Living Wage Debate

By Geoff Aung, Campus Progress. Posted June 20, 2005.

You've probably heard some of the Right's classic arguments against paying American workers a fair wage before - job loss this or free market that. Campus Progress is cutting through the Right's reductionist sound bites and rebutting their arguments, punch for punch, by dissecting some of the most common living wage criticisms.

Here's a fun fact to get you started: Since 1968, the inflation-adjusted value of the minimum wage has decreased nearly 40% from its $8.49 peak to its current, miserly $5.15. We think that's a bad thing. So do plenty of other people, from campus activists to community organizers, to national campaigners like ACORN (Association of Community Organizations for Reform Now), which is leading the charge to get living wage ordinances passed across the country.

This is a big, nationwide problem. Right now, almost 6% of the workforce earns the minimum wage (which amounts to around $10,000 a year for folks working full-time) while another 6.5% of the work force earn a dollar or less above minimum wage, for a grand total of 15 million Americans working for poverty wages. Living wage ordinances which raise wages to provide enough for full-time workers to support their families above the poverty line only cover the subset of workers who are employed by businesses receiving government contracts or economic development subsidies. Still, living wage ordinances create a bulwark against the ongoing corporate race to the bottom.

And, well, we need that. In the immortal words of comedian Chris Rock: "There are people who would like to get rid of minimum wage. But we have to have it, because if we didn't some people would not get paid money. They would work all week for two loaves of bread and some Spam."

So get involved. Join the fray and arm yourself: Here's (nearly) everything you need to know to get smart on the living wage.

Round 1: Job Loss?

"Employers will not be able to afford to hire as many unskilled workers, and will respond by cutting back services or replacing workers with machinery." - Paul Kersey, The Heritage Foundation.

In Round 1, the Right falls flat on their marquis argument: Job loss does not occur as a result of living wage ordinances. Several studies debunk this idea, including the Economic Policy Institute's (EPI) evaluation of Baltimore's living wage ordinance and the Minimum Wage Study Commission, a congressionally sponsored committee of economists, which found that minimum wage increases in the 1970's caused no significant employment impact on adults (who make up at least 70% of the minimum wage workforce). Chalk one up for the good guys.

Round 2: Small Businesses Go Bust?

"The living wage is a bad idea for North Carolina's future, and small-business owners across North Carolina are thankful our leaders in Raleigh today preserved thousands of jobs." - Gregg Thompson, National Federation of Independent Businesses

Again, the left is in the know (and not in the Right). As the Center for American Progress made clear in a study that came out last year, higher wages do not harm small businesses. In the report "Economic Analysis of Florida Minimum Wage Proposal," the Center actually projects a benefit to small businesses in the form of increased sales--a result of more disposable income in the pockets of shoppers. Moreover, slight price increases (to the tune of 1%) and greater worker productivity can fully cover increases in business costs.

Round 3: Fuzzy Math?

"The minimum wage has gotten so high that it's paying people that are not skilled to do anything.... It's--whatever it is, six and a quarter, seven bucks an hour, an hour, going to be there soon." - Rush Limbaugh

"There aren't families living on the minimum wage anyway; it's a teenage entry level job for 75% of the people earning minimum wage." - Rush Limbaugh

Actually, Rush, the federal minimum wage is $5.15. (A few states have higher minimum wages that trump the federal minimum.) Furthermore, a study by EPI indicated that only 31.8% of workers earning minimum wage are between the ages of 16 and 19. Thanks for the softball, Rush.

Round 4: Bad Business Climate?

"The actual cost of the living wage law may not be very much, but why would a business want to locate in a place where a bunch of left-wing nuts seem to be running the show? "What will be next?" Businessmen have to wonder when deciding where to locate." - Bruce Bartlett, formerly of The Heritage Foundation

Round 4, and the Right is still scoreless. This hallmark argument - that living wage ordinances scare away business - also misses the mark. According to NYU's Brennan Center for Justice, living wage ordinances actually promote "smarter economic development" by focusing businesses on creating higher quality jobs. Further, Brennan Center researcher Andrew J. Elmore found that the most desirable businesses were rarely deterred from locating in localities with living wage laws. Most town officials (and taxpayers, of course) want to attract higher paying jobs anyway, the study says, so it's not like these desirable high-paying employers are going to be turned away by a living wage.

Round 5: Shouldn't Billz Match Skillz?

"The low-wage labor force is, by definition, a labor force lacking some combination of education, training, job experience, and social skills. To raise wages and boost productivity, public policy ought to focus on encouraging low-wage workers to gain skills. Creating and raising a floor wage, divorced from such a consideration, makes the least-skilled workers more indispensable than ever." - Carl F. Horowitz, Cato Institute

Bills should match skills--which is why a living wage makes sense. For the value of their work, minimum wage earners are grossly underpaid. All American workers deserve the dignity of working a 40-hour week and not having to live in poverty. As the Economic Opportunity Institute makes clear, the real value of the minimum wage has decreased by one and a half times since 1968 (taking inflation into account). Simultaneously, over the past 30 years, worker productivity has increased by 40-45%. The fact is, businesses are cutting costs by underpaying their workers, and that's just not cool.

Round 6: Lower wages = Greater Opportunities?

"There is no such thing as a dead-end job. Low-wage jobs provide the poor with an escape route from poverty." - Paul Kersey, The Heritage Foundation

Ah, Heritage - extolling the virtues of low wages. Where to begin? Campus Progress believes higher wages are more likely to free people from poverty than paying them less and less when it comes to real value of wages. As the EPI notes, over 70 localities have enacted living wage legislation, and the benefits are clear. The ordinances aren't just about wages; they also deal with health and vacation benefits, labor relations, and fair hiring practices. And in its analysis of wage proposals in Florida, the Center for American Progress found another advantage to higher wages: "ripple effect" wage increases, or unrequired raises some businesses offer to workers after the higher minimum wage takes effect.

Round 7: The Death of the Free Market?

"So why is there a movement afoot to kill the goose that is laying the golden eggs - to replace our system of market pricing for wages with a socialist ideal of setting wages according to some arbitrary system of value?" - Diana Furchtgott-Roth, American Enterprise Institute

Leave it to the American Enterprise Institute to start tossing around accusations of socialism. Government has played a serious role in regulation and, sometimes, subsidization, of business since the administration of Republican Teddy Roosevelt. Moreover, research shows that a living wage helps both workers and businesses. For example, the Brennan Center's study found that living wage laws have improved economic development in the targeted communities and cost much less to implement than analysts had expected, with contract costs increasing by less than 0.1%. Center for American Progress' analysis of the minimum wage proposal in Florida found unexpected business benefits and no significant net fiscal costs. In the CAP's study, researchers project not only a 3% sales increase for businesses in low-income neighborhoods, but also a net fiscal savings of $3.4 million. So the Right calls that socialism, eh? We'll call it progressive, populist economics at its best.

Geoff Aung, 20, is a sophomore at Columbia University, considering a major in American Studies.

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