The Economic and Political Effects of the Living Wage Movement

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It is not a pretty picture for working Americans as we trudge our way through the corporate-sponsored Bush presidency. Tax breaks for the wealthiest minority of Americans have been assigned utmost priority, while affordable healthcare and good-paying jobs continue to fall by the wayside. Organized labor faces an all-out assault from the Bush administration, which routinely uses homeland security as a pretext for breaking the backs of unions. As economic recession settles in, and as the current administration’s misguided fiscal policies necessitate cuts to vital domestic programs, the living conditions of many will surely undergo a rapid coarsening. In order to significantly alleviate these harsh realities of the so-called new economy, it is incumbent upon the working classes to organize and fight for their own self-economic empowerment. With the waning influence of organized labor and the indifference of state and federal lawmakers, a number of campaigns have made promising inroads at the municipal level. Throughout the 1990’s, groups in cities and counties throughout the country have been fighting for and winning a living wage. While still small in scope, the growing living wage movement demonstrates not only that working people can rise to the challenges posed by impossible economic circumstances, but that when they do, anything can happen.

II. A Brief Look Into the Background of the Modern Living Wage Movement

The term ‘living wage’ can be traced back to the 1870’s, although its precise origination is uncertain. It soon entered the vernacular of the labor movement, where it became a popular call to action (Glickman 62). Although the term became quite popular, debates on the matter were largely theoretical or philosophical in nature, as there was little hope of any kind of living wage being implemented on any meaningful scale. In 1906, living wage supporter John Ryan writes "Every man who is willing to work, has, therefore an inborn right to sustenance from the earth and on reasonable terms or conditions" (114). During this time, discussions about what a living wage was and should be were often very broad-based and involved all workers in general. However, the fairly recent phenomenon of municipal living wage ordinances, deals with policies enacted by local governments that effect a relatively small amount of workers. The modern living wage ordinance can best be described as municipal wage standards imposed on firms that enter into contracts with the particular municipal entity. The wage standards are designed to provide workers with a wage that is more in tune with costs of living than federal or state minimum wages. Unfortunately these ordinances only cover a small percentage of workers, even in a major city such as Baltimore, where for example that city’s 1994 living wage ordinance only covered 1500 workers (Murray 24). However, the size and scope of these ordinances seem to be expanding. In Berkeley, CA for example, the living wage movement has upped the bar. The Berkeley living wage ordinance, covers any business within the city’s posh Marina Zone with gross revenues of over $350,000 a year (Murray 27). Santa Monica recently attempted to follow suit, with a similar proposed ordinance which would mandate that companies within a "coastal tourism zone", a 1.5 square mile area, that make over five million dollars a year (primarily beachfront hotels and restaurants) pay their employees $10.50 an hour. The bill was passed by the Santa Monica city council but came 750 votes shy of passing a voter referendum (Candaele and Dreier 8).

The first major living wage victory came in the city of Baltimore, MD in 1994, where things were so bad that one religious group became involved after noticing a growing number of working people coming to soup kitchens (Pollin, 9). That group, Baltimoreans United in Leadership Development, soon became part of a diverse coalition of grassroots organizations that would win a living wage for Baltimore city contract workers. After the Baltimore victory, dozens of cities and counties would follow suit. While the scope of these laws is small, the potential is big. Columnist Robert Kuttner describes the living wage movement as "the most interesting (and underrated) grassroots enterprise to emerge since the civil rights movement" (2).

