Sunday, July 21, 2013

"The Labouring Classes Should Have a Taste for Comforts and Enjoyments"

McDonald's model budget for its minimum-wage employees -- along with the smug, fatuous, those-people-aren't-like-us-dear defenses of it -- has been the target of well-deserved scorn.

This kind of thing has been around forever (or at least as long as capitalism). Two hundred years ago, liberal reformers offered "Promoting Sobriety and Frugality, and an Abhorrence of Gaming"as the solution to the collapse of wages following the Napoleonic wars, and gave workers instruction on "the use of roasted wheat as a substitute for coffee." You could make an endless list of these helpful suggestions to the poor to better manage their poverty.

To be fair, liberals today do mostly see this stuff as, at best, an effort by low-wage employers to divert attention from their own compensation policies to the personal responsibility of their workers. And at worst, when the budget help includes assistance enrolling in Medicaid or the EITC, as a way of getting the public to subsidize low-wage employment.

But there's a nagging sense in these conversations that, disingenuous as McDonald's is here, still, at the end of the day, frugality, living within one's means, is a virtue; that the ability to prioritize expenses and make a budget is a useful skill to have. Against that view, here's Ricardo on wages:
It is not to be understood that the natural price of labour, estimated even in food and necessaries, is absolutely fixed and constant. ... It essentially depends on the habits and customs of the people. An English labourer would consider his wages under their natural rate, and too scanty to support a family, if they enabled him to purchase no other food than potatoes, and to live in no better habitation than a mud cabin; yet these moderate demands of nature are often deemed sufficient in countries where 'man's life is cheap', and his wants easily satisfied. Many of the conveniences now enjoyed in an English cottage, would have been thought luxuries at an earlier period of our history. 
The friends of humanity cannot but wish that in all countries the labouring classes should have a taste for comforts and enjoyments, and that they should be stimulated by all legal means in their exertions to procure them. ... In those countries, where the labouring classes have the fewest wants, and are contented with the cheapest food, the people are exposed to the greatest vicissitudes and miseries.
In a world where the price of labor power depends on its cost, there's no benefit to workers from budgeting responsibly, from learning to get by on less. The less people can live on, the lower wages will be. On the other hand, to the extent that former luxuries -- a decent car, some nice clothes, dinner out once in a while, whatever consumer electronics item the scolds are going on about now -- come to be seen as necessities, such that it's not worth putting up with the bullshit of a job if you still can't afford them, then wages will have to rise enough to cover that too.

For much of the 20th century, it seemed like we had left Ricardo's world behind. Among economists, it became a well-established stylized fact that it's the wage share, not the real wage that is relatively fixed. To even sympathetic critics of Marx, the failure of real wages to gravitate toward a (socially determined) subsistence level looked like a major departure of modern economies from the capitalism he described.

These days, though, the world is looking more Ricardian. For the majority of workers without credentials or other shelter from the logic of the labor market, real wages look less like a technologically-fixed share of output than the minimum necessary to keep people participating in wage labor at all. In the subsistence-wage world of industrializing Britain, workers' "frugality, discipline or acquisitive virtues brought profit to their masters rather than success to themselves."  Conversely, in that world, which may also be our world, profligacy, waste and irresponsibility could be a kind of solidarity.

I would never presume to tell someone surviving on a minimum-wage paycheck how to live their life. I know that being poor is incredibly hard work, in a way that those of us who haven't experienced it can hardly imagine.  But as a friend of humanity, I do worry that the biggest danger isn't that people can't live on the minimum wage, but that they can. In which case we're all better off if McDonald's employees throw the bosses' helpful budget advice away.


  1. Josh, the quote from Ricardo is based on his complete acceptance of the Malthusian principle of population. Ricardo believed, following Malthus, that workers paid below their (socially determined) subsistence levels would reproduce below replacement rates, resulting in labor scarcity and higher wages until parity with subsistence was restored. If we are now back in a Ricardian world, what is the mechanism that maintains wages at subsistence? Surely we are not back in a Malthusian world?

    1. You know, I was thinking of adding a footnote or comment about that as I was writing. Maybe I should have.

      The way I see it, you have to distinguish the question of whether wages are set at some kind of minimal subsistence level, from the question of what mechanism keeps them there. For Ricardo, as you say, the mechanism was the birthrate: If wages fall too low to support a minimally decent family life, workers will stop marrying and having children, and in a generation or two the resulting fall in the supply of workers will bring wages back up to the subsistence level. That's obviously politically noxious and factually wrong.

