The Future of Living Wages

What can governments do for incomes in an era of intense global labor competition and automation?

(Credit: a katz


  • Wage pressure will come from increased mechanization, automation & robotics – not just cheap labor.
  • Bolder strategies may become necessary simply to keep people occupied, fed and housed.
  • The borderlessness of MNCs lets them avoid national efforts to make them to pay their fair share.
  • The mechanism of legal wage minimums is losing its power due to transformation of the global economy.

Whose duty is it to ensure a living wage in a global economy where jobs can be moved easily to more “flexible” jurisdictions? And how is that goal of a living wage best achieved, regardless of any moral responsibility?

Increasingly, those questions may have two very different answers, as abstract ideals diverge from realistic solutions in the 21st century.

Aging policies

One common policy solution of the 20th century industrialized world was legal compensation floors, mainly hourly minimum wage laws. Companies were simply compelled to meet their duty to workers.

The first country to authorize a government role in setting minimum wages was New Zealand in 1894. The United States saw its first state minimum authorized in 1912, just over a century ago.

Franklin D. Roosevelt, the U.S.’s 32nd President and the leader of America’s New Deal, in 1933 explained the principle behind such mandates:

It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country.

In 1933, that statement was not just a moral argument, but also an enforceable policy position. Today, in many cases, it is not.

No enforceability

Large multinational corporations that operate worldwide have more leverage and flexibility in the global marketplace than any single national government. Their transnational character allows them to avoid national efforts to compel them to do their fair share under a more democratic capitalism.

In many sectors, if a large business has – in the words of Roosevelt – no “right to continue [operating] in this country” due to its preference for paying sub-living wages, it can and will simply go elsewhere.

The century-old mechanism of a legal wage minimum — while still critical — is losing its effectiveness against poverty and labor abuses due to the radical transformation of the global economy. New mechanisms are now urgently required to supplement it.

The underlying goal – the need for a living wage – that once led to the creation of minimum wages have not changed – but the toolbox must expand.

Until lately, the issue has stalled. In most of the industrialized world, strong social safety nets often reduced the perceived need for higher wages. Meanwhile, U.S. activists were tarred as closet socialists seeking the Europeanification of free-market America.

Everywhere, the poor typically lack political leverage. Their demands are frequently written off as ignorant populism detached from economic realities.

Tipping point

But we have reached a tipping point. Even techno-optimists – those who have long boosted the life-easing benefits of the arrival of robots – are now concerned.

They are starting to acknowledge that the pressure on wage levels (and employment levels themselves) will no longer just come from cheap, surplus human labor overseas. It will also come from increased mechanization, automation and robotics.

And this time, the pressure will affect (and is already starting to affect) workers with higher incomes, too.

It is as if President Roosevelt foresaw all of this. As he put it in his 1933 speech on the necessity for minimum wage mandates: “By workers, I mean all workers, the white collar class as well as the men in overalls.”

While the latter have often been politically weak, the voters of the “white collar class” tend to be the primary field of competition for most major political parties in advanced democracies.

With their jobs and wages increasingly at risk, too, the problem will be much harder for governments to ignore.

New solutions

If (and since) corporations are unlikely to do their part in a footloose global labor market, governments may have no other choice but to come up with the money and systems to subsidize employment and/or incomes (regardless of employment status).

Job creation subsidies in the U.S. have become widespread. Already, Germany has expanded subsidies for employers during downturns to maintain staffing levels at reduced hours but normal pay. Some U.S. states are testing similar ideas.

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Bolder strategies may become necessary simply to keep people occupied, fed and housed. That might even mean providing minimum income supports to freelancers and artisans, as well as various other strategies that seem inconceivable to many now.

Emerging labor markets

The issue is by no means a “first-world problem.” Globalized interconnectedness and technological advances have already delivered many workforce challenges from the older advanced economies to newly-industrialized countries.

These economies are facing this well before they have even settled into their new, middle-income or threshold high-income statuses.

From Latin America to Asia, governments are confronted with a simple reality. Mega-corporations simply move (or automate) production when wages are set above their preferred level.

