A Minimum Wage Versus a Living Wage

A decade since the last increase, and after several Democrats used the issue to win votes while campaigning during the mid-term elections, the House of Representatives voted to raise the Federal minimum wage on January 10th, after a similar bill was voted down in the Senate a week earlier. The House legislation is now en route to the Senate where Republicans are seeking to add a “compromise” of more tax-cuts for businesses. Given many tax cuts they have already received over the past period, this is less a compromise than the norm. Democratic Senate Majority Leader Harry Reid has indicated that the Democrats will vote along side the Republicans for the pro-business additions to the bill. Bush also came out “in support” of the raise, but added he was interested in tacking on more tax breaks and government bailouts for corporations. In addition to helping his big business partners, Bush is attempting to save some political face after a massive voter turn out against his party last November, and prove his ability “to work in a bipartisan manner”, i.e. to work with the Democrats to rosy up image of the US capitalist system.

What’s in the raise?

The bill provides for a rise in the national minimum wage to $7.25 an hour, a $2.10 raise over the current level of $5.15. The rise will be introduced in stages, with the first increase taking place within the first sixty days of the measure’s passage, rising 70 cents to $5.85. The next increase would not follow until one year after with another 70 cent increase to $6.55, and again, following another full year, the final increment of 70 cents would be added, for a total raise of  $2.10 stretched over 26 months (after already waiting ten years).  

A raise of $2.10 per hour will positively affect the lives of many working poor, but it in no way makes up for the decline in real wages over the last few decades.  It in no way makes up for the loss of millions of high-paying manufacturing jobs over the last few years.  It does not cover the millions of undocumented workers who are forced to live in the shadows of U.S. society, working for pennies, often under slave-like conditions. And it is a drop in the ocean of multi-million dollar raises, bonuses, and dividends given out year after year to CEOs and Wall Street stockholders. Corporate profits rose 21.3 percent last year and the average CEO currently makes more than 800 times what minimum wage workers are paid. To put it in perspective, consider the following: if the minimum wage had risen at the same rate as CEO pay since the 1990s, the current minimum would be around $23.00 per hour – just a bit more than the $2.10 that is being debated and “compromised” by billionaire Congress. 

The first federal minimum wage was introduced in 1938, at 25 cents per hour. Since then there have been only eight increases. This is contrasted to the continuously and uninterrupted rise in the cost of living, which doesn’t sit around waiting for congressional approval! The interim periods between each raise in the minimum wage are nothing less than losses in real wages by working people. This has been the case in the last ten years, and even more so if we go back to 1968. The average wage has fallen 5 percent and the minimum wage has fallen 43 percent once adjusted to inflation during this nearly forty year period.  

Conversely, this is a clear gain for the capitalist class, as lower wages translates into higher profits, especially if we take into account that productivity rose 111 percent over that period. The pundits of capitalism may lie, but the figures don’t – working harder doesn’t get you ahead! 

The current rise in the minimum wage is in many ways a half measure since more than half of the country already operates above the federal standard. Twenty-eight states and the District of Colombia currently have minimum wage laws that exceed the current federal level, several of which are already at or higher than $7.25. These are mainly states with heavier populations: California, Massachusetts, Connecticut, etc.  

The rise in the minimum may provide a positive short term effect for many workers, but there is no telling when the next rise will come. This gain can also quickly be eaten up by inflation, which is on the rise. Importantly, there is no provision or even a mention by the Democrats of tying wages to the consumer price index and inflation. When the cost of nearly everything else: rent, gas, food, education, heath-care, etc. all rise continuously, these periodic minimum wage “raises” can at best only partially offset the continuous pay cuts we suffer in real terms.

Wages – Living or Minimum?

Karl Marx, who spent a great deal of time and effort in analyzing the hidden economic mechanisms of capitalism, had the following to say: “Wages are only a special name for the price of labor-power (or the ability to work)…it is the special name for the price of a peculiar commodity, which has no other repository than human flesh and blood.” In other words, under capitalism, workers, who own only their ability to work, stand like all other commodities: up for sale on the market. In essence, a wage is our market price at any given moment. 