III. Brief Summary of Positions Against a Living Wage

Whenever the issue of mandatory wage hikes is proposed, it’s opponents, almost exclusively business owners and operators, come out against it wielding a tired arsenal of economic assumptions that are increasingly holding less and less water. First, the critics will claim that the proposed wage hike is counter-productive, that it will only end up hurting those it is meant to help. This is designed to demoralize the movement, even before any solid economic evidence is proffered. Opponents then suggest that any artificial (that is, government-induced) wage increase will cause businesses to hire less, thereby giving way to an increase in unemployment. If that’s not bad enough, these living wage ordinances will also have an adverse impact on the regional economy as a whole, because businesses might just leave the city or county under which such an ordinance has been enacted in favor of some other place with a friendlier business climate (Pollin 10). As these arguments crack and bend under a mounting body of contrary evidence, critics fall back on a quasi-laissez-faire rhetoric of the government not having the right to intervene in the affairs of business. If that doesn’t work, opponents will attempt to tar supporters. Take for example, a particularly nasty article by E.J. McMahon, that appeared in the New York Post while the New York City Council was contemplating a living wage. McMahon, a fellow at the Manhattan Institute relies on the tactic of vilifying unions to rally opposition to the living wage ordinance. McMahon writes, "By increasing labor costs for private contractors, living-wage laws reduce the incentive for the city to consider private contractors as an alternative to public employees(....) In other words, it isn't altruism alone that motivates the unions to play a leading role in the living-wage campaign" (17). This smacks of nothing more elegant than an attempt to divide and conquer the growing grassroots coalition that is apparently becoming a force to be reckoned with. However, without mandatory wage rates, private firms are able to continuously underbid public employees by paying their employees wages that are below the poverty level (Pollin 15). What is so "altruistic" about that?

IV. Workers Squeezed in the New Economy

It is becoming increasingly apparent that earning a living and supporting a family in America is getting harder and harder to do. Traditional assumptions about work and the economy simply no longer hold true. Take for example, the assumption that the harder one works, and the more productive one is, the more they’ll be compensated. According to the research of Robert Pollin, the U.S. economy was fifty percent more productive in 1997 than it was in 1968. However, the economic viability of the average family, when adjusted for inflation is 30 percent less than in 1968 (Pollin 1). This is just more evidence of the fact that Americans are working longer and harder and getting paid less.

In her groundbreaking 2002 book Nickel and Dimed: On (Not) Getting By in America, Barbara Ehrenreich went undercover as a low-wage worker, working as a housekeeper, a waitress, and a Wal-Mart sales associate. Ehrenreich’s goal was to get a firsthand account of how low-end workers get by, or not, as the case may be. The results of Ehrenreich’s experiment are not surprising. Ehrenreich writes,

"In the rhetorical buildup to welfare reform, it was uniformly assumed that a job was the ticket out of poverty and that the only thing holding back welfare recipients was their reluctance to get out and get one. I got one and sometimes more than one, but my track record in the survival department is far less admirable than my performance as a jobholder" (196).

Despite being out of the welfare system and in the job market, poverty still persists. In 2000, several years after welfare reform was enacted, 24.7 percent of single-parent families headed by women lived in poverty (Abramovitz 1).

In a Wall Street Journal article acknowledging the widening wage gap, Michael Milken points out that it is not a shortage of jobs that plagues the impoverished, but a growing wage disparity. Twenty years ago, an individual with a post-graduate degree could expect to make twice that of someone without a high school diploma. Now, that same individual with a post-graduate degree can expect to make up to four times the individual without the high school diploma (1).

But it is not without hope, people are beginning to see dismally low wages for the obscenity that they are. According to Bobbi Murray, writing in The Nation, Los Angeles city officials were "aghast" upon finding out that a company contracted to clean Downtown L.A’s Central Library paid its workers minimum wage without health benefits (24). In 1997, Los Angeles passed one of the country’s most expansive living wage ordinances on the books.

V. Living Wage Laws Benefit Workers.

Although limited in size and scope, living wage laws do make a difference. An analysis of Baltimore’s living wage ordinance conducted in 1999, five years after the ordinance was adopted in 1994, claims the ordinance has had a "small but meaningful effect on the incomes and lives of affected workers" (Niedt, C., et al. 32). In a 2002 study, living wage opponent David Neumark, was forced to admit that "the net result is that these living wage ordinances lead to moderate reductions in the likelihood that urban families live in poverty" (102). This doesn’t mean that passing a living wage ordinance should be viewed as the ultimate goal when fighting for economic justice. But it does build momentum for accomplishing greater tasks.

