There is a lot activity and buzz around the struggle to raise the minimum wage. We add our perspective to the broader discussion with this Q&A article.
How are wages determined under capitalism?
The value of a commodity is the average amount of socially necessary labor power needed to produce or replace that item. In capitalism, workers are treated as commodities, in that we sell our labor power to the capitalists for a wage. Therefore, wages approximate what is needed in a given year to keep the worker and his family alive, in order to continue providing his or her labor, and to produce the next generation of workers. This, of course, varies by time and place and the given standards of living achieved through class struggle in the country in question. The cost of keeping a worker and the family alive in the US today is more expensive than, say, India today, or the US in 1914. Specific wages may be higher or lower than the value of labor power, in that the supply and demand of labor and the conscious organization of the working class, or lack thereof, can force wages above or below its average value at a given moment.
Why are some jobs paid higher wages than others?
Once a person is hired by a capitalist, he or she must be able to do the job. Unskilled jobs take little or no training and the boss can hire a person and then tell them: “get to work.” Other jobs require certain kinds of skills, know-how, experience, and education. This means the time and labor taken to attain this skill increases the cost of replacing this worker, hence the higher wage. Think of electricians and plumbers, who must go through vocational school and apprenticeships in order to master their trade.
What role do unions play in increasing wages?
Unions unite the workers into a force that can shut down production and stop the profit-making for the boss. As a result, union workers have traditionally been able to earn more in wages and benefits. The average union worker is today paid $3.51 more per hour in wages, and earns $7.11 more per hour in benefits than comparable non-union employees, although the bosses will sometimes raise compensation of non-union employees when they are threatened with possible unionization.
Why are wages going down for the working class?
However, as Marx explains, such increases, unless defended and expanded, are a temporary situation. In the short term, unions can bring about some reform, but the capitalists will respond in the long run. Higher wages, benefits, and better working conditions raise the cost of labor and this (all other things remaining the same), cuts into the surplus value (profits) that the capitalist lives for. Hence, the capitalists find ways to reduce wages and benefits, weaken and destroy unions, or they move production to a location with cheaper labor. This explains the motivation for moving production to the mostly non-union South or to underdeveloped countries where the cost of living is very low and labor protections are virtually nonexistent. This has eliminated millions of higher-wage jobs in the US, and put pressure on the remaining union workers for “givebacks.” The only way out of this miserable choice is to challenge the capitalist system as a whole.
How does the fight for a higher minimum wage link up with the struggle for higher wages in general?
In the past, the labor movement fought for a national minimum wage, and this was finally conceded by the capitalist government of Franklin D. Roosevelt in 1938. The minimum wage was set at $.25 per hour, about $4.23 per hour in today’s money. This battle was to help raise the wages of the lowest-paid workers, and this would help the bargaining power in the short run of the entire working class. There were a number of increases in the minimum wage after 1938, and it was $1.60 per hour in 1968 (about $10.96 per hour in today’s money). And if the minimum wage had kept up with worker productivity since 1968, it would currently be nearly $22. Today, the federal minimum wage is only $7.25 per hour.
World War II created a sharp decline in the supply of labor as many men and women were sent overseas and war production greatly reduced unemployment. The postwar capitalist boom of the 1945 to 1974 period also created favorable circumstances for American workers, and the average living standard increased, along with real wages and benefits. However, capitalism has inherent contradictions, and during an expansion, it plants the seeds of future crises by creating overproduction. This ended the postwar boom. Also, as wages and benefits increase, this (along with increased investment in machinery), tends to reduce the rate of profit. The capitalist must then take measures to reduce labor costs to restore their rate of profit. This is why the 1970s was the beginning in the US of the demand for givebacks in collective bargaining. This is also why the minimum wage began to lose value and not keep up with the rate of inflation. Big business needed real wages to be reduced to increase their rate of profit.
How can a minimum wage that can really improve the lives of workers be won?
A useful formula for determining the starting point for a minimum wage that can truly help low-wage workers is two-thirds of the average hourly wage. This works out to around $16 per hour, and we would add, must be accompanied by full COLA (cost-of-living adjustments to ensure the wage keeps up with inflation). This $16-per-hour-tied-to-inflation wage, must be implemented immediately, as any “phase-in period” means the wage will lose its real value to inflation. The key to winning this is a united labor movement. All of the unions linked together—over 13 million members, retirees, and their families, friends, and neighbors—alongside the millions of unorganized workers, have a lot of potential power. The labor leadership must take the lead on this. The only way to achieve this is for labor to break with the parties of big business and run independent labor candidates in the upcoming elections. Worker candidates pledged to accept a workers’ wage if elected, and to fight for a $16-per-hour minimum wage and full COLA would defeat many of the hated politicians of the two big business parties.
But the AFL-CIO leadership is not doing this. They fight for very small increases in the minimum wage and their policies are based on appeals to the Democrats and Republicans. What can we do?
Yes, the current AFL-CIO leadership accepts capitalism and the logic of the system. Their demands are not based on the needs of the working class but on what is “realistic” to the capitalists and their politicians. Rank-and-file members need to organize in their unions to change these policies and put the leadership on the spot—or replace them. The labor leadership’s policies are “too little, too late,” and the real value of the minimum wage continues to slide as do wages in general. This must be turned around and can be—if we have the right strategy!
