Responding to the Crisis of Profitability: The Function of the Minimum
Wage in the Neoliberal Era
by
Jason Edwards
B.A., University of New Brunswick, 2008
A Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of
Master of Arts
in the Graduate Academic Unit of Political Science
Supervisor: Thom Workman, PhD, Political Science
Examiners: David Bedford, PhD, Political Science William Parenteau, PhD, History
This thesis is accepted by the Dean of Graduate Studies
THE UNIVERSITY OF NEW BRUNSWICK
May, 2011
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This work seeks to account for the erosion of the real value of minimum wages in
Canada during the neoliberal era. It surveys state theory and finds that the logic of capital theorists, primarily Joachim Hirsch and James O’Connor, provide a framework that is able to account for this change as their work explains from where the interests of capital and the state are derived. It explains the minimum wage, indeed all of the state’s economic policy, as fulfilling two primary functions: legitimating capital accumulation and optimizing the conditions for accumulation. Early minimum wages performed these two functions by stabilizing the low-wage sphere of employment and warding off labour militancy. Neoliberal minimum wages responded to the profitability crisis in the late
1960s and were adopted more aggressively by capital and the state as a means of promoting overall wage austerity. Table of Contents
A bstract...... ii
Table of Contents ...... iii
List of Figures...... v
Prologue...... vi
Chapter 1: Conceptualizing the State Introduction ...... 8 Pluralist State Theory...... 11 Antonion Gramsci and the Social Consciousness State Theory ...... 13 Structuralist and instrumentalist State Theory ...... 19 Ralph Miliband ...... 20 Nicos Poulantzas ...... 22 The Logic of Capital State Theory...... 28 Joachim Hirsch...... 27 James O'Connor ...... 32 Conclusion ...... 37 Notes...... 38
Chapter 2:The Minimum Wage in Canadian History Introduction ...... 40 The Historic Setting...... 41 Early Minimum Wage Legislation ...... 50 The Minimum Wage into the Fordist Era ...... 54 Discussion from the Standpoint of the Logic of Capital and the State ...... 68 Notes...... 60
Chapter 3: Neoliberalism and the Shifting Function of Minimum Wage Policy Introduction ...... 63
iii Neoliberalism and the Logic of Capital ...... 66 Minimum Wages in the Neoliberal Era ...... 76 The Minimum Wage and the Low-Wage Sphere ...... 83 Discussion: The Minimum Wage from the Standpoint of the Logic of Capital..93 Notes...... 99
Conclusion ...... 102
Bibliography...... 104
Curriculum Vitae List of Figures and Tables
Figure 1- Federal Program Expenditures as a Percentage of GDP...... 72
Figure 2- National Average Hourly Wages (2005 Dollars)...... 73
Figure 3- Percent Change in Average Annual Wages per Decade ...... 74
Figure 4- The Minimum Wage in Alberta ...... 77
Figure 5- The Minimum Wage in British Columbia...... 77
Figure 6- The Minimum Wage in Manitoba ...... 78
Figure 7- The Minimum Wage in New Brunswick ...... 79
Figure 8- The Minimum Wage in Newfoundland and Labrador ...... 79
Figure 9- The Minimum Wage in Nova Scotia ...... 80
Figure 10- The Minimum Wage in Ontario ...... 80
Figure 11- The Minimum Wage in Prince Edward Island ...... 81
Figure 12- The Minimum Wage in Quebec ...... 82
Figure 13- The Minimum Wage in Saskatchewan ...... 82
Figure 14- Sex Difference in Lower-Quartile Wages ...... 87
Figure 15- Percent Change in Average Canadian Minimum Wages ...... 96
Figure 16- Segmented Minimum Wages ...... 96
Table 1- Proximity of Quartile Wage Groups to Minimum Wages ...... 85
Table 2- Minimum Wage Declines by Province ...... 95
v Prologue
On April 27,2010, the Canadian city of New Westminster became the first
Canadian city to enact "living wage" legislation. New Westminster joined the more that 140 U.S. municipalities that have enacted similar laws in recent years.
Such policies respond to the ugly fact that so much work in Canada falls well below the threshold of a living wage, and that these brutal wage realities have worsened in recent decades. Before 1976, the majority of minimum wages in
Canada were sufficient to keep a fulltime worker out of poverty in a marginal way.
For example, an urban British Columbian, working fulltime for minimum wage in
1976 would earn 5 percent more than poverty-level wages.1 A similar individual in 2002 would be earning 14 percent less than the amount needed to cross the poverty threshold. At the other end of Canada, a 1976 rural four-member family in New Brunswick, earning minimum wage, would have been 6 percent above the poverty line, whereas their 2002 counterparts would actually earn 12 percent below the poverty line. In 1976 Quebec, a single, urban, minimum wage worker would earn wages commensurate with the poverty line. If we again consider the
2002 equivalent, the pay received by this individual in 2002 would have been 23 percent below the poverty level.
It is the character of the declining minimum wage that forms the immediate concern of this thesis, especially when so much low-wage work hovers very close to the minimum wage levels in every province. Why has it lost so much ground? Why has it contributed to the growth of a sphere of precarious, low-wage work? Why did governments allow the minimum wage to atrophy? Although we never want to lose
vi sight of the human struggles associated with low-wage, alienating work, the account of minimum wage policy in this thesis will draw upon critical state theory, particularly the body of literature sensitive to the tendency of the rate of profit to fall. Along the way it will provide a provisional response to the questions posed above, and offer an explanation of the trends that have forced a the growing number of North American municipalities to pass "living wage" laws.
Notes:
1 Calculations made by author using Statistics Canada: Income Statistics Division (2010) LICO numbers.
vii Chapter 1
Conceptualizing the State
Introduction
The minimum wage appeared after the First World War along with other public programs and policies as a part of Canada’s growing regulatory state apparatus. It was a policy endorsed by both labour and capital. Labour sought to give better protection to vulnerable, unorganized, largely female workers when facing unscrupulous employers.
For capital the minimum wage would help to stabilize the low wage sector by preventing some opportunistic employers from undercutting the prevailing low wage rates, effectively accepting that wages should not be permitted to plunge any further. This confluence of interests on the part of labour and capital permitted the introduction of minimum wage regulation. Over the early part of the post-World War Two period the minimum wage rose in real value along with overall wages in the economy. Between the mid-1970s and the mid-1980s, however, the minimum wage lost significant real value and for the next twenty years it stagnated. Capital supported this decline and stagnation wholeheartedly. Although minimum wages continued to be touted as examples of the benign nature of state regulation, they have come to be deployed to promote wage austerity. Current minimum wages stand well below the real values they reached in the mid-1970s.
The central problematic of this thesis focuses on the shift in capital’s attitude towards the minimum wage. We ask: “Why did capital regard the minimum wage as a regulatory opportunity to stabilize low wages in the earlier part of the twentieth century, and then come to regard minimum wage regulation as an opportunity to promote
8 generalized wage decline and austerity in the latter part of the century?” In other words,
what accounts for the shift in the view of the minimum wage by the ruling capitalist
class? In a more general sense, our problematic turns on the question of how best to
account for the evolution of minimum wage policy.
The theoretical framework that informs the discussion of the minimum wage in this thesis is drawn from the scholarly literature on state theory. State theory broadly addresses the relationship between society, the state, and the development of public policy. The specific literature on state theory that is briefly canvassed in this thesis is pluralism, Gramscian class-consciousness theory, the instrumentalism/structuralism debate, and the logic of capital theorists. This chapter explores the ability of the different schools to respond to our central problematic concerning the shifting attitudes towards the minimum wage by capital. Pluralist theory conceptualizes the state as a benign institution that enacts policy based on the outcome of competition between interest-groups. Marxist state theory is sensitive to class and does not assume that capitalism’s inherent contradictions are overcome by public policy. It will be shown that the logic of capital school provides the strongest theoretical framework to answer our question and to discuss the evolution of Canada’s minimum wage policy over the twentieth century. Accordingly, Chapter Two will use the language of die logic of capital school to review the pre-war implementation of the minimum wage as well as its evolution in the Fordist era. Chapter Three will use the theoretical framework afforded by the logic of capital school to explain the profound shift in the use of the minimum wage as an instrument to promote wage austerity in the neoliberal era.
9 The conclusion of this thesis will argue that the theoretical analysis of the
minimum wage informed by the logic of capital school permits us to avoid two serious
errors. First, it allows us to avoid falling in to the romanticized language of the
progressive left, inclined to regard the development of the minimum wage as a benign policy from the standpoint of working people. Second, the analysis of this thesis will allow us to avoid merely endorsing calls to increase die minimum wage without proper regard to the nature of the capitalist state and its regulatory regime.
This chapter oudines an intellectual justification for framing the discussion of the minimum wage through the theory of the logic of capital school. It summarizes pluralism as well as these three approaches of Marxist state theory. Each school of thougfit will be explained as a lens to consider the establishment and evolution of the minimum wage, especially in the neoliberal era. The animating problematic of this thesis is capital’s acceptance of the minimum wage as a stabilization policy in the earlier part of the twentieth century and then the use of the minimum wage as an instrument to promote wage austerity in the neoliberal era. The litmus test for each body of state theory is its ability to explain capital’s shifting regard for the minimum wage. Each school of state theory, in other words, will be assessed in terms of its ability to explain this profound shift in the socio-economic character of the minimum wage. Four schools of thought are surveyed. The first, pluralism, is generally identified as a liberal theory of the state. The other three are generally considered Marxist, and include social consciousness theory, the instrumentalism/structuralism debate, and the logic of capital theory.
10 Although each school sheds some light on the minimum wage, the contention is that the logic of capital approach provides a much more compelling account. The general argument of this thesis is that minimum wage policy conforms to the state’s need to optimize and legitimize accumulation in an economic environment o f falling profit rates. It is the logic of capital school that shows the best promise with respect to the provision of an account of our specific problematic, namely, why capital changed its attitude toward the minimum wage in the neoliberal era. More generally, the logic of capital school provides the best frame for a discussion of the minimum wage throughout the twentieth century.
Pluralist State Theory
Orthodox pluralist state theory holds that society as a whole is unified. The state is described in this body of literature as a neutral arbiter of social forces. Knuttila explains that the pluralist theorist sees the state as “being a neutral mediator of conflict, receiving
‘direction’ from all of the various power centres, but controlled by none and acting in the best interest of all, at least in the long-run.”2 The state converts pressure from interest-groups into public policy. Pressure is exerted on the state in multiple forms and by innumerable groups, any of which are able to influence policy. Policy is debated and enacted in a process that is open to public input. In this theoretical paradigm political parties “coordinate, organize, and channel factions, interests, and opponents,” and
“operate in a functioning polyarchy.” They effectively act “as intermediaries between individual citizens and the agencies of government."3 Government, according to pluralist theory, negotiates between interest group pressures, enacting policy that generally represents the will of the entire society.
11 This conception of the state is inadequate. As Knuttila questions: modem
pluralists make a major assumption: that the various groups, parties, or associations
compete on more or less equal terms. This is the key tenet of pluralism and it raises
fundamental questions.”4 Pluralist theory is unable to respond to society’s inequitable economic features. It does not explain why the ownership class’ interests constantly prevail over those of workers. It also fails to explain the basis of the groups that operate in society, especially where they came from and why they exist as class representative institutions. Knuttila contends that the most pressing shortcoming of pluralist state theory is that “... pluralism assumes the existence of some broadly conceived social or national interest that the state or government serves. Such a notion must imply a lack of substantial divisions, class or otherwise, in the society.”5 The fault identified here is the facile reading pluralism makes of society. To assume that society can be harmonious and does not contain irreconcilable interests is to overlook the social relations of class.
The interests of working people are diametrically opposed to those of the ownership class. It is in the interest of the ownership class to pay workers as little as possible.
Conversely, it is in the immutable interest of labour to be paid higher wages. Economic policy, including the minimum wage, has a class characteristic. Because of its failure to interpret such interests, pluralist state theory is unable to account for the social dynamics of the minimum wage.
Pluralism is not a sufficient lens through which to solve the question at hand.
Because pluralist state theory lacks a sufficient accounting of economic forces it is unable to explain capital’s evolving attitude towards the minimum wage. If we hold that the state enacts policy based on pressure exerted by competing interest groups we are
12 left asking why capital has emphasized the minimum wage as a mechanism of wage restraint since the late-1970s over its traditional role of wage stabilization. Pluralist state theory cannot account for this evolution. Instead, explaining the minimum wage in full requires the instruction of more critical social theory.
Antonio Gramsci and the Social Consciousness State Theory
Many of the most compelling theories of the state originate in the Marxist tradition of analytical critique. This body of literature understands the state as actively reproducing relations of class domination. The state is mired in the class struggle— owners against workers—and performs tasks required by the interests of owners.
Marxist theorists broadly embrace the spirit of Marx’s famous phrase, from The
Communist Manifesto’. “The executive of the modem State is but a committee for managing the common affairs of the whole bourgeoisie.”6 The primary role of the state in capitalist social formations, according to Marxist theorists, is to ensure the creation of the optimal conditions of capital accumulation and to mediate class relations.
Despite their common focus on the social relations of capitalist production,
Marxist analyses have varied. The first strand of Marxist state critique draws on the work of Antonio Gramsci. It focuses on the class construction of social consciousness.
It explores how the state is involved in maintaining exploitative social relations through the understandings and social ideas held by woiking people. The thought of Gramsci is valuable in its ability to explain how minimum wages fit into a framework of class domination. Despite this strength, it is unable to account for the origins of class interests. As we will see, Gramsci’s work cannot account for the change in minimum wages from legitimating mechanisms to tools used to reinforce wage restraint.
13 The state theory of Gramsci is important in that it focuses on the operation of class domination. It proceeds as follows. Every human is endowed with natural intellectual capabilities. By virtue of this inherent thoughtfulness, all people come to understand their world in terms of their class experience. Members of the working class, however, do not entirely understand their world in terms of their own class. Rather, they come to internalise many of the ideas of the ruling class. This worldview makes it possible for working people to be enlisted inter alia as scabs and union-busters. Indeed, they often perform such acts on a voluntary basis. Thus, the capitalists exploit the working class with the help of the working class. Gramsci explained this situation rising the famous concept of “hegemony,” which is a combination of consent and coercion. Coercion, the direct physical repression of workers, is often not the leading element in class domination. More common is consent, which is driven by the internalization of a worldview conducive to the interests of the capital-owning class. In order to build consent the ownership class offers minor, superficial concessions to the working class.
Through hegemony Gramsci postulates that class rule acquires support through the webs of social consciousness. Class struggle, therefore, takes place at a much deeper level than mere physical coercion.
To elaborate on Gramsd’s argument we can begin by observing that the most obvious method of the ownership class’ domination is coercion. Coercion is always employed by the state, although more periodically and institutionally. One can see coercion in such common state apparatuses as courts and legal institutions. These institutions are used as threatening and punishment mechanisms for individuals who must submit to the relations of privately owned means of production. In Gramsd’s
14 terms: “The selection or ‘education’ of men adapted to the new forms of civilization and the new forms of production and work has taken place by means of incredible acts of brutality which have cast the weak and die non-conforming into the limbo of the underclasses or have eliminated them entirely.”7 Coercion alone, however, is not a sufficient means of perpetuating asymmetric social relations.
More commonly, Gramsci holds, exploited individuals consent to the prevailing social relations of power. He notes that working people do not consistently act in a way that is conducive to their class interests. Indeed, they are often enlisted as scabs, working to undermine solidarity and reduce one-another’s ability to organize effectively.
They are often enlisted by the state and capital as thugs used to violently discipline uncooperative workers when coercion is needed. This conscription is performed by working people without an eye to the larger social ramifications. Members of the working class will often voluntarily work to diminish their own social strength, confounding the interests of the capitalist class as universal interests shared by everyone.
Gramsci asserts that “the development and expansion of the particular group are conceived of, and presented, as being the motor force of a universal expansion, of a development of the ‘national’ energies.”8
Gramsci’s state theory is a product of his upbringing in early twentieth century
Italy. He lived in a time of great social upheaval, and the Italian state played an important role in class relations. “In 1906 mainland troops were called to repress the
Sardinian peasantry. Later on, however, Gramsci was to discover the opposite side of the coin—Sardinian troops being used to hold down the workers of Turin.”9 His work is largely an attempt to answer the question: “If workers are not constantly being violently
15 repressed, why do they continually reproduce their own exploitation?” Despite the exploitative relations of class in capitalism working people are largely prevented from forming an organic working class consciousness. Workers rather think of themselves in national terms with aspirations of economic growth and national well-being. They are not workers, but Italians or Germans or Canadians. This displacement of organic class consciousness was evident when Gramsci saw socialist fervour in Turin ended by Italy’s
Prime Minister. Giovanni Giolitti, in 1920, had “no difficulty in reaching a compromise, by means of an offer of industrial co-partnership” that meant that “the revolutionary phase of postwar Italy was effectively brought to a close.”10 Such a compromise garnered considerable support from Italian workers.
Gramsci’s theory regards the ruling ideology as an obfuscation of class relations.
This is termed “hegemony”. Hegemony denotes an overall social framework within which working people live their lives and formulate their ambitions. It does not have the narrow connotation common to “liberal” and “conservative” ideologies, but rather refers to the larger cultural environment that absorbs competing political outlooks while resolving things in favour of the ruling class. The conventions and practices of the state tend to reinforce the political domination achieved by intellectual domination. In speaking of elections, for example, Gramsci writes: “... what is at stake is a rotation in governmental office of the ruling-class parties, not the foundation or organization of a new political society, and even less of a new type of civil society... the independence and autonomy of the subaltern group which it [a party or political group] claims to represent are in fact sacrificed to the intellectual hegemony of the ruling class...”11 Peoples’ perceptions of their interests derive not from their material existence or their location in
16 the social relations of production, but from more universal value systems that originate
in the ruling classes. Workers and owners often tend to see themselves in national terms rather than narrower working class terms. To use one example, although it is wholly in the interest of the ownership class to have a society that values hard work, working people often embrace this ideal despite the fact that it promotes longer working hours, longer weeks, later retirement ages and more intensive work schedules.
The ruling hegemony is given greater legitimacy by its ability to incorporate some values of the working class. This is the crux of Gramsci’s ideological hegemony. The working class envisions their potential prospects of positive development within the prevailing economic paradigm, not apart from it. The institutions of capitalism are seen by working people as real substantial choices. In actual fact, however, they each produce nominal, immaterial differences. Through such ideological obfuscation the capital-owning class is able to “retain its hold on and support among such a sizeable proportion of the working class.”12
For the hegemonic outlook to be accepted the working class has to be conditioned to believe that it is plausible. Gramsci regards the state as purveyor of the hegemonic ideology. Forms of social education are, for Gramsci, intended to serve the dominant class by inculcating the society’s hegemonic orientation. The state educates the citizenry in a manner that conforms to hegemony and builds a consenting workforce.
