Thursday, April 19, 2012

Wage Subsidy

I suppose most people do not think of child care assistance for poor working women as a wage subsidy from which an employer benefits just as much as or more than the worker, but that is exactly what it is.  If you are a conservative and disposed to resist that assertion, then take your complaint to your own economic Godfather, Adam Smith. 

Yeah, I know, Smith lived and wrote in the late 1700s when such programs did not exist, but what he said about free market wage levels are instructive and relevant here.  And as a liberal, I am among that group of folks who have, unlike the vast majority of conservatives, actually read the man whom ultra free market right wingers claim as their inspiration.

In The Wealth of Nations, Smith holds that  market competition over time sets wages at subsistence levels, which essentially means an amount sufficient to attract needed workers by providing enough compensation, but just enough, to assure those workers have both the ability and incentive to come back for more, day after day.  Assuming - and this is a big assumption - Smith had something useful to tell us in this highly nonspecific and basically intuitive formulation, a detailed fulfillment of such a broad assertion is dependent on a multitude of factors regarding the the overall standard of living in a given society, as well as its mores.  Consider, for instance, the fact that workers by the hundreds of thousands in one factory town in China are content to be housed in mass dormitories like inmates in a penal colony, while workers here are usually partial to having their own digs.  In a free country, which says something significantly more moral than simply a free market, workers rights are protected and the general welfare is respected by the civil authority, i.e. law.  Hence, unions participate in the economic dynamic which determines the allocation of the revenue generated in the market among the participants responsible for its production, and the indigent are extended various forms of assistance for essential needs such as child care and housing.

And here is the crux of the matter.  A free country, like that referenced above, is typically said to be a liberal society.  Conservatives say they oppose all things liberal.  But when it comes to some features, such as child care, Romney is full square in support.  Why?  Well, because the world is far more complicated than anything right wing economic theories can be stretched around, especially those that arise from the failure to even read, let alone understand, the implications of the writings of people like Adam Smith.  Employers do not, and can not always provide for every need of every potential worker in the labor pool, which they would like to draw upon to staff their operations.  In a free country, people have vastly differing lifestyles and needs, even those of similar education levels and economic circumstances.  Some are single parents, some not. 

A child care subsidy has the net effect of expanding the potential labor pool for employers, without requiring them to cover the real costs of tending to the subsistence needs of all of their employees.  Hence, they can keep wages at the level they want, and have more folks to choose from when hiring.  At the same time, folks who otherwise might not have been able to hold a job can afford to take one. Just too tough for most anti-liberals to get their minds around.

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