Living Wage

Living Wage

A living wage “is generally considered to require that a person working forty hours a week, with no additional income, should be able to afford housing, food, utilities, transport, health care and a certain amount of recreation.”[1] The purpose of a living wage regulation is to provide equal access to basic necessities of life for those below the poverty line, in an attempt to eliminate working poverty. With the great excess of wealth in our country it might seem odd that a living wage is not in place for the majority of Americans. To attempt to understand this I will briefly present the problems and responses to the problems of a living wage standard.

Problems

Limited effect: Current living wage regulations are limited to a select few cities and their contractors. Thus limiting the effect a living wage has on poverty, both by geographically limiting it to urban areas and by limiting the effect economically by being specific to municipal activities and organs. Thus for a LWR to be of any significant use, it would need to be either statewide or nationwide.

Ineffective: The Employment Policies Institute has conducted research[2] that suggests a living wage regulation is ineffective, by driving out of the job market the very people it’s meant to assist. This is due to an influx of competition (in the study from High School students) who wish to capitalize on the higher wages.

Inflation: A statewide or nation wide LWR could potentially disrupt the economy, causing inflation and possibly causing collapse. With a universally increased consumer buying power, prices might begin a slow rise. With a slow rise in cost, a sensible living wage that is tagged to a Cost of Living Adjustment would also increase, thus increasing more the buying power, and subsequently increasing prices a little more. This could turn quickly into a vicious logarithmic cycle that causes prices to outpace income, returning the targets of a LW back to poverty and bringing a state or nation with them.

Offshore jobs: a company faced with increased labor costs and decreased profits might consider locating production out of nation to return profits to pre-LW rates. This would reduce the overall employment in the economy most likely affecting the least skilled and lowest paid first. This is the very group that a LW is intended to help, but might instead abandon.

Responses to Problems

Limited effect: A statewide or nationwide LW seems most appropriate and desirable, but the movement towards a fair wage must begin somewhere. Cities are currently the easiest place to organize LW standards. Ultimately, cities should begin to pressure state and national government to adopt LW standards.

Ineffective: Increased competition for jobs offering a LW might actually improve the overall pay of lower and mid-echelon employees. With the ability of employees to live by working 40 hours a week in an increased number and selection of jobs, companies will have to lure employees in with new incentives, which can range from rapid advancement to higher starting pay.

Inflation: The increased focus on attracting and maintaining employees might arrest inflation, by increasing corporate costs and reducing corporate spending. Reducing corporate spending would reduce the overall amount of money in the economy, with money going to basic necessities instead of large scale investment.

Offshore jobs: many of the lower paid and least skilled workers are foreign nationals who have emigrated from their countries by necessity due to the overwhelming poverty they experienced in their own countries. A company moving offshore to a foreign country will most likely end up in those countries with high emigration rates to the United States, for the same reasons that the émigrés have left; poverty. A situation of poverty in a country provides a great opportunity for a company to reduce costs and benefit the local economy while offering a living wage in their new country of residence. Thus poverty can be addressed in the countries that have the highest problem. Yes, this will reduce the overall jobs in the United States and yes, we will have to deal with the immediate economic shock on the people and locales whose jobs are lost. But trying to avoid this shock could create even worse problems in the future. And those problems would continue to be international in scope with local patch work solutions, whereas we could make them local problems with international solutions.

A living wage is important to the dignity of a human person and the lack of one needs to be addressed. People deserve the right to live. There are problems with a LW and they will be difficult but these can be dealt with. Passing the issue off to future generations will not help the issue, but make it exponentially worse. If we deal with it now, we permit creative solutions to appear while we can still control the severity of the economic backlash.

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[1] http://en.wikipedia.org/wiki/Living_wage 03/09/2006

[2] http://www.epionline.org/news_detail.cfm?rid=57 03/09/2006