Slog readers responded with great gusto to my query earlier today: “Why doesn’t Seattle have a living wage ordinance?”
I’d like to expand upon my original post, and address some reader concerns. The type of living wage ordinance I have in mind is relatively small scale, requiring business with city contracts to pay their workers above the poverty line, with health benefits possibly thrown in. This would chiefly affect service workers, as most (presumably all) white collar city employees earn well above that. The real impact of such a law would be relatively minor: Baltimore’s living wage ordinance only affected 1,500 workers. (Bellingham has a living wage law of this nature, Washington’s first, which was enacted in 2002.)
Many of the articulate anti-wage law commentators feared that a living wage ordinance would either A) Drive jobs out of the city or B) cause businesses to cut down on the number of employees. Both are understandable fears and I have responses for both.
A) It should be clear from the above that the small-scale ordinance I’m talking about wouldn’t scare companies out of the city, in large part because the businesses in question can’t move and still efficiently hold their city contracts.
B) The standard conservative argument against the living wage movement and it was shared by many economists back in the mid-90s. But since then extensive research has shown resultant job loss (from moving outside the city or from simple layoffs) is minimal to nonexistent. Business simply trim their profit margin and get a much happier and more productive workforce. This has proved true everywhere from Baltimore to LA.
For more check out this 2000 article in Businessweek, of all places, which gives a summary of the research. For a lengthy analysis, check out the classic The Living Wage: Building A Fair Economy, by Robert Pollin and Stephanie Luce (its got graphs and charts and everything).
Also, a living wage ordinance on top of the highest state minimum wage in the nation wouldn’t be redundant. City-wide laws can more precisely target the living cost of living. They can include money for health benefits, as LA’s living wage ordinance does. Such laws also set standards within a city, often impacting business beyond those legally required to participate, and giving demonstrable proof that a city cares about its low-income citizens.
There’s no easy answer to this question but I’ll give it a go. Our politicians use a lot of the con arguements used in this thread (the biggest being business will leave the city.). Our interest groups that would normally put this on the ballot are instead blocking Eyman initaitives, attacks on workers comp and attacks on good family-wage jobs (like at the liquor stores…ahem Stranger).
Minimum wage jobs are generally in the service industries, right – janitors, fast-food workers, gas station attendants, etc. How can those jobs move out of the city, if we still need to have our offices cleaned, our french fries bagged, or our gas stations manned?
Santa Fe enacted a living wage law in 2003 and it has worked with excellent success. All of your fears are unfounded.
I told you before, the busybodies in the rest of the state won’t let you do that.
Trust me on this one.
San Francisco has it’s own minimum wage in addition to a living wage and businesses are still thriving there. I think there it’s around $10 per hour, and businesses also have to make health care expenses of about $2 per hour if they have more than 20 employees
Back in the late 80’s I had a summer job with a tear off crew for a roofing company (non-union, natch). It was dirty dangerous work that paid $5.50 an hour, unless we were on a state job and we were paid the “prevailing wage” of $17.50 an hour. You can bet I loved those rare state jobs. But now that I’m a taxpayer, I question why we should pay three times the market rate for unskilled stoop labor.
You think tax payers are edgy now, they’ll go ballistic if they have to pay a janitor more than the market rate. Put the resources into education. You can’t prop up the value of unskilled labor–there’s too much competition. Invest in creating skilled workers and everybody will benefit much more.
Have you done any analysis to see if there are ANY businesses that contract with the city that pay anyone less than a livable wage, whatever that might be? A law that affects no one is a waste of time.
$10 an hour in San Francisco, one of the most expensive places in the world to live, is less in real terms than $8.55 in Seattle (Washington State’s minimum wage). SF rents are unbelievable; people pay $1500 for shitty studios on dangerous streets. Seattle is merely expensive, cheap in comparison.
@6 No matter how much we educate our work force, we still need janitors, and those janitors need to be able to afford to live near the buildings they are hired to clean.
Raising the minimum wage to a living wage will lead to job gentrification and increased unemployment. Simple college economics.