In a sense, all wages reflect the minimum cost of the labor-power commodity. Frederick Engels, who worked alongside Marx in uncovering the workings of capitalism, points out that, under normal conditions of capitalism even a “fair day’s wage” is only what the market fetches i.e. the minimum necessary cost of labor power for any particular field of work. For the capitalist class, hiring labor power is just another cost of production. They therefore seek the lowest possible costs in order to realize the greatest margin of profit. It’s quite simple: all other things being equal, lower wages equals higher profits.  

Under capitalism, labor is indispensable to creating profit. Workers must therefore be maintained like all other elements of production.A legally mandated minimum wage is just the legal form that guarantees a certain minimum level of wages for at least one layer of the working class.  It is a form of market regulation, an effort to stave off growing discontent, and to pump a few more dollars into the consumer market. In this case it is also a demagogic attempt to gain support for the Democratic Party, a party that presents itself as the “kinder, gentler” face of capitalism, but which in reality is a party by and for the bosses.  

A living wage differs from a minimum wage in that a minimum wage is simply a set level or dollar figure i.e. 25 cents, $5.15, $7.25 etc. On the other hand, a living wage is a positive right to a decent standard of living. It is nothing more than a legally set real wage, tied to inflation. That is, the purchasing power of wages are tied to the real prices of other commodities. For example, as food prices rise, so do wages. A living wage maintains the standard of living and provides economic stability for working people. 

It is impossible to simply reform capitalism to make it more “fair”. At its core, capitalism is a system of exploitation of labor for profit. This makes a living wage for all an impossibility, as it would bring out all the contradictions of capitalism. So while Marxists support every material and social gain won by workers under capitalism, at the same time we realize that these limited gains are not an end in and of themselves, but function within the limited bounds of capitalism. Under pressure from below, the ruling class offers a crumb here and there in order to keep order. We think working people deserve more than crumbs. 

Yes to a minimum wage increase! Yes to a thousand and one of them! But the story cannot end there.  We need a living wage – one where workers do not have to wait in economic limbo for decades. Working people don’t need periodic token rewards tailored to placate and win votes. Rather, we deserve stability, dignity and access to all the requirements of social life: a real living wage.  

In the last presidential election, workers’ interests showed through the political contradictions inherent in a two party system. For lack of an alternative, voters were forced to choose between two anti-worker candidates, and in the end, Bush won.  But the instinctive class interests of working people were expressed in the minimum wage measures that appeared on the ballot in several states. The states of Nevada and Florida, which both went to Bush, both had ballot measures to increase the respective minimum wage of each state. In Florida, the measure passed 71.3 percent to 28.7 percent; and in Nevada, it was approved 68.3 percent to 31.6 percent. Minimum wage measures also passed in the other four states where the question appeared on the ballots.  

This highlights the enormous potential and need for a workers’ party in the US. With a fighting program of class independence and and a socialist program to improve workers’ lives, such a party would receive massive support from working people in every part of the country. Workers need to break with both of the bosses’ parties and form one of their own, one that clearly expresses the real interests of the working class. 

The interests of the working class majority transcend the narrow limits of capitalism. We don’t simply want to raise wages within the franework of capitalist exploitation, but to abolish the system of wages altogether.  To achieve this, we must abolish capitalism, thereby abolishing class society altogether, a form of society in which one class exists as the servants and wage slaves of another. Therefore, the real demands of our class are transitional, as they begin with the present conditions of capitalism, but can only be fully realized and maintained through the socialist transformation of society.  This means workers’ control over society and a democratically planned economy. 

From the program of the WIL:

  • A living wage for all
  • For a national minimum wage of at least two-thirds of the average wage with no exceptions.
  • For a siding scale of wages tied to inflation.


Join us in fighting for this perspective! 

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