The Political Economy of a Living Wage

Progressives, the New Deal, and Social Justice

Donald Stabile

• Publisher: Palgrave Macmillan
• Year: 2016
• ISBN:
  9783319324739
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

This book tells the story behind President Franklin D. Roosevelt's use of the phrase "living wage" in a variety of speeches, letters, and statements, and examines the degree to which programs of the New Deal reflected the ideas of a living wage movement that existed in the US for almost three decades before Roosevelt was elected president. Far from being a side issue, the previously unexplored living wage debate sheds light on the New Deal philosophy of social justice by identifying the value judgments behind its policies. Moving chronologically through history, this book's highlights include the revelation of a living wage agenda under the War Industry Board (WIB)'s National War Labor Board (NWLB) during World War I, the unearthing of long-forgotten literature from the 1920s and 30s that formed the foundation of Roosevelt's statements on a living wage, and the examination of contemporary studies that used a simple living wage formula combining collective bargaining, social insurance, and minimum wage as a standard for social justice used to measure the impact of New Deal polices.

© The Editor(s) (if applicable) and the Author(s) 2016

Donald StabileThe Political Economy of a Living WagePalgrave Studies in American Economic History10.1007/978-3-319-32473-9_1

Begin Abstract

1. The Political Economy of a Living Wage

Donald Stabile¹

(1)

St. Mary’s College of Maryland, St. Mary’s City, Maryland, USA

End Abstract

On June 16, 1933, President Franklin Delano Roosevelt issued one of the most important statements of his New Deal Administration. His first three months in office had been busy with legislation that aimed at making the financial system of the USA secure. At the end of the frenetic first 100 days, he announced his program for ending the Great Depression, the National Industrial Recovery Act (NIRA). One part of the NIRA was a short-term public works program to put people back to work. The longer-term strategy of the NIRA was for business, labor, and the government to work together and coordinate production, prices, and wages in an effort to reform the capitalist economy. In his presidential statement on signing the NIRA, Roosevelt announced where the reform element of the NIRA was headed, “Its goal is the assurance of a reasonable profit to industry and living wages for labor with the elimination of the piratical methods and practices which have not only harassed honest business but also contributed to the ills of labor.” ¹

Viewed from the perspective of the early twenty-first century, Roosevelt’s use of the words “living wages” to describe a goal of the NIRA comes across as a remarkable statement, especially because the NIRA was his first program for ending the Great Depression. After all, most of us would think that it has only been during the last two decades that a social movement with a goal of providing workers with a living wage has been growing in the USA. In this book, I will tell the story behind Roosevelt’s stated goal of the NIRA and examine the degree to which programs of the New Deal reflected the ideas of a living wage movement that existed in the USA for almost three decades before Roosevelt was elected president. My strategy will be to offer a history of the political economy of the concept of a living wage in the USA from the Progressive Era through the beginning of the New Deal. I will then compare the arguments in favor of a living wage with statements made by politicians, pundits, business and union leaders, and academics who favored the New Deal to see the extent to which their justifications of the New Deal were consistent with the arguments made by advocates for a living wage. The overall finding of the book is that the idea of a living wage was present in the New Deal to a greater extent than has been previously recognized. The New Deal advocates for a living wage used a simple formula derived from a broad political economy perspective: collective bargaining, social insurance, and a minimum wage equaled a living wage.

A Living Wage and the Issues It Raises

Present-day advocates for a living wage on a national level have used a strategy of expanded social security benefits, revitalization of unions, and a livable minimum wage to achieve their goal. This strategy for a living wage, however, would not be possible without the social reforms of the New Deal. More to the point, it has been overlooked that there was an earlier movement for a living wage that tried to influence those New Deal reforms. By placing Roosevelt’s comments on the living wage in the context of its history, I have found that he was reflecting a viewpoint that was expressed in a variety of writings during the three decades before he took office. Still, no one has studied Roosevelt’s relationship to the ideas expressed by the movement for a living wage. To give some examples, Daniel Fusfeld, in his study of Roosevelt’s economic thinking, never mentions the idea of a living wage. ² The same can be said of William J. Barber and his book on economic policy during the New Deal. Barber stresses the methods used in the New Deal to increase the purchasing power of workers. As a result, when he quotes from Roosevelt’s statement on the NIRA, ³ he points out that it had a goal of increased purchasing power. ⁴ He does not mention that Roosevelt referred to a living wage multiple times in between his statements on purchasing power. Deborah M. Figart, Ellen Mutari, and Marilyn Power discuss the NIRA in their book, Living Wages, Equal Wages, but do not mention Roosevelt’s inclusion of a living wage as a goal of the NIRA. ⁵ Allan Carlson does mention the relationship between the living wage and the New Deal in his brief history of the family wage, but he attributes that relationship to the Secretary of Labor, Frances Perkins, and not to Roosevelt. ⁶

