Minimun Wage Agruement Essay

Minimum Wage or 'Living' Wage?

World and I, October 2003

In March 1997, as many as 7,600 workers in Los Angeles got pay raises under the city's new living wage law. Mandatory for companies that got contracts or financial assistance from the city, the Los Angeles ordinance set a minimum wage for covered workers of $7.25, plus health-care benefits of $1.25 per hour for those without private insurance.

The city's living wage has since been raised to $8.32 with benefits and $9.46 without to offset inflation. The beneficiaries have included janitorial, clerical, child-care, and landscaping workers, parking lot attendants, kitchen staff, and dishwashers--workers in rapidly growing occupations that typically pay very little. Syndicated columnist Robert Kuttner has described the living wage campaign as "the most interesting (and underreported) grassroots enterprise to emerge since the civil rights movement."

Responding to religious organizations, labor unions, women's groups, and community organizations, about 90 other cities, counties, and school boards have also implemented some kind of a living wage law for employees of cities, government contractors, or firms that got subsidies or tax breaks from government. For example,

* Three years ago, Tucson, Arizona, enacted a law requiring city contractors to pay a wage of at least $8.26 with benefits ($9.30 without).

* Hartford and Meriden, Connecticut, both require a minimum wage of $9.02 for contractors and businesses receiving financial assistance.

* Gainesville, Florida, mandates a flat minimum wage of $8.56 for city employees only, while Miami Beach sets this minimum wage for contractors and city employees with benefits and requires $9.81 for those withlMinneapolis obliges firms receiving financial aid to pay $8.83 per hour.

* Burlington, Vermont, requires $9.90 with benefits, $11.68 without, for city contractors' employees and city workers.

* New York City requires $8.10 with benefits and $9.60 without benefits for city workers and the employees of contractors and subcontractors. Many of these cities also have inflation protection built into their laws (see acorn.org, epionline.org).

LOCAL, NOT FEDERAL

There are many other livable wage campaigns under way across the country (including statewide campaigns in Hawaii and Vermont). There is, however, no campaign to introduce living wage measures into federal contracting, reflecting widespread pessimism about the possibility of enacting this kind of policy at the national level. The living wage movement remains a local, grassroots effort, utilizing nationwide networking among activists--for example, through the Association of Community Organizations for Reform Now (ACORN)--and is not dependent on the endorsements of high-profile national politicians for its success.

While local living wage laws require different wage and benefit packages and cover different kinds of employers, they all share one fundamental motivation. In the words of Jen Mathews, director of the Vermont Livable Wage Campaign for the Burlington Peace and Justice Center: "If you work full time, you ought to be able to pay your basic bills without resorting to public assistance." The National Interfaith Committee for Worker Justice, a nationwide, multidenominational faith-based organization, reasons "that as God worked to create the world, our religious traditions value those who do the world's work. We honor our Creator by seeking to assure that laborers, particularly low-wage workers, are able to live decent lives as a product of their labor."

The laws are typically preceded by detailed research on the local cost of living, with numbers on housing, transportation, health care, child care, food, taxes, and other necessities drawn from public data sources. For example, in 1998, a single parent with two children working full time in Los Angeles would have needed $17.68 an hour to pay the bills, and a two-parent, two-job, two-child family would have needed $10.75 per hour per parent. A single, childless person in Omaha, Nebraska, would have needed $7.36/hour in 2002 if he paid for his own health care, and a single parent with two children would have needed $17.69.

In 2000, each parent of a two-parent, two-job, two-child family would have required $10.38 an hour to meet the family's basic needs in Minnesota. A single person in urban Vermont with no children would have needed $10.44/hour in 2001 if he had employer-sponsored health care. A single parent with two children and health care benefits would have needed $19.70. All figures assume full-time work. These numbers are based on no-frills budgets--usually factoring in no money for vacations, paying down debt, retirement savings, children's college educations, or even the occasional fast-food meal. (The Vermont data are exceptional: the legislature wanted to include a slightly more generous food plan and some savings.)

Armed with similar research results from around the country, advocates such as Mathews argue that regular minimum-wage protection for workers is "grossly inadequate." Someone working year-round, full time, for the federal minimum wage ($5.15), makes $10,300 per year, far below the basic-needs budget for virtually all household types in all states. Both the minimum wage and the federal government's official poverty line ($14,494 for a single-parent family of three) drastically underestimate the cost of living for workers at the bottom.