These malleable individuals, despite being subject to intense economic exploitation and servitude, will not tend to challenge society’s prevailing nationalist and economic mythology. The hegemonic worldview becomes received wisdom of the day. The state
17 raises workers to think within an ideological paradigm that conforms to the ruling hegemony.13
The political strategy of Gramsci reflects his emphasis on indoctrination. He terms the intellectual jostling for a revised ideology a “war of position” as opposed to the “war of manoeuvre” (that is, a brief, violent revolution). As he learned from previous class conflicts, socialist revolution will be fruitless in the absence of a new, worker-oriented hegemony. If the worldview of the capitalist class was still dominant then policies and programs would be thwarted due to a lack of understanding and a lack of support. Intellectuals siding with workers must therefore work to counter the prevailing hegemony by effectively making cultural struggle into a direct aspect of revolutionary struggle. The war of position is continuous and its outcome is measured by how individuals envision the nature of society and productive life. As Gramsci wrestled with the problem of how social relations of exploitation were maintained he observed that outright violent coercion is not always used to force workers to accept capital accumulation. Capitalist production, that is, is also perpetuated through a culture that conforms to the ideals of the dominant class. In the same way, only a stronger, counter-hegemonic ideology promoting the genuine interests of the working class would allow for successful revolutionary policies and the successful reproduction of socialist society.
Gramsci’s state theory offers an interesting lens through which we can consider the minimum wage in Canada. Hegemony, a broad ideology that conforms to the interests of the ownership class while offering token concessions to workers, illuminates our understanding of the minimum wage significantly. The minimum wage has
18 benefited the ownership class by lending moral authority to below-subsistence wages.
At the same time, the minimum wage has stabilized class relations by offering a minor
carrot to labour: slightly higher wages for the most vulnerable members of the workforce. Labour had been lobbying for wage regulation in the face of capitalism's extreme exploitation. The minimum wage can be seen, under the lens of Gramsci, as a concession made to workers in order to promote ruling class hegemony.
This state theory, however, does not fully explain the minimum wage in the neoliberal era. As we will see in our third chapter, minimum wages responded to the declining profit rates of the late 1960s and early 1970s. After their modest and steady inclines in the postwar period, neoliberal minimum wages had lost significant real value by the mid-1980s. These developments cannot be explained in whole using the work of
Gramsci. If minimum wages could increase in the postwar period, why did capital need them to erode in the neoliberal era? Why were the concessions made to labour reversed rather quickly? To answer these questions we must delve deeper into the relationship between the capitalist class and the state.
Structuralist and Instrumentalist State Theory
The second group of Marxist state theorists focus more directly on the relationship between ruling classes and the apparatus of the state. Their debate historically pitched instrumentalism against structuralism. Ralph Miliband, the representative instrumentalist, proposes that the state is an instrument of the capitalist class as a result of the social origins of the state’s staff. Nicos Poulantzas, in contrast, conceptualizes the state in terms of broader class relations. Structuralism, as this theory came to be called, explains the state as a product of structural class forces. Accordingly, the state is not
19 merely an instrument of the capitalist class. Poulantzas’ theory sees the state as a multi- tentacled body within the economic system. He is famously quoted for stating that the state came to exercise “relative autonomy” or relative freedom from any particular class.
These two thinkers, despite their strength, are unable to inform adequately our discussion of the minimum wage as they do not account for the origins of class interests.
As a result of this, they are unable to explain the shifting function of the minimum wage into the neoliberal era.
Ralph Miliband
Ralph Miliband is the predominant instrumentalist scholar. His work rebutted the pluralist claim that the state is autonomous and arbitrates between interest groups in a neutral manner. Instead, he argues that the state is used by the capitalist class as an instrument to achieve their economic and social interests. His well-known The State in
Capitalist Society empirically demonstrates that the ownership class’ deep involvement in the state’s political, judicial, and bureaucratic arms allows it to use the state as a class instrument. Pluralist scholars, he explains, attribute to every social group, “universal suffrage, free and regular elections, representative institutions, effective citizen rights, including the right to free speech, association and opposition.”14 These scholars then wrongly conclude that, “no government, acting on behalf of the state, can fail, in the not very long run, to respond to the wishes and demands of competing interests. In the end, everybody, including those at the end of the queue, get served.”15 Miliband considered this view of the capitalist state and society utterly untrue.
Miliband’s most striking empirical analysis is of the social origins of state elites.
This is done by first proving that there is an objective elite rooted in the capitalist class.
20 After surveying many social indicators, such as education, family lineage, and means of
subsistence, Miliband is able to state unequivocally that the individuals who occupy positions of decision-making in society are members of either the propertied class or a professional bureaucratic class. In his words: “What the evidence conclusively suggests is that in terms of social origin, education and class situation, the men who have manned all command positions in the state system have largely, and in many cases overwhelmingly, been drawn from the world of business and property, or from the professional middle-classes.”16 This means that the people controlling the state— politicians, upper-level bureaucrats, legal officials, military leaders—share a similar outlook by virtue of their class position. Minor discrepancies between their particular positions on some issues do not displace their overall agreement on economic policies or, indeed, on the question of capitalism itself.
After establishing the objective presence of a ruling elite Miliband explains how state actions are manifestations of this social solidarity. ‘The first and most important consequence of the commitment which governments in advanced capitalist countries have to the private enterprise system and to its economic rationality,” he writes, “is that it enormously limits their freedom of action in relation to a multitude of issues and problems.”17 State policy is restricted by the need to benefit the owners of capital.
Miliband uses inter alia the example of owners and striking workers. When state actors intervene in these disagreements, “the result of their interventions has tended to be disadvantageous to the latter, not die former.”18 He cites the state’s propensity to abuse its monopoly on violent force as an example of its unambiguous bias in economic disputes in favour of the interests of die capitalist class. Even state policy that benefits
21 working people is implemented with an eye to the interests of owners. The limited and
fleeting concessions made by governments and owners to the working class are not
made out of genuine concern for the well-being of labourers, but are a “ransom” paid
“for the promise of maintaining the rights of property in general.”19 Giving up minor
concessions is necessary in order to reproduce social relations of capitalist domination and servitude. State policy invariably conforms to what will best suit the long-term interests of the capitalist class.
Nicos Poulantzas
Nicos Poulantzas’ structuralist theory of the state accounts for the state’s behaviour amid class conflict. He situates the state within the larger context of the social relations of class. As Knuttila writes: “For Poulantzas, capitalist society is a class society, characterized by a system of production which results in the expropriation of wealth produced by one class by another class, so that any mechanism which has as its function the maintenance of those relations is not a ‘neutral’ function. Poulantzas thus suggests that the state’s role is to attempt to ensure the continuing overall maintenance of capitalist relations of production.”20 The state, according to this model, exercises a
“relative autonomy” apart from the direct influence of the capitalist class.21 The state is a complex of institutions which are structured in a way that allows them to respond to the needs of the capital-owning class and the general reproduction of capitalist social relations of class.
To elaborate, Poulantzas’ structural conception of the state begins with a schematic analysis of civil society. He recognizes civil society as a heterogeneous body of classes that are further divided into what he called “fractions”. These fractions form
22 an extremely intricate web within the dominant class. For example, “Monopoly capital
is chiefly the outcome of the concentration of industrial capital, in particular of the
amalgamation of several production units and productive capitals under a single
economic ownership.”22 Monopoly capital, moreover, embodies many contradictions within itself. Throughout the social order there are classes (such as the bourgeoisie/proletariat), which are divided into fractions (such as industrial/financial capital), which are also divided into concentrations (such as monopoly/small capital).
Society is thus a complex web of interconnected class fractions. Despite these complex divisions it is owners who maintain supremacy in the social order. In the words of
Poulantzas: “In talking of the bourgeoisie as the dominant class, it must not be forgotten that we are really dealing with an alliance between several dominant fractions of the bourgeoisie sharing in political domination.”23
This nuanced reading of class composition and class conflict is the foundation for
Poulantzas’ conception of the state. He characterizes the state as ( 23 it is not a direct participant in the class struggle. Elite bureaucrats and elected officials are not strictly workers or owners. The state exists in a class society, but does not constitute a separate or unique economic class. Secondly, the state must achieve relative autonomy to fulfill its reproductive function, especially its unifying and coordinating role. As explained by Poulantzas, relative autonomy rests in: ... the specificity of the constitution of classes and of the class struggle in the capitalist mode of production and social formations. I am thinking here of all my analyses on the specificity of classes in capitalism, on the power bloc and the different fractions of the bourgeoisie, on hegemony within the power bloc, on supporting classes, on the forms of struggle adopted by the working class, etc. All these being reasons that attribute to the capitalist state a precise role as political organiser and unifier, and as a factor for the establishment of the ‘unstable equilibrium of compromises’, which role is constitutively connected with its relative autonomy.26 In other words, the state must be somewhat free in order that it may fulfill its role as the arbiter of class relations and insure the reproduction of capitalist social relations. As Camoy writes: “the State as product and shaper of objective class relations...”27 It exists in a society that requires a break between political and economic power. The separation of the political sphere from the economic sphere is necessary in order to maintain exploitative social relations within capitalist social formations. Poulantzas challenges the idea of the state as an instrument of the dominant class. The state cannot be “manipulable at will”28 by the ownership class for several reasons. The dominant class is not an easily identifiable group. Poulantzas also takes issues with the idea that there may be a “determining instance”29 where capital-owners communicate to the state what functions they want the state to perform. The relationship between the state and the bourgeois is, for Poulantzas, much more subtle and dynamic. 24 The relatively autonomous state model does not mean that the state will “unequivocally ratify the specific socio-economic interests, empirically construed, of the dominant classes.”30 The state’s relative autonomy occasionally permits it to make concessions to the labouring class. Poulantzas writes: If its hegemonic function of universality, as the organizing framework of molecularized society, conforms to the interests of capital, it nevertheless necessarily contains, at the specific political level of class struggle, a guarantee of certain of the dominated classes’ economic-corporate interests—a guarantee in accordance with the hegemonic constitution of the class in power, whose political interests are asserted by the state. What matters here is that the integration of the economic-corporate interests of the dominated classes into the political state does not have the character of a mechanical ‘compromise’ within a socio-economic balance of forces...31 Some of the interests of the labouring class may be expressed in state policy. Such apparent compromises may benefit capital, however, as they help mask the exploitative nature of capitalist social relations of production. Policies that seem to benefit exploited classes, that is, are a means of perpetuating capital accumulation by lending legitimacy and an air of neutrality to the state in a capitalist social formation. Instrumentalist thought is not wholly incompatible with structuralism. Indeed, the distinction between these two schools may be overdrawn.32 Many academics have concluded that the discourse between Poulantzas and Miliband resulted not in entrenched theoretical distinctions but in a more complex and instructive conception of the modem capitalist state. These two scholars can be synthesized in a way that highlights their complementarity. The primary difference in their work was the feature of capitalism that they emphasize. While Miliband focused on the ruling class itself, Poulantzas opened up his analysis to the wider class struggle in society. 25 Poulantzas’ structurally embedded state is an intricate idea. The state is a product of the complicated class society within which it operates. The state is bom of complex class relations and reflects the outcome of class conflict through its relative autonomy. It supports capital by deepening and maintaining exploitative relations to preserve capital’s dominant position in society. In the words of Poulantzas, the state can only “express and crystallize class powers.”33 The theories focussing on capitalist class relations are suggestive with respect to the minimum wage. The very fact that both the working class and the capitalist class pushed for wage minimums in the early part of the 20th century would help to explain their adoption. Miliband's work also helps us see that the approval of the minimum wage by the capitalist class might have been historically paramount. However, the work of these theorists provides no account of the evolving character of class interests per se. Indeed, it would seem that the specific interests of capital more or less materialize out of thin air. Our salient question pertaining to the minimum wage cannot be answered by the Marxist schools that focus on class relations and the state: "Why was it so important for capital to let the minimum wage fall in the neoliberal era to drive home the message of wage austerity? In order to answer this more involved question we must examine the endemic economic tendencies that frame class relations as they navigate their way through the institutions of the state. For this we turn to the logic of capital theorists. The Logic of Capital State Theory The third group of Marxist theories is concerned with the deeper functioning of capitalist accumulation. These theorists situate the state and classes within the immanent laws of capitalism. They recognize particularly that capitalism exhibits a 26 downward tendency in the rate of profit. This inevitable fact stems from their acceptance of Marx’s theory of the changing organic composition of capital. The state is embedded within this unstable system, and accordingly undertakes two primary functions o f i) ensuring optimal conditions for accumulation and ii) mediating class relations. The work of two state theorists from the “logic of capital” school is considered in this study. Joachim Hirsch focuses on the crises that emerge from the tendency of the rate of profit to fall. The state, he broadly argues, is forced to deal with falling rates of profit by redoubling its effort to maintain an environment of optimal accumulation. The second theorist in the logic of capital group, James O’Connor, provides more detailed information as to how the state is able to aid owners’ mitigation of the downward-tending rate for profit. His explanation addresses the state’s dual role of ensuring accumulation and of ensuring smooth class relations. Joachim Hirsch The work of Joachim Hirsch is rare in that it situates the state within die framework of the logic of capital. More specifically, he explains the state’s role as it relates to the tendency for the rate of profit to fall. Hirsch claims that, “the development of the state form and the structural limitations and possibilities of state action can only be approached through an analysis of the relation between the state and the contradictions of capitalist accumulation.”34 To be sure, the state is institutionally separated from capital in order to perform duties which individual capitalists or capitalist organizations cannot do for themselves. But capitalism’s immanent tendency toward crisis forces the state to combat the falling rate of profit above all else. Hirsch uses Marx’s mature analysis of capitalism in Capital as a necessary starting point to a full 27 understanding of the state’s nature. Hirsch, however, engages in a more fully developed discussion about the institutional pressures that arise from capitalism's immanent tendencies. Hirsh understood the tendency for the rate of profit to fall as the most important feature of capitalist accumulation. Therefore, to grasp the implications of Hirsch’s work, we must first determine the nature of this fundamental law. The law of the falling rate of profit begins with capitalism’s competitive nature. Capitalists sell a commodity at a rate commensurate with the commodity’s average necessary labour time. That is, a product is sold for a price equal to the industry-wide average amount of labour that is needed to produce it. In order to compete with other capitalists, an individual capitalist enterprise will use technological innovation to lower the labour time required to produce a commodity. For a brief period the capitalist enjoys labour-time advantages over their competitors: “A capitalist working with improved but not as yet generally adopted methods of production sells below the market price, but above his individual price of production; his rate of profit rises until competition levels it out.”35 Instead of selling the commodity at the socially necessary (or average) cost of production, a capitalist who can produce the commodity at a faster rate will be able to sell at a similar price and thus reap greater profits. At the level of industry-wide production, especially as more and more producers adopt technological innovations, the end results will be grave. Lower socially necessary labour times result in lower rates of profit, by virtue of the changing ratio of workers to machines. In Marx’s words: “This mode of production produces a progressive relative decrease of the variable capital as compared to the constant capital, and consequently a continuously rising organic composition of the total capital. The immediate result of 28 this is that the rate of surplus value, at the same, or even rising, degree of labour exploitation, is represented by a continually falling rate of profit.”36 In short, competition leads capitalists to institute new production processes—technology—to produce a greater quantity of commodities. These commodities are, by virtue of the fact that their socially necessary labour time has diminished, of lower value than before the new production methods were instituted. But, profit is derived by realizing the surplus value of a commodity which constitutes less and less to the overall product relative to technology. Thus, profit rates will tend to fall across industries as they press through periods of technological innovation. As competition leads to greater and greater investments in capital, profit rates fall. The profit rate is a function of surplus value (the difference between the value that workers produce and the amount they are paid) divided by total capital invested. Total capital invested consists of both variable capital (labour, raw materials, etc.) and constant capital (the means of production). This equation can be represented as follows: profit rate = (workers’ value produced - workers’ nav> (variable capital + constant capital) This means that rising constant capital is inversely related to the profit rate. Kolakowski summarizes this seminal idea in his Main Currents o fMarxism : “As technology progresses, and the amount of constant capital increases, less and less work is necessary to produce the same volume of goods; the ratio of variable to constant capital decreases, and so does the average rate of profit. This law of the diminishing rate of profit is a universal feature of capitalist production.”37 Competing capitalists, employing greater 29 and greater quantities of constant capital in an effort to increase their own profits, are continuously forcing the industry-wide rate of profit lower and lower. It is important to note that this downward pressure does not manifest itself uniformly. The profit rate’s decline can be altered by what Marx called “counteracting influences” that can “cross and annul the effect of the general law.”38 There are innumerable examples of this which Marx generally organizes into six main categories: increasing intensity of exploitation, depression of wages below the value of labour power (“[0]ne of the most important factors checking the tendency of the rate of profit to fall.”39), cheapening the elements of constant capital, relative overpopulation, foreign