VI. Living Wage Campaigns Mobilize the Poor and Create Broad Grassroots Coalitions.

As has been said earlier, living wage ordinances are not the be-all and end-all of the contemporary social justice movement. But they do seem to be getting a whole lot of people fired up about social and economic change. In Southern California for example, the burgeoning living wage movement is part of a much broader progressive movement that involves organizing union drives, fighting for better healthcare, and building a new progressive politics. Harold Meyerson, writing in The American Prospect claims that a new "labor-Latino alliance" is pushing California into a more economically progressive direction. Inspired by the anti-immigrant policies of former Gov. Pete Wilson, scores of Latino-Americans have been flocking to the polls backing progressive-Democrats for office (20). Naturally, the living wage campaign figures prominently in all of this. But more importantly it demonstrates how the living wage movement can be a catalyst for broader campaigns. Madeline Janis-Apricio, a prominent Los Angeles attorney who has made a name for herself fighting for the living wage campaign, took advantage of the Democrat’s 2000 convention in Los Angeles where she pushed the idea of a national living wage (Hewitt, and Bates 2).

It is also important to note that the living wage campaign has also attracted the attention of students as well. In May of 2001, Harvard University students held a three-week long demonstration to demand a $10.25/hr living wage for all university workers. After twenty-three days of protests the administration agreed to consider the wage increase (Manners 16).

Another possibility is that workers who are normally unaware of such pursuits, might be introduced to social activism via the living wage movement. In February of 2003, I conducted an interview with a low-wage employee of a major national retail outlet. The findings were inspiring. While the subject was unaware of the growing living wage movement, they were certainly not antipathetic to the idea. The subject expressed a great deal of interest in the living wage, and when asked about the extent to which they would participate in such a campaign were one to arise in their area, indicated a desire to get involved.

VII. Living Wage Myth: Living Wage Causes Unemployment

When a living wage ordinance was proposed for St. Paul, MN, then-mayor Norm Coleman, (now the state’s Republican Senator) called the proposal a "knee-jerk, liberal, quick-fix attempt at social engineering that would have a disastrous impact on jobs and economic growth in St. Paul" (qtd. in Pollin 10). Similarly, critics of the living wage throughout the country are quick to paint apocalyptic pictures about its effects on the economy. Rampant unemployment and economic devastation were predicted for the municipalities that enacted living wage ordinances. Although it would be premature to dismiss these assertions outright, the evidence we do have, does not vindicate these claims. Because the living wage movement is a relatively recent development, there isn’t really any conclusive data that can be used to settle this argument with any immediacy. However, there are data that suggest that the apocalyptic imagery of living wage-opponents is not all it’s cracked up to be.

One of the most reasonable of critics’ assumptions is that mandatory wage increases will result in catastrophic unemployment. However, a plethora of evidence contradicts this premise. The Federal minimum wage hikes provide good evidence of this. The Federal minimum wage was increased in 1996, and then again in 1997. However, in 2000 the unemployment rate was lower than it had been since 1969 (Sklar, Mykyta, and Wefald 66). That is all well and good, but when we analyze the results of living wage ordinances, the matter is not quite so cut and dry.

David Neumark, once a staunch opponent of the living wage movement, recently released a study of California’s many living wage ordinances that has caused him to change his tune. Neumark finds that some job losses are detectable, but are offset by the positive aspects of living wage laws (Neumark 86). However, according to Bob Pollin, such job losses are so minor that they are liable to be caused by other economic factors, such as "the level of overall demand for goods and services(....)", which Pollin claims bears a much stronger relationship to employment figures than do mandatory wage rates (132).

An article by Steven Brull in Business Week, of all places, reports that studies have shown that living wage ordinances have "led to few job losses and lifted many families out of poverty" (68). This is part of a growing chorus of establishment voices admitting that the living wage movement is not the harbinger of economic doom it was made out to be.

