Wage Wars

Remember Suresh Naidu, the professor of economics and international and public affairs at Columbia University? If you haven't heard our first interview with him, search it and thank us later. Anyway, he's back, and he's badder than ever.

This time, he's talkin' past, present, and future regarding the topic of minimum wage. Put your thinking caps on and turn up your earbuds, this one is special.

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INTRO (0s):

So for a long time, it used to be thought that like minimum wage workers, they're just like teenagers in middle-class homes. Yeah. And you know, a big chunk of them were in like the sixties and seventies, but increasingly, partly, you know, since Reagan for all the reasons you talked about an increasing share of minimum wage workers are like older workers, workers with families, that you know, are trying to live on a minimum wage job. Hide your kids! Lock the doors! You're listening to HR’s most dangerous podcast. Chad Sowash and Joel Cheeseman are here to punch the recruiting industry, right where it hurts! Complete with breaking news, brash opinion and loads of snark, buckle up boys and girls, it's time for the Chad and Cheese podcast.

Joel (46s):

Aw. Yeah. What's up everybody. This is your favorite podcast. The Chad and Cheese podcast. I'm your cohost? Joel Cheeseman is always joined by my cohost at arms Chad Sowash and today he's back. He's bad. He's out for blood. It's part two of our interview with Suresh Naidu. It's Chad's biggest crush, Man. Crush it all. Suresh. Welcome back to the show. You have a PhD, but I question your intelligence coming back on the show. How you been man?

Suresh (1m 19s):

Totally legitimate to question my intelligence. So, yeah, I'm great. How are you? I'm fine.

Chad (1m 25s):

Excellent dude. Excellent dude. So give us a little, Joel gave us a, you have a PhD, but gives us again, listeners, a little bit of background about you and then we're going to jump into today's topic.

Suresh (1m 36s):

Yeah. So I'm, I'm an economist. I, my area of specialty is economic history and particularly of, of labor markets. So I've studied everything from American slavery to unions in the 20th century to the minimum wage and did the gig economy today. So I'm kind of a Jack of all trades as they come in economics. Yeah.

Joel (1m 55s):

With that background, you're the life of every party that you attend. Right.

Suresh (1m 59s):

You'd be surprised how much that's actually true.

Chad (2m 3s):

Get Suresh over here. Tell us that story short. I, so that's what we're going to do today. Today. We're going to have like a party discussion and it's going to be around minimum wage. I mean, it's in the news today, it's in the social discussion. Everybody's fighting about it, but you have the history behind this

Joel (2m 19s):

A unique perspective.

Chad (2m 20s):

Yes. And, and I'd love to be able to go back from a history standpoint and then just kind of like ramp into today and have that discussion. But I think it's important that, you know, we all better understand and we're more educated around the topics we're actually discussing. So therefore that's why we bring smart dudes on like, like you to talk about that. So how did this whole thing start? Was it, was it FDR? Was it before that.

Suresh (2m 45s):

In fact in the, you know, before the new deal, for example, like most labor law was the domain of state and local government. And so different States had different minimum wages. So that sort of starts, I think in New York state law in 1905, there's a, there's a background. So the Supreme court during this early 20th century period was super hostile to labor legislation. So, you know, there's this famous case Lochner versus New York where like New York tried to pass a statute, that limited, that was like a maximum hours law. Like, you know, that that bakers can work too many hours and the Supreme Court was like, this is an unconscionable restriction on freedom of contract and struck it down.

Suresh (3m 26s):

What that then led reformers of the day push for is like minimum wages for women and children, especially, and so the first minimum wage is like in Massachusetts in 1912. And then, you know, you kind of get a whole bunch of other minimum wages, always sort of restricted to women and children. The exception might be like Oklahoma in 1937, but also all of them exempting, almost all of them, exempting agricultural workers and domestic workers for, you know, which has sort of happened to exempt also a large fraction of the African-American population from coverage by the minimum wage. It was probably not an accident, you know, and there's like state level laws and, you know, in carving out exemptions for, for domestic and agricultural labor.

Suresh (4m 14s):

But then in 1937, the Supreme court determined that all of these are unconstitutional and basically strikes down all of the minimum wage laws. It's a 1936 or 1937. And then they like have another case where they find that it is constitutional. And then that basically leads FDR to put a federal minimum wage and the federal labor standards act of 1938. And that's the first federal minimum wage. It also has an exemption for agricultural and domestic work, but it's like kind of the, for the first time that you have like a blanket minimum wage that's binding in Mississippi the same way it's binding in like New Hampshire.

Chad (4m 53s):

So why did they put that in though? So what was the, what was the reason for that? Was it because poverty was running rampant? Why did the government feel like they had to step in from a federal standpoint and actually override everything the States were actually putting in place?

