IMAGINE a single mother working long hours each week at a university, trying to feed her family but making only the minimum wage. Exploited by greedy administration officials with annual salaries in the hundreds of thousands, she expends every ounce of energy in her body just to make ends meet. According to a workshop at the University last Tuesday led by the Georgetown Living Wage Action Coalition, this is the situation faced by workers at many universities, including our own. This situation ought not to occur, they say; all University employees should make enough money to support their family and have a decent standard of living. To rectify this injustice, they say, the University ought to institute a living wage.
The living wage activists present at the workshop are advocating that all University workers, including those working for contracted firms, be paid a minimum of $10.72 per hour. According to the Economic Policy Institute, this figure signifies the minimum wage "a full-time worker would need to earn to support a family above the federal poverty line" in Charlottesville. The current University pay rate, those activists say, is set too low. The poor are suffering, and the living wage will give them enough money to survive.
The idea certainly holds much emotional appeal. After all, not many people would identify themselves as pro-poverty. But good intentions do not always lead to good results, and the living wage is one plan whose consequences would be harmful to the people it is intended to help.
The most effective argument put forth by supporters for the living wage is that it will help low-income families. However, they either do not understand or choose to ignore the fact that most workers whose salaries would be raised under a living wage do not have to support families. Economists Burt Barnow and Mark Turner, of Georgetown and Johns Hopkins, respectively, estimate that only twelve percent of the families who would be affected by the living wage are below the poverty line. The rest are people who hold low-income jobs, but are not the primary supporters of a family. According to the Bureau of Labor Statistics, about 51 percent of minimum wage earners are younger than twenty five, and 62 percent have never been married. They are intended to be entry-level jobs, not permanent positions. The living wage, however, is calculated with the specific purpose that it will be able to support a family. So the living wage would be paying the amount needed to support children and a spouse to many young, single adults. And there are other consequences of the miminum wage that would harm the poor, as well.
Anyone who has held a job knows that employers want to get their money's worth out of their employees. The more an employee is paid, the more productive he or she is expected to be. Some call it greed, others call it efficiency; either way, it is reality. If the pay of contract workers is artificially increased, as the living wage would do, their productivity will also be expected to increase. This could mean that breaks are eliminated or workers are expected to work faster. Even worse for low-skilled workers is the likelihood that the positions they seek will be filled by highly-skilled workers. At $10.72 per hour, these jobs will be appealing to many searching for employment. The University and its contractors naturally want to hire the employees available, so these highly-skilled workers attracted by higher wages will be the first hired. Finding jobs will become significantly harder for the lowest skilled workers, such as high school dropouts, immigrants and the working poor.
This prediction is confirmed by a study of the effects of the living wage instituted in Santa Fe, N.M. University of Kentucky economist Alan Yelowitz found that a living wage of $8.50 per hour caused an increase in the unemployment rate of 3.2 percent. Almost all of this increase in unemployment was for workers with twelve or fewer years of education, the very same people living wage proponents wanted to help. On the other hand, 65 percent more employees with thirteen or more years of education were hired for living wage level jobs. The living wage left the least educated workers unemployed, and helped the highly educated make more money.
The root of the problem with the living wage campaign is that it goes against all economic reasoning. In a market economy, workers are paid according to their skills and productivity. Instead, the living wage attempts to force employers to pay employees based on their need. The vast majority of economists agree that programs such as job training and the Earned Income Tax Credit accomplish the goals of the living wage without its harmful effects. Helping out the poor is an admirable motivation, but the living wage is not the way to go about it.
Stephen Parsley's column appears Fridays in The Cavalier Daily. He can be reached at sparsley@cavalierdaily.com.
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