The Living Wage

Why a Living Wage?

A living wage can be defined as the wage required to keep a family above the poverty line. The main idea behind the living wage concept is to provide workers with a level of income that would allow for an acceptable standard of living. This would include being able to afford food, healthcare, housing, utilities and some degree of recreation.

According to the Association of Community Organizations for Reform Now (ACORN) "Living wages reward hard work and provide enough income for families to live on."

History of the Living Wage

During the Industrial Revolution, workers did not want to live in a wage-labor society. They compared wage labor to slavery. Rather, they were accustomed to a system called independent production in which craftsmen worked for themselves and took apprentices. As a result, during the early nineteenth century, workers hoped to own their own means of production rather than being the paid employees of others. Even workers who felt that wage labor was socially acceptable saw it merely as a temporary step on the road to self-employment.

Critics of the wage system asserted that wages did not provide a 'just return for labor.' They took both producerist and consumerist manners of thinking about labor. The producerist argument believed that the value of what workers created was more than what they earned in wages, and that the remainder was stolen from them. This is akin to the views of Karl Marx. In comparison, consumerists were concerned that wages could be set too low, in a way that would be unable to provide workers with a comfortable lifestyle. Before the Civil War, the producerist argument was supported by the majority of the nation.

Between the Civil War and World War I, businesses rapidly consolidated and were assisted by the government, leaving little alternative to wage labor. Because wage labor was so much more common, workers had much less power to avoid it. Although common citizens realized that there was little alternative to earning a wage, they nonetheless resisted the notion that wages should be fixed and were to be set in stone by employers. By moving from a producerist to a consumerist mentality, workers began to share the belief that wage labor was a liberation from rather than a form of slavery.

Ira Steward – Wage labor societies have no predetermined meaning. People could be either wage slaves or "proud citizen workers earning living wages”. George Gunton – Wages are simply a part of social progress, not a way for those in power to continue the system of slavery.

Consumerist labor leaders had a common theme in their advocacy of wage labor – the idea that wage earners should be earning what they called ‘A Living Wage'. The debate that had formerly compared wages to slavery was ending, while the comparison of poverty to slavery continued. Although there were a variety of arguments put forth, the general consensus was that wages should be enough to give workers relatively the same standard of living as independent proprietorship did before the Civil War.

Samuel Gompers (AFL president) (1898) – The Living Wage should be enough for a normal sized family to live in a rational manner that is self-respecting and maintains physical and mental health.

The individuals advocating the Living Wage countered the wage-slavery metaphor by equating high wages with freedom, independence, and citizenship. Additionally, they used prostitution as a metaphor for low wages. This meant that both prostitutes and low-wage workers were degraded and demoralized, but living wages represented harmony between economic activity and gender roles.

The battle for the living wage has traditionally been fought on the municipal level rather than the state or national level. This is because the monetary and political lobbying businesses can execute carries much less of an advantage on the local, small-scale level. The first victory for the living wage movement occurred in Baltimore in 1994. Starting in 1996, $6.10/hour became the lowest wage firms holding municipal service contracts could pay their workers. The ordinance also specified that the minimum wage would rise to $7.70/hour by 1999, and must afterwards remain consistent in terms of inflation.

Due to the success of the system promoted in Baltimore, multiple other victories were won in the following years. Only three years later, twelve cities including New York, Los Angeles, Boston, Milwaukee, and Portland adopted the living wage system. Current movements include those of Philadelphia and Denver. Although the specifics vary from city to city, the general idea is that private firms wishing to be considered for government contracts must pay their workers more than the national minimum wage.

While increasing to the minimum wage to a level above the poverty line is the driving force behind the living wage philosophy, the movement also is dedicated to maintaining or even improving the wages of all workers, vitalizing the labor movement, and reducing the amount of tax reductions given to business by the government.

(Reference: Pollin and Luce Chapter 2)

What is the cost of a living wage?

Critics believe that Living Wage laws create out-of-market wages, sometimes for less-skilled workers. In return this also raises the amount that highly skilled workers expect to earn. Contractors need to make up for these costs somehow either by laying people off or kicking back the costs to the government and/or consumers. In some cases the wage increases can be simply absorbed by the company, but that is not always the case.

Many economists that are in opposition of a Living Wage ordinance argue that the cost of a living wage will be higher unemployment. They believe, as stated above, that in order to maintain profits, companies must find other ways to absorb the cost of the higher wages that they now must pay. They do so by reducing benefits, increasing unemployment and sometimes by raising prices - which ends up harming the consumer.

Issues

Poverty

Pro

- Minimum wage laws are effective at targeting their intended recipients. This is backed by empiricals studies (Pollin and Luce p. 30)

Con

- Real wages will continue to decrease over time, limiting the effectiveness of a minimum wage.

Employment

Pro

-There is an argument against the living wage campaign asserting that it would increase unemployment and hurt its intended beneficiaries. They would unintentionally price themselves out of the labor market and destroy their own job opportunities. However, Figure 2.2 shows that this argument does not hold. Rather, there is a very slight trend showing the opposite, that unemployment actually decreases correlating with increases to the minimum wage. However, due to the heavy scatter of the data points, it is much safer to simply say that there is no relationship between unemployment and the minimum wage.

-Although there is no relationship between minimum wage rates and unemployment in the overall economy, only 8.9% of Americans are recipients of the minimum wage. The argument is thus made that...

Con

Productivity

Pro

Con

Privatization

Pro

Con