Conservatives Concerned About the CBO and the Dignity of Work Should Consider a Higher Minimum Wage

Feb 13, 2014Mike Konczal

It’s a shame that Ron Unz’s conservative case for a higher minimum wage gets caught up in the debate over immigration politics, because the arguments are broader and more fascinating, and incredibly important to have as part of the debate. This is especially true in light of last week’s CBO report, which has sent conservatives running to the barricades over the impact of Obamacare on waged work in this country. The conservative case for a minimum wage would address the two main concerns the right has displayed on this topic.

Broadly speaking, as summarized by Josh Barro here, there are two separate elements of the conservative take on Obamacare and the CBO’s findings. The first is that it allows people to break “job lock” and leave the labor market. This means there are fewer people working, which concerns conservatives because, as Ross Douthat put it, paid wage labor is “essential to dignity, mobility and social equality,” and they “see its decline as something to be fiercely resisted.” [1]

The second is that, because of the subsidies that are given to low-wage workers, these workers face a higher marginal tax rate. If there are subsidies for low-wage workers, as those workers make more money those subsidies are phased out. The fact that they are losing money while earning more money, or that a higher income means a smaller subsidy, functions like a tax. And this means that workers will work a bit less. Liberals in general don’t like this (though they do like that both effects will increase wages, as well they should), but understand it is going to be part of any type of means-tested income support.

Where does the minimum wage come in?

To address the first complaint, it’s important to keep in mind that the “dignity of work” isn’t a static concept, but tied directly to the conditions of work itself. If you ask the people striking against their low-wage job right now, you’ll find that things like working unpaid hours or erratic scheduling are also part of their complaints. As a result of these conditions, the work is socially tagged as undignified, degrading, erratic, and unpredictable. [2]

So driving the wages straight up can help counteract this. As Ron Unz writes, “consider the impact of a sharp rise in the minimum wage, sufficient to remove the taint of poverty overhanging so many of our lower-tier jobs.” This would, in turn, make lower-tier service jobs more attractive from a social perspective, increasing the level of dignity for those who hold them. This would in turn make people much more likely to seek out and hold said jobs. As I’ve argued elsewhere, by reducing vacancies, encouraging job searches and tightening the low-wage labor market, a higher minimum wage would also de facto give low-wage workers more power in the workplace, which would help reduce the petty tyrannies that come with low-wage work.

The second issue comes from effective marginal tax rates, or the burden low-wage workers face as income support is phased out. And the common bipartisan alternative to the minimum wage, increasing the earned-income tax credit (EITC), doubles down on this. There are ways to manage it and make the effective tax rate have less of a bite. But it’s essential to the DNA of means-tested income support that it’ll eventually phase out, and as a result impose some higher marginal tax rate. Conservatives who support a higher earned-income tax credit play into this as well.

The minimum wage, however, poses no such higher effective tax rate. If you work more hours at the minimum wage, there’s no effective tax because the minimum wage doesn't phase out. So if the slight effect of higher effective tax rates of Obamacare is driving you up the wall, perhaps now is a good time to consider this positive side of the minimum wage.

Additional:

I’ve seen many people point out that there’s an administrative simplicity and cost-effectiveness to the minimum wage over the EITC, amplifying the case for them to act as complements to each other instead of substitutes. But I had no idea that, according to the IRS and Treasury, the EITC’s improper payment rate is between 21 and 25 percent. This includes overpayments as well as underpayments.

That simply doesn’t happen with the minimum wage. And if you are a conservative who wants to “simplify” government, or if bringing the impact of government as close as possible to those who need help - say directly in the workplace rather than in the complicated and confusing tax code administered by a faraway IRS - is important to your subsidiarity view of policy, a bigger role for the minimum wage is essential.

[1] This will sound snarky, but I genuinely mean it: I want to see a conservative take on Nickel and Dimed, where maids cleaning bathrooms experience “social equality” with the people paying them.

[2] Remember that Dave Chappelle comedy skit about the person who gets a fast food job to impress his community, and finds that it isn’t quite as dignified as he thought?

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