PHENOMENON OF FALLING WAGES

Supporters also took a hard look at the long-term picture of economic development in the United States and were greatly disturbed by a pattern of growing wage inequality, with stagnant or falling inflation-adjusted earnings for the bottom 80 percent of men and the bottom 20 percent of women. A worker at the twentieth percentile of the male wage distribution saw his hourly wage fall, in 1999 dollars, from $9.32 to $8.12 between 1979 and 1999--despite the longest economic boom in 25 years in the 1990s. Wages for women at the twentieth percentile of the female wage distribution fell from $6.89 to $6.83.

While wages were falling below basic-needs thresholds for growing numbers of workers, economic policy rarely aimed to improve the quality of jobs. There was plenty of attention to job creation, and there were many local tax breaks to companies that promised to bring new jobs. There was rarely any discussion, however, of what kinds of jobs and what levels of compensation. As a result, supporters said, public economic-development resources were frequently being thrown at companies that paid much less than living wages, with no explicit goals and timetables to improve. Living wage supporters argue that government and companies that make money from government contracts or tax breaks ought to make a living wage the standard for paying their workers, and that living wages ought to be an explicit goal of local economic policy.

Opponents generally understand that $5.15 an hour does not pay the bills, but they invoke the specter of increased unemployment for low-wage workers as a result of living wage ordinances. Mandated living wages will increase employer costs: not just for wages, health insurance, and other benefits but also for payroll taxes. Furthermore, when government mandates wage increases for some workers, companies often raise the wages of similarly paid workers who aren't covered by the law, causing ripple effects. For example, if two employees of a government contractor both earn $7 per hour before a living wage law, but one works on the government contract and one doesn't, the employer will often give raises to both to preserve the wage structure.

Therefore, while some workers will benefit from higher wages, opponents say, others will be laid off. New jobs that had been in the pipeline will not be created. Furthermore, workers who lose their jobs may flood the low-wage labor market not covered by living wage ordinances--employers without city or state contracts or financial assistance--competing for those jobs and driving down wages. While this may not have been apparent in the booming 1990s, it may be an increasing problem as cash-strapped cities and states make hard budgetary decisions.

LIVING WAGES AND JOB LOSSES

Economists David Neumark and Scott Adams compared cities with living wage laws and those without to assess the effect on the entire low-wage labor market. Their findings seem to support the idea that workers benefit if they can keep their jobs but that many lose jobs. The economists concluded that about a year after living wage laws go into effect, a statutory living wage 60 percent above the minimum wage raises the average wages of workers in the entire bottom 10 percent of the metropolitan area by 3 percent. At the same time, however, the employment rate of this group drops more sharply. A living wage 60 percent above the minimum wage reduces their employment by about 6 percent. Furthermore, living wage laws might not do a good job of reaching low-income households, since some low-wage workers who are the laws' beneficiaries live in middle-class households.

Low-wage workers may not be the only losers from living wage laws. Since local and state governments could respond to higher costs by reducing their contracting for public goods and services, taxpayers might see fewer parking lot attendants and longer lines to check out of parking garages. There will also be fewer cleaning workers in office buildings and parks, leading to dirtier public places.

Moreover, if fewer companies bid for public contracts, those that remain will have more market power to demand higher prices. If public buildings are still being cleaned, for example, the job will cost more. In short, detractors of living wage laws say they are a bad deal for both low-wage workers and taxpayers.

Living wage supporters respond that the number of low-wage workers on government contracts is far too small to cause wage gains or job loss of the magnitude estimated by Neumark and Adams. For example, economists Robert Pollin, Jeannette Wicks-Lim, and Mark Brenner of the Political Economy Research Institute at the University of Massachusetts calculated that no more than 7,600 workers got a raise as a result of the Los Angeles law, out of about 1.5 million earning less than $10 an hour in the entire metropolitan area. The estimate of 7,600 workers affected is probably overstated because of widespread failure to enforce the law and uncertainty about which employers are actually covered. How can a law that directly affects one out of every 200 workers reduce employment by 6 percent?

