Since ACE is concerned with economics from the consumer perspective, and we've defined the consumer as the economic individual, it's time to consider other facets that comprise "an economic individual." Besides the evident facet of "an individual who consumes," the most important and obvious might be "an individual who earns" — earns wealth in order to pay for hir consumption. A worker, in other words.
We'll go into more depth on various categories of consumer-as-worker as we move along, but for now let's just consider the largest class, those who work to earn money to pay for their consumption, both basic and discretionary.
How much should a worker earn? From the employer perspective, it is "as little as possible." That is, an employer will pay the minimum needed to keep the worker on board and productive, if not "happy." This applies pretty much all the way from a junior janitor up to most C-level positions: the employer will only pay as much as they have to. And that's not unreasonable, in the general sense.
But it becomes a problem when we're talking about the lowest tier of employee, who is often young, modestly skilled, in training or development and does basic, commodity jobs. Or even not that young or unskilled, but (like far too many) not in a position to demand or get anything but the lowest wages an employer can pay.
Minimum-wage employees, in other words.
But "minimum wage" and all the fury and furor over it in recent years is a construct, like so many things in conventional economics, of the Golden Rulers. (Who?)
He who has the gold makes the rules.
(Them.) It's a concept of those who pay wages, often one bitterly resented no matter what its level. Every small rise of the Federal rate over its very modest beginning level (25 cents an hour, in 1936) to its almost laughable current one ($7.25 an hour, less than double that Depression-era value in adjusted dollars) is accompanied by national howls of pain and claims that another thirty cents per hour will drive small businesses into bankruptcy.
Never mind that many states have somewhat higher rates (typically $9-10) or the current push, implemented piecemeal across states and in large cities, to establish $15 as the minimum minimum hourly wage. It should be no surprise that it's hard to find a business-oriented discussion of this wage that doesn't include the term Socialism, with a capital S.
I suggest, from the ACE viewpoint, that "minimum wage" is not only as obsolete a concept as... hmm. Interesting stumbling block here. I was reaching for some other Depression-through-WWII concept that's well and truly outmoded, but... Dust Bowl? Returning. Ration stamps? Possibly on the horizon, with current inflationary and supply woes. Hoovervilles and soup lines? Every city has them. Let's just say that the concept of a minimum wage is as obsolete as a car without power windows. The idea that employers, even through the agency and cooperation of the government, can set an arbitrary bottom wage based on their business needs is—and perhaps one day will be—as repugnant as the notion that businesses could once buy and sell their labor force.
The idea that there is some minimum acceptable income level is neutral and admirable, and on additional thought, obvious. But establishing it by working backwards from what businesses need to maintain their profit margin, without any real regard for what worker—consumer—needs might be, is an indefensible approach... from an ACE viewpoint.
The correct approach to establishing a wage floor is from the other direction: how much does a worker need to live a secure, if basic, life? Reduced to the common economic question, how much is an hour of a worker's time—an hour from the life of a worker, consumer, person, individual—worth? Even that is a double-ended question: how much is that hour worth to the consumer... and to the employer? It should be obvious that only the latter has ever been answered in the endless debates and discussions of the topic.
But, of course, from an ACE viewpoint, it's the other question that is paramount and should be the controlling one. How much is an hour of a consumer's time, spent in service/labor to an employer, worth? No, that's too open; some individual could be worth an million dollars an hour to the right employer. What is a work hour worth, at minimum, from the consumer's perspective?
Ah. Now we've arrived somewhere.
I suggest that each such hour must return a basic living amount as a minimum. An after-tax, in-pocket amount that represents a total income that will support the consumer in a secure, basically comfortable, if wholly basic manner. To work the equation forward with conventional assumptions, starting with a 40-hour work week as a reasonable compromise between employee and employer needs, that means each hour worked must pay (net) 1/40th of a week's life-supporting costs, or about 1/170th of a month's life-supporting costs. No less. More only by employer need for the person, the skills, reliability, commitment—all the things elevated pay is supposed to bring and bind. But no less.
