Although I can't recall any particular instances of his using it, except when helping me with my homework, I associate the phrase "think it through" with my father. It has always seemed, I suppose, to summarize a particular approach to the world almost a philosophy that he emphasizes.
Not to leap too quickly from general philosophy to economic specificity, but the phrase comes to mind now because I wish people would apply the principle to the issue of the minimum wage, which is in the news of late. The most recent example in the media is the accusation of Nancy Pelosi's hypocrisy, upon the House of Representatives' voting to raise the minimum wage from $5.15 to $7.25 per hour (or about 41%). Not to single him out, but in a comment to Marc's post on that story, Scott Bill Hirst writes:
I support an increase in the minimum wage. ... I do not believe the GOP needs to be a puppet of organized labor but it needs to reach out to working class Americans more. Serious issues of affordable health care and affordable housing are issues that put great financial pressures on Rhode Island households and need to be adequately addressed in our state.I am still a Republican and Republicans need to facilitate addressing their positions on these issues. We need to look at imports and the respective policies of those countries on how they treat labor.
"Thinking through" the minimum wage brings to the fore the superficial, cynical, and injurious nature of this sort of "reaching out." As I noted in the comments, conservatives and Republicans ought to concentrate on explaining to working families that market forces confound efforts to force-raise wages, often to the detriment of those ostensibly intended to benefit.
Businesses Will Do as Business Requires
First consider the issue from employers' perspective: a business that suddenly finds itself having to pay 41% more for low-end, unskilled labor will have to find that money somewhere else in the budget. In the fantasy land of progressives, perhaps companies would shift resources from the higher ends of their payrolls, but in the real world, isolated excesses aside, those jobs pay better for a reason. More likely, companies will decrease their low-end employment, shifting their tasks either up the pay scale or to technology.
They will also increase their prices. Doing so may push smaller companies past the threshold of being able to compete, ceding the field to category killers (such as Home Depot) that bring economy of scale to their business models. In industries with captive customer bases (e.g., retail), these companies can pass increased costs on to consumers almost as a matter of course. In other words, the cost of goods often essentials will go up for everybody, including those at the minimum wage, as well as those who were just barely getting by before. In industries that aren't as tied to particular locations (e.g., high tech), companies that raise their prices too high will lose their ability to compete with firms elsewhere or will have to move elsewhere, themselves.
So, to sum up the effects of aggressive minimum wage hikes from the employers' point of view:
Workers Will Go Where the Money Is
To consider the issue from the perspective of employees, I'll draw from my own experience of jobs that required roughly the same level of prior experience (i.e., very little), estimating current pay ranges:
(Note that these pay ranges are purely for argument's sake; they don't have to be but so accurate.)
Although I'm simplifying the dynamic involved, there are direct and clear reasons that each form of low-end work has to, or can get away with, paying employees at the relevant rate. Jobs that are more difficult, dangerous, and strenuous have to pay better to attract employees from jobs that are more comfortable. If the music store must now pay employees $7.25 to hang out and watch the register, then the seafood store is going to have to up the ante to find laborers. If the seafood store breaks the $10.00 mark, the construction company is going to have to maintain the margin of remuneration. If laborers approach the wages of carpenter's helpers, then they aren't going to want to begin investing in tools and attention unless that rung moves higher, too, and if carpenter's helpers begin earning at a rate similar to carpenters, then the latter aren't going to take on more responsibility. And so on and so forth, throughout the economy.
Thus, costs rise for companies throughout the pay scale, and prices inflate to cover them. Plainly put, the pay scale just shifts, without an increase in the buying power of anybody involved. And in a globalized economy with technology always threatening to replace human workers, if there's sufficient incentive for companies to invest in it it shifts toward a ledge of layoffs and bankruptcies.
A Wage to Die By
In New England, government-types have been toying with the more insidious idea of a "living wage," which, in Norwalk, CT, means "115% of the poverty threshold for a family of four," currently $11.05 (via RIFuture). In Providence, the heated debate is over $11.97 per hour (or $10.19 with healthcare). I use the word "insidious" for four reasons:
The Conservative's Advice
Something is clearly wrong when we've reached the point of treating the government more as an employer than as a shared resource. There are activities that government structures are best positioned to undertake; driving the economy is not one of them. Neither is micromanaging employment relationships.
Well-intentioned people who want to help working families as opposed to "reaching out" to them should be able to discern, while considering the likely effects of forcing up the minimum wage, the place in which influence would best be applied: getting them past that low-end, clerk/laborer slot by opening up opportunities, not other people's wallets. I've gone on too long to explore them, here, but two areas for action toward that end are education and entrepreneurship, with the emphasis on the latter.
One difficulty with education, as a means toward broad social advancement, is that it will tend to mean advancement across industries. The college-educated laborer will not be inclined to return to the construction site and will not generally recoup his investment of time and money if he does. In contrast, manipulating government policies in such a way as to encourage small businesses making the leap from employee to business owner more plausible in a world of Big Box stores, category killers, and multinational corporations would harness Americans' natural drive to succeed and make every ground-floor job in every industry just a first step in each worker's quest to increase his or her own minimum wage.
ADDENDUM:
For more on the living wage movement, see this May 2006 post by Don Hawthorne.
Four words would've sufficed here:
Let them eat cake.
Very appropriately picked phrased, Rhody. The irony is that, not apparently knowing the context of that quotation, you miss the reason that it applies so well.
Posted by: Justin Katz at January 16, 2007 5:35 PMYou would be right, if only we could trust big business to do the right thing. Unfortunately, particularly in a state where we give companies big tax breaks only to see them bolt when they fail to hold up their end of the bargain, it doesn't happen often.
Posted by: Rhody at January 17, 2007 1:08 AMI don't see how the trustworthiness of big business applies to the simple consequences of forcing up the minimum wage. If anything, allowing your assumption for a moment, untrustworthy companies would exacerbate the dynamics that already lead to forced wage increases' harming of those intended to benefit.
Posted by: Justin Katz at January 17, 2007 5:18 AM