Suresh (5m 10s):

Well, so there was like an argument of the time, that it was the term was sweated labor. So it was basically like sweat shops in the U S and that people are like, we need to eliminate sweatshop. And it's a moral imperative to like end quote unquote sweated, labor, and Roosevelt was talking about the need to end starvation wages. So there was a real, like moral case for the minimum wage. And that's kind of always been there for, in the background of the minimum wage. It's not just like a, it raises wages for low income workers. There's also a real sort of sense in which it like the dignity of a minimum wage is part of like what, you know, you're trying to establish as like a democratic polity is like, need to have it, the people that work like can actually have a decent standard of living as a result of that.

Chad (5m 56s):

They can survive.

Suresh (5m 57s):

They can survive.

Chad (5m 58s):

That's the first time I've ever heard starvation wages, but that in itself, I mean, that's pretty damned impactful. Was that like what they use today, we use quote/unquote "living wage," which is kind of like a softened version of that. Is that was that the term that they were actually using starvation wages?

Suresh (6m 17s):

They talked about starvation wages, like reformers were like, we need to end starvation wages. And like, you know, there's like a quote from like the department of labor, "certain basic standards of adequacy, or generally recognized as inherent in the concept of a minimum wage based on the cost of living." So it's just like, you know, the government was talking about basic standards of living as a part of the reason to have a minimum wage. And then I think, like in the context of the recovery from the depression, there was also kind of a Keynesian Agra demand point that, Hey, maybe by raising wages of workers that will raise demand for products, and that will kind of have a stimulative effect on the economy. And that was just kind of in the air in the 1930s.

Joel (6m 57s):

Was this something that sort of appealed to both sides of the political spectrum, or was there a debate back then of, okay, well, yeah, if the Dems pass, you know, more money, that means more votes, so we gotta be against it. What did politics sort of come into play or was it an overall broad sense of, we need to help people.

Suresh (7m 15s):

It was politics got in the way, but not Republican versus Democrat. It was North versus South. And so basically both Northern Republicans and Northern Democrats were like pro a higher minimum wage while, you know, most of the South is Democrat at this point, remember, African-Americans, can't vote. And, they're like very, very much opposed. And so you just think that even though agriculture is exempt, like there's a whole bunch of low wage textile industries, for example, in North Carolina and South Carolina that are paying basically really, really low wages and know that they're going to get hammered by the minimum wage.

Joel (7m 51s):

You mentioned children. And I also think about sort of indentured servitude, right? Like the little towns that, dug coal and, you know, you bought the same stuff from the company that paid you money. And it was just sort of this, you know, bubble that you lived in. Did minimum wage laws pass before child labor laws and indentured servitude issues?

Suresh (8m 10s):

Yeah. Yeah. So the nature servitude stuff in the U S and in the UK just like ends way before we have minimum wages. We've gotten rid of it indentures, in the U S before independence with the exception of the US blacks in the U S office. Right. If you're white, you're not indentured worker, in the US. So, and then the minimum wage is sort of coming. It's like a beginning of the 20th century kind of thing. When you have this, you should just think of like, like at the beginning of the 20th century, it's been like two generations of just industrialization happening in the US after the civil war. It's just like big factories going up, used to think of like, Upton Sinclair's writing, like the jungle, a period where like, people are like really grappling with the consequences of industrializing the economy at a breakneck speed.

Joel (8m 58s):

And you had similar today, you had very wealthy companies, right. In that period, it was, you know, trains and steel and things like that. But we had a similar situation when these laws were passed. Maybe we look at today with a different lens.

Suresh (9m 13s):

Yeah. So I think like, it is similar and it's actually similar a couple of different ways. So like actually the Northern big businesses that are basically the Northern backing, the Northern Republicans, they're in favor of a federal minimum wage, in the 1930s. And even, so even before in the 1910s, they're important for these minimum wages because they're high wage employers. And that's like the way, I don't know if you guys have seen this, like Amazon's running like, basically full on ads in the New York Times talking about how it pays a $15 minimum wage and supports raising the federal minimum wage.

Joel (9m 48s):

Yeah. They just want to allow their workers to take a bathroom breaks other than that. Yeah.

Suresh (9m 52s):

Yeah. But you'll get $50 an hour, but they're also like busting a union in Bessemer, Alabama at the, you know, while they're like taking out ads, being like, Oh yes, we should raise the wage. So I think that's telling it's, they're willing to pay high wage. They're not actually willing to like, recognize any kind of, any kind of unions. And that's also similar, I think in the late 19th century, early 20th century, you have like, you know, Frick and Carnegie and Rockefeller, and they're like, you know, they're reformed, they're open to reform. They're open to like these minimum wages, because they're not actually that dependent on child labor or low wage, sweat, sweat shops. So they're like, yes, sure. Take, you know, and it's more like their competition that's that might actually depend on that, much more than them.

Chad (10m 36s):

Unions actually start to come in to play, to be able to drive wages, because again, collective bargaining, all that other fun stuff. I mean, there's kind of like this rolling need to focus on the employee, the actual people versus the corporation. Does that come in? You know,

Suresh (10m 55s):

That's in the 1930s, really unions are part of a broadly part of like the progressive