It is part of conservative canon that raising the minimum wage — or raising wages in general — isn’t a viable long-term solutions to America’s economic woes. And they’re right. It isn’t. At least, it isn’t in the same way that packing a bleeding hole with gauze isn’t a viable long-term treatment for a gunshot wound. Right now, the nation is bleeding to death from a hole called “inequality,” and hemorrhaging internally from the wound channel of supply-side economics — brought to us by a lead ball most accurately regarded as “materialism.”
Materialism is the obsession with having more stuff. New stuff…preferably cheap stuff, because spending less money means we can buy more new stuff. It’s a cheap flat-screen from China, or a $1 hamburger from McDonalds; it’s not spending more for something better, because “better” is a concept, not a thing. Bearing that in mind, this latest piece of research should make a good bit of sense.
In a new research paper published by the Federal Reserve Bank of Chicago (“Firm Dynamics and the Minimum Wage: A Putty-Clay Approach”), authors Daniel Aaronson, Eric French and Isaac Sorkin put an interesting new spin on the minimum wage debate. The paper seeks to explain why, given all the hypothetical predictions about wage increases and growth in unemployment, empirical observation indicates that said increases have little to no effect on real-world employment numbers. It’s a conundrum that seems to defy reason, and has long baffled economists who embrace traditional theory. But there’s nothing baffling about it, really…not if you think of materialism as the problem.
This study finds that, yes, jobs at fast food restaurants like McDonalds tend to drop when minimum wages go up, and many times, those fast food joints end up going out of business completely. That much follows standard conservative logic. This part doesn’t though: Unemployment numbers shortly afterward go right back up. Why?
Because better, smaller and slightly more expensive eateries take the fast food joint’s place. And they do just fine afterward, employing just as many people as $1 Dollar ClownBurger while paying more. Initially, closure of the Clownburger does put people out of work, causing a certain amount of upheaval and a good bit of lost income for ClownBurger Inc. But, ultimately, the eatery that displaces it brings more money into the community, along with better food. The study authors call the net employment effects “small, and sometimes indistinguishable from zero.”
Or, to put it more simply: People with more money buy better stuff. Shocking.
But higher quality isn’t the only reason that the establishments tend to do better in higher wage environments. A lot of it has to do with the management structure itself. Big firms and franchises like McDonalds have long supply chains, very established management structures and procedures and calculate every expense down to the penny to operate as efficiently as possible. These firms are like all apex predators throughout the world: highly specialized to a particular environment and set of circumstances, and unstoppable while in their element — but surprisingly prone to sudden extinction when environmental circumstances slightly change, and no longer favor their set of specializations.
If you’re thinking this might bode ill for other mega-corporations specializing in getting big, paying low and selling cheap, then rest assured you’re not alone — Wal-Mart isn’t fighting minimum wage increases just to save on the bottom line. They know, as well as any Tyrannosaur or Megalodon, that small changes in the environment quickly become cascade failures when you’re the apex predator.
However, those changes can be a Godsend for smaller creatures, still on the cusp of development. Smaller businesses, raised in an environment of $10-an-hour minimum wages, will evolve from Cell One to thrive under these circumstances. And that’s what conservatives and mega-corporations truly fear — that the small-business rats will one day rise up to take their place, and they, the apex predators, will become little more than part of the fossil record.
Might this reality usher in a new era of healing, of recovering from our self-inflicted wounds? Maybe, maybe not. But one thing’s for sure: We’ll never find out, or survive the lead poisoning of materialism, if we don’t stop the damned bleeding first.
You can read the entire research paper here.