trade, and the increase of stock capital.40 Each of these mitigating factors aims to restore the profit rate either by having workers produce a greater value of commodities or lower the wages given to workers. While individual capitals are not concerned with the general decline in the rate of profit, they do take these measures in order to increase their own profitability. While all of these items may slow, or even halt the rate of profit’s decline, its tendency to fall remains. This law is pivotal for Hirsch. He situated the state amid capitals continuously pushing the rate of profit lower. For Hirsch, “the investigation of state functions must be based on the categorical analysis of the historical course of the process of capitalist reproduction and accumulation,” and a “conceptually informed understanding of an historical process, in which the objective tendencies determined by the law of value and the capital relation assert themselves through the mediation of concrete political movements and processes, class struggles and conflicts between individual capitals and groups of capitals on a national and international level.”41 When mentioning the 30 “objective tendencies” of capitalism he is speaking primarily of the tendency for the rate of profit to fall. State action, that is, is accurately understood only when it is considered in relation to the law of value and the inevitable tendency for the rate of profit to fall. As Camoy summarizes: “The development of the State is derived from the falling rate of profits and the need to develop countertendencies against that decline.”42 The state’s role, Hirsch writes, is that which “cannot be fulfilled by individual capitals.”43 Members of the capitalist class are locked in the constant struggle to increase profits. They are unable to deviate from their self-interest and have thus employed the state to delay the consequences of the contradictions that inhere in capitalism. Other policy flows from this basic reality. For example, Hirsch explains that the modem welfare state is the result of a historical process that concluded with a need for the state to legitimate exploitation with minimal impacts on capital’s ability to accumulate.44 The welfare state benefits capital. After the exploitation of workers grows so great that they are unable to reproduce themselves, the state, in the words of Marx, “undertakes for Mr. Capitalist the business of keeping his virtual instrument of labour...intact as a reserve for later use.”43 Legitimating activities like minimum wages and unemployment insurance are implemented by the state as a result of workers’ struggle but benefit the capital-owning class. These programs “have shown themselves to be at the same time an essential moment in social pacification and in keeping class straggles latent.”46 The state acts as a legitimating instrument while fighting to mitigate the falling rate of profit and its consequences. This can only be done if the state appears to be a neutral institution, mediating between equally free groups. Hirsch regards the state’s apparent neutrality as 31 intrinsically false since it is obligated to support capital’s incessant need to mitigate falling profit rates: The contradictions of the capitalist process of reproduction in which the bourgeois state apparatus has its source and continuing basis, give rise to the apparent inconsistencies in its mode of appearance and activity. As the authority guaranteeing the rules of equal exchange and of commodity circulation, and autonomous from the social process of reproduction and the social classes, it acquires...the appearance of class neutrality free from force, which however can and must be transformed into an overt use of force...if at any time the foundations of the reproduction and self-expansion of capital and of exploitation are threatened.4 The methods used to mitigate the tendency for the rate of profit to fall, increasing the value produced by workers or lowering the wages given to workers, run counter to the interests of working people. When capital attempts to pursue these ends it is occasionally met with worker resistance and it often requires the help of the coercive apparatuses of the state for assistance in quelling such resistance. James O ’Connor O’Connor’s work is similar to that of Hirsch in that it assigns primacy to the inherent logic of capital. O’Connor makes explicit reference to Marx’s economic analysis: “In the worlds of Marx’s Capital, the fundamental economic problem is the JO falling rate of profit and hence the lack of capital to sustain economic growth. This law of capital accumulation governs state actions. The state is organized with the intention of perpetuating capital’s ability to accumulate wealth, mitigating the crisis- prone nature of capitalism. The state is constantly pressed to financially and morally support capital. In his work Accumulation Crisis O’Connor makes clear the importance of the inherent logic of capital from the outset: “It is well established that the effects of the present world crisis of capitalism are particularly debilitating in the traditional 32 industrial sectors of the developed countries. During the 1960s and 1970s, average profit rates and the profit share of national income in the developed countries declined and average unemployment and/or inflation rates increased.”49 O’Connor’s work centres on the state’s efforts to optimize the conditions for accumulation in response to capitalism’s immanent tendencies. For O’Connor state strategies are best understood when divided into two broad categories: accumulation and legitimation. He empirically evaluates state expenditures as they relate both directly and tangentially to the falling rate of profit. Policies that optimize the conditions for accumulation he calls “social capital expenditures,” while those that legitimate capital accumulation are titled “social expenses of production.” Both of these functions of state activity buttress capital accumulation either financially or socio-politically. Because of the profit rate’s downward tendency, these functions are ceaseless. The graphic below depicts these two main functions of state policy, as well as the two subsets of social capital expenditures. Social Capital Expenditures Social Expenses of Production (accumulation) (legitimation) Social Investment Social Consumption (infrastructure and (reproducing labour) human capital) The first function O’Connor attributes to the state is supporting capital accumulation. This is also referred to as social capital expenditures, and can be divided into social investment and social consumption. Camoy describes social investment as, “providing facilities without which private projects would be unprofitable, or providing 33 incentives for private capital accumulation. The most important of this kind in the United States is highway construction...”50 Stated differently, the state engages in projects that benefit capital but would not be profitable for it to engage in on its own. Building infrastructure has allowed many industries to flourish, such as rubber, fossil fuels, and the automotive sector, while also making the employees of these industries responsible for their own transportation to and from work. Another large part of social investment is human capital. O’Connor catalogues the historical progression of American education policy, including the post-WWII push by capital for the state to finance more workers’ education as well as research and development.51 He states that: “[N]o one corporation or industrial-finance interest group can afford to train its own labour force,” because “unlike other forms of capital over which private capitalists claim ownership, [workers’ skills] cannot be monopolized by any one or a few industrial- finance interests.”52 The costs of education are primarily shouldered by the public while the benefits of a more educated workforce largely accrue to the ownership class. The second type of social capital expenditures is referred to by O’Connor as "social consumption." Social consumption is spending that keeps working people available to capital, such as unemployment insurance, injury compensation and, in the Canadian context, healthcare. The state, in effect, maintains a reserve army of workers. This reserve can be called on to engage in production when capital requires more employees, or it can be used as a threat against working people who demand greater compensation. While such social expenses have tangibly improved workers’ lives, they greatly improve capital’s prospects for accumulation. O’Connor declares that, “In general the greater the socialization of the costs of variable capital [reproducing 34 workers], the lower will be the level of money wages, and {ceteris paribus), the higher the rate of profit in the monopoly sector. For this reason, monopoly capital often actively supports the expansion of social consumption expenditures.”53 By financing pensions and giving unemployed workers modest incomes the state promotes the interests of capital-owners. Programs that benefit workers most importantly are in place in order to offset the falling rate of profit. O’Connor’s other broad function of the state is referred to as the social expense of production, or legitimation. The state’s spending “attempts to cover the social costs of capitalist development—in essence, to maintain bourgeois hegemony and the legitimacy of the capitalist State itself.”54 Gaining loyalty means quelling opposition to private appropriation of the fruits of labour by placating the citizenry. Carrots are offered, such as employment insurance and disability pay, which assure workers of the good nature of capitalism. O’Connor goes on to reconcile this state function with that of the optimizer of the conditions for accumulation: “the state has two major functions—‘accumulation’ and ‘loyalty.’ These two functions are contradictory, and it is the task of administrative rationality in every state agency to reconcile them.”55 The logic of capital school goes a long way to providing aprima facie answer to our central thesis question, namely, what accounts for capital's shifting use of the minimum wage over the course of the twentieth century. More specifically, we have asked why minimum wages evolved from a strategy to stabilize wages to a strategy to drive wages downwards. The logic of capital writers relate the exigencies of capital accumulation to state theory and the development of public policy. The rate of profit tends to fall and it is necessary that the state assist capital as it responds to this tendency. 35 In fact, a capitalist state is a state that never ceases to combat the falling rate of profit at the level of public policy. Considering the state in relation to this immanent economic tendency provides an account for the evolution of minimum wage policy in Canada. We can provisionally submit that early minimum wages stabilized the low-wage sector of the economy and provided an optimal environment for accumulation. This is the quintessential accumulation junction. At the same time, they gave poverty-level wages legal and moral sanction and stymied labour unrest. This is the quintessential legitimation junction. In the Fordist era, the economic prosperity of early post-war era had sufficiently boosted profit rates so as to allow labour a slightly larger portion of the economic pie. Capital could tolerate real wage increases, including modest improvements in the minimum wage. But as the rate of profit began to emerge as a problem for capital in the late-1960s we see an extreme reaction against annual real wage increases. Accordingly, the state endorsed efforts to drive down all wages in then- general pursuit of restoring rates of profit. The minimum wage was enlisted as part of this overall strategy. It was adopted as a regulatory mechanism to promote wage austerity—a function that continues to this day. And in recent years, as will be argued near the end of this thesis, it would appear that capital's redoubled efforts to drive down the minimum wage meant that it lost credibility with the general public. Widespread efforts to raise the minimum wage appeared in many quarters of society. In the language of the logic of capital school the legitimation capacity of the minimum wage appears to have been undermined slightly. Predictably, we have seen modest real improvements in the minimum wage in the last five years, but nothing that poses a serious challenge to the general climate of wage austerity. 36 Conclusion The purpose of this brief survey has been to find the most appropriate theoretical lens through which to build an adequate account of the state’s minimum wage policy. As we will see in the following chapters, Canadian minimum wages were adopted in the late 1910s and early 1920s as the result of a confluence of interests between capital and labour. Organized workers wanted a higher wage floor for themselves and their unorganized counterparts, while capital wanted to stop some employers from undercutting competitors in the low-wage sector. After 1970, however, minimum wage policy evolved into a tool to promote wage austerity. Capital once regarded the minimum wage as a wage-stabilizing mechanism in the low-wage sector, but it now regards the minimum wage as a policy that can put downward pressure on all wages across the Canadian economy. What state theory, we ask, can account for the evolving “attitude” that capital has clearly taken toward the minimum wage over the last eight decades? Our initial survey of the most promising analytical schools has been fruitful. We have considered pluralist theory as well as several branches of Marxist state theory and concluded that the most theoretically sound and empirically descriptive lens through which to understand the minimum wage comes from die logic o fcapital school. This is the only frame of theory that offers an account of shifting public policy preferences with respect to wages and the economy. By keeping an eye on the immanent tendencies of the economy the logic of capital theorists are able to explain the origins of specific class interests and wage policies. Actors’ interests, more particularly, are determined in terms of their relationship to the downward-trending rate of profit. Stated differently, public 37 policy is shaped by capital and the state’s unrelenting quest to mitigate the immanent tendencies of capitalism. As profitability crises become apparent capital and the state respond together. The minimum wage, like most public policy, is an aspect of this response. The logic of capital school therefore shows the greatest promise as we struggle to account for the evolution of minimum wage policy. The following chapters will utilize the logic of capital theoretical prism to frame and elaborate our historical survey of minimum wage policy, and expressly detail the shifting function of the minimum wage in the neoliberal era. Notes: 2 Knuttila, Murray. 1987. State Theories: From Liberalism to the Challenge o f Feminism. Toronto, Ont.: Garamond Press. Page 76. 3 ibid. * ibid, 133. 5 ibid, 134. 6 In: Tucker, Robert C., ed. 1978. The Marx-Engels Reader. Second Edition ed. London, UK: W.W. Norton and Company, Inc. Page 473. 7 Forgacs, David, ed. 1988. A Gramsci Reader: Selected Writings 1916-1935. London, UK: Lawrence and Wishart, Ltd. Page 286. * ibid , 205. 9 Hoare, Quinton and Geoffrey Nowell-Smith, Ed. 1972. Selections from the Prison Notebooks o f Antonio Gramsci. New York: International Publishers. Page xx. 10 ibid, xliv-xlv. 11 Forgacs,A Gramsci Reader, 211. 12 Camoy, Martin. 1984. The State and Political Theory. Princeton, NJ: Princeton University Press. Page 87. 13 See Gramsci’s discussion of work as an example. He writes: “...one can say that the educational principle which was the basis of die primary school was the idea of work.” In: Forgacs, A Gramsci Reader, 312. 14 Miliband, Ralph. 1969. The State in Capitalist Society: An Analysis o fthe Western System o fPower. New York, NY: Basic Books, Inc. Page 2. 15 ibid. 16 ibid, 66. "ibid, 77. 18 ibid, 80. "ibid, 78. 20 Knuttila, State Theories, 110. 21 The debate between structuralism and instrumentalism is treated herein as a single, consolidated moment For a more hilly developed and chronological account of die interactions between these two schools of thought (personified by Nicos Poulantzas and Ralph Miliband) see Knuttila, State Theories and Carnoy, The State and Political Theory. 38 22 Poulantzas, Nicos. 1975. Classes in Contemporary Capitalism. Trans. David Fembach. London, UK: Humanities Press, Inc. Page 111. 23 Poulantzas, Nicos. 2008. The Poulantzas Reader: Marxism, Law, and the State, ed. James Martin. London, UK: Verso. Page 206. 24 Poulantzas, Classes in Contemporary Capitalism, 26. 25 Poulantzas, The Poulantzas Reader, 279. 26 ibid, 280. 27 Camoy, The State and Political Theory, 112. 21 Poulantzas, The Poulantzas Reader, 76. 29 ibid, 77. 30 ibid, 92. 3libid. 32 In Poulanztas, The Poulantzas Reader, 270, Poulantzas himself writes that, “the way in which the differences between Miliband and myself have sometimes been perceived, especially in England and the United States, as a controversy between ‘instrumentalism’ and ‘structuralism’, is an utterly mistaken way of situating the discussion...” This sentiment is mirrored by Miliband, who, according to Knutilla, State Theories, 117, “makes it evident that the perspective that maintains that there are two Marxist positions on the state... is incorrect.” Miliband, Ralph. 1983. Class Power and State Power. London, UK: Verso. Page 64 includes this decisive rejection of die dichotomy: “What I was rejecting there was the crude view of the state as a mere ‘instrument’ of the ruling class obediently acting at its dictation.” 33 Poulantzas, Classes in Contemporary Capitalism, 70. 34 Camoy, The State and Political Theory, 140. 33 Marx, Capital, 229. 36 ibid, 211. 37 Kolakowski, Main Currents o fMarxism, 244. 33 Marx,Capital, 230. 39 ibid, 234. 40 ibid, 230-239. 41 Hirsch, The State Apparatus, 82. 42 Camoy, The State and Political Theory, 141. 43 Hirsch, The State Apparatus, 66. 44 ibid, 84. 43 Cited in Hirsch, The State Apparatus, 84, as appears in Marx’s Grundrisse. 46 Hirsch, The State Apparatus, 84. 47 ibid, 65. 44 O’Connor, The Corporations and the State, 47. 49 O’Connor, Acctimtdation Crisis, 1. 30 Camoy, The State and Political Theory, 224-225. 31 O’Connor, The Fiscal Crisis o fthe State, 111-116. 32 ibid, 112. 33 ibid, 124. 34 Camoy, The State and Political Theory, 225. 33 O’Connor, The Fiscal Crisis o f the State, 70. 39 Chapter 2 The Minimum Wage in Canadian History Introduction It was argued in Chapter One that the “logic of capital” analytical framework provides a more thoroughgoing account of the state’s economic policy. By illuminating the immanent tendencies of capital accumulation this school is able to explain the origin and evolution of specific class interests and the policies they accordingly endorse. Such an analytical framework is necessary to understand the evolution of the minimum wage in Canada. After being enacted in the early 1920s, minimum wages steadily grew in real value over the Fordist era. Neoliberal minimum wages, however, have been significantly eroded and allowed to fall well below their mid-1970s peaks. The logic of capital school is best able to account for this shift in the use and social function of the minimum wage because it is die only frame of reference that explains the origins and content of evolving class interests and their corresponding policies. The broad oudines of this evolution are clear. Early minimum wages worked to legitimate capitalist exploitation. They allowed super-exploitation while simultaneously promoting the image of the capitalist state as a benevolent force. In the neoliberal era the minimum wage was adopted as a mechanism geared toward optimizing the conditions for accumulation by lowering wages. This change can be understood as a response to the profitability crisis that capital suffered in the mid-to-late-1960s which forced capital to push for a new policy paradigm that favoured optimizing the conditions for accumulation. 40 The present chapter will use the lens of the logic of capital to frame a more detailed discussion of the minimum wage legislation in Canada from the early part of the 1900s up until the profitability crisis of the 1960s. We will see that by making extremely low pay a public issue the state stabilized low-wage work, thus optimizing the conditions for capital accumulation. Further, because the minimum wage was a policy advocated by labour, the state appeared as a benign institution that could enact policy to protect working people. It is in this way that capital’s advocacy for the minimum wage can be interpreted as a dual-pronged strategy: it optimized and legitimated capital accumulation. The Historic Setting Canada’s first minimum wages can be traced back to the heart of the Gilded Age. The Gilded Age of capitalism, roughly covering the last half of the nineteenth century, represented untamed capital accumulation. Technologies that could increase production while deskilling workers were gaining in popularity. New machinery concentrated economic power in the hands of the ownership class to a degree that had never before happened in human history. The steam engine allowed mechanization that multiplied productivity exponentially.56 For a variety of social reasons, people flocked to cities to sell their labour. This was an uncertain path, however, as they “might have skills one day which, with luck, would enable them to sell their labour power, but they could find these skills redundant the next.”57 Generally speaking, people who could only survive by selling their labour—workers—found themselves completely at the mercy of those individuals who controlled the means of production—owners. 