JAMES SUROWIECKI'S latest column examines the relentless and discouraging growth in America's low-wage economy. Five of the six fastest-growing job categories pay wages below the median, he says, and are increasingly home to skilled workers and primary earners, as opposed to teenagers or the unskilled. The contrast with the past is striking, he writes:

In 1960, the country’s biggest employer, General Motors, was also its most profitable company and one of its best-paying. It had high profit margins and real pricing power, even as it was paying its workers union wages. And it was not alone: firms like Ford, Standard Oil, and Bethlehem Steel employed huge numbers of well-paid workers while earning big profits. Today, the country’s biggest employers are retailers and fast-food chains, almost all of which have built their businesses on low pay—they’ve striven to keep wages down and unions out—and low prices.

Today some firms earn fat profit margins, like Apple, but employ relatively few workers. And Mr Surowiecki notes that the big employers like Walmart or McDonald's have skimpy profit margins which give them scant room to raise wages. He argues:

The grim truth of those numbers is that low wages are a big part of why these companies are able to stay profitable while offering low prices. Congress is currently considering a bill increasing the minimum wage to $10.10 over the next three years. That’s an increase that the companies can easily tolerate, and it would make a significant difference in the lives of low-wage workers. But that’s still a long way from turning these jobs into the kind of employment that can support a middle-class family. If you want to accomplish that, you have to change the entire way these companies do business. Above all, you have to get consumers to accept significantly higher, and steadily rising, prices. After decades in which we’ve grown used to cheap stuff, that won’t be easy.

Mr Surowiecki notes that higher wages and prices should be accompanied by a stronger safety net, investments in education and infrastructure, and above all a rapidly growing economy. But I want to focus on the quote above regarding consumers and their tolerance for higher prices.

I'm not quite sure how to interpret his argument. One possibility is that Mr Surowiecki is recommending a higher rate of inflation in the American economy. That wouldn't be a bad idea. Higher inflation would help shake America out of its macroeconomic doldrums and push labour markets toward full employment. That, in turn, would raise worker bargaining power and encourage firms to invest more in retaining and training their workers. But it doesn't sound to me like that is what Mr Surowiecki is suggesting; if he were he would simply call for higher inflation and the column would be very different.

Rather it sounds like he has in mind an increase in relative prices: Americans should get used to paying more—relative to other things, like cars or housing or cable television—for the sort of cheap goods and services that support much of the economy's low wage labour: things like fast food or necessities purchased at Walmart. It seems reasonably safe to assume, however, that demand for such things is not particularly inelastic. That is, if prices for Big Macs rise people will buy fewer Big Macs. They might simply eat fewer burgers or buy fewer cheap toys from the Walmart dollar bin and instead spend a bit more on something else, like a home with a slightly nicer kitchen, the better to prepare more food at home. Or they might substitute toward higher quality products. If you have to spend $10 on a burger rather than $5, then you may as well go get a gourmet burger at a proper restaurant.

We have a general sense for how this might play out. Economic historian Gavin Wright has described how the New Deal's high-wage policies forced a complete reorganisation of the South's low-wage economy. In agriculture and industry there was extensive upskilling and mechanisation, a process that launched the South on a path toward convergence with the rest of the American economy. That was very much a good thing. But it was a very different thing from a process in which wages rose for a set of low-wage workers alongside consumer adjustments. The workers that benefitted, for one thing, were often different from those that initially held the low-wage jobs. Whites displaced blacks in many cases, and the period coincided with a great migration of surplus low-wage labour from the South to the industrial cities of the Northeast and Midwest.

Speaking more broadly, an across-the-board increase in wages at the bottom of the wage distribution, which was accompanied by a corresponding increase in prices, would have two big effects. One would be to raise the minimum productivity of the workers on the job, which would be achieved in part by some firing and hiring and in part by some investment in training, new capital, and industrial reorganisation. And the other would be a shift in the geographical distribution of labour toward cities where a dollar is worth less because the cost of living is higher.

These shifts could prove to be a good thing for the American economy. Average productivity would be higher. Given complementary policies like those advocated by Mr Surowiecki (greater investment in infrastucture and better demand-side policy, for instance) the economy could find a new, higher equilibrium income level, and perhaps even a higher trend growth rate. But there could also be unpleasant distributional effects—those clinging to minimum-wage jobs could be displaced by slightly more skilled workers—and a rise in structural unemployment. If you want to employ current workers at higher wages you either have to make them better workers or you have to take income from someone else—which can be sensible but which can also make for nasty unintended consequences. In one sense raising wages is as easy as raising wages. But in another, it's not.