Living wages benefit communities
Living-wage studies refutes naysayers

By Lisa Rayner
Tea Party Publisher

Many economists and business people oppose raises in the minimum wage and living wage campaigns. They believe that such ordinances cause economic harm. A number of living wage studies conducted within the last five years by living wage advocates have provided evidence refuting such claims. Here are the basic arguments against living wage laws and the evidence in favor of living wages:

• “Living wage laws induce inflation. Businesses will pass on their increased labor costs in the price of their products and services. The inflated prices will mean that those who gain wage increases due to living wage ordinances will gain no real spending power.” However, the nonprofit Association of Community Organizations for Reform Now National Living Wage Resource Center refutes this claim. ACORN analyses reveal that inflation is largely caused by factors other than wage increases. Raising the wages of low paid workers allow their incomes to keep pace with already occurring price increases.

• “Living wage ordinances drive up the costs of city contracts, leading to a rise in local taxes.” “Baltimore’s Living Wage Law,” a study conducted by the Preamble Center for Public Policy, found that such a scenario has not happened in the six years since Baltimore’s living wage ordinance went into effect. The real cost of city contracts decreased after the ordinance went into effect.

• “Living wage ordinances cause local taxes to rise.” Actually, people who earn less than a living wage already rely on tax-funded public assistance programs offering subsidized food, housing, childcare, medical care and other services. Living wages allow them to be free from such tax-funded subsidies. ACORN found that “a study of the estimated impact of the Los Angeles Living Wage Ordinance study predicts a 50.4 percent reduction in the amount of government subsidies received by affected workers and their families, as well as growth in spending, homeownership, and small business markets in areas of the city where affected workers are concentrated.” 

•  “Higher labor costs will cause businesses affected by such laws to cut jobs.” The Baltimore study determined that this simply has not happened. Some city contractors actually praised the ordinance for “leveling the playing field” by relieving pressure on them to lower labor costs in order to win low-bid contracts.

• “Local living wage ordinances create a ‘hostile business climate,' causing investors and employers to leave the affected areas and business recruitment efforts to fail. ‘Competitive’ wages are necessary in a competitive global economy.” Again, the Baltimore study determined that this prediction has not come to pass. The city reports that in the year after the ordinance went into effect, business investment in the city increased substantially. Furthermore, this line of reasoning would lead to the wages of American workers being lowered to match sweatshop wages in industrializing nations.

•  “Minimum wage earners are really the same people has higher income earners. The two groups are just at different stages in their careers and lives.” A Philadelphia wage study found that 75 percent of minimum wage earners in Philadelphia are over 20 years old and 70 percent are people who grew up in low income families.

• “Low paid workers who want to earn more need to get an education so they can work in more highly paid fields.” This argument conveniently ignores the fact that even if EVERYONE had valuable skills, it would still be necessary for janitorial work, clerical work, farm labor, retail sales work and other low paid positions to be filled by a certain percentage of workers. These jobs are just as important to the economy as any other job. The people who fill them deserve to be paid a living wage for their labor.

•  “Raising the local minimum wage above the federal minimum wage will lead to more people moving to that locality in order to take advantage of the higher wages.” Yes, this one is true to a certain extent. Raising the minimum wage nationally eliminates this problem. However, the same argument holds true for any improvements a city or region makes in order to make that locality a better place to live. It doesn’t make sense to simply allow all good features about a city to fall to the lowest common denominator nationally or globally in order to make people not want to move there. A better strategy is to encourage businesses to hire local people instead of recruiting heavily outside the area. Growth management strategies can also keep down the growth rate. Higher union membership also helps employees to bargain for higher wages. What is really needed is a global living wage agreement so corporations do not continue to move their operations to “sweatshop countries” in order cut their labor costs.

Nonliving wages are already causing considerable harm to the economy. Those who are paid those wages, and their children, must suffer the consequences. The gap between rich and poor has been growing wider for over two decades. The money saved by paying lower income people less has been handed over to those in the highest income brackets – those who profit the most from corporate “efficiency” measures and downsizing, high return investments and high-income tax cuts.

A redistribution of income is needed. Some living wage advocates have suggested the need for a wage cap that would require companies to pay their highest paid workers no more than 10-20 times that of their lowest paid workers.

Another helpful change would be a revenue-neutral tax shift from labor (wage taxes like social security and income taxes) to taxes on pollution and unsustainable consumption of natural resources. Many European countries have embarked on such “green” tax shifts, which will lead to their industries becoming more competitive with ours as the need for full ecological sustainability becomes ever more urgent.

If you value writings like this, please support Flagstaff Tea Party with a tax-deductible donation! Flagstaff Tea Party depends on the generous financial support of people just like you to continue its important work. With your donation of $35 or more, you will become a member of FTP and will be entitled to various benefits, such as discounts on advertising, and delivery of FTP by mail, if you wish. Low-income individuals may become a member for just $20, though at this low rate, delivery by mail is not available. As a member, you will enjoy the satisfaction of knowing that you are supporting a worthwhile endeavor. Without your support, FTP would be just another advertiser-driven rag, with nothing to offer except blandness and business-as-usual rhetoric. We know you wouldn’t want that!