41 Themstrom’s seminal study of this era, entitled Poverty and Progress, details such a situation in the United States. He concludes that the emerging industrial system “made the labour market highly unfavourable for the labourer.”58 Examples of de-valued labour abound: The famous Amesbury textile strike of 1852 revealed [such a] balance of power. The argument of the operatives against management was persuasive, winning them considerable public sympathy throughout the state. But the market position of these semi-skilled labourers was terribly weak. They were dispensable—their jobs could be learned in a few hours by immigrants who were desperate for work and willing to accept lower wages and inferior working conditions.59 Capital was seldom obliged to capitulate to labour’s demands. Instead, owners could easily substitute any worker for any other in a system that made them virtually interchangeable. This burgeoning asymmetrical economic relationship allowed capitalists to profit from the misery and desperation of workers.60 Workers had to cope by begrudgingly dedicating innumerable hours to die toil of work. Chris Hannan explains that, “Human nature itself had to be changed so that people would come to think there was nothing strange about spending all their daylight hours in a closed room without seeing the sun, the trees and flowers or hearing the birds.”61 Workers’ lives in this epoch consisted of extreme exploitation. Even young children were subordinated to capital’s unrelenting quest for profit. The Royal Commission on the Relations o fLabour and Capital,held by Parliament in 1889, provides the most telling examples. For instance, it states: “Many children of tender age, some of them not more than nine years old, were employed in cotton, glass, tobacco and cigar factories... Some of them worked from six o’clock in the morning till six in the evening, with less than an hour for dinner... The darkest pages in the testimony are those recording the beating and imprisonment of children employed in 42 factories.”62 This was the nature of the Gilded Age of capitalism; the social relations of production allowed workers’ economic and political status to completely degenerate. Consideration must also be given to gender relations in the Gilded Age. The status of women was that of mother and wife, not citizen. Ruth Frager and Carmela Patrias have accounted for the gendered social relations of production in their aptly titled work, Discounted Labour. They elucidate how women’s status as temporary or secondary earners meant that they were taken less seriously as working people. Labour unions and progressive citizens’ groups focused on male earners because women were thought to be earning extra money for leisure activity, sometimes called “pin money”, or would only be supporting themselves for a few years until marriage. The Ontario Minimum Wage Board, for example, “clearly ignored the findings of their own investigators that many women workers were supporting others beside themselves.”63 Women were also thought to be less productive than their male counterparts, and generally occupied sectors of production that were considered female. The results of this are explained by Frager and Patrias: “With so many jobs off limits to females, women workers’ intense competition for the available ‘women’s work’ helped keep their pay low.”64 These factors multiplied the extreme exploitation suffered by female workers, culminating in a sort of super-exploitation. Women occupied a considerably difficult social space in the Gilded working world. It is within this context that Canada’s first minimum wages were enacted. The very first legislated minimum was in the year 1918 by the province of British Columbia. Five years later, Alberta, Manitoba, Ontario, and Saskatchewan had all enacted minimum wage laws. These laws were specifically targeted at women. Minimum wages 43 for men were introduced in British Columbia in 1925 65 The passage of these laws was incremental. Most provinces first appointed boards and committees to oversee minimum wages on a claim-by-claim basis, requiring the officials’ expressed acknowledgement that the minimum wage needed to be enforced. There was no necessary symmetry between the legislation of the provinces. Minimum wages were, however, generally accepted as prudent labour legislation by the time of the Depression. As Copp’s meticulous evaluation of the old working world in Montreal demonstrates: ‘The purpose of the regulation was to promote stability and legitimize the policies of the larger, more efficient firms. Minimum wage laws were not intended to raise overall wage rates; indeed in practice their effect was rather to provide a justification for low wages.”66 Labour regarded minimum wages as positive policy measures. Organized labour thought that a minimum wage could lift desperate, unorganized working people, particularly women, out of dire poverty, and offer peripheral wage benefits to unionized workers. This push for minimum wages was gendered. Reformers were altruistically bound to the patriarchal logic of their era that accepted the subordinate wage position of women overall. Supporters of initial minimum wage laws were genuinely trying to help other impoverished workers. Having seen and documented the excessive inequality of the factory-production system, many thought that “reformed political structures would enable everyone to enjoy the benefits of the industrial system.”67 Organizations such as the Knights of Labour in the latter part of the nineteenth century believed that an increase in wages would not only give working people more equitable remuneration, but help transform Canada into “a society based on more democratic, humane 44 relationships.”68 Others, like A.O. Wharton of The Railroad Labour Board in the United States, agreed that legislation should be enacted to ensure that “The right of all workers, including common labourers, to a living wage [be] affirmed... which will insure the subsistence of the worker and his family in health and reasonable comfort.”69 These views expressed a regard for a more equitable distribution of income for all working people, not just for those workers represented by industrial unions. Organized labour believed that many other workers might benefit from legislated minimums. Workers whose skills were continuously being eroded knew that their labour was falling in value. Heron writes that “cost-conscious managers and tyrannical supervisors were invading the independence of workers in the production process more systematically than ever before, with new machinery to undercut their skills and greater scrutiny of their established work practices.”70 Working people who earned sustainable livings foresaw their eventual employment precariousness, and feared that their wages would soon decline. People who thought they may soon be victims of greater mechanisation saw legislated minimum wages as a means of mitigating complete wage destitution. It should also be added that organized workers saw their own interests reflected in the protection of unorganized workers in the sense that minimum wage regulation would undergird all wages across die economy. To reiterate, labour reformers did work within the gendered paradigm of the age. They sought to impose moral regulations on women that extended into the workers’ personal lives. Alcohol temperance, limiting inter-gender fraternization, and limiting recreational activity were all thought to be of value for women, and these goals were linked to calls for minimum wages. “For women in particular, the concept of a minimum wage would literally save them from a life of prostitution. A common 45 argument why women should receive minimum wages was that the minimum wage would enable than to safeguard their morals.”71 In the end, women were the first group to be covered by a minimum wage—a development that did not trouble owners, who paid female employees extremely low wages and who would not be challenged to change this practice. Copp confirms this distinctly paternalistic connotation in the findings of Quebec’s first Women’s Minimum Wage Commission. The Commission set a minimum wage for women that allowed them only twenty-five cents of daily income for recreation or saving, due to the Commission’s explicit recognition of women’s propensity for “frivolous expenditures.”72 Such notions of gender were in evidence among progressive circles pushing for minimum wage legislation. A confluence of class interests worked to secure the passing of minimum wage legislation. Owners also supported the minimum wage as a cohesive class in 1919 when they met at their National Industrial Conference. This was shortly after the Winnipeg General Strike, where labour’s backlash against unfair social relations had come to a head, resulting not only in the deaths of some striking workers, but which also confirmed capital’s fear of generalized revolt.73 At the National Industrial Conference, business “accepted some state intervention in the determination of wages.” Delegates such as the President of the Canadian Electrical Association spoke in favour of minimum wages, but only to a degree that would not impinge on profits.75 This was only after some cajoling and reassurance from the state. Quebec’s minimum wage commission, for instance, stated that, “employers had to be convinced that the Commission was not erected to cause them trouble... or upset their industry.” 76 The decision of industry to support minimum wages was not completely unanimous, but a broad consensus had been built between the state and capital which believed that 46 minimum wages would be beneficial for the ownership class. Capital explicitly endorsed the adoption of legislated minimum wages early in Canada’s history of legislated minimums. As was the case with labour, the ownership class offered qualified support for the adoption of minimum wages for a variety of reasons. Some supported minimum wage legislation as a way to increase productivity and instil a greater fear of unemployment among workers by enticing them with stable wages. Levin-Waldman, in his study of the rhetorical evolution of minimum wage legislation, noted the idea that minimum wages would create a motivation for workers to enter into the workforce. This was a powerful potential positive effect of minimum wage legislation for capital who realized that low wages were unattractive. Creating a socio-economic chasm between individuals who worked and those who did not work meant that having a job, whatever the pay, would be preferable to unemployment. It was thought that minimum wages, despite the fact that their overall effect on wages across the economy would be negligible, would actually motivate the poor to work. Capital also realized that the minimum wage offered legal and moral authority to the low-wage sphere of employment and hoped that this might obviate the push to organize the low-wage sector. Another argument was expressed by Sidney Webb, who claimed that a minimum wage would increase productivity. Having workers that were more attentive and compliant was a likely outcome of stable wages and was an argument that resonated with the ownership class.77 Capital was also convinced of the merits of minimum wage legislation as a macroeconomic necessity. In order that one may make profit from their production, they must sell what is produced. It was thought that low wages in The Gilded Age of 47 capitalism had significantly inhibited the market for goods. Some economists therefore advocated for minimum wages as a way to stimulate general economic growth.78 Still another reason that the capitalist class favoured minimum wages pertained to its own internal regional and sectoral struggles. Levin-Waldman uses the example of the economic conflict between the north and south of the burgeoning United States. He explains that minimum wages were seen as “an attempt to protect high-wage industries in the North from the Southern labor market.”79 Southern employers relied on low wages to contend with their more mechanized northern competition. Raising and stabilizing low-end wages in the south, it was thought by northern capitalists on both sides of the border, would level out competition and lessor capital flight.80 Capital’s argument for minimum wages was furthered by the contempt for “parasitic” employers. This idea was pioneered by Marilyn Power, and related primarily to the employers of women (because they paid the lowest wages). Power noted that if low-paying employers wanted to gain legitimacy, they would have to label employers who paid even lower wages as parasites. “Parasitic employers who paid less than the true social costs of labor could undersell their competition. They also were not motivated to lower costs further through innovations, organization, or production techniques.”81 In this way, capitalists actually sacrificed their most egregious offenders while saving the majority, that is, those who paid modestly higher wages. To be sure, it was not lost on working people that this meant that employers who paid dismal rates would benefit from the minimum wage legislation as a way “to protect them[selves] against the competitive undercutting of wages,”82 and thus avoid improving their own wages to lure or retain workers. 48 Early minimum wage legislation was enacted as a result of this confluence of interest between the working and ownership classes. Working people were unambiguously interested in the regulation; labour believed its effect would be positive on the whole. Owners’ opinions were slightly less obvious. While some of the most egregious employers would be forced to pay slightly higher wages, the vast majority of the business class would benefit from the legal legitimation of their below-subsistence wage rates. The logic of capital school helps us to understand the derivation of class interests, especially those of the capitalist class. As we noted, the Gilded Age was a time when capital exercised near total control of the labour process. Such an economic asymmetry, derived in significant part from recent technological innovation, meant that the profitability of investments was not yet in apparent crisis. From such a strong position capital was able to sacrifice its noticeably lower-paying cohorts in order to solidify its dominant position in the larger body of society. To summarize: 1) capital could optimize the conditions o f accumulation in the extensive low-wage sphere by inter alia warding off organization drives in the low-wage sector and insuring a more stable supply of labour. 2) capital (and the state) could legitimate its exploitative accumulation practice by appearing flexible and responsive to the demands of working people. 3) and labour provided support for minimum wage policies that might ameliorate their declining standard of living, especially since working people had been injured by the introduction of new technologies and labour processes, innovations that are, indeed, the early manifestation of the shifting organic 49 composition of capital destined to create accumulation crises and further social harm in capitalist societies. Early Minimum Wage Legislation When minimum wages were enacted in several provinces they did not serve to alleviate poverty. Rather, the economic advantage of capital was strengthened. Wage boards allowed minimums to be very poorly administered and policed. Inevitably, a defining element of these initial laws was their gendered nature. By legally sanctioning the low-wage sphere they promoted gender disparity, reinforcing women as the most exploited group of working people. To elaborate, the first provinces to adopt minimum wage legislation did not establish universal minimums. Instead, public employment standards boards were established. These were pragmatic in nature. For example, in 1919 Alberta set up autonomous employment standards boards in each of its four largest cities. These were responsible for minimum wages and maximum hours worked in each city. These committees acted more like ‘advisory boards’ since their recommendations were not legally binding. They were also largely ineffective at promoting compliance because they “had no power to deal with any question unless definite complaint was made, and the upshot of the matter was that no action was taken.”83 British Colombia had passed a comparable act a year earlier, establishing a committee that was mandated to incorporate the opinions of labour, capital, and, if necessary, the public. This committee’s findings were usually enacted as legislation, but could be appealed by workers or owners and reopened for discussion.84 Other provinces developed similarly irregular minimum wages that varied between industries and allowed for a myriad of exemptions topped off by poor records of compliance. 50 The experience of New Brunswick provides us with an excellent illustration of such problems around enforcement and compliance. Early regulatory mechanisms of the province's primary industries also demonstrated that enforcement of early legislation was weak and irregular. Minimum wages for foresters, almost exclusively men, were first legislated in 1934.85 The initial monthly rate of pay established by the province’s Forest Operations Commission was 32 dollars. Average earnings for foresters under this regulation were, however, between only 24 and 26 dollars per month.86 Parenteau, in his study of New Brunswick’s early twentieth-century forestry sector, found that the Commission did not have the resources ( “the procedure for settling complaints proved to be cumbersome, expensive and unsatisfactory.”87 Further, employers could communicate to one-another the names of any potentially troublesome employees who had pursued their rights and filed grievances for the minimum wage. This meant that the minimum wage could be cited as a mechanism for social justice while at the same time allowing employers to circumvent it and continue to pay low wages that were legislatively illegal. Perhaps most importantly, matters of compliance were expressly handled with an eye to the most basic goal of smoothing out accumulation. In its Fifth Annual Report the compliance board in Ontario stated that the purpose was “...nothing more than the extension of wage payments which are already general... the average employer will support pressure being put on whom he considers an unfair competitor and a disgrace to his trade; but he will resent any effort which he considers as an attack on the trade in general.”88 Instead of being a source of wage justice and redistribution, Ontario’s minimum wage board was implicitly and explicitly ratifying the low-wage and female- 51 exploitative status quo by merely sacrificing the worst offenders. Minimum wage compliance in Quebec, as noted by famed factory inspector Louis Guyon, originally had no budget for a staff and therefore had “little chance of success.”89 In 1928 it published a report stressing that “according to the testimony of employers’ representatives the putting into effect the minimum wage enactment, far from hurting their industry has rather stabilized it, suppressing the unfair competition of a small number of employers.”90 The prevalence of patriarchal attitudes intersected effortlessly with the early history of the minimum wage. In a disturbingly paradoxical way women were considered to be the weaker gender while also occupying many of the hardest, most denigrating jobs. Frager and Patrias, in their history of women workers in Canada, argue that “The initial decision to set minimum wages only for females was itself a compromise with employers and helped perpetuate gender inequality in the labour force.”91 This conclusion is supported by the fact that women were assumed to need “special protection”92 as they were negotiating not with their equals, but with males, who were considered their superiors. The original minimum wages that applied to both genders “were so low that few, if any, men would benefit”93 from them. Further, the moralizing pretensions of early Canadian legislation conformed to the notion that a low- paid female worker’s “need to manage on a tight budget would develop her moral fibre.”94 Bob Russell has surveyed early wage legislation and elucidated its conformity with gendered conceptions of work. He demonstrates that ‘minimum’ wages, which were applied to such industries as foodstuff production, soap production, retail stores, confectionary, and laundries, had an average rate of less than half of the so-named ‘fair’ 52 wages, which were applied to jobs dominated by men, such as construction, carpentry, and painting. In Winnipeg in 1918, places of employ that were chiefly occupied by female workers were mandated an average ‘minimum’ wage of 21.2 cents per hour, while male-dominated work had an average ‘fair’ wage of 57.5 cents per hour.95 The assumption that men were natural breadwinners who supported families meant that working women were bound to be relegated to a lower stratum of wage remuneration. Ontario’s 1920 Minimum Wage Act also reveals the same type of gendered orientation. It established a board that generated cost-of-living statistics for the setting of minimum wages in certain sectors. Saleswomen, it was decided, required a weekly wage of $12.56 in order to cover just the most basic expenses. This number was greater than the $ 12.50 weekly minimum wage set by the board, however. “Therefore, unless the woman managed to avoid spending the $20.00 per year allotted for doctor, dentist, and optician, she had to work full-time, fifly-two weeks a year, just to stay out of debt. And even then, on the board's calculations, she would be $3.12 short.”96 The minimums set by the board were knowingly below subsistence. In general, Ontario’s 1920 Minimum Wage Act mandated wages that were between $.75 and $2.25 below average industry wages.97 In Manitoba, to use another example, a $10 weekly minimum wage for women was established in the early 1920s. It was understood that such a wage was well below that required to meet basic needs.98 It was again apparent that throughout the first three decades of the 1900s “the legislation and payment of minimum wages continued to make female employment an option sought after by Canadian employers.”99 By setting such low minimum wages the board was certain not to challenge exploitative employment relationships. The need to smooth out the cycles of capitalist accumulation 53 coalesced with gendered stereotypes to entrench a low-wage sphere of production dominated by female workers. When summarized through the lens of the logic of capital state theory it can be said that early minimum wages were crafted in a way that smoothed out capitalist accumulation in the low-wage sphere. At the same time they legitimated such accumulation. Capital’s acceptance of the minimum wage was based on its goal of wage stabilization. More precisely, by expunging society’s lowest-paying employers capital groups ensured that their wages would not be undercut. Capital also hoped that the rising tide of labour might be weakened. It alleviated potential anti-capitalist fervour by giving die system of private ownership an air of legitimacy, an important fact in the face of the Russian revolution, the waves of postwar strikes, and the rise of radical left politics throughout the country. Expressed more directly in the language of the logic of capital, early minimum wages optimized the conditions for capital accumulation while legitimating intensely exploitative social relationships. As we will see below, these dual functions continued into the post-war era and did not significantly change until the emergence of the profitability crisis of the late-1960s. The Minimum Wage into the Fordist Era Canada’s economy had progressed dramatically between the beginning of the twentieth century and the aid of the Second World War. The Depression of the 1930s, juxtaposed against the high productivity of World War Two, allowed for positive macroeconomic intervention by the state. Canada adopted economic policies that were inspired by the economic