NCPA - National Center for Policy Analysis

Economists on a National Living Wage

April 17, 2003

The "living wage" movement supports local, state and even federal legislation to mandate a much higher minimum wage, presumably tied to the cost of living or the wage required to lift a one-earner family above the poverty level.

While some biased research shows that wage mandates have no ill effect on employment, most economists and most research suggest quite the opposite. A survey of some 360 labor economist across the United States found that:

  • Three-fourths of the economists surveyed believe that a national living wage would result in employers hiring better skilled applicants than they hired before the increase.
  • Low-skilled employees -- those ostensibly helped by minimum wage mandates -- would be further shut out of the job market.
  • More than three-fourths of the economists said that a national living wage policy would result in employment losses.

Employers facing increased labor costs through local living wage mandates would be forced to pass those costs along to consumers, most likely in the form of higher prices for products and services, says the James Madison Institute. As a result, consumers would shop in neighboring communities or states where arbitrary wage mandates do not exist and, hence, prices are lower.

  • A study of the economic implications of a living wage ordinance in Chicago found that such a law would have cost affected employers nearly $40 million a year with more than 20 percent, or $4.2 million, going to administrative costs.
  • A study for the Vermont State Legislature found that an increase in minimum wage to a level approaching an average livable wage would result in significantly fewer jobs for that state's lower-income workers.

For Florida, the study recommends state legislation to prevent local jurisdictions from creating wage "zones" and mandating arbitrary levels of pay in those zones.

Source: Gary Landry, "The Living Wage Movement and Its Implications for Florida," Policy Report No. 38, March 2003, James Madison Institute.

 

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