Is the worry that the owners of the contracting companies are not paying their employees a fair wage or that the city is just going with low bids that can’t possibly support cost of living?
In either case, couldn’t this be accomplished without a new law? Seems like the city could just specify the hourly wage in the contract. Contract law can handle it if a company is found to have violated it.
@6 – You were a taxpayer then, too, and were perfectly happy to receive a benefit of working in a union environment for your summer job. But now that you don’t have that option, you think it’s wrong to have controls in place to ensure fair wages for people who do that work for their livelihoods. Really?
@11 you realize that 17.50/hr in today’s dollars is something like 65k/year (over $30/hr). I’m sorry dear, but paying roofers the same as entry-level tech jobs isn’t “fair” it’s highway robbery for the people footing the bill (us).
Why do janitors need to live close to the buildings they clean? I work downtown, but I don’t “need” to live downtown or the surrounding neighborhoods.
@11: I think @6 is just saying that he’s (or she) has realized what a great job that was and is thankful for it, but in retrospect realized it didn’t make a lot of sense. He wasn’t in a union, just receiving state wages for govt. jobs.
If they pay living wages, then everyone will want one! If you don’t like your slave wages, then you can always go be homeless! My boss should be able to keep as much of my paycheck as he sees fit. I’m just glad to have a job where I can work 12 hours a day, seven days a week for an asshole! It’s called capitalism and if you’re not happy making slave wages, you must be some kind of communist! At least that’s what Democrats told me.
Go ahead, ask for higher wages, there’s always a crowd of guys hanging out at Home Depot who’ll work twice as hard for half the money.
Typical lefty author who has probably never run a business or worked in a management capacity his entire life. I work as a recruiter in the hospitality industry, and every year the minimum wage goes up, we have to do more with less – and that means only hiring the absolute best workers with the strongest background and highest level of productivity.
Our budgets have simply become too tight to take a chance on the underprivileged, undereducated, or inexperienced – so instead of helping these folks earn more, they actually earn less due to the MW because we cannot give them a job at all.
@17. You nailed it. Thanks. You should register so that all folks can see your comments (some people filter out comments from unregistered users). Did anyone else notice that the Newsweek article and book are both from 2000? The article below gives an example of what happens when businesses are forced to pay above the market rate. Anytime you mess with the laws of supply and demand, you get deadweight loss and unintended consequences. With a living wage law, you will see more automation and even fewer jobs for unskilled workers because you are forcing firms to pay above the market price for labor. Okay, that said, if you confine these rules to firms that take government contracts, then I suppose one can argue that as a society we should mandate that our tax dollars go to firms that pay workers a higher wage as part of the social contract. That is, we pay taxes for government services and so we decide that we want to pay low-skilled workers more than the market rate to carry out the business of the state or city. Companies that take government contracts probably get a pretty good deal–better than they can get from other businesses. So maybe it’s a reasonable trade-off. But the fact is that if you mandate a higher wage, you will get fewer low-skilled jobs. You just can’t get around these economic laws. They are more fundamental than any state or city laws. Jake, you are no Charles but like him you might want to enroll in a couple of basic economics courses. You can make better arguments from a position of more knowledge.
http://www.citybeat.com/cincinnati/artic…
@18 Interesting link, although one mini-article doesn’t make your argument. (Also, there were may have been other factors at work there–the only one making the causal link between the living wage law and the layoffs was the employer who didn’t exactly sound like the scrupulously honest type.) Most studies I have read show that small-scale living wage laws have little or no impact on employment. The studies I cite covered hundreds of businesses in dozens of cities, not one shady employer in Cincinnati. Yes, the book and the article were written around 2000, the peak of media interest in the movement. If you’d like more recent books and studies that made the same conclusions see this 2006 study from the Economic Policy Institute:
http://www.epi.org/publications/entry/bp…
And this 2008 book on the subject:
http://www.cornellpress.cornell.edu/cup_…
Because I am arguing for a law that would only cover those companies doing business with the city, the law wouldn’t have the private sector impact that you fear. (Automated janitors and lunchroom servers seem unlikely.) Still the impact on the private sector probably wouldn’t be as dire as you fear. These same arguments have repeatedly been made against the minimum wage and living wage laws, but the mass layoffs haven’t followed any of them.