VIII. Living Wage Myth: A Living Wage is Bad for Business

One of the central arguments underpinning much of the scare tactics used to frighten away support for the living wage is that it will drive vital businesses away, hurting the particular municipality’s chances of achieving and sustaining meaningful economic growth. But if we challenge this assumption, we find that paying a living wage can actually be beneficial for a company. Bob Pollin makes the case that businesses will actually benefit from paying their employees a living wage because it stabilizes the company’s workforce by reducing employee turnover and absenteeism. Pollin cites Henry Ford, who surmounted the problem of turnover at his factories by nearly doubling wages, as an example (21).

In a report for the conservative Employment Policies Institute, a conservative Washington think-tank, Jared Bernstein shows that companies affected by living wage ordinances have "consistently absorbed these wage increases through productivity, or efficiency gains" (4). This would seem to bolster Pollin’s argument. Bernstein goes on to cite a report by the business network Responsible Wealth, that provides first-hand accounts of businesses that pay their workers a living wage so that they can experience its efficiency-related benefits (5).

IX. Living Wage Myth: Mandatory Wage Increases Represent Undue Government

This is not a particularly formidable argument within the arsenal of living wage opponents. However, it is an important ideological underpinning of neoliberal economic theory. An ideology to which many living wage opponents subscribe. Undoubtedly there are many in the business community who would be happy to not have to deal with minimum wage laws at all. Indeed, Federal Reserve Chairman Alan Greenspan, referred to the minimum wage as "artificial government intervention" (qtd. in Sklar, Mykyta, and Wefeld 69). Following this logic, couldn’t it also be considered "artificial government intervention" when the government provides bailouts for foundering industries, or when the government provides millions of dollars in subsidies to corporations? One wonders what kind of condition our "free market" economy would be in, were it not for "artificial government intervention".

X. Living Wage Opposition Resorts to Unworthy Tactics

Wherever living wage campaigns are proposed, business groups will organize to prevent them from becoming law. However, in Santa Monica, more was on the line than just another local living wage ordinance. The Santa Monica ordinance would have been the most sweeping

law on the books, covering all workers in what’s called a "coastal tourism zone", regardless of whether or not that business had any direct financial relationship to the city. The group SMART, (Santa Monicans Allied for Responsible Tourism) was able to get the City Council to pass the ordinance, but a last minute effort by opponents was able to put the issue up before a voter referendum (Murray 27).

Opponents of the living wage ordinance (Measure JJ) then embarked on an extensive misinformation campaign, mailing out fliers designed to deceive voters. The fliers included the pictures of several prominent Democrats, including Rep. Henry Waxman, implying that they were against the proposed living wage law (Candaele and Dreier, "Wage war" 8).

If that’s not bad enough, the opposition then created an imitation living wage ordinance called Proposition KK. They even created a group called Santa Monicans for a Living Wage to garner support for the phony living wage law. If passed, the law would have covered only 200 workers and would have prevented the Santa Monica City Council from passing any future wage increases like Measure JJ (Candaele and Dreier, "Wolf" 9).

Deceptive campaigns such as these demonstrate the intellectual bankruptcy of the anti-living wage community. They are all too aware that the evidence does not support their claims, and so they resort to sleazy, underhanded maneuvers such as this. If the business community’s shameful mendacity didn’t actually cause SMART to lose the referendum vote, it might be taken as a sign that the living wage movement has the moral high ground. Unfortunately, occupying the moral high ground does not guarantee victory at the polls.

Clearly, the evidence suggests that the critics were wrong when they said the sky would fall if living wage laws were passed, and even the critics themselves admit that living wage laws reduce urban poverty (Neumark 102). However, the work of people who are fighting for economic justice is far from over. While the success of the living wage movement proves that progressive ideas can be implemented without creating all-around economic devastation, and that it is possible to get people excited about changing the economic landscape of this country, it is crucial that things are taken to the next level. More living wage laws like the Santa Monica proposal are necessary if the movement is to grow. Living wage ordinances help to alleviate poverty without negatively effecting the economy, and galvanize large numbers of people, bringing them into the movement for economic justice.

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