IMPACT ON TAXPAYERS

As for effects on taxpayers, Pollin and Stephanie Luce estimated that under the Los Angeles ordinance, the employers' total costs--including wages, benefits, payroll taxes, and ripple effects--were projected to increase by less than 2 percent. Most living wage advocates expect workers in covered jobs to offset these potential losses to taxpayers in three ways: by requiring less public assistance (for example, food stamps and Medicaid), reducing absenteeism and turnover (which cost governments money), and experiencing greater motivation to do their jobs better (which gets governments more for their money).

Are there alternatives to living wage mandates? Some opponents of living wage laws support the option of a higher earned income tax credit, which is a federal subsidy paid to low-wage workers through the Internal Revenue Service. They argue that it is not likely to destroy jobs, since employers don't bear the cost, and that it is better targeted at low-income families. Living wage supporters usually recognize the importance of the earned income tax credit supplement to low-wage workers in the short run. Nevertheless, supporters such as Jen Kern, director of ACORN's Living Wage Resource Center, explicitly argue that "limited public dollars should not be subsidizing poverty-wage work. Public dollars should be leveraged for the public good--reserved for those private-sector employers who demonstrate a commitment to providing decent, family-supporting jobs in our local communities."

For supporters, the great promise of living wage laws is the ability to increase dramatically the standard of living for a small number of workers, raise the social accountability of companies getting public dollars, and introduce living wages as explicit goals of local economic policy. The disappointment is that more workers cannot be helped with this strategy. Supporters remain confident, however, that living wage laws are at least a small step on the road to livable incomes for all families. For opponents, the promise of much higher wages for a small number of workers is outweighed by the threat of job losses and increased costs for local governments.

Living wages are still relatively new, and information on the policy's various effects is just beginning to come in. Both sides will be monitoring the results carefully in the next several years as low-wage workers and financially stressed cities cope with increasing economic fragility.

Elaine McCrate is associate professor of economics and women's studies at the University of Vermont and specializes in the political economy of low- wage labor markets.

Source Citation

McCrate, Elaine. "Minimum Wage or 'Living' Wage?" World and I Oct. 2003: 56. Opposing Viewpoints in Context. Web. 19 Dec. 2015.

Internal Citation

(McCrate)

Unequal to the task

National Review, December 31, 2013

"Economic inequality" is to be the great theme of the remainder of the Obama administration, the president announced in a speech that combined rank economic ignorance with shallow demagoguery. And the first item on Barack Obama's new economic agenda is an increase in the federal minimum wage to $9, higher than the minimum wage in any state excepting Washington.

A higher minimum wage is a cruel sentence of unemployment for young and low-skilled workers, for whom the real minimum wage is $0.00 per hour. It is also a poor way to help poor people. The Congressional Budget Office estimated that the last minimum-wage increase (to $7.25 per hour) would increase wages by some $11 billion in the subsequent year but only by $1.6 billion for poor families, meaning that it would cost $6.88 to provide $1 in economic gain to poor households. Some of that additional income no doubt flowed to families that are low-income but above the official poverty line, which is to the good, but many minimum-wage earners are nowhere near poor; rather, they are low-earning members of reasonably well-off households, including young people and parents working part-time. If our policy goal is to make work more rewarding for people at the lower end of the labor market, raising the minimum wage is a clumsy and inefficient instrument. Wage subsidies such as the Earned Income Tax Credit certainly have their problems as well, but they are economically less destructive, as are more straightforward measures such as the reduction of payroll taxes, which eat away at the wages of the poor disproportionately.

The main problem facing poor families is not a low minimum wage, but high unemployment. While the president likes to cite poorly understood income figures (which tell us little or nothing about the incomes of actual households at any given economic level, because the people who are in the top 20 percent or bottom 20 percent change from year to year and significantly from decade to decade), he ought to be looking instead at the data concerning household net worth and continuity of employment, which reveal problems connected tangentially at most with statutory wage floors.

In his minimum-wage speech, the president declared: "If you're a progressive and you want to help the middle class and the working poor, you've still got to be concerned about competitiveness and productivity and business confidence that spurs private-sector investment." This we agree with. Unhappily, though, the president has moved in the opposite direction, for instance making part-time workers more attractive than full-time employees through his expensive health-care mandate. And in the one key field in which the president enjoys almost full autonomy from Congress--regulatory reform--he has done nothing at all.

