Letters To My Country

May 3, 2012

The life of a 19th-century steel worker was grueling. Twelve-hour shifts, seven days a week. Carnegie gave his workers a single holiday-the Fourth of July; for the rest of the year they worked like draft animals. “Hard! I guess it’s hard,” said a laborer at the Homestead mill. “I lost forty pounds the first three months I came into this business. It sweats the life out of a man. I often drink two buckets of water during twelve hours; the sweat drips through my sleeves, and runs down my legs and fills my shoes.”

For many the work went without a break; others managed to find a few minutes here and there. “We stop only the time it takes to oil the engine,” a stop of three to five minutes, said William McQuade, a plate-mill worker in 1893. “While they are oiling they eat, at least some of the boys, some of them; a great many of them in the mill do not carry anything to eat at all, because they haven’t got time to eat.

The demanding conditions sapped the life from workers. "You don’t notice any old men here,” said a Homestead laborer in 1894. “The long hours, the strain, and the sudden changes of temperature use a man up.” Sociologist John A. Fitch called it “old age at forty.”

For his trouble, the average worker in 1890 received about 10 dollars a week, just above the poverty line of 500 dollars a year. It took the wages of nearly 4,000 steelworkers to match the earnings of Andrew Carnegie.

—

PBS American Experience: The Lot Of A Steel Worker

To put this in perspective: a minimum wage worker in 2012 who worked 12 hour days, 7 days a week, would receive 40 hours straight pay, and 44 hours overtime. that’s 768.50/week, at 52 weeks/year, meaning he or she would be earning just under $40,000/year.

When folks complain that government has too much of a role in the economy, I take them at their word that many of the harms they associate with said involvement are real. But in terms of increasing the welfare of the poor, history seems to tell a cautionary tale about removing all economic intervention completely from the picture. Uncle Sam was not telling Andrew Carnegie what he had to pay his workers in 1890, or whether he a had a legal duty to let them unionize. Yet if you compare Carnegie’s steel workers to a person making minimum wage flipping burgers at McDonalds, it’s pretty clear who’s in better shape. And it’s not the guy working 12-hour days for America’s most famous steel Magnate under comparatively laissez-faire industrial policies.

With all this being said, there’s no question that potential problems can crop up with minimum wage laws. As fellow Tumblogger Jakke said back in October:

Minimum wage is NOT about forcing employers to pay more than worker productivity. This would just result in mass layoffs for people in low-productivity jobs, and banning layoffs would drive those employers out of business. For raising wage levels above marginal productivity, this isn’t the right approach. You’ll most likely need to look at government subsidies instead.

Personally, I’m on record for repealing the minimum wage and replacing it with a Basic Income Guarantee (also known as a “Guaranteed Minimum Income” or “Negative Income Tax”). However, the analysis doesn’t end there. Any number of circumstances will change the empirical impact of a minimum wage law. For example, there is evidence that minimum wages have helped drive industrialization in developing countries. So it is difficult to make sweeping declarations about when or under what circumstances a minimum wage becomes detrimental. The devil, as they say, is in the details.

Yet what seems clear is that not a single modern thriving 1st-world economy has failed to introduce some sort of regulated wage floor, or alternatively, an organized system of collective bargaining, like that which exists in many European countries. Indeed, institutional trade unionism has helped countries like Germany increase the wages of unskilled workers without stymieing economic growth. Many countries have gotten by just fine without minimum wage laws by making Unions an indispensable player in labor relations. I see no issue with this approach, but I don’t see it taking hold in America anytime soon.

As in all things, there is a line to be crossed when regulating economic activity. many of the choices we face in economic policy are not simply a matter of “best” or “worst,” but rather, take the form of trade-offs. The challenge of policy is to discover a way in which to make that trade-off inherent in any regulatory proscription worth the effort. I know there are people who think that any attempt to do so is a waste of time. But Carnegie’s beleaguered steel workers prevent me from seeing the wisdom of that proposition.

9:11pm | URL: https://tmblr.co/ZMMjnxKqXKBQ

(Notes: 29)