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Nickel and Dimed and Quartered

By Russ Roberts

A friend of mine asked me the other day about Nickel and Dimed, Barbara Ehrenreich's experience as a low wage worker trying to make ends meet. She has a tough time. It's not easy living on the minimum wage. It's particularly hard to support a family of four on $10,000 a year. My friend wanted to know how a classical liberal devoted to limited government would view the challenge of the working poor.

My simple answer was that better education would go a long way toward helping the working poor in the future. But won't we always need people to do menial tasks, my friend wondered, people to wait on tables and work as janitors and dishwashers. Another variant on this point is the presumption that we need low-wage people willing to do those menial tasks and therefore, the entire capitalist system and our vaunted standard of living needs an army of low-wage people to support the rest of us.

In fact, if education were better in the United States, and more people were more productive, the higher wage alternatives would induce businesses and ourselves to look for ways of accomplishing unpleasant tasks using machines and technology in place of labor. That's precisely why the occupations of butler and housekeeper have declined so dramatically in the United States over the last 100 years. You'd think as we get richer as a society, more people would want to hire servants. But the rising wage of servants, a rising wage due to the higher productivity and therefore higher paying alternative occupations of potential butlers and maids, induces most of us to live without live-in servants. Instead we use vacuum cleaners and washing machines and dishwashers instead. Or if you can afford it, you hire a fraction of a servant, a cleaning service that comes once a week.

Link • November 23, 2004 • The Economy
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