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A Living Wage

Columnist: Mike Martini
November, 2014 Issue
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Mike Martini
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The common theme is that no one usually admits to making as much money to live on as they’d like.

 
A living wage sounds so good, how can anyone be opposed? The devil is always in the details.
 
The county of Sonoma is listening to arguments to impose a living wage requirement on all of its subcontractors. Individual cities are reviewing the adoption of local minimum wage requirements that are higher than state or federal requirements.
 
The logic supporting such moves is that wage earners would be able to afford to live in the community where they work; they’d be happier and, hence, more productive in their jobs; and they’d have some disposable income that would stimulate the local economy and create more jobs. All of those are admirable goals and ones we should pursue.
 
But would the adoption of a living wage ordinance actually accomplish any of these goals? I don’t believe so.
 
The city of Santa Rosa considered the adoption of a living wage ordinance a number of years ago while I was serving on the city council. After review of the proposed ordinance and discussions with those organizations impacted, I felt it wasn’t in the best interest of the community. I still feel that way.
 
At that time, the ordinance called for a wage of $12 per hour if benefits were provided and $15 per hour if they weren’t. Current city employees at the time all exceeded the minimums, so the ordinance would have applied to any provider of goods or services to the city. All of the contractors for large infrastructure projects exceeded the minimums. The ones to be impacted were the smaller, local businesses selling supplies along with nonprofits that provided social services. It was a surprisingly small number.
 
What struck me as odd—and still does—is how one picks what a “living wage” is. At the time, San Francisco had an $11 per hour living wage ordinance in place. How anyone could actually live in San Francisco in the late 1990s on $11 per hour is beyond me. It didn’t seem possible in Santa Rosa, either, as a $12 hourly wage translates to approximately $25,000 per year (for a 40-hour workweek). The $15 per hour being considered by the present board of supervisors equates to an annual income of $31,200 per year (based on a 40-hour workweek and 52 weeks per year).
 
I know there are many living in Sonoma County on less, as well as many making twice as much or more. Some make three or four times as much. The common theme is that no one usually admits to making as much money to live on as they’d like. Everyone but the highest 1 percent struggles with managing the family budget.
 
The answer I heard to defend the proposed living wage was that any number over the current wage should help. The recipients would all have more money, which could be spent into the local economy and support a stronger community.
 
But it wouldn’t. The economy, like so many other things, doesn’t work in a vacuum. Changing one thing impacts something else. With no changes in margins, raw materials and return on investment, the increase in labor rate must result in a higher price for the goods or service. The increase in wages would be matched with an increase in prices. The high tide raises all the boats. You actually couldn’t buy any more than you could before the wage increase.
 
Another impact I discovered was the wage creep expected throughout nonprofit organizations. Nonprofits are staffed with incredible individuals who forego higher wages for satisfaction for the services they provide. The wages they pay are quite compact with supervisorial staff getting only marginal rates higher than the general workers. If you mandate higher wages to the lowest level, you must increase the wages for supervisors, increasing costs across the board. There is a net loss for services provided vis a vis the revenues.
 
The consumers drive the economy, demanding more for their money. Taxpayers are consumers of municipal services, and history has shown they’re just as frugal as someone shopping for a toaster. They’ll pay no more than they have to pay. If one jurisdiction’s costs are higher than an adjacent one, the money will flow to the lower-cost one.
 
The answer doesn’t lie in artificially raising wages. The only proven answer lies in increased productivity. This can take the form of better skill preparation for the worker, efficiency in production or mechanical advances. Only then can you raise wages without raising prices, providing a net gain to the worker.


 

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