theories of John Maynard Keynes. Such policies provided a social safety net and more protective labour regulation. Rather than being an 54 altruistically redistributive state mechanism, however, minimum wages acted more in this time like wage anchors—pulled along by labour gains and rising wages generally. Canada’s economic progress leading up to 1945 set the stage for new social policy. Conrad and Finkel’s survey of Canadian history helps set the context: “Scarred by the economic devastation of the 1930s and impressed with government’s ability to plan for war, Canadians increasingly argued that planning for peacetime purposes could prevent another depression and improve the quality of living for everyone.”100 Canadian politicians were open to alternatives to classical liberal laissez-faire non-interventionism. Industrial relations were affected by social democratic movements, communists, and a weary public convinced that unbridled capitalism had led to crisis and deprivation. Such a volatile political environment led “employers and the state, as well as the emerging labour hierarchy” to agree “that class harmony was perhaps the most valued commodity of the post-World War Two period.”101 In order to secure capitalist accumulation Canadian owners and state representatives embraced and secured a new economic program that built on social and economic experiments of the inter-war period, including extensive industrial regulation such as minimum wage policy. To elaborate, this new era, referred to here as “The Fordist era”, was a shift toward Keynesian economics. John Maynard Keynes emphasized the demand side of economics, namely that public investment could maintain incomes and overall demand, thereby warding off economic downturns. Keynesian economics were able to maintain high levels of demand for mass-produced consumer goods by grudgingly permitting higher working wages and building public institutions that promoted consumption.102 Shortly after the Second World War the Canadian state embarked on a more ambitious 55 social policy. “Minimum wages and programs for employment creation, farm subsidies, and public education were included in the definition; so, too, were universal programs, such as medical insurance, and narrower programs, such as social assistance and old-age pensions, that targeted certain groups.”103 During the Fordist era real incomes and productivity grew steadily. For instance, the average weekly wages across the composite majority of Canadian industries rose from $67.90 in 1957 to $203.34 in 1975, a threefold increase in real incomes.104 Income inequality declined owing to pressures from labour and the working class.105 Canada’s ten wealthiest families owned 54 percent of total wealth before 1970, a figure that had declined to 51 percent of total wealth by 1977.106 Rising real incomes meant that the working class in Canada was relatively better off by the close of the Fordist era than they were at the end of WWII. Labour was clearly able to make palpable economic gains throughout the Fordist period. Capital’s support of the state’s shift toward a stronger economic role was unambiguous. Even before the war, members of the ownership class were lobbying the state to partake in a larger range of social functions. Alvin Finkel writes that a “veritable ‘who’s who’ of Canadian manufacturing and finance wrote Bennett to pledge their support for the New Deal effort.”107 Finkel goes on to list some members represented in this effort, including, but not limited to, the president of the Canadian Chamber of Commerce, presidents of multiple nation-wide banks, owners of multiple large manufacturing firms, and owners of the nation’s largest construction conglomerates. While the wealthy, depression-era Prime Minister was not as successful as his successors in the implementation of these programs, Bennett does represent one of the earliest explicit endorsements for combining state policy to secure an optimal 56 environment for capital accumulation with social policies to mediate class relations, and to combine these policies with an aggressive assault on radical political elements within the country. The political goals of the state were very clear: they had to appear benevolent without undermining the optimal conditions for capitalist accumulation. As Finkel confirms, the policies were ( The minimum wage during this time did gradually increase. A study on Ontario’s minimum wage in 1976 found that “each successive revision has raised the purchasing power of the minimum wage above its previous high point reached at the time of the preceding increase.”109 This means that the minimum wage’s real value in Ontario steadily increased over the course of the 1960s and first half of the 1970s, which is similar to the overall increase in labour’s wage. Indeed, as the Fordist era was drawing to a close the minimum wage rose in real value by about 65 percent over the course of the six years between 1968 and 1974.110 Appreciable minimum wage increases across the provinces did take place throughout the Fordist era.111 This is not to say that legislated minimums in the Fordist era had eliminated inequality or poverty. The minimum wage was never an instrument meaningfully geared toward greater wage justice or equality. Minimum wages during this era yielded bare subsistence pay. While capital and politicians could point to the minimum as an example of benevolent state regulation of the labour market, workers making minimum wage were left far behind their higher-wage and unionized counterparts. The minimum wage in Ontario, for example, was only 45 percent, less than half, of the average manufacturing wage.112 Legislated minimums were intentionally kept well below the wage gains made by organized workers. Rather, they conformed to the meagre status- 57 quo of unorganized labour. The Labour Gazette, which was the official newsletter of Canada’s Department of Labour, confirmed this restraint when it wrote that minimum wages “must be largely determined by that which is economically practicable.”113 The state was willing to move forward on minimum wage legislation, but it never lost sight of the economic concerns of the low-wage employers. The chasm between organized and unorganized workers was clearly reinforced by state policy. Discussion from the Standpoint of the Logic of Capital and the State Canadian minimum wages have historically been enacted in a manner that conforms to the requirements of capital accumulation. From a purely historical standpoint the minimum wage has ratified low-end employment and failed to halt the exploitation of destitute working people. It was pulled up owing to general economic wage trends in the Fordist era. Canada’s earliest capitalist epoch was marked by extreme inequality and a relatively destitute workforce. The growth in the importance of fixed capital meant that individual labourers occupied an increasingly expendable position in the social relations of production. Minimum wage legislation reflected this vulnerability among working people, especially unorganized female workers. While many altruistic labour organizations and civil society groups advocated for the minimum wage as a means of curbing exploitation, capital endorsed the legislation to stabilize low wages in accordance with its accumulation strategies. It regarded the minimum wage as a way to continue exploiting workers legally while preventing itself from being undercut by even lower-paying employers. The early minimum wage effectively gave legal sanction to extremely exploitative economic relationships targeting female workers. 58 In the postwar period the minimum wage was pulled along by more agreeable labour relations. Economic growth meant labour could exercise more militancy and wrest more gains from capital. The minimum continued, however, to stay well below average wages, and did not threaten the conditions of accumulation for a wide swath of the economy. The minimum wage in Canada, between approximately 1917 until the early 1970s, was ineffective as a mechanism of wage justice, nor was it ever meant to be a redistributive mechanism. Instituted minimums may have managed to put a modicum of income into the hands of society's most vulnerable workers, typically women, but only to a degree that did not disrupt capital accumulation or challenge the low-wage sphere. From the theoretical standpoint of this thesis the following summary can be made. First, minimum wages were enacted to secure the optimal conditions of capitalist accumulation generally, and especially in those industries where wages were low. This would help ward off any threats from labour, especially union-driven demands for higher wages. To theseaccumulation Junctions of the minimum wages we can also add the idea that early minimum wage legislation also had a legitimation Junction. That is, by appearing to be benevolent through the enactment of minimum wages, especially since such calls arose within the labour movement itself, the state did its part to ward off much more severe threats likely to arise in an oppressive, class-based society, especially one riven with poverty and privation. This function was especially important. Canadian minimum wages were enacted in an environment where the optimal conditions of accumulation were far from secure, especially inter alia given the threat o f a labour revolt in the aftermath of WWI, the presence of a radical left and the lingering sense of political alternatives presented by the example of the Russian revolution. 59 Secondly, during the Fordist era, minimum wages rose. This rise, however, was part of the upward movement of all wages in the Fordist economy. Considerations of wage justice were very faint, and the minimum wage, most importantly, was never intended to relieve poverty at any moment in the post-war period. Again, the minimum wage continued to optimize capital accumulation by providing legal cover for the low- wage sphere. Thirdly, rises in minimum wages and general wages were bound to be contingent upon the overall health of the Canadian economy. As long as high rates of profit were sustained, as was the case throughout the 1945 to 1965 era, then a sustained rise in all wages could be tolerated. The inevitable press of capitalism's immanent tendencies are bound to jeopardize this underlying condition regarding rates of profit. In point of fact, as we shall see in the next chapter, declines in the rate of profit caused capital and the state to abruptly change its attitude of begrudging toleration of rising minimum wages. A new policy regime was emplaced to arrest declining rates of profit in the late 1970s. As we will see, it is these shifting policy horizons that will frame the change in the minimum wage from a regulatory instrument that stabilizes the low-wage sector in the interests of Fordist-style capitalist accumulation to a policy instrument that promotes generalized wage austerity in the neoliberal-style capitalist accumulation. Chapter Three will show that the logic of capital school really comes into its own when we encounter declining rates of profit and the palpable use of the minimum wage as an instrument to promote generalized wage austerity. It is to this era that our discussion now turns. Notes: 56 Harman, Chris. 2008. A People’s History o f the World. New York, NY: Verso. Page 257. 60 37 ibid, 320. 38 Thernstrom, Stephen. 1964. Poverty and Progress: Social Mobility in a Nineteenth Century City. Cambridge, Mass: Harvard University Press. Page 18. S9ibid, 19. 60 For a more complete account of the constantly declining social position of workers see: Braverman, Harry. 1974. Labor and Monopoly Capital: The Degradation o f Work in the Twentieth New Century. York, NY: Monthly Review Press. Here he demonstrates, using the work of Marx, that capitalism constantly creates a larger, more exploitable, workforce. 41 Harman, A People’s History, 321. 42 Quoted in Rinehart, James. 2006. The Tyranny o f Work: Alienation and the Labour Process. Fifth ed. Toronto, Oat: Nelson. Page 32. 43 Frager, Ruth and Carmela Patrias. 2005. Discounted Labour: Women Workers in Canada, 1870-1939. Toronto, Ont: University of Toronto Press. Page 106. "ibid, 31. 43 Derry, Katheen and Paul H. Douglas. 1922. “The Minimum Wage in Canada.” The Journal o fPolitical Economy 30(2): 155-188. 44 Copp, Terry. 1974. The Anatomy ofPoverty: The Conditions o f the Working Class in Montreal, 1897- 1929. Toronto, Ont: McClelland and Stewart Page 48. 47 Conrad, Margaret and Alvin Finkel. 2003. Canada: A National History. Toronto, Ont: Pearson Education Canada. Page 331. 48 Heron, Craig. 1996. The Canadian Labour Movement: A Short History. Second ed. Toronto, Ont: James Lorimer aand Co. Page 22. 49 Associated Press. 1922. Rail Board Rqects ‘Living Wage’ Plea. The New York Times, August 30. 70 Heron, The Canadian Labour Movement, 31. 71 Levin-Waldman, Oren M.2000. “The Rhetorical Evolution of the Minimum Wage.” Rhetoric and Public Affairs 3 (2): 336-343. Page 137. 72 Copp, The Anatomy o fPoverty, 47. 73 Conrad and Finkel, Canada, 372. 74 McCallum, Margaret E. 1986. “Keeping Women in Their Place: The Minimum Wage in Ontario, 1910- 1925.” Labour/Le Travail 17:29-56. Page 36. 73 ibid, 36. 74 Copp, The Anatomy o f Poverty, 47. 77 Levin-Waldman, The Rhetorical Evolution o f the Minimum Wage, 135. 78 ibid, 139. 79 ibid, 140. 80 In this light, minimum wages can be interpreted as a way for the state to encourage greater investment in fixed capital (machines) rather than its workforce; the only way to compete is by having a more efficient productive process. This mechanization ultimately takes place at the expense of workers’ relative value. 81 Levin-Waldman, The Rhetorical Evolution o f the Minimum Wage, 136. t2 ibid, 156. 83 ibid, 156. "ibid, 159. 83 Parenteau, William M. 1994. Forest and Society in New Brunswick: The Political Economy o f the Forest Industries, 1918-1939. Doctor of Philosophy in the Department of History, University of New Brunswick. Page 355. 84 ibid, 387. 87 ibid. "ibid, 49. 89 In Copp, The Anatomy o f Poverty, 46-47. 90ibid. 91 Frager and Patrias, Discounted Labour, 107-108. 92 ibid, 109. 93 Derry and Douglas, The Minimum Wage in Canada, 156. 94 Frager and Patrias, Discounted Labour, 108. 61 95 Russell, Bob. 1991. “A Fair Wage or a Minimum Wage? Women Workers, the State, and the Origin of Wage Regulation in Western Canada.” Labour/Le Travail 28:59-88. Page 73. 96 McCallum, Keeping Women in Their Place, 44. "ibid, 4 8. 99 Russell, A Fair or Minimum Wage, 84. "ibid, 87. 100 Conrad and Finkel, Canada, 443. 101 Palmer, Bryan D. 1992. What’s aw Got to do With it? Historical Considerations on Class Struggle, Boundaries of Constraint, and Capitalist Authority.” OSgoode Hall Law Journal 41 (2&3): 465-489. 102 Workman, Thom. 2009. I f You’re in My Way, I'm Walking: The Assault on Working People Since 1970. Halifax, NS: Femwood Publishing. Page 12. 103 Conrad and Finkel, Canada, 443. l04Meltz, Noah M. 2008. Wages and Working Conditions. Available from http://www.statcan.gc.ca/oub/11-516-x/sectione/4147438-eny.htm#2. Series E86-103. Dollars based on I960 Standard Industrial Classification. 105 Wallerstein, Michael. 2000. ‘Wage-Setting Institutions and Pay Inequality in Advanced Industrial Societies.” American Journal o f Political Science 43 (3): 649-80. This work shows that “The more wages and salaries are set in a centralized manner, the more egalitarian the distribution of wages and salaries.” This means that Canada’s stronger unionization rate and greater likelihood of industrial (rather than craft) unionization would positively influence workers’ share of revenues. 106 Morisette, Rene, and Xuelin Zhang. 2006. “Revisiting Income Inequality.” Perspectives on Labour and Income (December): 5-16. Page 10. 107 In: Panitch, Leo, ed. 1977. The Canadian State: Political Economy and Political Power. Toronto, Ont: University of Toronto Press. Page 352. 108 In: ibid, 353. 109 Aykroyd, Colin. 1977. A Survey o f Recent Canadian Minimum Wage Research. Province of British Columbia: Ministry of Labour. Page 12. 110 Ibid. 111 Ontario’s legislated minimum, when compared to other provinces’, was actually not particularly high. In 1977, its rate was lower than that of nine other provinces, as well as Canada’s federal rate. Ontario’s minimum wage this year equalled less than ninety percent of seven other provinces’ minimums. Canadian Manufacturers’ Association. 1977. Minimum Wages: Theory and Practice. Toronto, PageOnt. 30. 1,2 ibid, Table A. 113 In: Thomas, Mark. 2004. “Setting the Minimum: Ontario's Employment Standards in the Postwar Years, 1944-1968.” Labour/Le Travail 54:49-82. Page 79. 62 Chapter 3 Neoliberalism and the Shifting Function of Minimum Wage Policy Introduction The central goal of this thesis is to provide an account of the changing character of minimum wage policy in Canada. How are we able to explain the erosion of minimum wages from Fordism to neoliberalism? Minimum wages, as we will see, have increasingly been in used as an instrument to promote general wage restraint in the neoliberal era. The minimum wage has evolved from a policy instrument to promote wage stability in the low-wage sector in die Fordist era into a policy instrument to promote downward wage pressure and generalized wage austerity in the neoliberal era. How are we to account for this profound shift in the use of the minimum wage? We have surveyed several theories of the state and early Canadian minimum wage history. After briefly outlining four conceptions of the state we found the logic of capital school, which leans on the mature work of Marx found in Capital, to be the most theoretically apt at explaining the minimum wage. In the section on early Canadian minimum wages we found that the policies were implemented as a result of a confluence of interest between workers and owners. Moving into the postwar period, minimum wages continued to act in a way that stabilized the low wage sphere of employment while lending it moral and legal authority. The twin policy functions of accumulation and legitimation were satisfied in our survey of the early history of the minimum wage as outlined in the previous chapter. The current chapter will discuss how the minimum wage has evolved into a tool used by capital to actually lower wage expectations. Using the framework of the logic of capital we can understand this trend as a response to the 63 immanent tendencies of capital accumulation, and it is here that the logic of capital school proves to be most helpful. With the emergence of the crisis of profitability in the 1960s, the minimum wage was adopted by capital and the state more fully as a way to optimize the conditions for accumulation by working to dampen all wage expectations. As outlined in Chapter One, according to the logic of capital writers state policy is bound by the inevitable dynamics of capitalism, especially the tendency for the rate of profit to fall. This feature of capitalism emerges as a result of the ownership class’ constant need to innovate in order to compete. Hirsch builds this law into state theory and uses it to explain the role of state policy in society. By understanding how capitalism’s inherent tendencies influence the state we can more fully account for the origin and evolution of specific public policies, especially those relating directly to economics. To mitigate declining rates of profit the state works with capital and employs several different policy strategies. Central to this is a concerted effort to attack wages. Almost any piece of legislation can be interpreted as a part of the general strategy to confront wages. At the same time, efforts to optimize the conditions for capital accumulation must gain popular favour, or be legitimated. Economic interventions, as outlined by O’Connor, can thus be seen to take on the dual character of accumulation and legitimation. The behaviour of minimum wages in Canada can best be understood by looking through the logic of capital lens. Minimum wages have gone through a significant change from a regulatory mechanism to stabilize wages when first implemented to a regulatory mechanism used to promote wage austerity and downward wage pressure in recent decades. The logic of capital theory provides us with an explanation of the derivation of the capitalist class’ evolving policy interests. Economic policy can be 64 understood as legitimation and accumulation measures that respond to profitability challenges. These twin functions helpfully frame the early history of the minimum wage. The original minimum wages only applied to the most destitute workers, almost exclusively women. These low minimums legally ratified the pitiful low-wage sphere. Owners in the low-wage sphere sacrificed only their most egregious peers in order to legitimize their own economic goals. Politicians could point to minimum wages as proof that the state was benevolent and just, thereby legitimizing a sphere of intense exploitation. In this way, Canada’s pre-WWU minimum wages worked almost wholly in the interest of the capital owning class. It must be stressed, however, that the capitalist class did not use the minimum wage to depress wages aggressively. As also observed in Chapter Two, in the Fordist Era there was a marked increase in the living conditions of working people. Several historical factors had allowed labour to gain strength. Minimum wages began to rise in real value, pulled up by overall wages. Legislated minimums, however, did not manage to keep pace with average wages. Minimum wage legislation never challenged the low-wage sphere across the economy, especially in the non-unionized sectors, and never promoted what might be called “wage justice” despite the fact that it looked like benevolent policy. The minimum wage fell sharply in real value during the 1980s. This decline coincided with the neoliberal policy framework that responded to the profitability crisis of the late 1960s and early 1970s. In this atmosphere wage restraint became the leading policy goal aimed at the restoration of higher rates of profit. The policy function of the minimum wage evinces a profound shift from a device of low-wage stabilization to one promoting generalized wage austerity. That is, the neoliberal era has presented the state with an opportunity to use minimum wages in a new way that accentuates their 65 accumulation opportunities by promoting wage restraint. In this chapter this new role is explored within the overall perspective that the minimum wage continues to optimize and legitimate capital growth, but with special attention to its aggressive use as a means of promoting general wage austerity. The minimum wage has been used as a signal to exert downward pressure on all wages. It will be argued that it is a tool used by the state and ownership class to combat the falling rate of profit by helping to moderate all wages across the economy. Neoliberalism and the Logic of Capital State policy is inextricably linked