The supporting arguments used by those who favor a “living wage” appear to be clear and forthright.
In a recent commentary in another local newspaper, the Rev. Garett Dorsey and Jeann Zang provide a clear exposition:
“By paying people a `living wage,' we show respect for them and what they do and we enable them to give something back. The have the income to spend more, local businesses, professionals, school districts and, yes, churches, benefit. We also benefit as a community because people who are able to meet their basic needs by working a 40-hour week have time and energy for their family, their faith community, and civic life.”
Because the debate is essentially one of justice and ethics, it is important to make a few, basic moral assertions.
All Christians should realize the importance of work. And all Christians should seek to work toward justice in wages. No one wants to see the poor stuck in their poverty or those at the bottom of the wage pool being forced to remain where they are. The central issue is how to lift the poor out of their poverty.
Proponents of the ``living wage'' believe they have found the means. If through the use of legislation, the government at one level or another can force employers to pay workers $10 or $12 or even $15 per hour, then the poor would no longer be in poverty.
Unfortunately, the economy and the use of the power of the government are not so simple. For those who want to understand the effects of implementing a ``living wage,'' it is important to have a grasp of this truth:
When the government puts in place a certain public policy, there always is some response that comes from the marketplace. In public policy circles, this is called the “elastic effect.”
For instance, raising the entrance fee to a public park by 5 percent would lead us to conclude on the basis of logic that the park would take in 5 percent more income than it did last year. But this is not necessarily the case because raising the cost may cause 10 percent fewer people to visit the park, resulting in lowered revenue.
The problem with the ``living wage'' as an ``answer'' is that it leads to negative consequences that are equal to or sometimes worse than the problem the policy sought to remedy.
Studies over the past 40 years indicate that even a legally determined minimum wage leads to fewer available jobs. If forced to pay higher wages, employers tend to hire fewer employees. Labor economists, for examples, point out that a 10 percent forced increase in wages will increase unemployment by 1 to 3 percent.
Furthermore, companies that have a ``living wage'' imposed on them may induce companies to move their operations to another location, resulting in a further lose of jobs.
And finally, the extra costs produced by ``living wage'' legislation will not be born by the companies affected. They will, of course, pass along the costs to those who buy their products, which will include the employees who have just had their wages raised, thus making those same wages that much less “livable.”
Who are the people most likely to be effected by the elastic effects? The same poor people that proponents of the ``living wage'' seek to help. Their jobs will be the first ones cut when employers decide cost reductions are necessary to keep the business viable. The entry-level jobs, so needed by low-income people to get them started moving up the economic ladder, are the very ones that will disappear.
A wage which enables people to live above the poverty line is a noble goal, provided that it respects the rights of both employer and employee and is realized within the context of free negotiation. Certainly the employer has a moral obligation to pay a fair wage, but this does not mean that a government edict can accomplish this.
Simply put, wages, like the price of goods and services, are not the capricious decisions of employees; they are the response of those who own businesses to what consumers are saying they value. To disregard this economic law is to invite economic disaster.