Eleanor Roosevelt, Labour and the Living Wage

The living wage has recently been the subject of debate in Britain. The UK Labour Party has made a point of putting it at the centre to their response to the ongoing economic struggle, should they win the 2015 General Election (BBC, 2013). However, Labour are not the first to see the positives of the living wage.

Eleanor Roosevelt - who campaigned for the civil rights movement, for gender equality, for human rights, and for the New Deal when First Lady of the United States - also made the argument for a better standard of wages:

'Refusing to allow people to be paid less than a living wage preserves to us our own market. There is absolutely no use in producing anything if you gradually reduce the number of people able to buy even the cheapest products. The only way to preserve our markets is an adequate wage.'

The Labour Party, in trying to ensure the acceptance of this more 'adequate wage', are trying to sweeten the deal with tax concessions for employers who adopt it (Wintour, 2013). However, there arguably shouldn't be a need for such incentives.

The Roosevelt Institute have sought to debunk as a myth the idea that there are negative effects to a living wage (Chong, 2013). The myth claims that minimum wage schemes reduce the likelihood of full employment, by over-inflating the amount that businesses have to pay workers for unskilled labour. As a result, the myth concludes, the numbers trapped in poverty will increase as there will be less work to go around.

The Roosevelt Institute's own investigation suggests that that the 'higher wages = fewer jobs' argument is not backed by economic studies. The studies they cite suggest instead that there is no real downside to rising wages, but some real positives. Employees with more money make it easier to keep profit making enterprises afloat and flourishing. And by guaranteeing a minimum acceptable quality of life for even those with no skills, there is a guarantee also that they will be healthy enough to develop skills in the future.

Certainly from the Keynesian viewpoint, rising wages pose far, far less of a threat than falling wages. John Maynard Keynes' theories proposed that when an economy was suffering from the effects of a recession, the government aught to intervene to save what it can; in order to alleviate unnecessary suffering and maintain the existing infrastructure for future economic use.

Part of that process means propping up demand. By ensuring that there are always people with enough money to be able to spend and consume, there is also always an assured market for the products of paid labour. For Keynes, the failure to prop up demand would only exacerbate the problems caused by recession.

Fundamentally, the Institute's argument presents treating employees fairly, by paying them fairly, as ultimately economically beneficial, both in the short term - by creating a solid customer base and fighting off poverty - and in the longer term - by ensuring the health, time and space needed to develop more complex skills.

These arguments certainly back the UK Labour Party's advocacy of the living wage. But they do not suggest further financial incentives to be necessary. As Eleanor Roosevelt argued, what is needed more is a better settlement for everyone involved in a society; a settlement based on fairness.

'It seems to me that all fair-minded people will realize that it is self-preservation to treat the industrial worker with consideration and fairness at the present time and to uphold the fair employer in his efforts to treat his employees well by preventing unfair competition.'

That should mean policy-makers tackling better regulation of unfair practices; and furthermore searching for ways to extend and enhance consideration and fairness in both the economy and society at large. Only through the extension of a fair deal for all can people be ensured of the health, time and space needed to develop more complex skills and innovate.

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References:
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+ BBC's 'Ed Miliband pledges living wage tax breaks for firms'; 3 November 2013.

+ Eleanor Roosevelt's 'The State's Responsibility for Fair Working Conditions'; in Scribner's Magazine; March 1933; from Eleanor Roosevelt & Allida M Black's 'Courage in a Dangerous World: The Political Writings of Eleanor Roosevelt'; Columbia University Press; 2000.

Also quoted in Crash Course US History; 'The New Deal'; 18 October 2013.

+ Patrick Wintour's 'Ed Miliband sets out tax rebate plan for living wage'; in The Guardian; 5 November 2013.

+ Emily Chong's 'Debunking the Minimum Wage Myth: Higher Wages Will Not Reduce Jobs'; Roosevelt Institute's Next New Deal Blog; 7 August 2013.