Why Fight the Minimum Wage Hike for Federal Employees?

Conservative should rethink their opposition to President Obama’s minimum wage hike for federal workers.

President Obama's 2014 State of the Union 6

President Obama proposed a minimum wage increase for federal workers in his State of the Union address.

By + More

Of all the small ball items in last week’s State of the Union address, the one getting the biggest play appears to be President Obama’s announcement of an executive order instituting a $10.10 per hour minimum wage for federal contractors. Pretty much everyone asserts that this move will affect virtually no one, and yet no one much likes it: liberals because, well, it affect virtually no one, conservatives – argues Brian Beutler in Salon – because they oppose any sort of government intervention in the market. As usual, this has everything backwards.

Let’s assume that governments should, as in the wildest dreams of conservatives in the Patrick Henry mold, have essentially no ability to compel anyone to do anything. If they exist at all, then, governments would be something like consumer co-ops – some odd form of collective enterprise in which “ownership” and participation accrues on some basis other than simply how much money you invested. This may indeed be where governments are headed, so let’s imagine what that looks like.

This government-as-co-op could not – as governments do now – tell me, or anyone else, how much to pay my workers, or, say, how much I have to pay for a gallon of milk. But as an enterprise itself, it could make its own decisions like any business as to how much it wants to pay its workers or, for that matter, with whom and under what circumstances it would contract for milk, or any other goods and services.

[Check out editorial cartoons about the economy.]

This is precisely what private enterprises do. And contrary to what many of both capitalism’s cheerleaders and its castigators contend, businesses often pursue objectives other than the lowest possible price, including for labor. Many large corporations try to shape the behavior of other firms that compose their supply chains – seeking low prices, sure, but also often preferring reliability of quality or supply. Most want to guarantee that parts and components that fit their specifications are available when they need them, and they use their market clout to shape the marketplace to such ends.

And nowadays, many businesses are concluding that higher wages make sense. In his address, Obama cited Punch Pizza in Minneapolis as a business that recently decided to raise its workers’ wages. The firm’s owners appeared on TV afterwards to discuss their decision and argued that this essentially was a hard-headed business decision – not some funky, misguided, liberal, triple-bottom-line fad: After serious analysis, they concluded that raising wages would allow them both to attract better workers and to retain more of those whom they did hire – two activities significantly affect most businesses’ bottom lines.

There has, in fact, been a spate of literature on this subject lately and lots of businesses share Punch Pizza’s view. It’s not just in the high-end knowledge industry: The manager of a food kiosk at Philadelphia’s main train station once related to me how he increased profits by convincing the owner to dramatically increase wages; higher-quality workers applied, productivity and reliability went up, thefts went down, and the higher wages more than paid for themselves. I can’t swear that treating workers better always produces financial gains – it’s still probably more profitable to run a salt mine like, well, a salt mine – but the argument for more equitably shared economic returns isn’t quite the Birkenstocks-over-bottom-line position that those with one-dimensional economic views claim.

In another example, groups funded by the Koch brothers and others are fighting a union certification election next week in a Volkswagen facility in Tennessee – though Volkswagen itself has endorsed unionization. The company believes that joint worker-management committees like those in Germany improve productivity and quality, and that a collective worker organization like, say, a union is essential to such a process. But who cares about letting businesses decide what is in their own best interests if it diverges from conservative orthodoxy?

[Check out U.S. News Weekly, an insider's guide to politics and policy.]

So, if many of our best businesses can conclude that it behooves them to pay more for workers, why couldn’t a co-op – or the government itself? If you believe in a government that’s less cop and more co-op, that’s exactly what it should do. And it’s exactly what Obama’s order would do. Conservatives should be thrilled that it’s government without regulations and liberals should be excited that it represents a broader principle for improving people’s lives.

In fact, governments have been moving for some time in the direction of using their role as market actors, rather than dictators, to effect change – much as major businesses do. Contracting provisions that commit the government and its suppliers to “Buy American” (and, in the case of many state and local governments, to buy from in-state and local sources) are ubiquitous and all-American. Many governments provide procurement preferences for companies owned by veterans as a way to support the public policy of greater economic opportunity for those who have served our country in the military. Most governments have embarked on programs to retrofit their many buildings and facilities to be more energy efficient or to use more sustainable energy sources. This not only saves them money but also serves the larger policy purpose of bootstrapping a market for such services, and “leading by example,” to make energy conservation and sustainability more prevalent practices without government mandate. Governments have used similar market clout to drive down prices and improve consumer options in their roles as purchasers of prescription drugs and health insurance – which they provide for large numbers of individuals in state custody, for students and staff at public schools and universities, and for public employees.

All of these represent ways that governments can – like businesses – pursue their larger goals through market forces rather than through force and fiat. So what would be the arguments against? Either that we shouldn’t have governments at all, or that no one should pay workers more, even businesses, co-ops or other entities that want to. Is that really how conservatism wants to define itself today?