Refocusing the Minimum Wage Debate: Overcoming Management Failure and Achieving the High Road

Abstract

Early supporters of the minimum wage couched their arguments in terms of achieving greater productivity and efficiency. Some of the early management theorists like Frederick Winslow Taylor talked about how overall efficiency could be improved if management undertook to make second-class workers into first-class workers. The efficiency wage argument put forth by Sidney Webb held that a minimum wage would actually encourage managers to invest in their workers’ human capital. This paper refocuses the debate on the issues that the minimum wage really speaks to: the type of society that we want to be. On the basis of CPS data, I show that the effective minimum wage population is considerably larger than commonly supposed, and that today’s unskilled workers are no different than the unskilled industrial workers during Taylor’s time. Therefore, Taylor’s argument about making second-class workers into first-class workers through efficiency wages still has application to today’s growing low-wage labor market.