      But I think that's a secondary issue because you can follow Marx and throw out the birthrate mechanism and keep the idea of a subsistence wage. Then the mechanism that keeps wages at the subsistence level isn't the birthrate, but entry and exit from wage labor. After all, as he points out, wages adjust on much faster scales than generations, and also in practice -- it was already clear in the mid-19th C. -- the birthrate response runs the in the wrong direction. Subsistence here doesn't mean the minimum people need to reproduce themselves biologically, but the minimum they need to function socially as wage workers.

      For the US today there are lots of margins for people to leave wage labor -- household labor; disability or early retirement; the shadow economy, legal or otherwise (Sudhir Venkatesh says that the incomes at the bottom tier of drug trafficking are close to fast food wages); outmigration (especially for recent immigrants); support from family or other social networks; and obviously homelessness and destitution. Then there are people who remain notionally in the labor force but are less available, like people who can no longer afford cars. And then there are the various forms of more or less overt noncompliance as people in effect say, "I give up. Fuck this!" in various ways.

      I think all those margins have the same logic as Ricardo's birthrate story, which is why I think his argument applies here even though the specific mechanism he had in mind is wrong.

  2. Keynes, from chapter 3 of the General Theory...

    "The completeness of the Ricardian victory is something of a curiosity and a mystery. It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commanded it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority."

    1. Edward,

      "Ricardian" in that passage refers to a different set of arguments. Ricardo's ideas about wages and distribution definitely were not victorious, quite the opposite.

  3. Let me get this straight.

    Poor people who live within their means are chumps abetting their own exploitation. Any money they save over expenses will be automatically deducted from their next paycheck.

    Instead, they should blow all their money on malt liquor and lottery tickets. Then the bosses will have to raise their wages so they can socially reproduce their labor.

    Better yet, they should tell the boss to take his job and shove it, then go float down the river on a raft. That will toll the death-knell of capitalism.

    If that's the advice of a left economist, I'll take a Victorian scold any day.

    1. Why? Because the great majority of the poor, especially in poor countries, will never follow any of this advice? Isn't that begging the question?

    2. Obviously Ricardo's argument is about the expected standard of living in general. No one would deny that some individuals may be better off if they find ways to live tolerably on very low income. (Some people I know are very successful at it.) But that doesn't mean that workers collectively can improve their situation that way.

      What I am saying is that if workers in general were more willing to tell the boss to take the job and shove it, wages and working conditions would be better. That's how things are when you live in a world of conflicting interests -- the only way for people to make their lives better, is by willing to do things that make tier lives worse. As RL says, it's no different from any other kind of solidarity. The scab is presumably better of personally than the person who honors the picket line, too.

      What I hear you saying that the idea that responsible behavior by working people only benefits their bosses, is very upsetting and unfair. So it can't be true -- or at least, economists should pretend it's not true.

      (Which, funnily enough, is exactly how people reacted to Ricardo at the time.)

  4. "Instead, they should blow all their money on malt liquor and lottery tickets. Then the bosses will have to raise their wages so they can socially reproduce their labor.

    Better yet, they should tell the boss to take his job and shove it, then go float down the river on a raft."

    Isn't this the whole point of having unions? If all the workers together ask for higher wages, they will actually get higher wages (up to a technologically determined point).

  5. @ Random Lurker

    In the cartoon version of labor organizing, yes--all the workers get together and ask for higher wages and, presto, they get them!

    In the real world a strike is a cross between a dog-fight and a siege. "All the workers" don't get together; there is often dissension in strikers' ranks and bosses import strike-breakers, run the business with supervisors, or use their cash reserves to wait out the strike.

    As in every human conflict, in a labor conflict victory goes to the side that's more disciplined and strategic and that husbands its resources more efficiently. Frugal workers with money in the bank can last a lot longer in a strike. Workers who have racked up debts by blowing all their money on liquor and gambling will feel much more pressured to cross picket lines.

    Then there's the real "humanitarian" side to this. Frugality often provides an indispensable margin between a life of at least some security and dignity and one of utter material and moral chaos--a life of hunger and evictions and humiliation and loneliness and constant gnawing fear. Only leftists with comfortable trust funds or academic sinecures could romanticize "profligacy, waste and irresponsibility" as a species of Dionysian "solidarity."

