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A Charitable Solution For The Minimum Wage Debate

marketing@pennpoliticalreview.org March 31, 2014 Soapbox Blog No Comments on A Charitable Solution For The Minimum Wage Debate

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It’s easy to become disillusioned with all the debate that’s been had about minimum wage laws in recent months. The reckless appeals to emotion are more than a little bit jarring—“equality!” from the left, “efficiency!” from the right—and hopes of reaching anything but a deadlock are uncommon, to say the least. And it is not necessarily a clear-cut issue. There is convincing evidence that our current minimum wage is not nearly enough to sustain a person’s life, but anyone who’s taken Econ 1 knows that in a competitive market minimum wage creates unemployment, which is especially bad when your country has only just crawled out of a serious recession. Still, no one has been able to put forward a clear, agreeable solution. Recently, however, Pavlina Tcherneva, an economist at Bard College, has advocated a new idea. It’s something of a throwback to the New Deal, when Roosevelt instituted programs to curb unemployment, stimulate the economy, and provide necessary services all at once. Unlike Roosevelt’s plan, however, this one doesn’t make our already-overwhelming bureaucracy all that much larger. The idea is this: to use the nonprofit sector to guarantee jobs for the would-be unemployed.

The nonprofit sector of the economy is often overlooked. By nature, it generally has neither the resources nor the influence of the larger private and public sectors. After all, it is more focused on helping those who need it than selling products and appeasing shareholders. Due to their often meager size, especially in relation to their visions, most nonprofits are unable to hire the kind of workforce that they need, want, and deserve. This is especially true in times of economic downturn, when people are worse off financially and therefore less able or willing to donate money. In this model, anyone who can’t find work elsewhere is essentially paid by the government to work for these nonprofits. This is accomplished through government subsidies that cover the cost, which would otherwise be undertaken by each nonprofit, of hiring a new worker. This government aid would be flexible enough that people could enter and leave these nonprofit jobs at their will. That way, when the economy is bad and people lose their jobs in the for-profit sector, they can be hired almost immediately by the newly subsidized nonprofits. Average people are guaranteed jobs when they would otherwise be out of work. When the economy is good again, for-profit businesses have the resources to hire people directly from these nonprofits, presumably for better pay.

The reason this model works so well is that under it nonprofits are able to best meet their goals when it is most imperative for everyone that their goals are met. Soup kitchens and thrift stores are never understaffed, especially not when people are most in need of food and clothing. For larger nonprofits, having more workers can allow them to expand the scope of their operations—for example, a charity operating here in Philadelphia can open a location in Baltimore at the precise moment when Baltimoreans could use another charity. At the same time, the people who have lost their jobs are able to nonetheless earn a living wage. Then, once for-profit businesses are once again ready to hire these people, they have additional job experience and the businesses are able to thrive even more. The nonprofits lose labor, but only when their services are no longer as needed. Everybody wins.

It might seem at first glance that the necessary bureaucratic costs to institute such a program would be smothering. This might be true if not for all the other bureaucratic costs it would cut. Welfare as we know it would no longer exist; it would serve only those who are incapable of working, rather than those who are unable to find work. The job guarantee program could also pick up some of the costs imposed by Social Security, Medicaid, and other preexisting programs. However, perhaps the most convincing fiscal argument for the nonprofit job guarantee is that it would give ordinary people extra spending power, bolstering the economy when it’s at its worst. Then, once the economy is back on track and more people are working for for-profit firms, bureaucratic spending will dramatically decrease. Finally, the minimum wage debate can end once and for all, because unemployment is now a non-issue and the minimum wage can be set at no less than the living wage without significantly harming businesses. Thus, the model works on both a microeconomic and on a macroeconomic scale. It fluctuates naturally with the market, yet stabilizes it. It contributes both to economic growth and to human development. Frankly, it checks all the boxes.

Of course, not everyone will agree. As it is rooted in the Keynesian tradition, the program is unlikely to be supported by many fiscal conservatives. Even most moderate Democrats would probably take issue with its size and scope. The political leverage that would be required to actually institute it given the American political system would have to be all-encompassing. Really, it’s more of a nice thought than anything else. Realistically, the nonprofit job guarantee program is more likely to be launched in some smaller, more avowedly leftist country like Portugal or even Cuba. But should those of us who inhabit the social-democrat wing of the American left ever gain control of the government, this idea is so crazy that it just might work. It’s disappointing to think that we may never find out for sure.

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