A few weeks ago, you couldn’t swing a stick without hitting on a discussion about raising the minimum wage. One of the more nuanced arguments coming from those in favor of raising it involved how productivity has risen, but the minimum wage has not. In fact, these people argue that if the minimum wage simply “kept pace” with worker productivity, it should currently be at $22 an hour. This somewhat silly notion was even half-heartedly endorsed by the Indian Princess Massachusetts Senator Elizabeth Warren.
Now, there are many ways to potentially refute this argument, and well known Austrian Economist Bob Murphy touched upon some of them in a blog post. The only perspective I really brought to the table in this discussion was pointing out that income alone is a poor judge of standard of living. In our society, we seem totally obsessed with incomes, while almost completely ignoring the real issue, quality of life. Rising inequality is constantly vilified, while advances that have made life better for everyone are considered to be some sort of given, as if they just happen completely independently of free markets.
The simple fact of the matter is that the quality and availability of critical goods and services in America has risen dramatically over the last few decades. For everyone. Across all classes and levels of income. I really don’t think there are any Americans who would trade places with someone living in the 1970s, even though there may have been “less inequality” and minimum wage workers might have received “fairer” wages.
Remember: Incomes are merely a means to an end. We desire a high income only because it enables us to enjoy a higher standard of living. As technological progress occurs, living standards can rise, even if incomes remain unchanged (or even fall). This is the real measure of how well off we are as a society – how well do our people (at any given level of income) live? Increased productivity has led to an increased standard of living, which has benefitted all of us.