Actually, paternalism in factor income is not at all unprecedented

Matt Bruenig has an interesting post on his Demos blog. In a nutshell, he asks why so many people believe transfer income should be treated very differently than wages. He quotes a Washington Post editorial by Michael Strain:

If we take money from John to give to Matthew, who would starve without it, then we owe it to John to make sure that his money is appropriately spent on Matthew’s food and shelter, not on Matthew’s alcohol and gambling.

And Bruenig asks why the same paternalism shouldn't apply to wages spent on alcohol or gambling?

But wait! Paternalism used to be the norm for waged labor!

Here's a 1931 article on Henry Ford's "shotgun gardens," so-called because employees were forced to keep them or they would be fired. Here is a quote from Henry Ford's actual press release introducing the policy:

"Next year, every man with a family who is employed at the plant will be required to have a garden of sufficient size to supply his family with at least part of its winter vegetables. Those who do not comply with the rule will be discharged. The man too lazy to work in a garden during his leisure time does not deserve a job. When the people of our country learn to help themselves they will be benefited far greater than they would be by employment insurance. If our agricultural plan is adopted throughout the country, the dole need never be thought of."

This sort of thing was really common. In The Invention of Capitalism, Michael Perelman quotes the welfare secretary of the steel giant American Iron and Steel Institute: 

regulation of his meals, the amount, the character and the mastication of them, the amount and character of drink, the hours of rest and sleep, the ventilation of rooms . . . washing of hands before meals, daily washing of feet, proper fitting of shoes, amount and kind of clothing, care of the eye, ear and nose, brushing of the teeth, and regularity of the bowel. (cited in Montgomery 1979, 40)

Yes, this company had a welfare committee (or in other words, a paternalism committee).

Why such paternalism? An early economist, James Steuart, calculated that a two full days' work at the going wage rate in Scotland was enough to support that worker (not the worker's family--just the worker) for one day. Families had to support themselves by gardening and selling products they could make by hand, such as handloom weaving. (For the record, Steuart didn't consider such sub-poverty wages a problem; he viewed it as a great efficiency, a triumph of the free market).


Perelman notes that Adam Smith himself wrote about how gardening could be useful for lowering wages. If a household can produce some if its food in a backyard garden, then their wages can be below sustenance level. The same applies to selling handmade crafts; this income allows factory owners to lower wages further below sustenance level. Smith helpfully explains why gardening is so great:

This ability to leave labor with the responsibility to fend for itself when wages are insufficient to support a family is an immense boon to capital. Even when no outside income is required, the effort labor expends in organizing and arranging its own affairs relieves capital of much responsibility (Marx 1977, 1033). In fact, in his chapter on ‘‘Wages of Labour,’’ Smith suggested that this factor accounted for the superiority of wage labor relative to slavery (1976, I.viii.41, 98; see also Marx 1977, 1033).

That's what the paternalism is for: profit. Political economists like Smith and the capitalists who owned factories evinced a creepy obsession with how working class households spent their free time. They declared war on laziness, emphasizing frugality and insisting the working class should spend their entire waking hours working in factories or else engaging in some activity to supplement their income--gardening or handicrafts, for example--so that wages could be lowered. They argued that children should join their parents in work; John Locke argued that children should enter the workforce at age 3. Hence the "concern": if workers couldn't supplement their wages by gardening, then factory owners would have to increase their wages so the workers didn't drop dead.

Of course, the rich factory owners weren't expected to engage in any of this kind of industriousness. Henry Ford certainly didn't get on his hands and knees to grow as many winter vegetables as he possibly could in a tiny garden in his spare time. If Henry Ford ever gardened, it was because he thought it was fun and he chose to do so, not because someone threatened to revoke his livelihood.

It's not a far jump at all to revert back to paternalism for wage income. McDonald's famous 2013 sample budget explaining to their workers how to live on the minimum wage ("You can have almost anything if you plan ahead and save for it!") shows that this type of paternalism for wage labor isn't dead.

Paternalism has one motivation: profit. Just as early political economists like Adam Smith and capitalists like Henry Ford obsessed over ways to lower wages below sustenance level in order to increase profits, looking for excuses to avoid paying for a welfare state saves money. Paternalism is a fig leaf for cruelty. Nevermind the decade and a half of falling median household income. Nevermind the concurrent soaring corporate profits. Nevermind the worsening poverty, child poverty, and extreme $2 per day poverty. Nevermind that the richest 1% controls over a third of all wealth, the richest 10% control over three quarters of all wealth, and the richest 0.1% are about as wealthy as the poorest 90%. The real problem in America today is that a poor person might go to the casino.

In Strain's parlance, John shouldn't be suspicious of the capitalists who have seen their incomes soar while his income has fallen. John should be suspicious of Matthew, the guy who can't find a job and has nothing to live on.