Raising the minimum wage is a symbolic project, the main point of which is to engage in cheap demagoguery when Republicans vote against it, as they will and as they should. There is much the president could be doing to help the working poor, from regulation to school reform, but he does little more than make the occasional misguided speech.

Source Citation

"Unequal to the task." National Review 31 Dec. 2013: 14. Opposing Viewpoints in Context. Web. 19 Dec. 2015.

Internal Citation

(“Unequal”)

Minimal Wages

Commonweal, January 10, 2014

In a recent speech on economic inequality, President Barack Obama drove home his argument for raising the national minimum age with a quotation: "They who feed, clothe, and lodge the whole body of the people should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed, and lodged." Karl Marx? Franklin Delano Roosevelt? No: Adam Smith, described by the president as the "the father of free-market economics." Not that FDR would have disagreed with Smith. Before helping to establish the nation's first minimum wage in 1938, FDR declared that "no business which depends for existence on paying less than living wages to its workers has any right to continue in this country."

Today many businesses in this country depend, if not for their existence, then for some of their profits on paying less than living wages to their workers. The government keeps many of these workers out of poverty by providing them with tax credits and public assistance--in effect subsidizing their employers by making up for inadequate wages. A full-time worker making the current minimum wage ($7.25 an hour) earns just over $15,000 a year, almost 20 percent below the poverty line for a family of three. If such a family is to be "tolerably well fed and lodged," they will need food stamps and housing subsidies. Many of them, lacking employer-based health insurance, will also qualify for Medicaid. From time to time, a big company will unwittingly acknowledge that many of its own workers don't make enough to meet basic needs. A Walmart in Canton, Ohio, was recently embarrassed by reports that it had organized a Thanksgiving food drive for its "associates."

It wasn't always this way. In 1968 the minimum wage was $10.65 an hour in today's dollars. If it had kept up with inflation and gains in labor productivity since then, it would now be $25 an hour. No one in Washington supports raising the national minimum wage that high, but Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) have introduced legislation that would raise it to $10.10 and index it to future increases in the cost of living--mak-ing the minimum wage not only more fair, but also more predictable and less subject to political exploitation. The Economic Policy Institute estimates that such legislation would affect 30 million American workers.

Contrary to popular misconceptions nourished by some in the media, most of the low-wage workers who would benefit from a higher minimum wage are not teenagers earning a little pocket money and learning some basic job skills. More than 90 percent of them are adults and almost a third are parents. The federal government spends around $7 billion a year on public assistance just for the families of fast-food workers. If conservative lawmakers are serious about streamlining entitlement programs and promoting self-reliance, they should be lining up behind proposals to raise the minimum wage.

So why aren't they? It isn't for lack of public support. A large majority of voters from both parties are in favor of raising the minimum wage. Whatever their opinions about welfare, most Americans agree with Adam Smith that those who work for a living should actually make one. Opponents of a higher minimum wage say it will only hurt the poor by reducing the number of jobs: when labor costs are higher, they warn, employers will hire fewer workers. This argument has a certain intuitive force, but several recent studies suggest that modest minimum-wage increases have no significant effect on employment levels. Lobbyists for retailers and fast-food restaurants also argue that higher wages will drive up business costs, which will be passed along to consumers as higher prices. But research suggests that a $10.10 minimum wage would add only a few pennies to the price of a hamburger. The lobbyists don't mention that the big corporations they represent could also absorb some of the higher labor costs by accepting lower profit margins. Some of what a McDonald's franchise owner pays in higher wages, for example, ought to come out of the fee he has to pay to the McDonald's Corporation, which made $5.5 billion in profit in 2012.

A higher minimum wage would be good for the nation's economy. It would stimulate demand by giving low-wage workers more spending power. It would save Washington and the states billions of dollars on entitlement programs by reducing poverty. But the argument for raising the minimum wage is as much moral as economic; it is an argument about fairness and the dignity of labor. No one who works full time in the richest country in the world should need to supplement her income with handouts, public or private. Or as the president put it in his speech, "If you work hard, you should make a decent living." Adam Smith couldn't have said it better.

Source Citation

"Minimal Wages." Commonweal 141.1 (2014): 5. Opposing Viewpoints in Context. Web. 19 Dec. 2015.

Internal Citation

(“Minimal”)