Living the living wage


There are many people who are calling for a living wage. I took it upon myself to look into this concept a bit and see how effective or practical this concept would be. There are definitely a lot of upsides to this concept. People are paid enough money to live on and it would equal the plain for many people. But there are also a lot of questions that come to mind. How would this be implemented and what exactly is a living wage? I will try to address these issues in the next couple of paragraphs.

The government is passing a living wage law, it mandates that all companies pay a living wage to their employees. So lets take 40,000 dollars as the base line for all persons in the US to live a normal existence. That would essentially mean that a full time employee who works forty hours would have to paid 40,000 divided by 52 weeks then divided by 40 hours would equal the hourly rate of 19 dollars. This seems pretty doable for most companies to pay to their employees. If the majority of people made this wage they could easily get by in most of the United States.

As we have seen before, with any kind of new government program there are always many questions that one has to ask. What are the unintended consequences of this legislation? Are workers worth this much compensation? Not only would you pay 19 dollars an hour a business will also pay ACA, Medicare, Medicaid and Social security. That would tack on another 5-10 dollars onto what a company has to pay for an employee. To hire someone who works for say Mcdonald would end up costing 25 dollars per hour. So multiply that by 25 by 40 hours a week by 52 weeks in a year that is 52k total. So it tacks on 12000 dollars more to the total compensation. Is some one working a cash register, flipping burgers, bagging groceries, stocking shelves and the list goes on worth 52000? I am not saying that there is no value to these jobs, however would most businesses be willing to pay that amount to their employees?

In looking at articles that deal with the whole concept of a living wage there are essentially 2 opinions on the subject. The first indicates that there really is no drastic effects on poverty, unemployment or economic growth. However most of the persons who talk about this either come at it from an emotional level or they only address it from the government side meaning that the government employees or contractors should be paid more and that this didn’t have an effect on their unemployment. The other side comes at it from the economic effects and state that a living wage largely doesn’t work for many reasons, taxes on companies would go way up because government services would start costing a lot more. Also for companies to make a profit they would have to fire people or cut their hours.

In summary, there are many more things that could be brought into this discussion. One could address things such as is it fair and proper to make these kind of laws? Also what is proper compensation for persons. Some people need 50 thousand to get around; others could live of off 40. Doesn’t the market decide who should get compensated and at what level? Well according to many people, corporations only care about profits and will attempt to cheat all their employees to make a profit there for we need the government to “force” companies to pay a living wage. Whether this is really true is another matter. What do you think about this subject?

Links: http://www.salary.com/increasing-the-minimum-wage-pros-cons/

EPI: http://www.epi.org/publication/bp170/

http://www.ajc.com/news/news/opinion/pro-con-does-raising-the-minimum-wage-help-the-eco/nQKzJ/

Santa Fe’s study on a living wage: http://bber.unm.edu/pubs/SFLWExecutiveSummary.pdf

Independent Womens Forum: http://www.iwf.org/files/ebd37ebfb3d181f351e468b6a5897384.pdfImage

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7 thoughts on “Living the living wage

  1. I think this gets a lot of credence because Card and Krueger wrote one paper (Myth and Measurement: The New Economics of the Minimum Wage) and it attracted a lot of enthusiasm from proponents. Funny, mostly they said it had no discernible effect on employment. Anyway, they got nice cushy jobs because they said the right things. Most economists think the minimum wage is not only nonsense but detrimental to industries and the least productive workers (immigrants, disabled, teenagers, ex-cons, etc). That’s something we were taught in the first course of undergrad. They spent so much time cleaning out the economic garbage that clutter people’s heads.

  2. Only the customer can tell you what a product is worth. We have a competitive free market, where customers can choose to pay the lowest price, So we don’t always know how high a price the customer might be willing to pay for a product.

    There is probably a significant gap between the lowest price, which the customer currently pays, and the highest price a customer might be willing to pay. Between these two prices, you are free to set a minimum wage which can be totally recovered in the price.

    Because a minimum wage applies to all similar competitors (for example, Wendy’s, MacDonald’s, KFC, etc) they would not have to worry about being underpriced by their competitor. All competitors can recovery the added cost of the minimum wage increase by raising their prices — so long as the price does not go above the most that the customer is willing to pay for fast food.

