Raising minimum wage is actually totally capitalist

The escalating debate over minimum wage in this country is often framed in very simplistic liberal versus conservative terms, with the assumption that liberals support higher wages and conservatives do not. The truth, though, is a bit more complicated, for while many conservatives do resist a higher minimum wage, they shouldn’t, and not just because higher minimum wages are the right thing to do in an ethical sense for those who believe that poverty is a problem and higher wages will help solve it. They’re actually the right choice from a purely utilitarian and capitalist perspective, something many conservatives are perfectly aware of—so it’s telling that they continue to oppose a higher federal minimum wage.

Opponents to higher minimum wage typically cite federalism (all states should be allowed to govern themselves), free market capitalism (companies should be allowed to do what they please without interference from the government), undue burdens on companies (it will be too expensive to implement higher wages), and job loss (created by that undue burden and a lack of willingness to invest in younger, inexperienced workers who need training). All of these arguments, however, don’t hold water in the face of actual economic research, including that conducted and supported by some conservative organizations: In other words, conservatives are telling other conservatives to get over it with respect to the minimum wage, and diehard opponents aren’t listening.

The federalism and unconstitutionality argument doesn’t hold water; there’s a legal precedent for a federal minimum wage, and opponents really aren’t going to win that one, which they probably know, but they have to throw up that flag anyway. The free market capitalism argument is equally ridiculous, given that the government provides constant boosts and support to companies, especially large ones, so they’re hardly operating without interference. Studies show, furthermore, that the claimed undue burden and job losses aren’t realistic, which is where we really get down to business. So to speak.

Higher wages do necessitate a reallocation of corporate funds, but not necessarily in the way some conservatives are claiming. In the immediate short term, they’re actually going to save companies money, because of one little secret: Turnover. Most low-paying jobs have extremely high churn rates as employees constantly cycle in and out in search of better work. Retention rates are a serious problem, and they’re an expensive one. For every departing employee, companies need to go through reams of severance paperwork, and they need to invest more resources in advertising for, hiring, and training a new employee. Cutting down on turnover increases efficiency, and saves money.

More highly paid workers also tend to be more efficient, to improve the quality of their work, to show up for work more, to be less prone to disciplinary problems, and to work harder. Paying employees better pays off by generating more direct profits for the companies they work for, which knocks down a very serious conservative argument against raising the minimum wage. Companies can hardly whine about facing an undue burden when they’re actually looking at the prospect of reduced employee-related expenses paired with an increase in wages. Notably, corporate valuation also increases, as higher wages are also associated with a dramatic uptick in stock value, the result of ethical investors flooding into the market and pushing demand up.

This isn’t the only reason higher wages directly benefit parent companies, though. Put simply, people with more money to burn tend to burn it. This isn’t just about improving quality of life, but also about increasing disposable income, and when people have money to spend and they spend it, that money has to end up in someone’s pockets. Those pockets are, rather naturally, those of the companies providing the products and services that people want. Pay people more, they spend more money, everyone wins. Which is a pretty great deal.

Moreover, it’s one that should sound familiar to conservatives. The Bush-era tax cuts were specifically promoted as economic incentives. Bush and his advisors pushed them on the grounds that people with more money in hand would spend it, particularly on big ticket items they wouldn’t be able to afford otherwise. Facing the beginnings of a recession, Bush wanted to bolster domestic spending, and conservatives went along for the ride, concealing their virulent opposition to taxes behind the convenient shield of bolstering the economy.

The problem was that they went about it in the wrong way. Cutting taxes doesn’t increase economic activity: Increasing wages does. Slashing tax revenue just means that the government has to borrow more money, descending deeper into insolvency, and it also means that the government starts cutting needed social services, creating increased need in the population in general. Raising wages retains tax revenues (and actually increases them) while still promoting economic growth. Advocates for increasing money in hand to contribute to economic stability should be all over a higher federal minimum wage.

Resistance to the minimum wage in the face of studies arguing for it illustrates a clear and stark truth. Conservatives aren’t concerned with economic growth or the health of society in general, nor are they interested in the more efficient, cost-effective path to a common good (pay people more and they won’t need social services!). They’re interested in creating a world that reinforces existing power structures, and a world where equal access to society and the alleged American dream are available to only a few—because this isn’t about leveling the playing field, but about helping your friends get ahead.

Image: ‘Minimum Wage?!,’ Denis Bocquet, Flickr