How will big business react to a higher minimum wage?
Let’s say the labor leaders set up a mass labor party, won control of the government, and a $16 per hour minimum wage were instituted. Would big business just stand there and pay it? Both history and current events show that the capitalists will fight against every reform that workers demand, up to and including sabotage. Venezuela is a particularly good example. The bosses would intimidate workers and lay them off. They would threaten to move production elsewhere. They would hire armies of lawyers to find loopholes to prevent the enforcement of the new law. In other words, this is about much more than just one law about the minimum wage. If it is serious about defending all workers’ interests, the labor movement has to understand that the fight for a higher minimum wage is also a fight for socialism. A government of the working class would nationalize the top 500 corporations, to be run democratically under workers’ control in the public interest, as well any other companies (including the so-called not-for-profits) who would dare threaten or lay off workers or in any other way not comply with the new minimum wage. Workers at each workplace would need to be organized and vigilant to defend their interests.
What about the new minimum wage law in Seattle?
Seattle shows that if people are mobilized and fight for change, the big business politicians will grant some concessions, but along with this, they will try to co-opt the movement. The upset election victory of Socialist Alternative’s Kshama Sawant to the Seattle city council on a platform for a $15-per-hour minimum wage showed how tired workers are of the status quo. This was combined with a referendum to raise the minimum wage in SeaTac, a neighboring city, where the Seattle area airport is located. The campaign “15 Now!” was launched in the aftermath of the elections, and received a lot of grassroots support.
In response, the Democratic mayor and city council passed a bill which nominally sets the minimum wage at $15 per hour, but only for some workers, and which will not be fully phased in until 2017 (remember: in three years, $15 will be worth less than today). The approved plan also institutes a series of unequal tiers and blatant counterreforms, such as a sub-minimum wage for youth and disabled workers, counting tips and healthcare benefits toward the minimum wage, and a longer phase-in for those working for an employer with less than 500 employees.
Regrettably, Sawant helped set the stage for these concessions when she did two things. First, she joined the mayor’s advisory committee on the minimum wage, made up of business and labor representatives. Such a committee fosters illusions that the minimum wage can be worked out as a deal through negotiations at the top, with employer-employee collaboration, rather than it being the result of class struggle. Secondly, Sawant herself proposed phasing in the $15 minimum wage for workers at employers who employ less than 250 people, and at so-called not-for-profits (many of which are enormous companies with well-paid executives and low-paid workers). This divided the working class, precisely when when maximum unity was needed.
Instead of “15 Now!” it became “$15 for some, significantly less for others, phased in over a period of years.” In the end, Sawant actually voted in favor of the mayor’s watered-down, pro-big business proposal, and then passed this off as a great victory for socialism and a model to be emulated nationally. This reflects a class-collaborationist and reformist approach—trying to fix capitalism one tiny reform at a time through deals with the ruling class, rather than organizing workers to transform the entire system. Genuine socialists must always tell the truth: whatever reforms might be attained, unless this system is changed we are stuck with capitalism—and that means horror without end. There are no shortcuts to achieving this.
What about small business and their ability to pay the higher minimum wage?
Many small businesses complain about paying higher minimum wages, but their complaint does not mean that they cannot afford to do this. It might mean that the profits of some of these businesspeople might be a little lower. A workers’ government would seek to include small business in a socialist planned economy, so they would have customers for their goods and services, along with cheap credit. If a socially useful and necessary small business can show, by opening its books to the workers, that the higher wages are going to force it to close, then a workers’ government could use tax relief, and in some cases, even subsidies to allow them to survive. It would also give them the option to voluntarily integrate into the broader planned economy, where economies of scale would reduce these kinds of hardships. However, the workers should not be the ones to pay for their employer’s “tough situation.”
Can “15 Now!” and similar campaigns really win us higher wages?
The fact that the AFL-CIO leadership has taken no action to invest the necessary resources to mobilize people for a higher minimum wage has created a vacuum. The Service Employees International Union (SEIU) has launched “Fight for 15” and “Fast Food Forward,” and small groups like “15 Now!” have been set up to organize around this issue. This is a good thing. However, these campaigns will lose effectiveness if they do not tell the truth to those who get involved. The real power to change society is with the whole of the labor movement, not with small groups that pop up overnight. These groups should focus workers on the trade unions and their leadership, helping to transform them into fighting organizations, to break from the Democrats and Republicans, and to build a mass labor party. Otherwise, the labor leaders are left off the hook. For example, in a “15 Now!” brochure, it says: “The only way we can counter the power of corporate America is by building a massive grassroots campaign with local neighborhood and campus groups, town hall meetings, mass rallies, and strikes.” Unfortunately, this is misleading, as it implies that such a mass movement can be built with very small forces, and it makes no mention of the only force that can actually get the job done: the labor movement.
Serious people know this is a tough fight and a long one. The fight for a significantly higher minimum wage goes hand-in-hand with the fight to change society. If you are ready for this long-term struggle, contact us!