The Daily Caller

The Daily Caller

Corporatism or a Border? Your call!

My friend Matt Miller rightly wants to find a way to make low-skilled service jobs pay enough to enable participation in normal ”middle class” life. He notes, hopefully, that there are many service jobs that can’t be offshored because they have to be performed here.

“That means jobs in areas such as home health care, retail sales, teaching, personal grooming and fast food.

In-person service work accounts for roughly 30 million jobs in the United States. The sector is experiencing faster job growth than the economy overall, but wages are relatively low and lag wage growth in the broader economy. If we could make this non-offshorable segment of American work a more certain path to the middle class, it would offer an important measure of security and optimism in a global economy that poses threats to many Americans. Figuring out a feasible way to do this ought to be a national priority.”

So far so good. Then we get to the solutions part, which for Matt involves the CEO of McDonald’s recognizing his “duty to help solve broader social challenges” and declaring that he was going to start paying $12/hour in selected cities, with elaborate studies of the results.

It’s a plan. Here’s my plan: Stop importing unskilled immigrants until labor markets tighten and wages rise as employers compete for harder-to-get workers. Then admit immigrants only to the extent it won’t deny workers at the bottom reasonable wage increases.

How do these policy alternatives stack up? Here are three things about Matt’s plan:

1) It’s complicated: Most obviously, McDonald’s has to keep competitors at bay somehow while it jacks up its wages. How is that going to happen? Subsidies from other McDonald’s enterprises? From the government? There are all sorts of interests for the Mac CEO–no longer a soulless profit-maximizer–to take into account:

How much of the adjustment should be borne by consumers via higher prices? How much by shareholders in terms of reduced returns? Is there a role for taxpayers to do more via an expanded earned-income tax credit? Will this higher wage unintentionally hurt less-skilled Americans because chains will end up hiring only workers who, in economic terms, are ‘worth’ $12 or more? Will it lead to faster automation that reduces the number of jobs?

The immigration plan, on the other hand, is pretty simple: have an effective border like other countries do. We might have to build a big fence, and have a computerized system to check the status of new hires. Neither is a difficult technical (as opposed to political) job. Later, we’d have some kind of legislative or administrative process to set the number of immigrant and guest workers. That’s more complicated, but again nothing out of the ordinary in a democracy.

2) It’s corporatist: Miller’s scheme has to be corporatist**–again because McDonald’s couldn’t get away with raising wages for “statesmanship” reasons in a viciously competitive free market composed of equal economic actors. It can only happen as part of a cozy alliance of big players like McDonald’s and government, one that has power to take the interests of all the “stakeholders”–consumers, shareholders, etc.–into account in a way neither the market nor a straight democracy would.

A society where the big boys help out the little people out of a sense of duty is by definition corporatist (it implies there are some people who occupy large, powerful, paternalistic social roles and some who are charity recipients, as opposed to all who are equal citizens).

An immigration-based solution, on the other hand, respects both the particular egalitarianism of the market and the fuller equality of democratic politics. Once we have a working border, the market would be free to raise or lower wages without anyone acting out of charitable or paternalistic non-economic “duty.” Don’t need no “statesmen.” We could talk about ordinary “workers” and “employers” rather than “stakeholders.”

3) It’s crazy. Miller’s plan isn’t going to happen.  McDonald’s CEO will never try it, even if Miller, Robert Reich and Harry Belafonte hold him captive in a cabin at the Aspen Institute while they read him the complete text of Nickel and Dimed. Why? Because if McDonald’s tried it on a large scale it would immediately lose market share and profits to fast food firms with cheaper workers and cheaper hamburgers. Its stock would plummet. Its workers would no longer be making $12 an hour because they wouldn’t have jobs.

But the immigration solution has a good chance of working. It requires only two mechanisms: a border that works well enough, something that many countries have accomplished, and the economic law of supply and demand–which was still in effect last time I tried to buy gas (and which may be shifting, gradually, in favor of the workers, unless employers and their lobbyists do something quick to stop it). And it works across the board, for all low-wage workers in the market, unionized or non-union, whether they are lucky enough to work for a benevolent, socially responsible Matt Miller/Business Roundtable CEO or just an ordinary schmuck-trying-to-make-a-profit boss.

Here’s an experiment in statesmanship: Miller should drop his delusional corporatism, risk social opprobrium and help those “in person service workers” by opposing the current Gang of 8 scheme to bring a globalized labor force back here to compete with them. I suspect he won’t do that–he lives in the think tank/statesman/stakeholder world, where helping the working poor is a “national priority” but there is only one acceptable position on immigration. That’s OK. But not to recognize the contradiction is beyond deluded.


**–”Corporatism” in this context doesn’t mean “benefitting corporations,” though it usually does that. It means treating society as if it were a body (corpus) with different people playing distinct superior and inferior roles, not unlike bodily organs–as opposed to treating society as a collection of equal economic and political actors.