Should the U.S. Have a living wage requirement?

Thesis Statement

Decisions made without adequate information about risks serious consequences. Nowhere is this more true than in public policy. However, municipalities across the country are making decisions about one of the hottest concepts of public policy at the memory - the "living wage" - which does not have access to the facts that form the basis of sound public policy .

The "living wage" movement is present in over 70 cities and at least 39 states. In general, living wage advocates a minimum wage boost of super-high - between 50% and 150% higher than the federal minimum wage - for city contractors or employers who receive special treatment in a city or county . More than 30 cities have enacted a living wage requirement, with the passage expected soon in many jurisdictions.

To date, few economists have had the opportunity to study a living wage. The authors of this report, Dr. George Tolley, Peter Bernstein, and Lesage, Michael, opened a path that other researchers can now follow. The methodology used by the authors, provides essential information for any decision about the minimum wage.

This study was originally presented to the Council of the City of Chicago in July 1996. At that time, the Council was considering a "living wage" ordinance calling for a 79% increase in minimum wage for employees of city contractors and companies that received city tax breaks. The results of this study are alarming:

The ordinance would cost the city about $ 20 million per year. The city spent more than 20% of this amount ($ 4.2 million) in administrative costs of certification, monitoring and implementation of the Ordinance. This cost $ 20 million will require a permanent increase in taxes to the citizens of Chicago. (Neumark, 12-99)

Labor costs between the companies concerned would increase by $ 37.5 million. This does not include additional administrative costs incurred by employers in the reporting of payroll and other documents to the city, or in determining which workers (if any) would be covered by ordinance. Even companies that have already paid more than the wages called for in the ordinance that support the ongoing costs of proving compliance.

The city could expect at least 1,300 jobs lost as a result of the Ordinance.

Depending on each employee, the costs of the proposal could amount to over $ 7,000. However, a full-time worker whose support for the family to see their disposable income increased by less than $ 1,900 in the Ordinance. Meanwhile, the federal government to "win" more than $ 4,400 (much higher payroll and income taxes), and the state government to "win" over $ 900. (Neumark, 230)

The living wage ordinance would result in wage increases for about 8,470 workers. However, the authors note that many of these workers were not in poverty, for starters. Nationally, over 70% of workers with wages below $ 7.50 live in households with incomes well above the poverty line for a family of four. Thus, while more than ...