By focusing on the living wage as a goal of the New Deal, I will also address another issue in its history. As Ira Katznelson points out, historians have typically divided the New Deal into two phases using 1935 as a boundary year. The first phase marked a period of economic reform with the enactment of legislation such as the NIRA and the Agriculture Adjustment Act; the second phase saw social reform through three programs for economic security: labor relations through the National Labor Relations Act (NLRA), social security due to the unemployment insurance and pensions provided by the Social Security Act (SSA), and the minimum wage provided by the Fair Labor Standards Act (FLSA). ⁷ Cass Sunstein also criticizes historians for dividing up the New Deal in his study of Roosevelt. ⁸ Economists have gone further than historians, with Barber describing how Roosevelt made “more than one ‘U-turn’ in his economic strategies.” ⁹

To be sure, those economic strategies involved different ways to increase purchasing power. In this book, however, I will join with Katznelson and Sunstein to focus on the continuity in Roosevelt’s approach with regard to a living wage because it was, as I will describe throughout this book, a common theme in the New Deal’s interest in helping workers attain economic security. Roosevelt’s overall goal was to see all workers earned a wage that covered the cost of life—a living wage. Even after World War II took care of the purchasing power problem, Roosevelt retained an interest in a living wage when near the end of the war he set forth a second Bill of Rights with an implicit goal of a living wage, as will be discussed later in this chapter. My intention is to reach a better understanding of the Roosevelt New Deal through an analysis of how its programs for economic security were consistent with the agenda of the living wage movement.

There is another point that needs to be made, however. Many New Deal programs were motivated by the theory that the cause of the Great Depression was underconsumption caused by the lack of purchasing power among workers and overproduction by business. The NLRA and the FLSA aimed to increase the purchasing power of workers by getting them higher wages; the SSA would give them unemployment insurance and pensions to spend. From this perspective, it could be argued that Roosevelt’s advocacy for a living wage was a Trojan horse for increasing consumption demand through higher wages for workers. The push for greater purchasing power from workers was a central feature of the New Deal and it was the pursuit of how to achieve it that caused the many changes in policy that Barber describes. Bruce Kaufman analyzes the purchasing power side of the argument with great acumen, ¹⁰ and Barber makes it the central theme of his book. ¹¹ I agree with them that the purchasing power argument was central to the New Deal’s economic policies.

The problem with this argument, however, is that it works the other way just as well, because the underconsumption theory can also serve as a ploy to secure a living wage. Both parts of this argument were made by supporters of the New Deal and they often went hand in hand. To give one example, in his statement on the NIRA, Roosevelt called for a “change from starvation wages and starvation employment to living wages and sustained employment,” adding that “decent living, widely spread among our 125,000,000 people, eventually means the opening up to industry of the richest market which the world has known.” ¹² While I will offer other examples of advocates for a living wage who also employed the purchasing power approach, I focus on the living wage part of the argument for three reasons. First, it has been overlooked for so long. Second, the living wage argument unifies all of the Roosevelt programs for labor as much as the purchasing power approach does. Kaufman, for example, points out that the NLRA and FLSA continued the effort to improve wages that started with the NIRA. ¹³ From a living wage perspective, the NLRA, the SSA, and the FLSA all continued the living wage goal of the NIRA. Third, as Kozak and I have argued, Herbert Hoover was just as strong an advocate for increasing the purchasing power of labor as Roosevelt and the New Deal. ¹⁴ Walter Lippmann believed that Hoover’s “historic position as an innovator has been greatly underestimated and that Mr. Roosevelt’s pioneering has been greatly exaggerated,” ¹⁵ and Rexford Tugwell, a prominent member of the...

Table of contents

• Cover
• Frontmatter
• 1. The Political Economy of a Living Wage
• 2. A Living Wage from World War I Through the Onset of the Great Depression
• 3. Planning a Living Wage: The National Industrial Recovery Act
• 4. A Useful and Remunerative Job: The National Labor Relations Act
• 5. Social Security: Protection from Poverty in Old Age and Unemployment
• 6. The Right to Earn Enough: The Fair Labor Standards Act
• 7. Collective Bargaining, Social Insurance, and the Minimum Wage: A Program for a Living Wage
• Backmatter