That is, an employer who demands an hour of a consumer's time is responsible, without exception, for compensating that hour at a level that provides that basic support on a 40-hour-per-week basis. It does not matter whether the employment is for one hour a day or eight (or ten), or one hour a week or month. There is a floor level—let’s call it a minimum wage—that must be paid for that hour, and one set by the reality of the consumer's living costs, not the arbitrary "needs" of the business.
This amount is likely to be higher than most mandated "minimum wage" levels. In cities and higher Cost of Living (COL) areas, it's likely to be higher than that equally arbitrary fifteen dollars. But absolutely nothing else is ethical... which is why this essay and the overall concept is titled the Ethical Hour.
This opens a can filled with open cans of worms, yes. But then, so does nearly everything when raised from the ACE, consumer-centric viewpoint and not the established one of conventional economics and the Golden Rulers. We can't cover all the aspects in this one bite—which is only the beginning of the discussion—but let's start with those utterly outraged business owners over there and the ethical notions on the table.
The argument of business is, and is going to be, that they can only pay X amount for these employees for their business to be profitable. That argument has been accepted largely at face value for... somewhere between 'a long time' and '-ever.' If you aren't getting an inkling of why it's BS, you haven't been reading these essays very carefully, particularly not this one. (Go back and start at the beginning, again, if not.)
What an employer wants to pay, to preserve hir business profits, is irrelevant when any consideration but business profitability is considered... especially ethical considerations. Many employers want to pay much less than mandated minimums, down to literally a couple of dollars an hour—and would, if not forced to pay more even under our current faulty system. And many would find laborers for two or three dollars an hour, because that’s how real job markets work, and the average pay rate for most employment in the area would fall correspondingly.
But what right does an employer have to use an hour—or forty, or approximately 170—of a consumer's time without compensating them for its equivalent and necessary value? What right does an employer have to use 40 hours of a consumer's time and pay them only some fraction of what that week will cost the consumer to live in that basic, secure manner? By what terms should a consumer have to work more hours at these sub-par rates to pay for a single week of self-support?
The answer, of course, is none. No one has such a right, but we have granted this phantom privilege to employers, at incalculable human cost, for far too long. The "minimum wage" must be full compensation for that hour of earning as it applies to the consumer's economic well-being. No less. It must be ethical compensation of that hour.
And yes, the cans of worms multiply here, but we can easily deal with them. To start with the big nightcrawler in the middle, COL is not the same in every state; it's not the same in every county. It may not even be the same in all parts or boroughs of a large and diverse city. There is no argument against setting COL, and thus this 'ethical hour' rate, for each such area. No, someone in a small town in Nebraska should not (necessarily) be paid the same as someone doing the same job in NYC or pretty much anywhere in California. That's the fundamental flaw in most blanket arguments for "a higher minimum wage"; there are places where it would be unreasonably high... and low. So let's assume, until we can go into detail, that the rate represents the individual consumer cost of basic, secure living in their employment area... no matter how many nationwide tiers there might be to that rate.
But let's touch on the other end of the argument, of that big squirmy worm, before we conclude, one equally complex in actual practice but simple enough to outline: the notion that business must pay some lower rate in order to remain profitable. In conventional discussion, this is the trump card; simply saying "If I pay another dollar an hour I will go out of business" closes the argument.
And it's BS, supported only from the conventional/Golden Ruler viewpoint. My god, a business can't go out of business because of costs! No one can be ordered to raise their costs to the insolvency point!
Says who? Oh, other Golden Rulers, etc. Gotcha.
I posit that a business that cannot make a profit unless it underpays its workers is functionally bankrupt. It has no inherent right to continue on the basis of substandard wages. If the cumulative hourly labor of its employees does not generate profit over that 'ethical hour' rate, the business is insolvent. Since this is heresy of the burn-at-the-stake level, let me reframe the issue: if a business can only stay solvent by buying black-market, stolen supplies from the back end of the trucking depot, at half market cost... is it a solvent, profitable business? No. And it's no different for labor. If a burger joint can only keep the lights on with low-paid labor, it's bankrupt; dead man walking.
And if the difference between current "minimum wage" and the 'ethical hour' is not the overall solvency of the business but the level of the owner's profit, something that has been established for businesses large and small with increasing frequency as the employment debate rolls on... well, looky looky here. We have a stake and some kindling all ready to go.
—published on Quora 28 Feb 2022