Also, it isn’t that I need to take “basic economic courses”. We just obviously come from very different schools of thought. Your Chicago School is not objectively correct either, as recent events have proven.
#17/#18: So, we should lower the minimum wage, cut health benefits, and cut workplace safety requirements so that we can get more jobs? That seems to be your argument.
It’s not an economics argument, it’s a morality argument. Should we have (maybe) fewer jobs that pay a living wage, or (maybe) more jobs that don’t pay a living wage so those people have to turn to crime, unpaid debts, and living in slum-like conditions to get by?
If you agree that people should get paid a living wage, the only question is about what that living wage should be. If you’re against changing the living wage, you’re arguing that things are exactly perfect as they are right now, which is ridiculous.
simple economics, pay 9 people $10hr, or pay 10 people $9hr and there is your ten percent unemployment.
@19 I agree that one anecdote about a firm laying off workers is not enough to make an argument, but one does also need to question the objectivity of a paper published by an organization like the EPI. That said, I read through this and it is interesting. One idea that struck me was that by setting high wages, a city could put up an entry barrier that encourages better firms to participate: “These firms felt that the new policy had made it possible for “scrupulous” companies paying decent wages to compete against firms whose main strategy is to drive down wages. Elmore’s survey indicates that following adoption of a living wage, some cities instituted competitive bidding for contracts that had not been put out for bid in many years. These cities report that the return to bidding led to cost savings.”
You are correct that I subscribe to the Chicago school (having gotten my MBA there). Nothing, however, that has happened recently in the economy invalidates the fundamental economics that are emphasized at Chicago. Could living wage laws have enough unexpected positive effects to offset the negative effects? Possibly, and if more cities experiment with such laws and evidence mounts that they do little harm and more good, then I would expect good economists everywhere to jump on board. Until then, an attitude of skepticism is appropriate.
@20 The free-market is efficient but not equitable. For that reason, I believe that we should have a single-payer system for heath care in this country. No children should go without healthcare in our wealthy society. It is not morally acceptable to have winners and losers in that sector of our economy. And I am no expert but I suspect that uncoupling healthcare with employment would be in everyone’s best interest. Capitalism is far from perfect but it is the best-known system for distributing goods and services. But if we decide to tinker with the market, as is the case with laws about wages, we have to know what we are doing and be willing to accept the trade-offs. There are always trade-offs.
@21, You can’t simplify the statement that much and expect it to ring true. If an employer needs 10 employees to operate 10 tractors, he can’t just fire a worker and still get his work done. More likely, the people at the top make a slightly less margin of profit. Considering our levels of inequality in the nation, I think they’d be fine.
Jake, enjoyed the post – keep them up.
@22 Agreed. That is a particularly interesting side effect of living wage laws. Re: Giving “scrupulous” employers a chance against those who save money by lowballing their employees–which happens all the time in Chicago, thanks Daley–while saving the tax payers money for which they receive lower quality goods and services. (Which isn’t to talk trash about your school, the city of Chicago, or your moniker, just Richard M. Daley, who I don’t think too highly of.)
The only part of your response I take issue with is this:
“…if more cities experiment with such laws and evidence mounts that they do little harm and more good, then I would expect good economists everywhere to jump on board. Until then, an attitude of skepticism is appropriate.”
Plenty of cities have experimented with small-scale living wage laws. As the Businessweek article I linked to above states, mainstream economists were skeptical of these initiatives in the mid-1990s, but by 2000 most of them agreed that they do far more good than harm. Skepticism hour is up, with the exception of people at the other EPI (Employment Policies Institute) who seem to believe that the early capitalists had the right idea when it came to the poor. (Work ’em ’till they drop.)
Your point certainly would hold true for wider living wage laws though (which might, say, require all businesses within a city limit to pay a living wage). Again, while I find that idea appealing, I think it would need to be approached skeptically, and carefully, before I would advocate it.