Sunday, February 12, 2012

The Steady Devaluation of Human Labor

Over the years, inflation has generally gone up and the minimum wage has been adjusted periodically to bring it in line with the higher cost of living. Raising the minimum wage usually involves a big political fight.

In 1970, minimum wage was $1.60 per hour. Now it's $7.25 per hour, an increase of 453%.

However, due to inflation, it takes about $9.28 in today's dollars to buy what used to cost $1.60 in 1970, an increase of 580%. Minimum wage statistics are found here and an inflation calculator is available here

The graph shows that the minimum wage, in constant dollars, has had its ups and downs since 1970 but the overall trend indicated by the straight black line is down. The numbers show that the American economy puts less value on the entry level worker than it did in 1970. Why is that? Are minimum wage workers less intelligent now than they were forty years ago? Are they lazier?

The reason probably has a lot to do with the rise of the global economy and cheaper Chinese labor. It may also have to do with basic attitudes toward labor. Some see labor as a commodity, while others believe it is not.  

Here are some remarks made by Representative Steve King (R-IA) on the floor of the House of Representatives last year:

"Labor is a commodity just like corn or beans or oil or gold, and the value of it needs to be determined by the competition, supply and demand in the workplace."

That very attitude toward workers was a powerful motivator during the early days of the labor movement. The idea that people were on par with animals, equipment, and raw materials was offensive and demeaning to workers who wanted a better life for themselves and their families.
Samuel Gompers, cigar maker-turned-labor organizer and founder of the American Federation of Labor in the early 20th Century, had a different business ethic related to labor and said this: “You cannot weigh the human soul in the same scales with a piece of pork.”

Labor advocates actually managed to insert a statement affirming the status of human labor in the 1914 Clayton Antitrust Act“The labor of a human being is not a commodity or article of commerce.”

So, is labor a commodity or not? The recent remarks by Rep. Steve King stand in direct opposition to the those of Samuel Gompers and the Clayton Act. The fight has gone on for decades, but, based on the above chart, it looks like King's side is winning.

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