Opinion Editorial | |
| Wednesday, August 4, 1999 | |
Left Promotes Living Wage Over Democrats' Objections |
Most of the talk about third parties in the United States lately has been on the right, with the Reform Party and others competing for disaffected conservative voters. But there is also a growing third party movement on the left as well. One is the New Party, which has had great success getting "living wage" legislation enacted by city governments across the country. Democrats are finding these left-wing third parties every bit as much of a threat as their right-wing counterparts are to the Republicans.
A case in point is the living wage issue. Under such legislation, a city requires that all contractors doing business with the city pay wages to all their employees that are well above the legal minimum wage. For example, in June the Los Angeles County Board of Supervisors passed an ordinance requiring all county contractors to pay their workers at least $8.32 per hour ($9.46 if no health insurance is provided). Other localities have living wage requirements that are even higher. At present, the national minimum wage is $5.15 per hour.
Advocates of living wage ordinances pooh-pooh any negative effects they might have on city budgets or employment. They often cite a study done in Baltimore that showed the cost of city contracts falling after a living wage ordinance took effect. However, a careful analysis of the Baltimore study by the Employment Policies Institute in Washington found that the data had been doctored to prove its point.
It is contrary to common sense to think that a city can demand higher wages from its contractors without raising the cost of city contracts. For all businesses, labor is their largest single expense and for service firms, which make up a large share of city contractors, labor is virtually their entire expense. That is why every serious examination of the living wage by reputable economists has found the idea that it will lower city costs to be ridiculous.
Thus a study of a proposed living wage ordinance in Chicago by two top academic economists, George Tolley of the University of Chicago and Peter Bernstein of DePaul University found that it would have cost the city $20 million per year, raised costs for firms doing business with the city by $37.5 million and destroyed 1,300 jobs. Ironically, it wouldn't even have done much for those getting pay raises from the ordinance because much of it would go to higher taxes and reduced payments from the Earned Income Tax Credit.
Even more telling is the reaction of Democrat city executives when confronted with living wage ordinances. In Detroit, Mayor Dennis Archer strenuously opposed a living wage referendum last year. He pointed out that many of the agencies the city contracts with to provide services for the poor and elderly are nonprofit organizations like churches and charitable groups. They would also be forced to pay higher wages to their employees along with profit-making businesses, thereby hindering their ability to assist those in need.
And in July, a living wage campaign in Montgomery County, Maryland was torpedoed when Congressman Al Wynn of Maryland and Montgomery County Executive Doug Duncan, both Democrats, opposed the measure as threatening to business development in the county, because it would apply to businesses receiving city tax breaks as well as contractors. The liberal Washington Post even supported their efforts, calling the living wage legislation "a formula for assisted economic suicide."
The living wage is bad policy. It raises costs, destroys jobs and discourages business development. Those who don't believe top economists when they say so may be forced to reconsider when liberal Democrats like Mayor Archer and Congressman Wynn say the same thing.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, August 4, 1999.
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