Living-Wage Laws Often Harm Poor

By a 3-2 vote, Ventura County Supervisors ordered a study of a proposed living wage ordinance that would require employers on every county contract of more than $25,000 to pay workers at least $8 per hour with health benefits, or $10 without them. In exploring such an ordinance, the county has joined many other U.S. cities and counties that have enacted or are considering such a move, promoted as a way to help lower-wage workers support their families on a single paycheck.

Despite the fairness rhetoric, the primary beneficiaries of living-wage laws are not low-wage workers. Many, in fact, are harmed by such laws. The main beneficiaries are those who have politically pushed the hardest for these laws: labor unions.

The working poor often suffer from living wage laws because higher wages for government contractors increase the cost of government services (all but admitted by the county’s exemption for merchants leasing land at county-owned Channel Island Harbor, because many struggling businesses could not afford the increase). Higher costs require either higher taxes or reduced services for area residents, including those with lower incomes who do not work for the companies affected--a questionable means of aiding the poor.

In addition, few of the workers affected are sole earners maintaining families. According to a UC Irvine study, most are second or third workers in families that earn more than $30,000 a year. As a result, poor families without breadwinners in county-connected jobs are hurt. Although hourly wages rise, some workers lose their jobs and others are scheduled to work fewer hours as employers substitute high-skill workers and capital equipment for now more expensive low-skill labor.

Employers forced to raise wages also select the most capable of low-skill workers, reducing employment for the least skilled, who are also most likely to be poor. Further, displaced workers are forced to seek other jobs, and their added competition for those jobs pushes down other low-skill workers’ wages.

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Although the working poor do not necessarily benefit from living wage laws proposed on their behalf, the laws clearly advance the interest of unions that support them for supposedly altruistic reasons.

Living wage laws increase that pay rate for low-skill union workers who previously negotiated below-living-wage contracts. Further, by forcing employers to pay higher wages even if they are nonunion, the laws reduce competition from nonunion companies, whose costs are forced up. Because of the increased costs, the laws also undermine cities’ and counties’ attempts to save their taxpayers money by privatizing public services or by putting welfare recipients to work, either of which threatens union jobs.

By forcing affected contractors to pay employees more, living wage laws allow union workers to get pay raises and job security they couldn’t get through traditional means. Such laws use government’s ability to force taxpayers to bear increased costs, which unions couldn’t use in direct negotiations with employers.

Living wage laws also provide other props for unions. They substitute for local attempts to impose higher minimum wages, something only the state has legal authority to do. By dealing only with cities or counties where support is strong, they divide and conquer opposition that would prevent passage at the state level. And living wage laws are intended as wedges for further expansions of unions’ reach.

Supporters of these ordinances know that living wage laws sound good. But their effects don’t match the rhetoric. They are neither efficient nor effective as ways to help the poor. They harm many of the poor families that backers claim to want to help, in addition to other local residents and taxpayers. They do stealthily expand local union power, the same power behind earlier attempts to restrict big box stores because they are nonunion.

If the study ordered by the supervisors is competent, complete and honestly evaluated, Ventura County will not adopt the proposed living wage ordinance.