    The middle and upper classes can afford wastrelism; frugality and sobriety are the weapon of the poor.

  6. @WB
    I think you miss the point badly here.
    While you use the dismissive example of booze, the "financial plan" offered to the worker is such that he/she cannot really save anything when you take in account the fact that people can have unexpected expenses.
    So the message is not that those people could lift their lifes through frugality (this would pose different problems ) but that they should just shut up and enjoy what they have.
    This is what is usually referred to as the "soft bigotry of low expectations", in that it is assumed that those people shouldn't really expect to , say, send two kids to a top university or something. The reason those people shouldn't expect [nice stuff] isn't obvious to me.

    So if the workers ask for higer wages to save (instead than for booze), well maybe this is better, but they still have to ask.

  7. I think the OP was more striking a pose than making a point, Random Lurker. But to the extent that it made an argument--and it certainly did champion the cause of drinking and gambling and heedless spending--it's a bad one. The conceit that dissipation is tantamount to revolution has been peddled by upper-class ideologues and professors (Timothy Leary?) for centuries. As a prescription for working-class well-being--and progressive political engagement--I think Victorian moralism has more to offer.

    I don't think the ethos of frugality is, as you put it, about shutting up and being content with what you have. It's strongly linked with aspirations to save, invest and improve one's position in life.

    The sample McDonald's budget that the OP links to does include savings, insurance and "rainy day" money. It could go much further in that regard, because it overbudgets for extravagant discretionary spending, at least for one person. Discretionary spending--food, clothing, personal products, gas, etc.--is budgeted at almost $200 per week, which is a lot. (Remember, McDonald's wants people to eat out!) it's quite feasible for a single man to get by on $40 per week or less discretionary spending, even living in Manhattan. If the budget were to trim discretionary spending to $100 per week, it could put almost $500 per month into savings. That's enough to build a substantial nest egg.

    Granted, things look very different if that budget has to support a family with children. And the McDonald's budget is unrealistic in one crucial respect: it's based on take-home pay of $2000 per month, which would require working 80 hours per week at minimum wage--seldom feasible and certainly not humane.

    But even if it doesn't support savings, frugality still pays off in other ways--securer housing, without the menace of the landlord pounding on the door over back rent; a healthier diet of food instead of beer and cigarettes; even a clearer head, because studies show that people who are plagued by money worries suffer chronic cognitive deficits, no matter what their income. Frugal living is happier living.

    That leftists scoff at such considerations shows just how much their world-view is distorted by bourgeois cultural obsessions. Hence your own definition of a subsistence income, which requires "send[ing] two kids to a top university or something." Apparently there is no other conceivable standard of material sufficiency and social fulfillment. Why, if we can't get Britney and Sasha into Harvard, we might as well just go live under a bridge!

    Indeed, sending kids to over-priced charm schools--I mean, "top universities"--so they can spend four years partying and "studying" subjects they could learn just as well by staying home and reading books in their spare time is pretty much the acme of waste and profligacy. It's no wonder left academics talk up that ethos--their sinecures depend on it.

    1. I think the OP was more striking a pose than making a point,

      Haters gonna hate.

  8. @WB

    "Hence your own definition of a subsistence income, which requires "send[ing] two kids to a top university or something." "

    My point is not that a subsistence wage includes yale tuition , but that there is no reason workers should be happy of a subsistence wage.

    It seems to me that this kind of budget advice imples that they should, and that it is a rethorical device to blame workers who don't accept this situation.

  9. Another perspective on this is the question whether all varieties of sobriety and circumspection are "created equal". Is self-sufficiency touted as a virtue (in a particular way) really part of a cultural narrative meant to undermine solidarity (which it seems it often is). How can objectively useful survival skills and attitudes promote solidarity (or at least be neutral)? WB, I think you are onto something but stoicism (aka economics as a morality tale) seems deeply embedded in conservative rationalizations for the status quo.

    If that's wimpy splitting the difference, so be it.

  10. Oy vey! What a kill-joy W. B. is! He lacks the sense of absurdity or black irony to realize that he's a "working class" Thatcherite.

  11. No, John C. Halasz, I'm not a Thatcherite (although I proudly wear the label of "kill-joy"). But I do know that Thatcher won many elections by painting the left as the partisans of waste, profligacy and irresponsibility. Do you really think that endorsing her caricature, as the OP does, will help the left?

