, and we as a society ultimately incur the higher social costs by having to subsidize manager’s failed leadership with the necessary supports for low-wage workers.

Of course, there is the more basic question of how we even determine what a person is worth. On what basis could we say that one is only worth $7.25 an hour compared to $10.10? That is a value judgement for which there is no universally accepted objective measure. The point about the minimum wage is, contrary to the view that it is a feel-good measure, it is a reference point for the overall low-wage labor market. It has become, perhaps by default, the accepted guide for what low-wage workers are worth. It has become a necessary labor market institution to ensure that those at the bottom end can make a liveable wage.

For those on the political right who like to tout family values, it needs to be emphasized that paying workers liveable wages that enable them to support themselves and their families in dignity is ultimately a matter of family values. To then oppose minimum wage increases on the grounds that these workers aren’t worth more would appear to strike most ordinary observers as being hostile to family values. Surely we can see the hypocrisy.

April 29, 2014

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