The Living Wage: Building a Fair Economy.

Robert Pollin and Stephanie Luce The New Press, $22.50, 235 pp.

John Buell

Despite the conservative political and economic tenor of the last two decades, one progressive initiative is making a comeback: Proposals to expand the number of workers eligible for and/or to increase the minimum wage are on the table not only in Washington but in many localities. Not surprisingly, however, even modest enhancements of minimum-wage law evoke fierce conservative counterattack. Last spring, Washington Post columnist James Glassman intoned: "All else being equal, if you raise the price of something (for instance, labor), then the demand for it (for instance, by employers) will decline. That's not just a theory; it's a law."

Two respected social scientists, economist Robert Pollin and sociologist Stephanie Luce, address these longstanding conservative arguments in this short, accessible book. Partisans on both sides can benefit from their analysis. Pollin and Luce put forth at least eight good reasons why federal and state policy makers should consider an increase in the minimum wage:

1. History justifies an increase. Historically, the seeds of future stagnation have been laid when corporations and markets were permitted to exercise total control over workers' wages. The 1880s and 1920s are examples of eras of corporate hegemony that soon brought on economic woe. More important, the now much-lamented era when unions and governments placed a floor under wages (ca. 1945-70) saw the nation's fastest and most prolonged period of economic growth.

2. Corporations can afford the increase. Even after the recent federal boost in the minimum wage to $5.15, today's jobs pay 30 percent less in real, inflation-adjusted dollars than they did thirty years ago. It is important to remember that if the minimum wage had increased as fast as worker-productivity gains have in the last thirty years, it would now stand at over $11 an hour. Pollin and Luce also show that municipal minimum-wage ordinances, which compel recipients of city contracts to pay all workers a "living wage," defined as between $6.50 and $7.50 an hour, have amounted to little more than 1 percent of total production costs for most contractors. Firms have been able to absorb most of the costs, through further productivity improvements or simply by accepting lower profit rates. Jobs have not been lost.

3. Many jobs at or just above the minimum wage are in the service sector and cannot easily be relocated out of the country. Two of my home state's neighbors, Vermont and Massachusetts, have recognized that the current federal minimum wage is too low. They have already set higher state levels, and it is hard to detect any business flight.

4. Workers aren't just raw material. How workers are treated has a major impact on their job performance. Pollin and Luce note several examples of firms that pay $7.25 an hour to their lowest-level workers and yet compete successfully with firms paying far less. "The key to their competitive success," they suggest, "was a high morale/high productivity work environment, which included almost no absenteeism or turnover." When workers are treated with respect, their self-esteem and willingness to contribute both on the job and in their communities is enhanced.

5. Workers are also consumers. Our current economic growth is heavily dependent on consumer confidence (and debt!). That cannot continue forever. Only if we raise those on the bottom of the income ladder will we be able to put economic advance on a sounder foundation.

6. Society neither can nor should allow working Americans to persist in hunger or deprivation. Recent changes in welfare law were premised on the popular assumption that if one works hard, one can escape poverty. Maine is one of the few states where this assumption has received careful scrutiny. Stephanie Seguino and Sandy Butler, of The Maine Center for Economic Policy, have studied poor women. Their findings indicate that many of those leaving welfare for the job market receive below-poverty-level wages. Such workers will continue to need assistance, either in the form of private charity, restored welfare, or increases in the earned-income tax credit.

7. The earned-income tax credit is good public policy because it creates an incentive to work and is broad based without intruding unduly in the lives of recipients. Nonetheless, even this tax credit is an implicit subsidy to businesses whose strategy is to pursue a low-pay, high-turnover work force. Although such a strategy may work for business in the short run, it imposes severe costs on the rest of us.

8. Alleviating urban poverty requires some economic-development policy. Recognizing that need should not result in writing business a blank check. State and local subsidies to businesses in urban areas usually require no quid pro quo and often fail to produce lasting job growth. States would be far better off emphasizing adequate transportation and education for workers than direct subsidies to business.

Catholic social thought has long maintained that the worker is a vital part of the community and merits a living wage. Pollin and Luce demonstrate that modest boosts in the minimum wage, especially during a booming economy, can leverage greater worker productivity and continuing consumer demand. The hyperbole of business groups to the contrary, such minimum wage policies do not constitute micromanagement. They merely encourage business to compete in areas other than the race to the bottom when it comes to worker wages.

Pollin and Luce do not regard the minimum wage as a panacea. Modest increases in wage levels are both possible and necessary, but we can best afford increases if productivity is expanding and extreme inequalities within the workplace curbed. Toward these ends the authors advocate both broader protections for union organizing in the workplace and restrictions on the speculative financial markets that encourage short-term management thinking. Of course, such reforms are still a good way off, but that is all the more reason to attend to local struggles over minimum-wage ordinances. Properly framed, campaigns for a living wage are popular, can achieve impressive benefits, and demonstrate how limits on market excesses work to the long-term advantage of everyone.

John Buell is the author of Democracy by Other Means (University of Illinois).