    That’s the economics of the problem.

    Here are the moral issues:

    (1) To sustain the ethics of working, a person must be able to support him/herself by his/her own honest labor. This means that the wages for any job must meet that minimum requirement.

    (2) If a product cannot command a price sufficient to pay someone enough to justify spending 40 hours a week producing it, then the market should be allowed to prune that product, and the worker should instead produce something of more value to the marketplace.

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  5. What do we do with job providers who do abuse their employees with unreasonable demands or insufficient safety standards? Yes, I think public pressure does a lot to make the necessary changes to industry, but does it always do enough at the right time? Those questions always come to my mind in discussions such as this. Powerful people will always have the upper hand. In the case of large industry, who is in the seat of power? And will ethics join those in the seat of power? What are the provisions to prevent corruption and its negative impacts. Ethics: who decides and under what conditions and to what end and by what means? Isn’t that some of what this discussion is about? What should an ethical employer do? How should an ethical employee respond? I know this, there is a lot out “there” that seems wrong but the money flow doesn’t correct it. Why do enlisted personnel in the military make such a pittance of a wage when they receive such great training for such an important occupation? Who decides that wage? What are the powers that can make change to that wage? Mc Donalds essentially controls massive segments of the agriculture industry. The result is mass produced low quality food in general, not just in their restaurants. It also happens to be produced in some highly unethical ways. Mc Donalds has a big wallet and pays big bucks to send a big voice to Washington. Who is in the seat of power? The consumer or the producer? It’s a convoluted world we live in to be sure.

  6. A living wage could never be effectively implemented on a national level, for reasons that anyone who has ever drawn military housing allowances is intimately familiar with; i.e. the cost of living in San Francisco, Seattle, Miami, Boston, New York, San Diego, Los Angeles, or Portland is quite a lot more than it would be for Knoxville, Charlotte, Richmond, Lexington, Cleveland, Jacksonville, Dover, or Norfolk; not to mention the fact that a living wage in, say, Baltimore technically only has to provide you with the lowest rent housing available. So what ends up happening is that a lot of white-collar types are going to have to move into the ghetto. “Yes, I wanted a cubicle job so I could live in a war zone. Thank you, Dunder-Mifflin!” And if you think that will have a positive effect on the ghettos, you’re not paying attention. White collar workers with relatively high pay are not, on the whole, going to live in the ghetto next to people with whom they share nothing in common. That’s just not how people work. So the relatively high-pay types will tend to cluster together, generally in a housing community. They’ve tried the whole “ghetto reclamation” concept in a lot of places. I used to live in one in Miami. It was surreal. And it didn’t work. It was just an ivory tower situated in the wrong part of town (and it was EXPENSIVE! It was way cheaper to live in the part of town where the median income was “Scrooge McDuck.”)

    On a state-by-state level, the issue is more manageable, but you still have some states like Maryland and Massachusetts and New York and Maine where the cost of living varies dramatically based on what part of the state you live in. If you pegged your cost of living in Massachusetts at Boston’s Dorchester Heights or Quincy neighborhoods (and think for a second that corporations won’t lobby to do just that), would people who work in Cape Cod be able to survive? No.

    It seems that a living wage serves only to enforce (note: key component of that word is “force”) an even playing field, which is not fair to people who are already struggling to survive in high-cost areas. I was in line for a job in South San Francisco, which straddles that very fine line between cheap and clean, that would pay $56k/year. Which is a pauper’s salary in that part of the country. If you made the living wage $40k/year, I’d have to move to Oakland and spend my weekends cleaning graffiti off the walls of my home, spraying the blood off of the sidewalk in front of my house, and getting ineffective policemen to scare away drug dealers.

    • So very true. It is very difficult to say what is a living wage for any one. What is enough for some is definitely not enough for others and lets not even get started when people get married and have kids.
      THe reality is that the world is so varied from place that forcing a living wage would never work. However to allow a freer market we need to get rid of the federal reserve to end inflating the money supply.

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