Recently, during a tense farm labor dispute, Mexican federal government even briefly considered paying the difference between a minimum and living wage. Ultimately, this unprecedented proposal was abandoned.

Still, similar ideas are bound to resurface elsewhere, as wages and employment figures reach a crisis even outside of recessions. New approaches to the realities of the 21st century economy are now inevitable.

Funding them fairly will be a hurdle too, of course. Tax avoidance among high-earners, like offshoring, is another costly jurisdictional hopscotch game plaguing globalization today.

Experimental remedies from unexpected places that seem far-fetched now may become global fixtures. Just as New Zealand’s curious minimum wage law in 1894 once did.

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About Bill Humphrey

Bill Humphrey is a senior editor at The Globalist. [United States] (@BillHumphreyMA)

Responses to “The Future of Living Wages”

Archived Comments.

  1. On September 7, 2015 at 9:15 am tini responded with... #

    Living wages are now undermined by another factor beyond globalization and technology – namely economic migration and refugees. The Serbian president just educated Chancellor Merkel, that German subsistence benefits of approx EUR 400 a month with relatively modest hurdles to meet, are the primary reason why half the Balkans and an even higher share of Syrians, Iraqis or Africans whish to immigrate and risk their lives to do so. Hungary’s premier was so blunt as to proclaim the ongoing migration a German crisis of misguided incentives. A lowering and stronger conditionality of benefits is imminent. In this connected world the prospects of a living wage for the poor are dire indeed. I suppose only closed off communities may be able to provide a adequate living wages in the future with all left outside to lower their expectations to Bangladesh subsistence or even lower levels to compete with machines.

  2. On September 7, 2015 at 8:15 am sdewye responded with... #

    I have said it before in this space, but it bears repeating: there is a solution to every problem mentioned by Mr. Humphrey, and more. Why it seems to be impossible for people to acknowledge that solution is beyond my powers of ratiocination. It requires ‘only’ that we change the monetary system. That is no small thing, but it isn’t changing from one economic system to another. If interested, the proposal is available for consideration at (It can be considered as a strictly economic proposal, without reference to justice–though implementing it would make the economy more just by any standard.)

  3. On September 7, 2015 at 12:44 pm bhumphreyTG responded with... #

    Even if that were true — and I don’t believe it is — global migrant and refugees will continue in great numbers over the coming century with or without generous welfare benefits, due to various insecurities, many of them increasingly related to climate change. But to your point about economic refugees/migrants specifically and closed communities, I think you are raising important concerns even if the solution is a matter of disagreement. Wages would probably not be nearly as depressed in places like the United States were it not for multinational corporations moving jobs to poorer countries with weaker enforcement mechanisms and legal frameworks to ensure fair compensation. We can’t keep exporting problematic practices around the world and expect no blowback, including large migration for better opportunities. We need to ensure that foreign development investment (both public and private) from the first world into the third world is genuinely building up the bottoms of those economies so that people have an economic reason to stay there and work up, rather than coming to the advanced economies for social mobility (relative to their home situation).

  4. On September 10, 2015 at 10:34 am WINTHROP allen responded with... #

    Should people be “imprisoned” in the country of their birth?
    They would necessarily compete with kith and kin for resources, identity, and political power. Some would thrive, others perhaps not. If the place were overpopulated, the issue would press upon them in a personal way. How would they deal with it? The ancient solutions were cannibalism, war and massacre.
    We modern folks have a more humane option, contraception. But wait! Half the world inhabitants reject contraception on ethical, or religious grounds.
    So, what is to be done? Must those who choose to limit population be required to absorb the surplus from countries that wantonly overpopulate? No, that is politically untenable. The overpopulators must be convinced to modify their behavior or, that failing, go back to the “ancient solutions” mentioned above.

    Some call for “education,” but at best that is a long-tern solution. We have seen the education option fail to keep up with the pace of propagation. The population could double again with the education proposal still dragging along behind.
    If difficult, even draconian measures are not taken soon, we shall see migrants gunned down at borders, en masse.