to intrinsic economic realities. As observed in Chapter One, it is in the work of Hirsch and O’Connor that this relationship is most fully explored. Hirsch regards the tendency of the rate of profit to fall as the real governing condition within which the modem state formulates public policy. The state does not deviate from its roles of enabling and legitimating accumulation as it responds to the falling rate of profit.114 While the tendency of the rate of profit to fall has been a feature of capitalism generally, it became more pressing by the late 1960s. Moseley has documented these changes in the American economy, and concluded that there has been “a significant decline in the rate of profit in the early postwar period.”115 The United States’ rate of profit in 1945 was approximately 22 percent of investment, a return that declined slowly over the post-war period to 12 percent in 1975.116 Marx had predicted that under intense competition capitalists would be forced to increase their investments in “dead capital” (machinery). It is in the direct labour of working people, however, where surplus value is created, and thus profit rates will decline. Moseley summarizes this decline in a concise manner: 66 an increase in the composition of capital has a negative effect on the rate of profit because it means a declining percentage of the total capital is invested in labour power, which is the source of profit. Similarly, an increase in the relative proportion of unproductive labour means that a larger percentage of the suiplus-value produced by productive labour must be used to recover the costs of unproductive labour and thus a smaller percentage of surplus-value is left over as the profit of capitalists. According to this explanation, the relative increase of unproductive labour accounted for approximately 60% of the decline of the rate of profit in the postwar US economy and the increase in the composition of capital accounted for most of die remaining 40%. With profits going down investment accordingly shrunk. This decline in profitability had to be counteracted by state policy and revised strategies of capital accumulation. As the falling rate of profit became evident public policy in Canada predictably moved to counter this trend. The change in the prevailing policy paradigm that began in the early 1970s is termed neoliberalism. Business and government have devised many strategies to deal with the declining rate of profit. Cutting costs of production was the most obvious general remedy. This meant, primarily, a general reduction in the share of income allocated to working people.118 Since wages and profits are diametrically opposed, the revised strategies of capital and the state since the 1970s can be seen as wage-lowering strategies. A myriad of tools have been employed to this end both by capital and the state. Capital took advantage of technological and financial developments which allowed them to restructure the production process in a way that cut labour costs. These strategies are divided below into domestic alterations of the production process and moving fixed capital around the globe. For its part, the state facilitated these changes by adopting a strictly anti-labour agenda, deregulating the movement of capital, cutting social programs, lowering expenditures, and privatizing public goods. Most importantly, 67 capital and the state have worked in tandem throughout the neoliberal era to decrease wages. An elaboration of these points is helpful. To expand on production alterations, the ownership class significantly altered the production process over the neoliberal era in an effort to lower the cost of labour. Technological innovation, combined with the restructuring of human resource models, has made work more intensive and less fruitful for workers. The case of a large Canadian bank’s customer service centre epitomizes these changes: ...management began to seek greater flexibility in its clerical workforce on a company-wide basis. In 1990, upper-level management made a decision to hire workers on a temporary basis only. They also made a strong commitment to part-time employment. In the CPC [Customer Payment Centre], this meant that management was relying increasingly on temporary and part-time workers while introducing new technology and pressuring employees to work extra hours in order to adapt to the new machines and still meet pre-established work quotas... In addition to numerical flexibility, approximately one year after the introduction of the new computer equipment the company adopted a philosophy known as Total Quality Management, with its goal of functional flexibility. As a first step, management flattened the department’s occupational structure, and compressed related pay scales.119 This restructuring has diminished workers’ bargaining power by making each worker interchangeable with any potential job-applicant. This means that management feels less pressure to raise wages. Indeed, at the firm discussed above, management has held assemblies where they have delivered “a punitive message, warning that jobs would be lost if workers did not make special efforts (and even concessions) in the interest of the firm’s survival.”120 Jobs that have remained in Canada have been subject to significant alterations in the interest of increasing the profitability of operations. The ownership class’ assault on wages includes the relocation of capital. Throughout the neoliberal era capital has moved around the globe in search of cheaper 68 labour. Extremely complex production processes can now be performed by any worker, since the production has become mechanized to the point where very little skill is required for adequate performance. Goldstein explains the global movement of capital as a way “to draw the surplus workers in the underdeveloped regions into the most advanced manufacturing and service processes in direct competition with workers in the imperialist countries."121 Workers, as a result of this competition, are pitted against one- another and have their bargaining positions compromised. Goldstein uses the example of auto parts manufacturers to illustrate his point: Delphi and Visteon are two of the largest auto parts suppliers in the world. That is because they previously belonged to GM and Ford, respectively. Both were ‘spun off* as part of the auto companies’ plans to reduce labor costs. Delphi has declared bankruptcy for its U.S. operations, which are unionized by the UAW. Its overseas operations employ 115,000 workers. Many of these branches operate in low-wage countries like Mexico and China and are not part of the bankruptcy procedure. The company’s immediate goal is to reduce U.S. workers’ wages from $27.00 an hour to $16.50 an hour. Its long-term goal is to reduce its U.S. workforce from 32,000 to 7,000, destroying 25,000 union jobs.122 This is a typical cost-cutting strategy of businesses operating in the neoliberal era. Moving jobs away from unionized facilities into regions with lower wages can drastically reduce labour costs and enhance profits. Turning to neoliberal state strategy, there has been a generalized attack on organized labour. The goal is to foster an environment that is extremely favourable to capital. Most notable in the American context was the Professional Air Traffic Controllers Organization strike of 1981. When this union stopped work it lost certification and 11,000 of its members lost their jobs.123 The conclusion of this episode of labour agitation was a signal to workers that “the power of the state would be used against labor and in favour of capital...”124 Such strategies employed by the state have 69 greatly reduced labour’s ability to organize. Between 1981 and 1998, the total unionization rate of Canadian workers fell from about 37 percent to just over 30 percent, with the manufacturing sector being hit hardest, falling from about 44 percent to 31 percent.125 This has had a negative impact on workers’ wages. As Fang and Verma have demonstrated, unionized workers are generally paid 7.7 percent more than non- unionized workers performing the same tasks.126 Labour’s militancy has also been quelled. Between 1965 and 2009, the annual number of person-days missed by Canadian workers due to work stoppages fell by 122,340.127 Goldstein, addressing neoliberalism in the American context, states that “by pushing back the strongest industrial unions—the unions that set the higher standard based on earlier struggles—the bosses laid the basis for opening up an assault on the broader working class.”128 He correctly identifies the ability of labour to organize as the fundamental lynchpin in the relationship of power between labour and capital. The state’s second basket of neoliberal anti-labour policies centered on trade liberalization. Notable Canadian political economists McBride and Shields have concluded that “the most fundamental aspect of the neo-liberal assault on the traditional Canadian polity is represented by the Free Trade Agreement (FTA) and the North American Free Trade Agreement (NAFTA).”129 The FT A, signed in 1988, and its successor, NAFTA, signed in 1992, superimposed a policy regime above the sovereignty of the Canadian state. NAFTA limits the state’s ability to engage in activities such as public auto-insurance and child-care for which corporations “have the right to claim compensation for loss of potential earnings.”130 Further, the agreement has allowed the ownership class to move to regions where wages and labour and environmental standards are much lower, thereby pitting workers in different regions against one- 70 I <11 another. The Canadian Centre for Policy Alternatives has released multiple informative publications detailing the effects of free trade on the Canadian economy. For example, between 1987 and 2006, a study by this organization found that the top forty-one corporations who comprise the Canadian Council of Chief Executives (the group formerly known as the Business Council on National Issues, an organization that aggressively championed the deal) increased their revenues by more than 125 percent. Those same corporations have collectively slashed their workforces by nearly 20 percent.132 The most visible overall effect of the FTA and NAFTA has been frequent job losses due to corporate relocation. The Canadian state has also restructured social programs over the neoliberal era. Changes in unemployment insurance in die 1990s cut access considerably. Between 1976 and 1996, the percent of unemployed people actually receiving employment insurance fell from about 92 to well under 65.133 Successive neoliberal governments have raised the qualification threshold and excluded people who do not accept employment because they have personally deemed it unsuitable.134 These alterations have culminated in a social policy that has made workers “desperate enough to take any job that comes along.”135 Lower social spending resulted from an overall decrease in Canada’s state expenditures. Canada’s expenditures on programs (total expenditures minus debt costs) exhibit a dramatic drop over a fifteen year period, shown in Figure 1. The amount spent by the government of Canada in 1999 on programs (relative to gross domestic product) was 12.4 percent, a figure dwarfed by the nearly 20.0 percent rate in 1984. State 71 Figure 1- Federal Program Expenditures as » Percentage of GDP 20 19 18 17 16 15 14 13 12 11 10 IJ6 officials saw fit to limit the state’s social expenditures to discipline workers. Another strategy employed by the state in an effort to lower wages was its selling of public enterprises. This also included shedding a large portion of public-sector workers. Between 1986 and 1996, Canada sold more than $7.2 billion dollars in company assets.137 Examples include such giants as CNR, Petro-Canada, Air Canada, and Teleglobe. Provincial governments followed suit, selling off a combined $6.65 billion in public entities.138 These included such telecommunications giants as Alberta Government Telephones and energy moguls Suncor and Syncrude. Between 1990 and 1999, more than 228,000 public employees lost their jobs, reflecting about 7.5 percent of the public workforce.139 As a result once-strong unions in many companies have now been decimated and thrown onto the defensive. Working people have fared poorly in this environment. Nowhere is this more evident than in the fact that among forty-one of Canada’s largest corporations, twenty- eight reduced their workforces by a combined 205,062 employees, yet increased their revenues by a total of $93 billion between 1988 and 2008.140 By all measures, workers have more than doubled their productive capacity since I960.141 This increase in the output of each worker has not translated into wage gains, however, despite the fact that the Canadian economy “has grown by 72% between 1975 and 2005, in real per capita terms.”142 Instead, workers’ share of Canada’s economic pie has dwindled, from about 65 percent in 1961, down to just over 60 percent in 2005.143 This problem is even more pronounced in specific Canadian Provinces, like Nova Scotia, where wages lost 5 percent of their real value between 1991 and 2006, even though productivity per worker rose by more than 15 percent.144 Real wages in Canada over the past three decades have stagnated. After years of growth, the average real hourly wage in Canada reached $21 (1992 dollars) in 1976. Over the following thirty years, however, it was tethered to the $21 mark. Average real hourly earnings between 1976 and 2006 tended to hover around the $21 mark, as shown Figure 2- National Average Hourly Wages (2005 Dollars) 25 24 23 22 21 20 19 18 17 16 15 1970 1975 1980 1985 1990 1995 2000 2005 2010 143 in Figure 2. The growth of Fordist era wages ends abruptly in the mid 1970s, and yields to thirty years of extremely limited growth. Such a trend reflects the neoliberal policy paradigm that had congealed significantly by the early 1980s. To elaborate, average annual earnings over the course of the twentieth century reveal stunning wage trends. Between 1920 and 1950, average annual wages grew steadily. They grew by more than 34 percent per decade between 1940 and 1970.146 Unfortunately for workers, this rate of increase had halted in the mid-1970s. Between Figure 3* Percent Change in Average Annual Wages by Decade 1980-90 1970-80 1960-70 1950-60 1930-40 1920-30 1980 and 1990, annual wages only grew by only 2 percent, compared to the almost 43 percent increase during the decade after 1930. Figure 3 indicates the relative changes in average annual earnings over the course of each decade. By the 1980s wage gains were largely halted. The culture of anti-worker austerity that had been cultivated by capital and die state had manifested itself in the paycheques of working people. The movement toward austerity also meant that state representatives felt less pressure to deal with unemployment during the neoliberal era. Canada’s official measure has gone from 3.4 percent in 1966 to over 7.5 percent in 2003.148 Statistics Canada has written that “most labour market participants, especially those with low education levels, are more likely to be unemployed today than in the early 1970s.”149 McBride’s account of Canadian unemployment trends, aptly titled Not Working, attributes the rise in unemployment to state actors’ acceptance that “the policy priority should be to stop inflation and to allow unemployment to settle eventually at its natural rate.”150 The state became less willing to invest in projects that would lower the number of Canadians who could not find jobs. Steadily, neoliberal state actors have tolerated an increase in the number of people who are unable to find work. Most importantly, rising unemployment tends to exert a downward pressure on wages, especially low-end wages in the unorganized sectors of the economy. A social corollary of these trends is Canada’s increased inequality. With union density eroded and rising unemployment there was a widening of the chasm between Canada’s “haves” and “have-nots”. For example, between 1984 and 2005, median wealth in Canada grew by about 25 percent while average wealth jumped by almost 70 percent, figures which reveal that growth in wealth over the 21 year period largely benefitted wealthier people.151 Analyzing the change in wealth between 1984 and 2005, Statistics Canada researchers found that “median net worth stagnated or fell in the bottom 40% of the distribution but rose substantially in the top 40%.”152 To conclude, the falling rate of profit was recognized as a grave problem by the early 1970s. Capital and the state responded in tandem. Labour’s ability to organize was compromised by flexible, capital-intensive production regimes and productive restructuring. Rates of unionization shrank along with labour militancy, allowing for the stagnation of wages. As state policy repudiated the Fordist compact its support for social programs waned. The general thrust of these programs has been to restore rates of profit by attacking wages. Neoliberalism can be regarded as a logical result of falling rates of profit. With this overview in mind we turn to a discussion of the minimum wage. 75 Minimum Wages in the Neoliberal Era It is in this environment of austerity that we consider minimum wages in Canada. As we have seen, the tendency for the rate of profit to fall manifested itself in the 1960s. This compelled capital and the state to adopt an aggressive anti-labour stance. They reorganized the workplace and restructured social programs. Over the same period minimum wages lost real value. We can commence this discussion by examining specific changes in minimum wages across each province. It will then be argued that the fall in the real value of the minimum wage evident in every province reflects its use by the state as a regulatory mechanism to promote wage restraint. Since Canada’s turn to neoliberalism minimum wages have stagnated and decreased in real value. Since 1976 Newfoundland’s minimum wage has only fallen by 10.4 percent, while those of New Brunswick, Quebec, Manitoba, Saskatchewan, Alberta, and British Columbia each declined by more than 20 percent. British Columbia saw the most marked decline over the same period, maintaining only three quarters of its 1976 value in 2007.153 Each provincial decline can be depicted graphically, and the trends are strikingly similar. Every province’s minimum wage reached its apex in the mid-1970s after substantial increases over the previous three decades. By the late 1970s each province experienced a sharp decline through to the mid-1980s, and stagnated over the next twenty-five years. Finally, most minimums have increased slightly over the latter half of the 2000s. It is helpful to review the trends for each province to reveal the similarities across the country. 76 Alberta’s minimum wage reflects the Canadian trend despite the province’s impressive economic performance. Between the years 1965 and 1977 the real minimum wage increased from $5.65 to $8.93.154 After 1977, however, minimum wages declined Figure 4- The Minimum Wage in Alberta 10 9 8 7 6 (V12 5 Si § 2 " 1 0 1960 19701980 1990 2000 2010 2020 Year to their pre-1965 levels. Successive governments in Alberta then managed to hold the line on minimum wages. Alberta’s 2003 gross domestic product per capita was more than $54,000, or 40 percent above the Canadian average.155 Despite its recent impressive economic performance, Alberta’s real minimum wage did not come within $2 of its 1977 peak over the next twenty-five years. The real value of British Columbia’s minimum wage reached its peak in 1976 before falling precipitously. In 1976, employees in this province were entitled to no less Figure 5- The Minimum Wage In British Columbia 11 10 9 8 r \ i H . 7 — ...... tl ...... S 77 than $9.65/hour. Nine years later it had lost almost $5.00, or half of its real value, dipping to just $4.95 in 1987. This was followed by a period of extremely slow growth, rising to slightly over $7.00 in 2008, which was more than $2.50, or 36 percent short of its apex. For most of the last decade the minimum wage’s real value in British Columbia has been falling. Manitoba’s minimum wage doubled between 1965 and 1976, going from $4.17 to $9.45. With the onset of neoliberal austerity inflation gradually eroded the province’s minimum wage. After 1976, the $9.45 minimum wage steadily decreased, and by 2008 Figure 6- The Minimum Wage in Manitoba 10 9 f t 8 e 7 i f * * 11 1 1 / 1 3 2 1 u 1960 1970 1980 1990 2000 2010 2020 Year it had stood at just under $7.50. The purchasing power of minimum wage workers in Manitoba was $2.25 less than their peers just twenty years earlier. The minimum wage has been on a very slow incline since 2000. In 1976 New Brunswick’s minimum wage reached its peak of $8.20. It had quickly fallen to $5.99 by 1981, and stagnated through to 2006. It recently increased 78 Figure 7- The Minimum Wage in New Brunswick Q A J« t * * ...... 2g 4 4 - l 3 2 1 A 1965 1975 1985 1995 2005 Year to almost $7.00 per hour. Newfoundland experienced a similar rise and fall. The real value of the minimum wage tripled between 1965 and 1976. Six years later, however, the rate had fallen from $8.04 to $5.90. It remained below $6.00 for the two decades following 1984. Between Figure 8- The Minimum Wage in Newfoundland and Labrador 1965 1975 1985 1995 2005 Year 2005 and 2008, the minimum wage inNewfoundland increased slowly by about $1.00 per year. The trajectory of Nova Scotia’s minimum wage is similar to that of other Canadian jurisdictions. It rose markedly in the decade before 1977 and reached $8.18. By 1984, however, it had sunk back to $6.00, and hovered there for approximately twenty years. 