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

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)

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