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?
Santa Fe’s study on a living wage: http://bber.unm.edu/pubs/SFLWExecutiveSummary.pdf
Independent Womens Forum: http://www.iwf.org/files/ebd37ebfb3d181f351e468b6a5897384.pdf