Law Students

Old Liberalism and New Labor

By "PG"

I liked Barbara Ehrenreich's Nickel and Dimed, but this remark from her blog (which I read for the first time just now) bothered me: "And what about the unemployment rate? The old liberal faith was that 'full employment' would create a workers' paradise, with higher wages and enhanced bargaining power for the little guy and gal. But we've had nearly full employment, or at least an unemployment rate of under five percent, for years now, again, without the predicted gains. What the old liberals weren't counting on was a depressed minimum wage, impotent unions, and a witch's brew of management strategies to hold wages and salaries down."

I hadn't thought this was a particularly liberal faith -- rather, it's an economic one. If unemployment goes down toward zero, that means there's a very high demand for labor relative to the supply. If the demand for labor is outstripping the supply, this will pressure the price of labor upwards. However, like many economic models, this assumes the amount of labor is somewhat static. For minimum and other low-wage jobs in particular, of course, it's not. The annual influx of immigrants, both legal and illegal, means that the demand won't outstrip supply and there won't be the upward pressure.

To take Ehrenreich's favored target, Wal-Mart, let's assume that managers are indeed pressuring their lower-level employees to work more hours, not get breaks, etc. If there were a shortage of labor to fill those positions, management wouldn't be able to do this, because people who got disgusted and quit wouldn't be easily replaceable. Shelf-stockers and cashiers will be exploited for greater productivity up to the point that it causes a loss in productivity numbers to have to hire and train new employees.

Not to get all Lou Dobbs about immigrants as a menace to Americans, but discussing the effect of full employment on wages, without noting the effect that increasing the labor supply would have, is just unhelpful. It gives Ehrenreich a false rhetorical victory where she gets to claim that the old faith has led us astray. It also is part of a bad habit among liberals not to want to admit that immigration isn't a boon for everyone. That unwillingness is going to carry an electoral cost as the folks whose wages haven't risen figure it out instead of just buying Ehrenreich's explanation that it's the government's fault (for not increasing minimum wages) and the unions' fault (for not getting more members) and management's fault (for being evil incarnate). Legal intervention, collective bargaining and kinder management may be necessary remedies, but the lack of them is not the root cause of individuals' lack of bargaining power. You don't have to externally force the owners of capital to share more of it with the workers if the workers' ability to walk away would impose a harm on the owners.

Full post as published by De Novo on January 14, 2008 (boomark / email).