Wednesday, July 19, 2006

Minimum Wage Legislation - Race, Immigrants, and Economic Logic

The Center for Economic and Policy Research (CEPR) reported toady that Kennedy (D)/ Hoyer (D) ammendment to the Defense Appropriations Bill was approved by the Senate and is now waiting approval in the House. The amendment would change the minimum wage from 5.15 to 7.25, thats about 1,500 more a year for minimum wage workers. Todays minimum wage is the lowest its been in 50 years.

The Civil Rights Act of 1965 made racial discrimination illegal in the labor market. These political changes marked the increase in power to legislate the highest minimum wage to workers; well that is mostly people of color who were looking for opportunities outside of the Jim Crow system. The subsequent decline in the minimum wage reflects the rigidity of a political economy which consumes labor through constructing racial difference. The decline of profitability by American industries following the Civil Rights Act posed challenges to global competition in monopolistic manufacturing industries, such as the automotive and textiles industries. A series of minimum wage "adjustments" were made to secure the profitability of American industries but in the end, American businesses sought the labor of non-citizens in foreign lands whose laws did not protect wages nor against discrimination (that is not to say that everything here in the US was fine, but that legal discourse made differential treatment a political liability). Now industry is bringing manufacturing back to America, because the new wave of immigrants suffer from historic subjugation and under-representation and are kept fearful in society by restrictive harsh immigration laws making them a cheap source of non-citizen labor (not subject to anti-discrimination laws for citizens).
As the cost to producers goes up, the harder industry leaders lobby to lower minimum wage (this often comes in the form of complaints about global competition, recession, and inflation). The Producers Price Index (an index which measures the general cost of production for all commodities) was fairly steady throughout the first half of the 20th century, then came the Civil Rights Act and growing scarcity of resources. Scarcity of resources means higher costs in research and development. Below is a graph of the PPI from 1913 to 2006 the average production of all commodities. The begining of the upward slop falls squarely on the late 60s.

When the cost of production increases producers pass that cost on to the consumer with higher prices. The higher that prices go, the more money people must spend on necessities. The price of milk over the past few decades ('80-'97) speaks to this.

So on the one hand we have an economy that desires and creates cheap laborers, but on the other hand the economy needs consumers in order to generate the profits that all business seeks. If the income for the general population is too low, businesses will see a decline in thier profitability and an increase in unproductive inventory. In this manner, the political economy is not meant to eradicate poverty but to generate it and manage poverty within certain thresholds. Milton Friedman, knew that unemployment and interest rates were connected and sought ways of managing this interaction. The debates about legalizing immigrants over the past year come to intersect squarely with the issues of minimum wage and poverty regulation. To be sure, immigration reform is not only about brown bodies in a white nation, but also about new elements that challenge the tolerance of previous poverty regulation thresholds. For instance, the reaction of American industries to the Civil Rights Act. The guest worker program is an excellent example of poverty regulation, disposible brown labor.

The usual debate surrounding immigrants and the economy regards the mantra, "they took our jobs." When the Cuban Muriel boat immigrants where absorbed by the Floridian economy in the 80s thier wages did sink as a result of an increase in the number of workers searching for a limited number of jobs (many economists believe labor markets to function this way). The reality is that the economy makes jobs for them or they make jobs for themselves. The last economic census said that new immigrant businesses accounted for a majority of the new businesses for 2005. No true capitalist would turn away from the opportunity to extract some surplus value from a willing worker. Not even a racist capitalist would turn down the opportunity to stick it a brown worker. Latino immigrants comprise 40% of agricultural jobs, 33% of grounds maintenance jobs, 22% of food preparation jobs, and 22% of construction jobs. The presence of cheap laborers creates the incentive to invest in industries that can exploit them. Without thier presence, the unfavorable forcasts of profitability would prohibit such investments.

All in all, the minmum wage increase is likely not to pass the House and the extra 750,000,000 that would be paid to the lowest wage earners will stay in the hands of white corporate shareholders.


Blogger Jason Chang said...

Sorry, Blogger won't accept my pcitures for this entry. I'll try to put them up later on in the day.

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