The Living Wage Hoax

All across the country, unions and liberal activists are promoting a scheme called the "living wage." The basic idea is that any body doing business with the government must not pay less than a "living wage."

The amount of the wage varies but the target is an hourly wage equivalent to at least the federal poverty level for a family of four. In 1997, that level was determined to be $16,400. That much would require a wage of $8.20 an hour, 60 percent more than the present federal minimum wage. Other living wage proponents contend that it ought to be 125 percent of the federal poverty line for a family of four, or $10.29 per hour. A bill is pending in Congress, H.R. 314, which would set the minimum wage for federal contractors at this level.

In some cities, living wage proponents are demanding even more. In 1998, San Jose, California established a living wage of $10.75 per hour. A proposal is being considered in San Francisco to set the living wage at $14.50.

There's no end to how far the "living wage" idea can go. A 1998 study by the National Priorities Project and Jobs With Justice found that a living wage for a family of four was $32,183 a year. That's $16.09 an hour.

The political muscle behind the living wage is coming almost entirely from labor unions and from so-called "community organizations" heavily dependent on support from unions.

Union support for living wage ordinances is a thinly disguised, cynical attempt to put low wage earners at a disadvantage. One of the biggest threats to public sector union power is privatizing - contracting-out for the provision of public services.

Privatizing efforts, where they are successful, move jobs from the public payroll to the private sector. According to the latest figures from the Bureau of Labor Statistics, public employment is 37.5 percent unionized while only 9.4 percent of all private sector employees are union members. On the surface, it would seem that moving 100 jobs from the public sector to the private sector would reduce the number of dues paying union members by 28 but for the unions, the figures are perhaps even more stark. The types of jobs most likely to be unionized in the public sector are the very jobs that are least likely to be unionized in the private sector. So, when it comes to collecting union dues, privatizing is virtually an all or nothing situation for unions.

Decisions on privatizing are usually made on the basis of a cost comparison. When such a comparison shows that it is less expensive to have the service performed by the private sector, the work is contracted out. This is a very likely out come. Many who have studied the issue refer to privatizing as "better government at half the price."

Living wage proposals, by forcing contractors to pay a super minimum wage, make it more difficult for the private sector to compete. This is the real purpose of such ordinances, to keep the jobs and the union dues derived from them in the public sector.

Beyond this rather fundamental concern there are other issues which deserve consideration when discussing "living wage" proposals.

  • How many workers will be affected by implementation of a "living wage?"
  • Would employers choose to hire different employees if they were required to pay a "living wage?"
  • Would a "living wage" encourage contractors to demand increased productivity from workers so that they could change jobs from full-time to part-time status?
  • Would employers choose to use labor saving equipment to compensate for the cost of paying a "living wage?"
  • What recourse is available to those who lose their jobs due to adoption of a "living wage?"
  • Would a "living wage" make it harder for people to move off welfare into the work force?
  • What will be the total costs of such a "living wage?"
  • Would the additional cost of "living wage" force government agencies to reduce the level of services provided?

Much of the information supporting "living wage" proposals comes from a 1996 study of "Baltimore's Living Wage Law" by the Preamble Center for Public Policy. In October 1998, the Employment Policy Institute (EPI) published a rebuttal of this study charging that it was based on altered data and invented information and calling it a blatant attempt to deceive the media and the public. The complete text of "The Baltimore Living Wage Study: Omissions, Fabrications and Flaws" is available on EPI's web site at www.epionline.org.

Editorial, San Francisco Examiner
March 15, 1999
Wages of Sin

[The] proposal to provide workers with a "living wage" is a wolf in sheep's clothing and an expensive beast at that.

FIRST OFF, there's the name: the "living wage" proposal. Now that's a Trojan horse if we ever saw one. Wouldn't it be more honest to call it "the scheme to suck taxpayers' blood?" Now, that would be truth in advertising, until it hurts.

We don't mean to sneer, but the sanctimoniousness, disingenuousness and wrong-headedness of [the] drive for "living wage" legislation drives us up the editorial wall.

What [the] proposal pretends to be is an assured livable income for any employee who works for a firm city government has any sort of financial dealings with. Things are still loosey-goosey but, for the time being, that figure is about $14.50 an hour.

What [the] proposal really does is a whole lot of mischief. For starters, it would cost The City an extra $200 million a year just for salaries of employees covered by agencies holding municipal contracts. That doesn't count the cost for a zillion other outfits that do business with City Hall, or even city workers who earn less than $14.50 an hour.

Such a law would plain put out of business many non-profit groups that couldn't pay. Even with city subsidy for municipal contract work, who would pick up the tab for the non-profits' other employees? Or would they get a magic exemption?

With such a steep wage scale, welfare-to-work might revert to welfare-to-welfare. Entry level jobs? Forget it.

One of the dirty little secrets of [the] legislative gambit is that it's aimed at fighting the non-profits on behalf of city unions. They hate contracting out. And [living wage] is their tool in crushing the move toward increasing "privatization" of services.

We could just be honest about this and hand over The City to the [union] and there wouldn't be the current hypocrisy.

In case we're being too subtle about this, let us emphasize: This push for a "living wage" is total and utter nonsense. If living wage legislation is enacted in San Francisco in its current form, someone is going to have to pay through the nose. And you know who that's going to be. We won't spoil [the] fun secret, but it's spelled T-A-X-P-A-Y-E-R-S.

"Living wage" legislation sounds so fair, so just, so humane, so innocuous. But it's a wolf in sheep's clothing. Or maybe it's a lot of bull. In any case, the beast will devour non-profits and taxpayers alike.