79 Figure 9- the Minimum Wage in Nova Scotia 9 8 7 « 6 2 5 (N 4 I 3 2 1 0 1965 1975 19951985 2005 Year Like other provinces, after Nova Scotia’s minimum wage reached its mid-1970s peak, it dropped considerably and experienced a long period of stagnation, followed by a recent and very modest increase. Over the past five years, it has slowly risen to the $7.00 mark. Ontario’s minimum wage follows a slightly more irregular path when compared to the other provinces. In 1968 it was valued near $5.00. In 1974 it reached a high of $8.59, maintained this value for three years, and then declined to a low of $6.18 by 1983. Over the course of the next twenty years it recovered some of the lost ground, but Figure 10- The Minimum Wage In Ontario ______10 9 8 7 6 5 4 3 2 1 0 1965 1975 1985 1995 2005 Year 80 still fell short of its earlier peak by $.50. Ontario’s real minimum wage again lost value in the late-1990s. And in keeping with recent Canadian trends Ontario’s minimum wage experienced a slight increase over the late-2000s. Prince Edward Islanders have experienced a similar undulation of their minimum wage. In 1965 the Island’s minimum wage had a real value of just under $6.00. Within a decade it had grown by one-third. The $8.00 minimum wage fell back down below Figure 11- The Minimum Wage in Prince Edward Island ______9 8 7 a 6 I 5 «N 3 2 1 0 1965 1975 1985 1995 2005 Year $6.00 in real value by 1984. It then hovered around the $6.00 level for the next twenty years, but has recently risen to slightly more than $7.00 per hour. The minimum wage in Quebec has followed a comparable provincial trajectory. Over the ten years between 1965 and 1975 it nearly doubled. This dramatic jump in real Figure 12- The Minimum Wage In Quebec ______n 10 9 8 7 6 IN 5 4 8 3 2 1 0 1965 1975 1985 1995 2005 Year 81 value, from $5.06 to $9.66, represented a large increase in the standard of living for low- wage workers. It was, however, short-lived. Over the following ten years the minimum fell by almost $3.50, more than one-third of its value. It then stagnated, growing by just $1.00 over the 25-year period between 1985 to 2010 and never coming close to the historic high of the mid-1970s. Finally, Saskatchewan’s history with the minimum wage exhibits a similar trend when compared with other jurisdictions. In 1968, its value was less than $6.00. Within Figure 13- The Minimum Wage in Saskatchewan fN (N 1965 1975 1985 1995 2005 Year eight years, the province’s real minimum wage had risen by 50 percent to almost $9.00 per hour. It then entered into a long period of decline and fell below $7.00 by 1987. Between 1987 and 2007, the province’s minimum wage stagnated below just $7.00 per hour. Increases over this period were barely enough to stave off the eroding effects of inflation. During the 2000s, the minimum wage slowly rose in real value to $7.40.156 The historical evolution of each Canadian province’s minimum wage is similar. They rise until the mid-1970s, and then decline significantly for ten to fifteen years. Between about 1990 and 2005 minimum wages generally stagnated. Inreases in their nominal value were largely offset by inflation. Recently, most minimum wages have 82 seen slight increases in real value, but are still well below their high points from the mid- 1970s. American minimum wages have exhibited similar trends. Gitterman’s seminal study of American minimum wages concludes that: “During most of the 1960s and 1970s, a person working full time year-round at the minimum wage would have earned an income roughly equal to the poverty threshold for a three-person family. By 1985 a similarly situated worker earned less than the federal poverty threshold for a two-person family. And many minimum wage workers fared even worse because they had less than full-time, full-year work.”157 These declines have directly allowed the wages of a large pool of Canadians to be corroded. Statistics Canada’s Survey of Labour and Income Dynamics offers compelling data about this decline in minimum wages.158 Goldberg and Green conclude that 61 percent of minimum wage earners are adults. Of that number, only 12 percent are full-time students.159 This report confronts the myth that most minimum wage earners are teenagers who are supported by their parents’ incomes. It has also become clear that a larger number of workers in Canada now receive an hourly wage that hovers preciously close to the minimum wage. The Minimum Wage and the Low-Wage Sphere The minimum wage can also be regarded as a wage that anchors the low-wage sphere. Income trends in neoliberal economies show a marked growth in the low-wage sphere of employment. Declining minimum wages are part of a larger mosaic of state policies that contribute to wage depression. Much work in Canada has become less stable, secure, and enviable. As labour’s power has weakened work has become “precarious” and many working people now earn non-living wages. This trend is even 83 more pronounced when one considers the gendered aspects of these declines. A disproportionate number of women work for wages very close to the minimum wage. Stagnating minimum wages go hand-in-hand with the deepening of the low wage sphere of employment and the intensification of female wage exploitation. Indeed, studies have emerged in response to these disappointing neoliberal wage trends. Saunders has cogently summarized the basic character of economic life for many Canadians as follows: “A large part of the labour force works for low pay, without representation, and with poor prospects of improving their conditions of work. These workers are vulnerable, in that their participation in the labour market leaves their wellbeing at risk. More specifically, vulnerable workers find it difficult to access work that provides a decent income and working conditions that meet societal norms.”160 Precarious employment has been encouraged by the state’s post-Fordist policies. Using data from Canada’s General Social Survey, Krahn has shown marked increases in precarious or “non-standard” labour. For example, the number of people employed part- time increased from 11 percent in 1976 to 17 percent of the labour force in 1994. He also noted that this trend “underestimates part-time job creation, however, since many individuals holding several part-time jobs are classified as full-time workers... and the number of multiple jobholders has increased.”161 Further, involuntary part-time work (those working part-time who are also searching for full-time work rather than working part-time to attend school or as a peripheral activity after attending to other personal needs) tripled as a percentage of the part-time workforce between 1976 and 1994, from 12 to 36 percent of part-time workers, and is still on the rise.162 This means that more than one out of every three part-time employees would prefer more regular hourly work. Further, jobs with contracted end dates have been increasing in Canada. For example, 84 between 1997 and 2002, temporary jobs grew much faster than permanent jobs: 30.5 percent, compared to the latter’s 12.3 percent. They also jumped as a percentage of total employment, from about 11.5 percent to 13 percent.163 Tabi and Langlois, examining changes in Canada between 2002 and 2003, found that the largest growth in employment between these years, at 12 percent, was in the retail and sales sectors.164 Non-standard employment typically includes lower wages. The growth in the retail and sales sector that was noted by Tabi and Langlois, for example, is problematic for working people since weekly wages in this field amounted to less than one-quarter of total average earnings.165 Similarly, aggregate part-time jobs’ wages in nominal dollars increased by only about 9 percent between 1997 and 2002, while those of full-time jobs went up by more than 13 percent.166 167 We can see that the minimum wage across Canada anchors the low-wage sphere. Expressed differently, many wages tend to hover very close to the minimum wage. We Table 1- Proximity of Quartile Wage Groups to Minimum Wages Province Minimum Wage Lower-Quartile Wage Difference Median Wage Difference ALTA 8.00 13.65 5.65 19.00 11.00 BC 8.00 12.00 4.00 19.00 11.00 MAN 8.00 11.00 3.00 16.00 8.00 NB 7.25 10.00 2.75 14.42 7.17 NFLD 7.50 8.75 1.25 15.00 7.50 NS 7.60 10.00 2.40 15.00 7.40 ONT 8.00 12.00 4.00 18.12 10.12 PEI 7.50 10.00 2.50 14.60 7.10 QUE 8.00 12.00 4.00 17.00 9.00 SASK 7.95 11.00 3.05 16.75 8.80 TW can see this connection when we consider the lower-quartile and median wages. In every province, save Alberta, the lower quartile wage is within $4.00 of the minimum wage.169 As Table 1 shows, one-quarter of all working people in Manitoba, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island, and Saskatchewan earn 85 within $3.05 of their respective minimum wage. The widespread belief that minimum wages are irrelevant is untrue. Further, these poor wages are not only among non standard employees. Canada’s Survey of Income and Labour Dynamics has revealed that approximately 14 percent of full-time workers made less than $10 per hour in 2002.170 This number is especially meaningful as these are full-tim e employees, not simply students or individuals looking to fill spare hours. Many Canadians unfortunately work within a small margin of the legislated minimum wage. Provinces exhibiting higher lower-quartile and median wages have not been more generous when legislating the minimum wage. Alberta and British Columbia’s quartile wage data is remarkable, as is that of Ontario and Quebec, to a lesser degree. While these first two provinces have lower-quartile wages that are $4.00/hour or more than their legislated minimums, state officials have resisted pressure to increase minimum wage rates. They have prevented legislation from reaching a level that promotes any upward pressure on wages. Alberta in particular has a lower-quartile that is $5.65/hour over the minimum wage, and a median that is $ 11.00/hour higher than the minimum. Yet the province’s minimum was frozen in 2010, with state officials citing a “fragile” economy. 171 The dynamics of low-income intensity are more telling when gender differences are considered. Female workers occupy a much larger portion of the low-wage sphere than their male counterparts. A Statistics Canada study has found that in 2008 “women accounted for 60% of all minimum-wage workers, but just under half of all employees.”172 Lower-quartile data exposes an even greater gap between working men 86 Figure 14- Sex Differences In Lower-Quartiles 8.00 ■ LQ Female 1 I I I T ■ LQ Male IIi mu m i ni ri i 0.00 H III ri 1111 Alta BC Man NB Nfld NS Ont PEI Que Sask ------and women. Figure 14 shows that in every province the lower-quartile for men is at i least a dollar higher than that for women. Several provinces have gaps of more than two dollars when males and females are compared. In seven of ten Canadian provinces, the lower-quartile of male wage-eamers receive an hourly wage that is almost twice as much as their female counterparts. The considerable low-wage sphere in Canada is anchored by the minimum wage. Large numbers of working people are remunerated just slightly above provincial minimums. Policy-makers have steadfastly refused to use the minimum wage as a tool to promote wage justice, and have rather regarded it as a wonderful opportunity to send a signal about wage restraint. We can see this, for example, in discussion from Alberta, a province basking in sustained economic growth and relatively low unemployment. A culture of austerity and wage restraint dominates political discussions regarding economic policy. Despite its strong economic growth Alberta has allowed its minimum 87 wage to atrophy. The Government of Alberta’s 2010 Speech from the Throne addressed the province’s commitment to suppressing wages: The review of Alberta’s competitiveness will point die way and ensure that Alberta is an attractive place to do business. Your government will partner with industry to design the right model to encourage the investment in technology Albertans are known for... All of these initiatives are part of the government’s plan to enhance competitiveness. As we lead the way out of the recession, we know there will be tough competition for investment and jobs. Those economies that offer speed, controlled costs, superior innovation and extraordinary talent will flourish... Government regulation must accomplish our collective goals, while at the same time promoting business entrepreneurship, individual liberty, and creativity. Your government will aggressively pursue improvements to ensure we have effective regulations that are both clear and practical... To this end, we will continue efforts to increase our competitive edge, foster value-added opportunities and increase access to important international markets... we must minimize the cost o f doing business here, including the cost o f regulation, while at the same time providing die world-class services that are the hallmark of competitive jurisdictions.174 As an "effective regulation" the minimum wage provides the Alberta government with an opportunity to promote a generalized message of wage restraint across all economic sectors. The Albertan throne speech faithfully reflects the general message touted by the Canadian state: lower labour costs by moderating wages. The reference to labour costs, mentioning the region’s “competitiveness,” is made explicit several times throughout the speech. When the Lieutenant Governor mentions “controlled costs” and stringent regulations that are “clear and practical,” he is assuring the business community that the actions of the government will favour, on the whole, the ownership class. Despite Alberta’s relatively privileged economic position its workers are reminded about “tough competition for investment and jobs.” An upwards movement of the minimum wage would raise the "cost of regulation" but a stagnating minimum wage accords with this economic vision.175 And, by holding the line on the minimum wage, the government is able to hammer home its general message of wage restraint. 88 State representatives often explicitly link changes in their minimum wage with an emphasis on austerity in their public communications. British Columbia’s New Democratic Party, arguably the most labour-friendly party in mainstream Canadian politics, provides an example of this type of discourse. The party’s leader, Carole James, pushed for a raise in the province’s minimum wage from 8 to 10 dollars—a 25 percent increase. The province’s minimum wage had been stuck at $8.00/hour for several years. Despite the fact that this measure would keep the minimum wage well below its 1975 real value, she felt compelled to push for the raise with tempered, apologetic language: “Raising the minimum wage after a six-year freeze and reducing taxes for small businesses reflects my balanced approach. We are going to ensure that work pays and that taxes remain competitive.”176 Her efforts, of course, were unsuccessful. Over the decades governments have been able to use increases in the minimum wage as an opportunity to send an economic signal that wages should never again outpace the rate of inflation. Indeed, in periods when the value of the real minimum wage is being eroded it drives home economic ideas about global wage competitiveness and generalized austerity. In this capacity the minimum wage is one of the more prominent regulatory mechanisms used as leverage to lower wages. The passing decades since 1970 have exhibited a significant decline in Canadian labour standards. This process is sometimes called the "deregulation of labour," a misnomer in the sense that it is not so much that regulation has decreased, although this is certainly true in many contexts, but rather that regulatory mechanisms are now being used against working people. A recent article in Just Labour provides a good summary of the general process with respect to labour laws: “... the past 25 years in Canada has been a period of 89 labour law retrenchment. Since the mid-1980s, the provincial legislatures have enacted, more commonly than not, statutory provisions on union certification and the protection of collective bargaining that have made union organizing and negotiating more difficult.”177 David Fairey, documenting these changes in British Columbia, found that legislation had significantly lowered woxkers’ ability to realize minimum standards of treatment.178 Throughout the 1990s and 2000s, British Columbia’s successive neoliberal governments altered the complaints process, making it more difficult for labour to make demands on capital. The province’s employment standards budget was significantly cut, resulting in a lowered enforcement capacity. Such alterations are typical policy measures that have significantly reduced labour’s bargaining power. The minimum wage is part of this general regulatory environment that weakens the power of working people and erodes their standard of living. Yet, the minimum wage is also unique. First of all, it is directly about wage remuneration, the most salient aspect of the conflict between working people and the business class everywhere. It has the perennial status akin to legislated wage and price restrictions sometimes set by governments (such as Trudeau's in the 1970s) in times of supposed economic crisis. Secondly, it is a high-profile policy that receives a lot of attention when governments announce legislative increases. A brief survey of the obiter surrounding legislative increases provided us with a glimpse of this relationship. New Brunswick’s Liberal Party, for example, in justifying a minor increase of the provincial $8.25 minimum wage, quotes its Minister Donald Arsenault as stating that “this balanced approach will continue to move us forward on our path to self-sufficiency and build a better future for New Brunswick.” The party goes on to assure business that to offset minor raises in the minimum wage programs such as “a tip differential associated 90 with the minimum wage, as well as the concept of a training wage for inexperienced | MQ workers,” will be proposed in upcoming legislative sessions. These reassurances are aimed at convincing the ownership class that the government will do everything in its power to insure that wages not rise beyond levels endorsed by industry, and the underlining fact that cautious increases will not outpace the rate of inflation is abundantly implicit in the term "balanced." State officials frequently make the issue of wage restraint front and centre. As Manitoba’s Labour Minister, Becky Barrett, stated: ‘’Neither employers nor employees are served well...by a minimum wage that is out of touch with current economic and labour market conditions.”180 British Columbia’s Finance Minister, Carole Taylor, similarly claimed that, “raising the minimum wage now — at a time of record low unemployment — would be a disincentive for investors.”181 Such discourse, despite the fact that higher legislated minimums help wage-eamers directly, opportunistically uses a fuzzy language about die purportedly blended interests of owners and workers to push economic growth and promote wage restraint. When asked about the comparatively low minimum wage in his province, British Columbia’s Minister of Labour, Murray Coell, boasted that "we've taken a different tack I A A than some of the other provinces, but it's proven to be quite successful." He added that “we're not looking at increasing the minimum wage, we're looking at creating good- paying jobs through tax reduction and benefits to people who are earning less than $18,000 a year...”183 Once again, discussions about the minimum wage can be seen as real opportunities to promote the message of economic growth and wage restraint. Capital has also directly weighed in to emphasize the link between the minimum wage and the importance of wage restraint. The Canadian Chamber of Commerce 91 argued that a national minimum wage would “discourage employers from paying higher than the national wage, causing harm to some employees whose wages are equivalent to, or exceed, it.”184 This bizarre twist of logic expresses specious concern for working people by suggesting that a rise in the minimum wage will generally work to promote wage restraint by forcing businesses to tamp down all wages to off-set legislated increases. Of course, it masks the fact that if the Chamber really believed its own disingenuous assessment it would come to endorse a proposed legislated increase enthusiastically. The Canadian Federation of Independent Businesses’ regional director in New Brunswick at least wins points for honesty: "What is the point of increasing the minimum wage? We want to help the working poor and those living on lower incomes. And the first thing that would help them would be increasing the basic personal [income tax] exemptions.”185 The CBC correctly paraphrased his basic point: “Helping workers make ends meet should be up to government and not businesses.”186 The obiter surrounding public discussions of the minimum wage often directly stress die importance of economic growth through wage restraint. As a high-profile wage any legislative increases risk sending the wrong signal about wage growth. And so each increase is used as an opportunity to reiterate the general importance of wage restraint. More importantly, the overall performance of the minimum wage in the neoliberal era, especially its precipitous decline in the late 1970s and early 1980s, and the period of long stagnation thereafter, should be seen as a powerful economic message regarding wage moderation in the economy. The atrophy of the minimum wage reflects the broader goal of wage austerity across Canada in the last four decades. 