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Tuesday, August 2, 2011

Churchill: 'Liberalism and the Social problem' – a new compilation of speeches 1906-1912.

The minimum wage problem.

by StFerdIII

Socialism seeks to pull down wealth; Liberalism seeks to raise up poverty.”
[Churchill May 14 1908, Dundee Hall speech].

 This is little book a wonderful and new product for Churchilliana. The publishing firm, General Books, copied a number of Churchill's speeches between 1906 and 1912 using optical character recognition software. These full length reproductions were then turned into a book of some 138 pages. They are a fine compilation on Churchill's vision of 'Liberalism', or the establishment of what some might call welfare-capitalism, which merges aspects of socialism and communal responsibility, with trade, free[ish] markets, and aspects of capitalism.

These speeches formed the ideology and political convictions of Churchill the politician during the social-reforming era of 1906 to 1912. This was when the modern welfare state and its important components was created. Churchill became a minister of power during 2 governments serving as MP for Manchester North-West [1906-8], and Dundee [1908-22]. He entered the Cabinet in 1908 until 1910 as President of the Board of Trade and served as the Home Secretary from 1910 to 1911. These crucial 5 years from 1907 to 1912 were essential to restoring the communal health of Great Britain and the many 'have-nots'. Churchill's speeches make the argument as to why this is so and why a safety net of health, insurance, poor relief, and wage floors is necessary. Conservatives might be shocked but yes we do need a minimum welfare state.

In fact in reading this book and one of Churchill's speeches on the minimum, I was persuaded to drop my opposition to the minimum wage. By design and inclination many Conservatives are against what they view as an artificial floor on wages, which do indeed increase costs and could create more unemployment. I personally don't believe this is true. A wage floor as set in our modern society is a very low wage indeed, barely providing a livelihood let alone an income surplus for the worker. Churchill believed and rightly so, that the interests of 'Labor' that abstract 'class', was not necessarily the interests of socialism. This was in 1906. Today of course the 'laboring class' is closely aligned with the Marxists and Socialists. It was not so 100 years ago.

In 1909 Churchill gave a remarkable speech on what was called 'The Anti-Sweating Bill', or a bill against the cheap use of 'sweat labor' without regard to minimum wages. His critique of the free-market at the low-end of the wage spectrum is correct and anathema to much of conservative opinion on the pricing of labor:

It was formerly supposed that the workings of the laws of supply and demand would in the regular and natural course of events, and by a steady progression, eliminate that evil, and achieve adequate minimum standards. Modern opinion has found it necessary greatly to refine upon these broad generalisations of the truth, and the first clear division that we make to-day in questions of wages, is that between a healthy and unhealthy condition of bargaining.” [p. 82]

'Sweated labor' can lead to a mis-pricing in the labor market. Illegals, out of school working-boys or young-men; or those desperate enough to earn some money, can easily bid down the price for a sweated-labor job hour to something approaching zero when compared to the cost of living. In any large nation state we have millions of people in this 'category'. Such a threat was real during Churchill's day, and it is still with us in the current era. When muscle or energy is all you have to sell, and we have a market surplus of such labor, than the surfeit will simply drive down the hourly price to a level equal to that of the most desperate. This is especially true when unions are weak or non-existent:

In the case of any great staple trade in this country, if the rate of wages became unnaturally low compared to other industries, and the workers could not raise it by any pressure on their part, the new generation at any rate would exercise its preference for better pay and more attractive forms of industry.” [p. 83]

In other words we might disenfranchise a whole host of necessary labour and trades by pricing the work at such a low level that no one will do the work. We already see this in the service industry trades where illegals or migrants are performing the duties that the native-born will simply not do at the current labor price. In this regard without a minimum wage the conditions for these workers would be even more disastrous than they are already. I loathe unions but Churchill is right. Without collective bargaining power an individual worker in a sweated, non-value added job might well find himself in a race to the bottom of the wage scale.

Most 'capitalists' will pay good people a good wage. Higher wages usually denote higher productivity and greater margins. But in the sweated trades reliant on muscle and not skill, there is little that a sweated worker can do especially if he is alone and without some form of group support [subject to the usual depravity of group leadership and politicization]. He might be able to differentiate himself on higher quality or faster throughput, but that is not a certainty in many of the lower wage earning classes. It is only humane that these people are protected and given a base of support in which to build up their skills and opportunities in the future, and by extension their wages.

A minimum wage is thus rather necessary. Yes indeed unemployment might be higher with a minimum wage since the artificial wage floor will distort supply and demand and not allow the market to 'clear' labor supply at a lower then minimum wage price level. So what. The economic costs to businesses are marginal. Society's costs to be borne to support this mild increase in unemployment is both bearable and moral. It is not strictly a question of profit or loss, nor of liberal economics. It is a social issue and one concerned with granting a cadre of people access to a minimum floor of earnings and by consequence, some dignity. Churchill the 'liberal' was right on this one.