THE SUBJECT of living wage campaigns has gained prominence in many communities (including Charlottesville) during the past five years. Allow me to offer some comments about my observations concerning such campaigns. Please note that these comments represent only my own views, and not those of The Liberty Coalition (to which I serve as advisor) or the Libertarian Party (to which I serve as chairman). In addition, the issue of enacting a "living wage" mandate for contractors and the issue of a pay increase for U.Va. personnel (including those working for contractors) are separable; my views about the former are not connected to my views about the latter.
In my experience, the typical living wage mandate advocate contends that some employees at a given organization are paid wages that are insufficient for those employees to make ends meet. Thus, the organization should pay its employees a living wage. This wage is frequently defined as the yearly salary which allows a full-time worker to support a family of four at the federally defined poverty line. A ballpark estimate of this salary is $18,000.
From what I have seen at the University, employees who, for many years received less than the living wage, usually survived in sufficiently good health to return to their jobs on a daily basis. Thus, the phrase living wage apparently is more a provocative sales tool than an accurate descriptive. It may be easier to rally people to campaign for a living wage than for "raising the minimum wage."
In some cases mandate advocates suggest it is somehow undignified for employees to work for wages below the living wage. As an aside, I consider such suggestions to be based upon an arrogant presumption. It is up to each employee to determine whether working for a given wage is undignified. It strikes me as patronizing for mandate advocates to declare that work for wages below the mandated level is undignified.
Mandating that the organization pay wages above those established on the market may have unpleasant consequences that should be faced honestly. First, to the extent the organization must pay wages higher than necessary to obtain a given amount of services, it means, all things being equal, the organization has less money to fund other activities that may be as important to the mission of the organization.
For example, assume a living wage mandate forces the organization to expend $1 million more each year than would be expended absent the mandate. That $1 million now is unavailable to hire additional workers, provide scholarship assistance to needy students, reduce tuition costs, repair buildings or to be used for many other worthy options. My point is not that these other options should be chosen instead of raising wages of those workers covered under the mandate. Rather, mandate supporters should understand their cause does not enjoy some special moral high ground, and that arguments for a mandate should be based upon careful analysis as opposed to tendentious assertions.
Another issue to consider is that the organization may respond to the mandate and its cost by reducing the number of workers. Thus, as with any mandated minimum wage, those who maintain their jobs may receive a wage increase that would not have occurred absent the mandate. However, those who lose their jobs because their labor has been priced above the value of the services they produced may be considerably worse off than before.
An opinion often advanced by mandate advocates is that mandating a wage increase will help the organization by virtue of increased employee satisfaction and reduced turnover in jobs. It is indeed possible such benefits will occur; judiciously raising salaries to improve employee satisfaction and performance is a widely-used management technique. Determining the likelihood and value of those possible benefits is a matter for careful consideration that recognizes the many conflicting demands upon the organization's resources.
It is difficult before the fact to determine exactly what will occur should a living wage mandate be imposed. If the mandated increase is not substantial, then the bad consequences may be few and relatively painless. However, in such cases one may properly ask whether the mandate achieved its stated purpose. Incidentally, in reviewing some literature (nearly all of which was written by mandate supporters) offered by living wage organizations concerning the consequences of mandates that have been instituted (e.g., Detroit, Baltimore), it struck me that the purported benefits of the mandates were consistently overstated and the costs consistently understated.
It is perfectly appropriate for members of the University community to be concerned about working conditions for others in the community. However, we should not allow assertions of good intentions by mandate advocates to obscure the reality that a wage mandate can have bad consequences, some of which may be borne by those whom the mandate is supposed to benefit. Emotional appeals are not an appropriate substitute for careful analysis informed by economic reality.
(James W. Lark III is a professor of Systems Engineering.)
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