Economy / Politics

The Cost of a Living Wage

living wage

The federal minimum wage is $7.25 an hour.  Many states have implemented minimum wages that are higher than that.  But, in most places around the country, the minimum wage is not enough to support a family’s basic needs.  This is where the debate over implementing a “living wage” comes into play.

The living wage, as the name suggests, is designed to pay workers at a level corresponding to the cost of living in their area.  In most places, the living wage would be almost double the minimum wage.

Last week, fast food workers went on strike to protest their low wages.  Washington D.C. has also come into the national spotlight this month with debates over enacting a living minimum wage for some major corporations.  At the center of this debate is Wal-Mart, which responded to the prospect of D.C.’s “living wage” bill by threatening to cancel plans for three sites and to pull out of three more sites which are already being built.

In spite of Wal-Mart’s threats, the D.C. Council passed the “living wage” bill, which mandates that companies with corporate sales over $1 billion and that occupy more than 75,000 square feet pay their employees a minimum of $12.50 an hour- $4.25 more than D.C.’s minimum wage.  Wal-Mart states that the cost of doing business would be too high with the “living wage” bill in place.  Along with Wal-Mart, six other national retailers wrote a letter to Mayor Vincent Gray urging him to veto the bill.

It has been four weeks since the bill was passed by the Council, but Mayor Gray says that it has not come to his desk yet.  There is no consensus as to whether he will veto the bill or pass it through.

Chicago tried, and failed, to implement a living wage law in 2006.  The measure passed with an overwhelming majority (35-14), but was then vetoed by the mayor.  Since the bill was vetoed, Wal-Mart has opened nine stores in Chicago, providing jobs for many in the area.

The idea of a living wage is one which has been nationally debated.  Labor organizations and their Democratic allies applaud the living wage for allowing the working class to have higher incomes and benefits.  Democrats explain that a worker who holds a full-time minimum wage job falls below the yearly federal poverty line.

Businesses and their Republican allies oppose the idea, stating that it drives away companies which would otherwise do business in the area, and therefore stifles job growth.  They cite that implementing a living minimum wage would cause businesses to lose profit, and compensate this loss by laying off their workers and raising the prices of their goods.

There will always be a debate over raising the minimum wage in this country.  But, raising the minimum wage is not a sufficient fix for pulling the average worker out of poverty.  While it may benefit a few workers, raising the minimum wage or implementing a living wage will cause workers to be laid off and prices to rise.  Instead, this issue should just be left to market principles.  Wages should be a reflection of a worker’s value and scarcity of their skills.

The D.C. Council’s new bill and the fast food workers’ strike brings to light the issue of a living wage.  Increasing minimum wage or implementing a living wage would create more unemployment and raise the prices of everyday goods.  Everyday workers need to understand this.  A minimum wage increase will hurt the economy more than it will help it.