ACCORDING TO LAG, the Labor Action Group and Living Wage Campaign at the University of Virginia, the "simple principle" of living wage activists is to make sure no one who is employed full time at the University is in poverty. There is nothing the least bit simple about their ill-conceived scheme to bring this about. I use the word "ill-conceived" because of the three main misconceptions that make the living wage attractive. The first major misconception is that living below the poverty line in this country is intolerable. The second is that wealth can be created by fiat. The third is nearly peculiar to the University (and stands out as the acme of idiotic economic policy); namely, the idea that tying the living wage to the Consumer Price Index will benefit anyone.
The word poverty has awful connotations. It dredges up images of small African children with distended stomachs, sallow faces and apathy toward the flies crawling all over them. Narrowing the scope of our liberal guilt to our own country, we often imagine the impoverished as toothless West Virginians living in squalid "hollows." Before we go about making fiscal policy with the popular image of American poverty, we should pause and review the definition of poverty and what exactly the impoverished own. According to the Employment Policies Institute, the poverty line is often defined as all households whose income falls below the 20th percentile. But policy is often set by "budget methodology," i.e. declaring that any household that spends more than some set percentage of their income on food and housing is below the poverty line. All objective attempts to define the poverty level in America are subject to tidal waves of criticism from activists and economists.
So although the number of families living in poverty is in dispute, the facts show that -- under both income and budgeting definitions -- most of the impoverished live comfortable lives. According to a study by economist Christopher Sarlo, 53 percent of people below the National Council on Welfare's Low Income Cut Off line own their own car, precisely the same percentage as above the LICO line. When the living wage demonstrators shouted the "Hey, hey John Casteen, can you live on 6.13?" chant to our august University president, he should have replied "Yes, and I can afford cable TV, because the in-kind government subsidies that I receive offset my artificially low nominal income."
There is no doubt whatsoever that a pay increase from $5.15 an hour to $8 an hour is a boon to the individual laborer that receives it. Although it may be easier for one man to live on $8 an hour, it is impossible for the next worker to live on $0 an hour because he was fired. In the absence of real growth, wage increases will undoubtedly increase unemployment. Labor is a commodity, and wage is labor's market price. Here's a simple principle: If supply stays the same, an increase in price results in a decrease in demand. Like it or not, in order to maximize profits firms will cut back their payroll (lowering the quality of their product, of course). To compound this phenomenon, the living wage ordinance will actually increase the labor supply by drawing workers to the area that hope to attain a higher paying job. Substituting fiat determination for market determination of prices completely undermines the capitalist system upon which the American prosperity -- prosperity that gives us the liberty to set a minimum wage to defend against potential abuses of the system -- is founded.
LAG goes further than other living wage campaigns across the country in demanding that the wage be tied to the Consumer Price Index. Social Security and other entitlements are tied to the CPI, but those government spending programs are supplemental incomes that amount to redistribution of consumer spending, not wages paid from corporate revenue that sap capital and stall growth. Tying the wage to a national cost of living index is silly, because local New York City inflation would affect the local Charlottesville living wage. Furthermore, the CPI itself is a poor calculus, primarily because it doesn't account for substitution of inferior goods (like buying Sam's Choice instead of Pepsi). Problems with the CPI alone fail to explain the fallacy of LAG's scheme, for the University itself could decide to undertake the logistically absurd calculation of an accurate local cost of living index. Once calculated, the cost to the local economy would be far greater than the expense of the survey.
Goods and services are exchanged in an open market at a price divided by the minimum price at which a supplier is willing to sell and the maximum price that a consumer is able to buy (maximizing the supplier's profits and the consumer's satisfaction). Without the ability to float freely, higher wages will allow prices to soar, and those soaring prices will force wages higher. This snowball inflation will most gravely affect staples such as bread and milk. Labor is a commodity just like bread and milk, and any time a good is decommodified it puts another nail in the coffin of free market capitalism under which the impoverished of our nation live relatively healthy and fulfilling lives.
(Ali Ahmad is treasurer of the
College Republicans.)
Read More
SHRAUGER: McIntire’s three-year model limits opportunities for first-year students
By Alex Shrauger | 6 hours agoBy pigeonholing students into commerce so early, the University violates its own mission of providing a holistic education that produces students capable of succeeding in a variety of fields.
STUMP: Housing and Residence Life is deaf to students’ need for paper towels
By Ezgi Stump | 10 hours agoThe decisions of HRL neither reflect the preferences of residents nor appear to be made of sound reasoning.
RASHID: Denying compensation to Resident Advisors will leave us behind
By Muhammad Ali Rashid | YesterdayHousing and a meal plan are not payments so much as the bare minimum for RAs to exist at all.
