ABSTRACT
Attempts to resurrect wage policy coupled with what could be considered a new political economy of the minimum wage do force us to consider wage policy in a broader perspective. In this chapter I explore the potential for wage policy to boost the incomes of the middle class and to essentially arrest the stagnation of wages that have characterized the last three decades. Despite a general consensus that the minimum wage only affects a small percentage of the labor market, it nonetheless elicits considerable political controversy. Were it the case that it is so inconsequential to the labor market as neoclassicals argue, there really should be no opposition. Jerold Waltman (2000) has argued that the minimum wage is at root a symbolic political issue. And yet, the consequences are very real for those involved. For businesses that have to pay, there are tangible costs and for low-wage workers that will get a pay increase when the minimum wage is raised, the benefits are very real. The problem, however, is that the evidence on the effects are inconclusive, and are easily manipulated by either side of the debate to its respective advantage. What is particularly peculiar about the minimum wage debate is that only a small percentage of the labor market earns the minimum wage. And yet, at the same time public opinion tends to be favorable towards a minimum wage that keeps up with inflation and which would allow low-wage workers to sustain themselves in dignity. This, of course, begs the question of whether there is more to opponents’ claims than meets the eye. Waltman argues that contemporary minimum wage politics are characterized largely by symbolism and ideology, where those opposed to minimum wage increases worship at the altar of free market fundamentalism. Not only is it an affront to their ideological sensibilities, but it is viewed as an intrusion into one of the basics of business decisions. Moreover, staunch ideologues view the minimum wage as an infringement of their basic property rights. Social welfare liberals, on the other hand, have come to view the minimum wage primarily as a cash transfer program, though not necessarily a very important one. The biggest constituency in support of minimum wages has been the unions. And yet, it is hard to believe that opponents of the minimum wage would be driven solely by ideology. The question is whether it impinges on interests not easily forecast by the neoclassical model.
