Wrong Tack on Wages

Requiring private firms that contract with the county to pay a “living wage” certainly has moral appeal--the words themselves sound easy to support. It is clearly an outrage that many people work full-time at minimum-wage jobs and still fall below the federal poverty line.

But is a city by city, county by county approach the right way to address this? We don’t believe it is. Private company wages should not be set by the Ventura County Board of Supervisors or the Oxnard City Council.

Both of those bodies last week endorsed proposals that would require contractors to pay their employees significantly more than the minimum wage.

Advocates of a living wage have their hearts in the right place, but a piecemeal approach is bad economic policy that could in the long run hurt the people it is intended to help. Contractors and concessionaires would have to offset the higher labor costs by raising prices, cutting jobs or both. The requirement could incite layoffs, discourage companies from doing business with particular government entities, or drive those businesses elsewhere altogether.

Ventura County awards several million dollars each year to private companies to provide services--from construction work to maintenance to gardening. Many of those business owners pay their employees at or slightly above the state minimum wage of $5.75 an hour; the federal minimum wage is $5.15.

A full-time minimum-wage worker in California earns $11,960 a year, far below the federal poverty level of $16,450 for a family of four. Currently, 23% of the county’s 727,000 residents earn wages below the poverty level.

County supervisors decided to draft a law that would force companies conducting business with the county or receiving more than $25,000 in subsidies to pay their full- and part-time employees a minimum of $8 an hour with benefits or $10 an hour without. The amount was calculated as the level required to keep a family of four off welfare.

In pursuing these measures, Ventura County and Oxnard join a growing list of local governments nationwide that require contracting businesses or those that receive subsidies to pay employees enough to keep them above the federal poverty level.

The cities of Los Angeles, Pasadena, West Hollywood, Baltimore, San Jose, Oakland, New York and the county of Los Angeles are among several dozen governments that have adopted similar laws.

A UCLA study commissioned by the city of Los Angeles when it considered such a measure in 1997 pointed out that most minimum-wage workers would benefit by taking advantage of the federal government’s underused $3,500 earned income tax credit. The study said that less than half of eligible city families were collecting the tax credit, leaving $100 million of unused benefits still available at no cost to the city, its private contractors or the local economy. The study recommended that the city launch an informational campaign to alert all low-wage workers and urge city contractors to encourage their employees to apply for this tax credit.

That would be a good first step for Ventura County, too. Such a campaign would cost little yet have a great impact on the working poor. Organized business groups that oppose the living wage proposal ought to step forward and mount a public service campaign to inform workers about the tax credit.

Another step toward improving the lot of the working poor would be to create more good-paying jobs in the private sector. Business leaders too often seem to become involved in public policy only to fight a measure out of self-interest. They could help reduce the demand for living wage laws by offering constructive and innovative ideas for addressing the problem, not merely combating this proposed solution.

When business refuses to deal seriously with the problems of the working poor, it contributes to overreactions--such as proposals for mandated wage hikes.