TOO MANY people are quick to dismiss the Living Wage Campaign with the simplistic, ECON 201 argument: An increase in the wage will lead to a decrease in quantity of labor demanded. The prevalence of this argument is due in part to the "living wage" supporters' pathetic response. They argue in both their pamphlet and Web site that increasing the minimum wage to $10.72 per hour will not cause unemployment.
However, both supporters and detractors of the "living wage" seem to miss the fact that the University of Virginia is a state-sponsored institution. Therefore, it does not have to follow the rules -- in this case, the law of demand. The University can increase its wages without firing any employees, but this will have other, more subtle costs. For failing to fully think this through, the Living Wage Campaign is completely irresponsible. But for unilaterally imposing this wage increase and the costs it entails, they are downright morally wrong.
As economists are fond of saying, "there is no such thing as a free lunch." In this case, the University cannot increase its wages while maintaining the same number of workers without imposing some sort of costs. There are three ways the University can pay for the "living wage." First is by diverting funds earmarked for other things. Second is by increasing tuition. Third is by asking the Virginia General Assembly to pay for it. Every one of these methods imposes costs on people who were never even given the opportunity to register an opinion on the "living wage" -- a few dozen students decided to coerce it upon them.
The first way the University can pay for a wage increase is by taking funds it uses for other things -- the Living Wage Campaign would like to take the money from the University's endowment.
The problem with this is twofold. First is the idea of opportunity cost. Every penny that would be spent on this wage increase is not being spent on something else. The money from the endowment could be going towards professors' salaries, maintaining Grounds or being invested in the future so that the University can continue to attract top professors, researchers and students. Furthermore, if the Living Wage Campaign successfully takes some of the endowment for its special cause, why couldn't every interest group just sit in Madison Hall until they got their fair share of the endowment? The Board of Visitors spends hours pouring over budgets, taking the totality of the University, including its future, into account; a handful of students should not be so quick to second-guess it.
An increase in the minimum wage paid to employees from $9.37 to $10.72 could also easily be financed by a slight increase in tuition. Why don't the living wage campaigners advocate raising tuition to help, in their view, the needy? The answer is because then they would have to pay for it. Advocates of the living wage are quick to pay for their scheme in ways that are not easily apparent and that largely affect future University students who have no way of registering their opinion. But, when the costs are immediate, apparent, and affect them, living wage campaigners shy away.
The third way the University can afford to increase its wages, more money from the General Assembly, has not even been tried. If the living wage campaigners wanted to, they could travel to Richmond and lobby the General Assembly. In fact, the General Assembly has a number of methods at its disposal to raise the money: It can take the money from other projects, increase taxes or issue state bonds. However, diverting money runs into the same opportunity cost problem as taking from the University's endowment, raising taxes is both unpopular and introduces a plethora of inefficiencies into Virginia's economy while making it less business-friendly, and issuing bonds both crowds out investment and weakens the state government's financial standing.
But, these are not the reasons why the living wage campaigners have eschewed lobbying the General Assembly; it is because petitioning the government is a democratic process. The workers of the University have not shown their solidarity with the movement, there has been no outpouring of support among students, and it is highly doubtful that the citizens of Virginia would tolerate all the aforementioned costs to have better paid janitors at the University. As such, the Living Wage Campaign has decided that they know what is best for people better than they themselves do. This is arrogant paternalism in the extreme. I for one have faith in people, and if they choose to work, then that is their choice -- whether because of the wage, the job security, or whatever I leave that up to them. A handful of students think they can bully the administration into accepting what they have decided is best; I just hope no one listens.
Josh Levy's column appears Fridays in The Cavalier Daily. He can be reached at jlevy@cavalierdaily.com.
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