Monday, October 06, 2003

The Living Wage, Explained

Many who claim to have a desire to advance the cause of 'social justice' support the idea of the living wage. This policy goes beyond the standard of the minimum wage, which such people believe substandard no matter what work the wage comes in exchange for, and recommends an hourly figure that provides a better standard of living.

Setting aside whether or not more income means a better standard of living (it doesn't if one cannot manage money), let's look at the subject from the cause and effect.

Consider that the employer is a municipal government, such as the City of Indianapolis. Let's use round figures to make it easy to observe the dynamic... the current wage is $5/hour for City workers. It has been asserted that nobody can really live too well on $5/hr, so the proposal is to make the wage $10/hr.

The City currently employs 20 people at $5/hr, which means the City spends $100/hr on labor. The City accepts the idea of the living wage, and commits to $10/hr for each worker.

Problem is, the City only has $100/hr to spend on labor. If it keeps all 20 people employed, it must now spend $200/hr on labor, if it is to keep 20 people on the payroll. Where will the extra money come from? Keep in mind that these are the times of shrinking budgets, and nobody from Bart Peterson to Gray Davis to George Bush has been able to assure citizens that their policies will be bringing budgets up to 1990's level funding.

One of three things has to happen. If the City is to maintain its' current spending level, it must fire 10 workers. If the City is to maintain its' current staffing level at the living wage, it must cut spending on other City services. The City may also maintain its' current staffing level at the living wage if it engages in deficit spending.

If you are a proponent of social justice and a proponent of the living wage, will you be the one willing to break the news to those who lose their jobs so that others may enjoy a living wage? Or, will you be the one to notify those who lose other City services so that City workers may enjoy the living wage? Or, will you be the one to notify your children, who inherit your deficit, that the idea was yours? It would be real social justice if you were made to do so.

By the way, the reason private companies cut jobs and wages is that they face the same problem as cities... except they do the right thing. Companies add to their labor costs when the money is flowing in. When the money stops, companies correctly contract so that they may survive. No company that plans to survive would add to the costs of labor when the money was running out. Cities tend to ignore reality by not making appropriate cutbacks, and worse, consider adding to labor costs through policies such as the living wage.

Think of your own budget. Do you increase spending when you get bad news from the boss? Or do you suck it up and cut back on spending? Families cut back. Companies cut back. Why should cities be any different?

The living wage is not social justice. It's social suicide. Unfortunately, there are those who want this for Indianapolis. It's one thing to subsidize others yourself. It's another to impose your will upon others despite all common sense, which is when it becomes malice.

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