IT HAS become ubiquitous:"$10.72! $10.72!" We've heard it shouted and repeated on the Lawn the past few weeks and seen it plastered around Grounds on flyers and in chalk. What exactly does this figure represent? It represents a vehement demand for a so-called living wage based on several assumptions that stem from an entitlement mentality. Instead, we should evaluate different options for expending our University's finite resources and carefully examine the consequences of each -- both positive and negative -- to all parties involved.
First, we must strip away some of these claims to privileges that the living wage movement holds. Fundamentally, an employer doesn't have the inherent responsibility to provide a minimum threshold income to its workers. Individuals do not have the inalienable right to earn a certain salary that allows them to live in a certain area at a certain standard of living and raise a family of four.
The Living Wage Campaign's report, released Feb. 21, 2006, states, "The University's success is still built on the backs of people who are paid less than their dedicated labor is worth." But who determines what someone's labor is worth? The Living Wage Campaign uses a standard to determine wages that isn't equivalent to the actual value of an individual's services -- markets determine that.
Aside from the federal $5.15 per hour minimum and minimums set by some localities for government employees, employers are not obligated to pay a particular wage, although almost all pay above this for market-based reasons. This free-market system balances supply and demand, as well as wages and profits, and it places the power to check business not in the hands of the government but in the control of the consumer and the worker.
We live in a society with relatively unrestrictive physical mobility. People can switch jobs if they are not satisfied with their current employer. The University competes with other businesses for employees, and if employees earning below $10.72 are discontent, they can search for a similar job with more desirable wages and benefits. If many employees were finding a better offer, the University would have to offer more attractive salaries in order to retain employees, but it is quite the opposite. Since 2003, the turnover rate has been eight to 10 percent at the University, which is low compared to the industry standard rate (between 17.4 percent and 19.8 percent). Living wage advocates argue that turnover rate is costly to businesses (which is why many service industries pay above minimum wage), but there comes a point of diminishing marginal return when reducing a low turnover even further yields greater costs than benefits.
The living wage position also presumes that people have an implicit right to live in the town that they work in. Many people work in major cities and commute long distances via car or mass transit because it is less expensive to live in suburban or even rural areas. Many of us have parents who travel one or even two hours each way to work a 12 or 14-hour day, and many of us will be in this boat in the next few years.
Some will counter that the cost of living is uniquely high in Charlottesville due to the University's presence. This is true; the University and the students create demand, and thus businesses, restaurants and strip malls open up shop. However, to say that the University is to blame for the high cost of living for and therefore it should ensure that all of its employees only have a 10 or 20-minute commute is ridiculous. Charlottesville would not be the economic powerhouse that it is if the University were in another town. The University provides jobs, economic growth, tourism and a voracious consumer demand.
If the University were to implement such a mandated wage, we should deliberate over some possible implications. When wages are artificially set above or below market equilibrium, there will inevitably be effects. Economics Prof. Ken Elzinga wrote in an e-mail, "If UVA wants to pay more money than need be to purchase some input, whether labor, capital equipment, fuel, or material, it is free to do so. But... it should be aware of the probable consequences, both direct (a higher cost providing education) and indirect (a reduction in the employment of that input)." There is a debate over the extent of the reduction in employment, but finite resources that could be devoted elsewhere would be diverted to the artificial wage. The monetary costs -- an additional $2,806 per employee currently earning the new rate of $9.37 per year, as well as the opportunity costs are real -- and we often neglect these in our crusades for a "human right," as the Living Wage Campaign Report labels it. The money for the artificial wage takes away funds that could be used to build more on-campus housing to relieve the strain students put on the local housing market, or to support student volunteerism programs that help local residents and their children. As Elzinga noted, "My hunch is that students at UVA who tutor through Madison House or the Abundant Life Center in the long-run do more to improve living wages than living wage campaigns."
We must look beyond the emotional rhetoric at all the real costs and benefits of an artificial wage and then proceed, with an informed and coolheaded frame of mind.
Whitney Blake's column appears Thursdays in The Cavalier Daily. She can be reached atwblake@cavalierdaily.com.
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