Public Policy: Progressivism is Really About Efficiency

10 Feb 2016 11:52 AM | Mike Lillich (Administrator)

By Oren Levin-Waldman


(First published online in the Yonkers Tribune)


As the Democratic Party chooses a nominee to run for president in the General Election, an interesting debate is occurring over the meaning of progressivism. Senator Bernie Sanders accuses former Secretary of State Hillary Clinton of not being progressive enough. She claims that she is progressive because she supports all the right “progressive” policies: universal healthcare, a higher minimum wage, college education, etc. And yet, the progressivism that she and Sanders appear to speak in the name of is really not the same as the progressivism of the Progressives of the early Twentieth Century.


This raises the obvious question of just what are the implications of different definitions of progressivism for economic policy. Traditionally progressivism was a doctrine of efficiency. The early Progressives sought reform in local government on the grounds that it was corrupt. A system based on the old Jacksonian spoils system — to the victor goes the spoils — could not deliver services in an equitable fashion. In a city like New York residents could count on not receiving prompt services if they backed the wrong candidate.


The early Progressives, however, were also elitist who sought to displace the ethnic minorities who were dominating municipal government. Born of the patrician classes they felt that it was their natural right to govern, and unless the rules of the game were changed they would never again have their chance. Therefore, they introduced reforms designed to restore themselves to their rightful place.


First, they supported a civil service system in which workers would be hired on the basis of merit. Their merit would be based on their mastery of scientific principles of management. Second, they introduced at large city council elections in an effort to weaken the hold of ward leaders. And third, they introduced the concept of primary elections so that the voters themselves could choose candidates running for office. This was intended to weaken the control of party bosses making decisions in the old smoke filled rooms.


They also pushed for ratification of the Seventeenth Amendment to the Constitution in 1913 that resulted in the popular selection of the U.S. Senate. Prior to this, the legislatures in each state simply chose two senators and sent them to Washington. While this along with primary elections were seen as steps in the greater direction of democracy, their real goal was the weakening of party bosses who either were not members of the right social class or had not attained the appropriate level of education.

Of all these reforms, perhaps the most important one was the idea that principles of scientific management should be applied to public administration. The father of scientific principles of management, Frederick Winslow Taylor, sought to achieve greater efficiency in the new industrial production economy. Industrial production, often referred to as the Fordist Production Process named after Henry Ford, revolved around the assembly line.

Taylor conducted time and motion studies at the Midvale Steel works in Midvale, Pennsylvania, and later at Bethlehem Steel, in an effort to determine what would make workers more productive and in the end more efficient. It was management’s responsibility to take “soldiering” workers, by which he meant lazy and second class, and turn them into first class workers. If management could not do this, it was a failure. Taylor also assumed that if workers became more productive, employers would reward them with higher wages. Although Taylor never specifically spoke of efficiency wages, he appeared to be introducing the concept because he certainly believed that one way to get product out of workers was to pay them more.


Sidney Webb, also writing during the progressive period argued that a minimum wage would achieve greater efficiency because better paid workers would better maintain themselves, and in turn would be more productive, thereby adding to the efficiency of their employers. Moreover, higher wages would encourage their employers to invest in their human capital by offering them training so that they would be worth the higher wages.


At the heart of progressivism was efficiency, whether it be the production of goods and services in the private economy or the delivery of services in the public sector. Today progressivism is more about social justice and achieving the “just society.” But social justice often turns on questions of redistribution, especially from the rich to the poor, as any number of “progressive” candidates today support over taxation of the wealthy to pay for more programs for the poor and maybe even the diminishing middle class. It is not clear, however, that the old Progressives would have recognized themselves in the New Progressivism.

A

ll of this raises a fascinating question: Could a Republican running for office supporting a higher minimum wage on the grounds that it is an efficiency wage claim to be a progressive, too? Would this represent a threat to the so-called social justice progressives? Neoclassical economics does stress that if a minimum wage does not result in the layoff of those workers whose value is less than the minimum, it will result in an increase in productivity among low-efficiency workers.


The neoclassical economist often presents the efficiency side in terms of the anti-shirking wage. Workers paid a higher wage will avoid shirking on the job for fear that if they do they will lose their higher paying jobs and be forced to accept lower paying jobs. Moreover, because they won’t shirk, the employer can save money on monitoring costs. Granted, this is a more negative formulation of Webb’s argument, which we often refer to as the “Webb Effect,” but it does recognize the greater efficiency to be derived from higher wages, even higher wages that are legislated.


Can our competing definitions of progressivism be reconciled? I have argued many times in this space that the path forward with regards to economic policy favorable to the middle class does not lie with redistributive policies. Rather the path lies with strong wage policies that through wage contour effects can lift, not only the wages of those at the bottom, but those in the middle as well. Although such an outcome will no doubt further the objectives of social justice, it would be in lines with the old progressive vision of the efficiency wage. Perhaps it is time to resurrect the efficiency wage argument as the best way to appeal to those middle class voters who remain.



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