92 Discussion: The Neoliberal Minimum Wage from the Standpoint of the Logic of Capital The problematic of this thesis turns on a leading query. At its outset the minimum wage was a regulatory policy instrument that stabilized the low-wage sphere. During the neoliberal era, however, it came to be used increasingly as a policy instrument that promotes generalized wage austerity. Expressed as a question we can ask: "What accounts for this historic shift in the use of the minimum wage?" To answer this question this thesis has employed the logical of capital state theory. Like other public policies, the minimum wage has responded to the tendency of the rate of profit to fall. It is only with an eye to this determinative feature of capitalism that the state’s actions become clear. The theoretical grist of this discussion is supplied by Joachim Hirsch and James O’Connor. They contend that all public policy will respond to the immanent tendencies of capital. The most salient tendency is the falling rate of profit. The capitalist state will respond to this tendency by enacting policies that i) promote the optimal conditions of accumulation to restore rates of profit and ii) will do so while trying not to upset the working class to the point of civil unrest. In other words, because the rate of profit tends to fall state policy must continuously work to enhance capital’s ability to accumulate while legitimating those policies that might lead to challenges from working people. These are called die accumulation junction and the legitimation junction. The entire spectrum of state policy can be interpreted as a response to the tendencies that inhere in the process of capital accumulation. In the early-1970s the falling rate of profit began to exert an obvious influence on the ownership class. Capital investments were proving to be less fruitful. The state, fulfilling its role as the guarantor 93 of conditions for optimal accumulation, worked with capital in an effort to decrease costs and thereby restore rates of profit. This primarily meant crafting policies that promoted the lowering of wages. Canadian economic policy accordingly shifted from a Fordist to a neoliberal policy paradigm. It came to include such features as freer trade, deregulation, and smaller government. Each of these policy changes were designed to lower labour costs, usually by significantly weakening labour’s bargaining power. This new policy paradigm worked in tandem with the altered production paradigm that capital had established independently (although with strong support from the state). Capital inaugurated a more flexible production processes, flattened employment structures, and embarked on extensive relocation away from populations with higher wage expectations. In short, lower profit rates had compelled the ownership class to abandon the Fordist compact and rapidly move towards a neoliberal paradigm of public policy. As part of this overall strategy, the minimum wage was pressed into a more aggressive role. It has become a useful tool in the pursuit of neoliberal restructuring by promoting wage restraint. Minimum wages had been increasing in real value throughout the Fordist era and well into thel970s. By the middle of the 1980s, however, their values were allowed to erode significantly in every Canadian jurisdiction. They were then permitted to stagnate for more than two decades. Through the lens of the logic of capital this behaviour is hardly surprising. Minimum wages were enlisted in the general pursuit of wage restraint. It has been a regulatory mechanism that allows policymakers to send wage signals across the economy. After 1975, minimum wages in Canadian jurisdictions began to fall as the state and capital tried to optimize the conditions for accumulation. This decline in real 94 value meant that minimum wages could be used to send exemplary signals about wage trends to owners and workers. They became the perennial legislative complement to Trudeau-era wage and price controls. Capital and the state have been able to use the minimum wage to reinforce the public air of austerity that pervades the neoliberal accumulation paradigm. The historic performance of minimum wages has simply responded to the imperatives dictated by the immanent tendencies of capitalist accumulation. In the quest to respond to falling rates of profit minimum wage restraint helped send a very clear signal—restrain wage increases. Table 2 summarizes how much minimum wages declined in the early part of the neoliberal era in each Canadian province. Marked decreases in minimums are seen between the mid 1970s and mid 1980s. Several provinces saw declines of more than one-quarter of their original value. Alberta, British Columbia, Manitoba, and Newfoundland dropped their minimum wages by one-third or more of their 1976 value. Table 2- Minimum Wage Declines by Province (2002 Dollars) Province 1976 1990 Percent Change ALTA 8.84 6 -32.13 BC 9.65 6.38 -33.89 MAN 9.49 5.91 -37.72 NB 8.2 6.04 -26.34 NFLD 8.04 5.35 -33.46 NS 8.04 5.75 -28.48 ONT 8.52 6.86 -19.48 PEI 8.04 6.06 -24.63 QUE 9.23 6.69 -27.52 SASK 9 6.58 -26.89 AVG 8.71 6.16 -29.05 On average, neoliberal provincial governments decreased their minimum wages by about 29 percent. 95 Figure 15 provides an alternative graphic summary of the data, highlighting the long period of minimum wage stagnation over the entire neoliberal era. To illustrate the general trend, provincial minimum wages have been averaged for each year between 1970 and 2010. The growth that minimum wages experienced during the early 1970s was abruptly reversed by neoliberal governments by the mid-1980s. This was followed Figure 15- Percent Change In Average Canadian Minimum Wage -10 1970 1975 1980 1985 1990 1995 2000 2005 2010 TW by a long period of stagnation until very recently. In the last five years we have witnessed a modest gain in the real minimum wage. Figure 16 graphically displays neoliberal minimum wage performances in two Figure 16- Segmented Minimum Wages 10.00 9.00 A ...... 8.00 7.00 ~ j r ------Albt J v — — NS 6.00 / v y 5 0 0 ~ t * 4.00 *...... —i ...... —i------T...... 1------1— —i— —t—* ...... r------1 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 representative provinces: Alberta and Nova Scotia. After 1974 we see drastic declines, followed by a long period of stagnation, then a slight upswing in more recent years. 96 What might account for the recent upswing in the minimum wage? The recent trend suggests that the minimum wage lost its moral credibility during the long period of stagnation. In the theoretical language of this thesis the legitimation Junction o f the minimum wage had been jeopardized. Indeed, countless groups arose across Canada to press for legislative raises in provincial minimum wages, pointing out that contemporary levels condemned recipients to a life of poverty.189 One of the original campaigns dedicated to raising the minimum wage began in Ontario in 2003. The Ontario Coalition for Social Justice lobbied with enough success to convince the provincial New Democratic Party to include calls for a $ 10/hour minimum wage in its platform. The governing Liberals were convinced to raise the provincial hourly minimum wage to $8 over a span of several years. Similar groups such as Manitoba’s Just Incomes Coalition, New Brunswick’s Common Front for Social Justice, Quebec’s Collective for a Poverty- Free Quebec and Prince Edward Island’s Working Group for a Liveable Income have each joined in the movement for minimum wage increases. Multiple national students’, women’s, aboriginal, and labour groups have also contributed to the effort. In response to this political pressure minimum wages have exhibited modest growth. Every provincial government except British Columbia and Quebec increased their minimum wage by more than 10 percent between 2004 and 2008.190 The slight restoration in the real value of the minimum wage in recent years has been guarded. When politicians endorse higher minimum wages their proposals are low enough so as to not challenge capital’s optimal conditions of accumulation. The New Democratic Party’s representative for Edmonton-Strathcona in Alberta’s provincial legislature recently displayed such an overall emphasis on wage restraint. On her website, Rachael Notley has posted transcripts of debates in the province’s legislature 97 where she has argued passionately and convincingly for an increased minimum wage. Her concern for working people and wage justice, however, is careful not to threaten capital accumulation. As she reveals in her questions to government: “Why won’t the minister stop being such a miser and give minimum wage workers the 12 cent raise they were promised... In this contact this government has just grabbed 20 bucks a month out of their pockets. Twenty bucks a month won’t bankrupt a business, but it will mean less food on their tables.”191 To summarize the basic point of this thesis in the theoretical language of the logic of capital school, the accumulation Junction o f the minimum wage has always been in play. At its historical outset it stabilized the low-wage sector, and was permitted to rise in accordance with the increase of all wages during the Fordist era. Its legitimation function was also clear from the outset. It made the state appear benevolent and just, and it made public policy appear as though it genuinely balanced the interests of workers with those of the business community. At the outset of the neoliberal era, as the immanent tendencies of capitalist accumulation had begun to assert themselves, state and capital abandoned the Fordist public policy paradigm. Accordingly, the minimum wage was enlisted to drive home a message of wage austerity, and permitted to lose considerable real value. And thus it shifted from being an instrument of wage stability in the low-wage sphere of the economy to an instrument that also promoted the generalized goal of wage restraint. This change in emphasis is profound: the minimum wage evolved from being a policy o f wage stabilization to being a regulatory mechanism promoting o f wage depression. It would appear, however, that this neoliberal goal challenged the legitimation aspects of the minimum wage. Public calls to ease up on its restrictiveness arose throughout the 2000s. Minimum wage restraint, to put the matter a 98 bit colloquially, had gone a bit too far. In recent years, therefore, we have seen very modest increases in the real value of the minimum wage, thereby bringing its moral authority back in line with its legal authority. Its legitimation Junction has been restored to round out its ever present accumulation Junction. Notes: 114 Camoy’s summary of Hirsch is helpful: “the dynamic force behind the capital accumulation process and therefore behind the development of the state itself is the tendency ojthe rate o f profit to which fall, in turn represents a condensation of the contradictions inherent in accumulation (class exploitation). The development of the state is derived from the foiling rate of profits and the need to develop countertendencies against that decline.”(Author’s emphasis.) Caraoy, Martin. 1984. The State and Political Theory. Princeton, NJ: Princeton University Press. Page 141. us Moseley, Fred. 1999. “The United States Economy at the Turn of the Century: Entering a new Era of Prosperity?” Capital and Class (67): 25-45. Page 27. 1,6 ibid, 28. 117 ibid, 28-29. 112 See: Workman, Thom. 2009. I f You ’re in My Way, I ’m Walking; The Assault on Working People Since 1970. Halifax, NS: Femwood Publishing. Pages 16-17. 119 In Shalla, Vivian, ed. 2006. Working in a Global Era: Canadian Perspectives. Toronto, Ont: Canadian Scholars’ Press. Page 78. 120 In ibid, 88. 121 Goldstein, Fred. 2008. Low-Wage Capitalism. New York, NY: World View Forum. Page 12. 122 ibid, 24-25. 123 Lippit, Victor D. 2004. “Class-Struggles and Re-Invention of American Capitalism in the Second Half of the Twentieth Century.” Review o fRadical Political Economics 36 (3): 336-43. Page 338. m ibid,339. 125 Workman, I f You 're in My Way, 57. 126 Fang, Tony and Anil Venna. 2002. “Union Wage Premium.” Perspectives on Labour and Income September 13-19. Page 18. 127 This number is derived from statistics provided by Statistics Canada, http://estat.statcan.gc.ca Table 278-0009. Accessed June, 2010. 122 Goldstein, Low-Wage Capitalism, 164. 129 McBride, Stephen and John Shields. 1997. Dismantling a Nation: The Transition to Corporate Rule in Canada. Second ed. Halifax, NS: Femwood Publishng. Page 161. These authors have also identified the dismantling of the Foreign Investment Review Agency and the National Energy Program as corroborative alterations to Canada’s ’free trade’ assault on workers. 130 McBride and Shields, Dismantling a Nation, 168. 131 ibid, 169. 152 Campbell, Bruce. 2007. "20 years Later: Has Free-Trade delivered on it Promise? " Canadian Centre for Policy Alternatives. Page 3. 133 Lin, Zhengxi. 1998. Employment Insurance in Canada: Recent Trends and Policy Changes. Ottawa, Ont: Statistics Canada, Analytical Studies Branch. Page 4. 134 ibid, 5. 135 Workman, I f You 're in My Way, 118. 136 McBride, Stephen. 2001. Paradigm Shift: Globalization and the Canadian State. Halifax, NS: Femwood Publishing. Page 84. 137 ibid, 86. 132 ibid, 87. 99 m ibid,SS. 140 Campbell, 20 Years Later, 2. 141 Russell, Ellen and Mathieu DuFour. 2007. Rising Profit Shares, Falling Wage Shares. Canadian Centre for Policy Alternatives. Page 8. 142 ibid, 5. 143 ibid, 9. Corporate profit shares are also displayed in this work where they follow a (predictably) opposite trend. 1 DuFour, Mathieu and Larry Haiven. 2008. Hard Working Province: Is It Enough? Rising Profits and Falling Labour Shares in Nova Scotia. Canadian Centre for Policy Alternatives. Page 16. 143 Russell and Dufour, Rising Profit Shares, 6. These values are in 1992 dollars. 144 Rashid, Abdul. 1993. “Seven Decades of Wage Changes.” Perspectives on Labour and Income 5 (2). Table 1. 147 ibid. 149 Akyeampong, Ernest B. 2007. Canada’s Unemployment Mosaic, 2000 to 2006. Perspectives on Labour and Income 8 (1). 6. 149 Morisette, Rene and Feng Hou. 2006. “Unemployment Since 1971.” Perspectives on Labour and Income (May): 12-16. Page 16. 130 McBride, Stephen. 1992. Not Working: State, Unemployment, and Neo-Conservatism in Canada. Toronto, Ont University of Toronto Press. Page 14. 131 Morissette, Rene and Xuelin Zhang. 2006. “Revisiting Income Inequality.” Perspectives on Labour and Income (December). Page 5. m ibid, 6. 133 Workman, I f You 're in My Way, 85. 134 All of these dollar values are constant 2002 Canadian Dollars and are hourly minimum wages. 133 Baldwin, John R., Mark Brown and Jcan-Pierre Maynard. 2005. Interprovincial Differences in GDP per capita, Labour Productivity and Work Intensity: 1990-2003. Ottawa, Ont: Statistics Canada, Micro- Economics Analysis Division. Page 4. 134 These data ate derived from statistics provided by the Government of Canada. Historic minimums are made available by Human Resources and Skills Development Canada, htto://srvl 16.8ervices.fc.ca/dinit- wid/sm-mw/menu.aspx?lang=eng. These numbers were divided by their respective consumer price indexes, which can be found on Statistics Canada’s E-Stat, http://estat.8tatcan.gc.ca ‘Prices and price indexes’ Table 326-0021. Accessed February-May 2010. 137 Gitterman, Daniel P. 2010. Boosting Paydheques: the Politics o fSupporting America's Working Poor. Washington, DC: The Brookings Institute. Page 62. 134 This decline in minimums has been further eroded by legislation allowing particular industries and target groups to be paid even less. Human Resources and Skills Development Canada divides individuals who are subject to minimum wage legislation that is unique to their employ (differing between regions) into several categories: young workers, workers with disabilities, live-in care workers, form labourers, homeworkers, miscellaneous differentials, and other miscellaneous workers.(Human Resources and Skills Development Canada. http://srvl 16.8ervice8.gc.ca/dimt-wid/am-mw/intro.asnx?lang=eng. Accessed February 1", 2010.) Many of these workers actually make less than minimum wages. 139 Goldberg, Michael and David Green. 1999. Raising the Floor: The Social and Economic Benefits o f Minimum Wages in Canada. Canadian Centre for Policy Alternatives. Page i. 140 Saunders, Ron. 2003. Defining Vulnerability in the Labour Market. Canadian Policy Research Network. Page 7. 141 Krahn, Harvey. 1995. “Non-Standard Work on the Rise.” Perspectives on labour and Income (Winter): 35-42. Page 35. 162 ibid, 36. 143 Tabi, Martin and Stephanie Langlois. 2003. “Quality of Jobs Added in 2002.” Perspectives on Labour and Income 15 (1): 34-39. Pages 13-14. 144 ibid, 14. 143 ibid, 15. 144 ibid, 13. 147 Goldstein’s Low-Wage Capitalism shows that Canadian capital has not deviated far from its southern neighbour. In 2006, more than forty-four million people in the US were working for $11.11/hour or less. 100 That is, about thirty percent of the one-hundred forty-nine million person labour force earned within $ 1.28 above the federal poverty line. (Found on pages 107 and 133.) 168 Workman, I f You 're in My Way, 90. 169 These are hourly rates in 2007. 170 LaRochelle-Cote, Sebastien and Claude Dionne. 2009. “International Differences in Low-Paid Work.” Perspectives on Labour and Income (June): 3-13. Page3. Demographic composition of minimum wage earners is explained more fully above. 171 Kleiss, Karen. 2010. Low-Income Workers Take a Hit for Business. Vancouver Sun, February 6,2010. 172 Statistics Canada: Labour and Household Statistics Analysis Division. 2009. “Minimum Wage.” Perspectives on Labour and Income 13(1): 34-39. Page 3. 173 Workman, I f You ’re in My Way, 91. 174 Government of Alberta. 2010. Speech from the Throne. Third Session of the Twenty-Seventh Legislature. http://www.alberta.ca/home/documents/Throne Sneech.pdf. My emphasis. The argument expectantly used by apologists of capitalism in tandem with such language is the supposed efficiency of private ownership of the productive apparatuses. Such assumptive reasoning cannot account for works such as Erik K. Olsen’s 2010 “Class Conflict and Industrial Location,” which demonstrated convincingly not that productive efficiency is the goal of firm managers, but that productive efficiency is frequently sacrificed in order to lower labour costs and consequently increase profit 176 CBC News. 2007. NDP Wants $2 Boost in B.C. Minimum Wage. CBC News, April 12,2007. 1 Lynk, Michael. 2009. “Labour Law and the New Inequality.” Just Labour: A Canadian Journal o f Work and Society 13:123-139. Page 134. 178 Fairey, David. 2005. Eroding Worker Protections: British Columbia's New “Flexible " Employment Standards. Canadian Centre for Policy Alternatives. 179 New Brunswick Liberal Party. 2010. Minimum Wage Will Rise to Atlantic Average by September 2011. Available from http.7/www.nbliberal.ca/?s=minimum+wage. My emphasis. 1(0 Canadian Federation of Independent Business. 2010. Oct. 1“ Minimum Wage Hike to $9.50/hour is ‘Reckless’. April 8,2010. (accessed April 27,2010) 1(1 CBC News, NDP Wants $2 Boost in B.C. Minimum Wage. 182 Vancouver Sun. 2010. B.C. Won’t Raise Minimum Wage: Coell. The Vancouver Sun, April 1,2010. httD://www.vancouvet8un.com/bu8ine8s/rai8e+minimum+wage+Coell/2753318/stnrvhtml (accessed May, 2010) 183 Vancouver Sun, B.C. Won’t Raise Minimum Wage. 184 Canadian Chamber of Commerce. 2009. Review o f Labour Standards in Canadian Labour Code.Page 22. 185 CBC News. (2009) N.L. Puts Pressure on Region’s Minimum Wage. CBC News, January 7,2009. http://www.cbc.ca/canada/nova-8cotia/8torv/2009/01/07Jpft-atlantic-wayelitm1 (accessed November, 2010) 186 CBC News, N.L. Puts Pressure. 187 For data sources see endnote 156. 188 For data sources see endnote 136. 189 Hewlett, Dennis. 2005. “The Call for a Living Wage: Activists Fighting for Fair Wages Across the Country.” Canadian Dimension 39 (3). 190 For data sources see endnote 43. 191 www.rachaelnotlev.ca (accessed April 2010, no longer available) 101 Conclusion This thesis has turned on a simple question: "What accounts for the shift in the nature of the minimum wage between the Fordist era and the neoliberal era?" More specifically, we asked why the minimum wage evolved from a regulatory instrument to stabilize the low-wage sector into a mechanism to promote generalized wage austerity. To account for this change we recurred to state theory focussing on the logic of capital. This school of thought zeroes in on the manner in which the state responds to capitalism’s inherent contradictions as it optimizes and legitimates capitalist accumulation. The immanent press of capitalism's tendencies, especially the tendency of the rate of profit to fall, led to a public policy revolution in the early 1970s. As part of this shift to a neoliberal policy paradigm the minimum wage was enlisted to promote generalized wage restraint. Provincial governments utilized the minimum wage to send a signal of wage restraint across the Canadian economy. The shift in the policy Junction o f the minimum wage was ultimately rooted in capitalism's immanent tendencies regarding rates o f corporate profit. As the rates ofprofit fell in the late 1960s the stage was set for the minimum was to be used to promote generalized wage restraint across the economy. By the early 1980s this use o f the minimum wage was abundantly evident. The notion that minimum wage policy is bound by the inherent logic of capitalist accumulation has important political implications. Although I would like to see it raised in every province, no policy recommendations emerge out of this study. In the context of capitalism minimum wages cannot be permitted to rise to a level that threatens rates of corporate profitability. Nor can they even rise to a level approximating wage justice. As such, the conclusions of this thesis sit awkwardly against the progressive view that 102 higher minimum wages somewhere promote fairness and equity. Rather, they fit seamlessly into the contemporary social structure of capitalist accumulation—and little more. They allow low-wage industry to flourish while diminishing progressive concerns about severe exploitation, especially regarding women. Advocates of a "living wage" fail to respond to this blunt reality. Minimum wages do little to lessen the plight of working people. Although right-wing arguments claiming that increases in the minimum wage will hurt working people are unfortunate and disingenuous, it is also hardly true that minimum wage increases will do much to help working people. And so this thesis offers few policy prescriptions. The regulatory mechanisms are part of the capitalist system of exploitation. The minimum wage is not an attack on private ownership but a "moment" in the organization of it. An authentic political agenda aiming to end destitution and provide an environment of genuine economic security and social justice must look beyond so-labelled "improvements" in such regulatory mechanisms as the minimum wage. It must consider minimum wage policy in its true character: a feature of capitalist accumulation and exploitation. The problem of wage justice and fair remuneration cannot be fixed in the context of capitalism. 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I l l Jason Edwards Education University of New Brunswick, Fredericton, NB M.A. in Political Sdcacc Expected May 2011 Thesis: The Minimum Wage’s Evolving Function, Responding to Profitability Crises. University of New Brunswick, Fredericton, NB B.A. Honours in Political Science 2008 Thesis: The Political Economy of Occupied Iraq. Central Kings Rural High School Graduated Honours with Distinction 2004 Academic Work Experience Mount Allison University, Sackville, NB Marking Assistant 2011 Marked tests. To Normand Perreault in “Comparative Politics.” University of New Brunswick, Fredericton, NB Examination Invigilator 2008-2010 Intermittently oversaw exams for multiple courses. University of New Brunswick, Fredericton, NB Graduate Teaching Assistant Marked tests and papers, as well as helped with logistical aspects and lecturing. To Raj Venugopal in “Public Policy Analysis.” 2009 and 2010 To Professor Thom Workman in “Pivotal Political Events.” 2009 To Guna Kulasegaram in “Introduction to Political Science.” 2008 University Involvement UNB Graduate Student Association, Fredericton, NB Committee Member 2009-Ongoing Sat on multiple committees, including Orientation, Graduate Research Conference, Constitution and Bylaws, and Health and Dental. UNB Graduate Student Association, Fredericton, NB Graduate Research Conference Abstract Reviewer 2011 Reviewed abstracts submitted by prospective presenters. UNB Graduate Student Association, Fredericton, NB Vice-President Communications 2009-2010 Participated in the decision-making of the Executive Committee. Moved information between groups such as the Executive Committee, Council, general membership and external actors. UNB Graduate Student Association, Fredericton, NB Committee Chair 2010 Lead the committee responsible for ordering the Association’s annual complimentary day planners. Scholarships Awarded University of New Brunswick, Fredericton, NB Graduate Reiearcb AuUtaatihip 2009-2010 University of New Brunswick, Fredericton, NB Graduate Summer Bureary 2010 University of New Brunswick, Fredericton, NB Governor Thomas Carleton Award 2004-2005 Languages English - first language French - near working proficiency