    The issue is not whether workers should expect and demand better pay. We all agree that they should. The question is what they should do with the pay that they get. Should they carefully husband it and try to construct a semblance of dignity and security? Or should they blow it all on drink and gambling, as the OP hopes they will, in the anticipation that that will...

    Well, actually, what will it do? The idea is that dissipation will somehow further the revolutionary cause of the proletariat, but the mechanism is not quite spelled out. Maybe, broke and hung-over, workers will hit bottom and realize that revolution is the 13th step to recovery. Or maybe permanent unemployment is a kind of wild-cat strike that will force up wages through work-force attrition.

    I don't buy it; improvidence just adds financial burdens that make you more beholden to the boss. Most of all, it makes people sad and distraught every waking minute that they are not inebriated. That's no way to live, or to organize.

    1. Disciplinary resentment disguised as moralism is a trait of a reactionary mentality: the improvidence of the poor is the cause of their poverty and thus they deserve their fates. Why can't those people just pull themselves up by their own boot-straps? (Add in a few anti-intellectual sneers and strictures against artistic expression and convivial enjoyments, and the recipe is complete).

      But Kalecki put it clearly in a punchy slogan: "Workers spend what they get; capitalists get what they spend."

    2. I like Kalecki a lot, but his argument here is different from that of Ricardo and the other classical economists. Kalecki says the **wage share** depends on the degree of monopoly. The classicals say the **real wage** is determined by the customary standard of living. The two claims are not compatible.

    3. Kalecki's slogan, a deliberate over-simplification, was about effective demand. Capitalists' spending contributes to effective demand, (and their "saving" is investment spending), whereas to demand savings from workers subtracts from effective demand. It amounts to demanding that workers become capitalists. The claim that workers through thriftiness could achieve significant advancement is individually theoretically possible, but highly improbable in reality. And the demand that workers must save for a rainy day, which is especially absurd, when workers scarcely earn enough for minimum standards of subsistence, is a substitution for collective social insurance arrangements, including full employment policies, which would effect the demand and thus the price of labor. Misconstruing the structural effects of differential distributions in possibilities, while mis-directing attention from those alternative outcomes is ideology.

  12. Marshall:

    "Some detailed study of the necessaries for efficiency of different classes of workers will have to be made, when we come to inquire into the causes that determine the supply of efficient labour. But it will serve to give some definiteness to our ideas, if we consider here what are the necessaries for the efficiency of an ordinary agricultural or of an unskilled town labourer and his family, in England, in this generation. They may be said to consist of a well-drained dwelling with several rooms, warm clothing, with some changes of underclothing, pure water, a plentiful supply of cereal food, with a moderate allowance of meat and milk, and a little tea, etc., some education and some recreation, and lastly, sufficient freedom for his wife from other work to enable her to perform properly her maternal and her household duties. If in any district unskilled labour is deprived of any of these things, its efficiency will suffer in the same way as that of a horse that is not properly tended, or a steam-engine that has an inadequate supply of coals. All consumption up to this limit is strictly productive consumption: any stinting of this consumption is not economical, but wasteful.

    "In addition, perhaps, some consumption of alcohol and tobacco, and some indulgence in fashionable dress are in many places so habitual, that they may be said to be conventionally necessary, since in order to obtain them the average man and woman will sacrifice some things which are necessary for efficiency. Their wages are therefore less than are practically necessary for efficiency, unless they provide not only for what is strictly necessary consumption, but include also a certain amount of conventional necessaries."

    Marshall here presents it as being in the *employer's* interest that the worker's level of comfort should not be too low. And perhaps it is so. But there is clearly another dynamic at work, since employers frequently fail to see it that way.

    1. Will-

      Right. But you could turn it around Ricardo's way too. If the employer can, let's say, encourage workers to refrain from alcohol and tobacco, then it will be possible to get the same efficiency at a lower wage.

      As long as the wage is set by a customary standard of living, then anything that helps workers achieve the customary standard with less money will only benefit the boss. I know this offends some people's idea that economists should only tell uplifting morality tales, but oh well.

    2. JW, Where does "sticky" wages fit into this?

    3. "Sticky wages" is the claim that nominal wages don't adjust quickly, especially downward. It's a claim about short-term dynamics, not the long-term or equilibrium level of wages.

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