LEADERS of the Living Wage Campaign at the University should recognize that artificially high wages are not a viable solution to the problem they perceive: That the lowest-paid University employees do not earn enough to live comfortably. Campaign leaders would do better to advocate a decrease in the minimum wage paid to the University's workers.
The term "living wage" is a misnomer. It implies that a worker must earn significantly more than the minimum wage in order to live comfortably and that setting the cost of labor artificially high results in a benefit to society.
But living wage policies, by their very nature, exclude the least competent workers from the labor market. This is hardly any help to those on the bottom rung of the socioeconomic ladder. Living wage activists often argue that increasing workers' pay is better for a company in the long run. The argument goes something like this: Giving workers a higher wage motivates them and increases their productivity. Companies ultimately save money, because they experience less employee turnover and consequently invest fewer resources in the hiring and training process.
It is true that companies often use pay raises to motivate their employees and improve retention. In the case of minimum-wage workers, however, employers typically have no economic incentive to increase pay above market rates. Minimum-wage jobs are those that require little skill beyond showing up to work on time and remaining on-task. Therefore, employers can replace low-wage earners quite easily and at little cost to themselves.
Living wage activists also reject the idea that artificially high wages decrease the number of jobs available to the least competent workers. They point to what they believe is a simple lack of evidence: Unemployment did not rise after the federal minimum wage was increased from $4.75 to $5.15 in 1996.
Presenting this information as evidence is misleading. A 40-cent wage hike in the mid-1990s cannot be compared directly to a "living wage" that represents an increase of at least $3 over the current minimum wage.
Furthermore, a net increase in jobs following a wage hike does not mean no jobs were lost. It simply indicates that the number of jobs lost was less than the number of new jobs created because of an expanding economy.
The University currently pays its direct employees at least $8.19 per hour, while contracted employees are paid at a rate determined by their respective companies. The goal of the Living Wage Campaign is for all University employees -- contracted or not -- to earn a yet-to-be calculated wage to keep employees above the current poverty line plus benefits.
The University's contracted employees are the least likely to be awarded a living wage. Most state and local political observers correctly agree the University cannot legally force its contractors to pay employees anything above the current minimum wage.
Leaders of the Living Wage Campaign should consider the effect of raising the current minimum by another 46 cents. The pay hike represents another financial burden the University must shoulder: The same amount of minimum-wage labor now costs the University 5.6 percent more. The University can swallow the cost, pass on the cost to students or decrease the number of minimum-wage jobs by 5.6 percent. None of these options are particularly attractive, especially considering the current economic climate.
Likewise, the University could increase labor efficiency by decreasing the living wage by 46 cents. The University would be able to hire 5.6 percent more minimum-wage workers at the same cost of labor. This simple analysis ignores the detrimental effect of high minimum wages on the rest of the labor market. The cost of labor increases across the board -- not just at the lowest extreme -- leading to fewer available jobs.
Living wage policies are appealing because their advocates draw an overly simplified, feel-good picture: Living wages enable working families to live above the poverty line. For example, the Living Wage Campaign at the University has calculated that each parent in a family four needs to earn $8.65 per hour full-time for that family to live above the poverty line.
This calculation assumes that most minimum-wage earners are married, have two children and are working 40 hours each week, which doesn't take into account the wide variety of family types. It also assumes that living at or below the poverty line is intolerable, and that earning less than $8.65 per hour is somehow undignified.
The University's lowest-paid workers should be more indignant at the suggestion that they are earning an inadequate amount of money. An hourly wage of $8.19 is hardly a mean pittance and already deprives some of the least competent workers of job opportunities. The University community would benefit from a decrease in the living wage, not an increase.
(Sam Bresnahan's column usually appears Tuesdays in The Cavalier Daily. He can be reached at sbresnahan@cavalierdaily.com.)
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