Socialism in Every City

The spread of the "living wage." Originally published at The Weekly Standard

THE “LIVING WAGE” movement has become the latest effort to impose socialism on the United States, one city at a time. After a slow beginning in the 1990s, living wage ordinances — which impose minimum wages much higher than the federal one — have now been adopted in over 100 municipalities, from Somerville, Mass., to Portland, Oregon, from Minneapolis to San Antonio. Cities as large as New York, Boston, Chicago, St. Louis, and Denver have adopted living wages, as well as towns and villages as small as Taylor, Mich., Bellingham, Wash., Oyster Bay, N.Y., Lakewood, Ohio, and Port Hueneme, Calif.
In major urban centers, the effort is often spearheaded by radical city council members who otherwise spend their time raising taxes and condemning the war in Iraq. But upscale suburbs like Alexandria and Arlington County, Va., have adopted living wage ordinances, as have Tucson, Ariz., and Missoula, Mont.

“Most of the people who testified were immigrants to the region who said, ‘I’m new to the area, I’m working two jobs, and I still can’t afford to pay my children’s school expenses because I’m only making $6.50 an hour,'” says Barbara Donnellan, director of management and finance for Arlington County, which passed a living wage ordinance earlier this year. Arlington now pays a wage of at least $10.98 an hour to its workers and requires businesses with which it contracts to do likewise. “We want to be a diverse and inclusive world-class community where each person is important,” says Donnellan.

Although church groups, labor unions, and local community organizations have been involved in the campaign, the major exponent has been ACORN (Association of Community Organizations for Reform Now), a community-organizing group founded in 1970 that claims 700 chapters in 51 cities. Traditionally a group that knocks on doors to raise money and consciousness about discrimination in voting, housing, and banking, ACORN has found the living wage to be its most galvanizing political issue. “It’s the one issue that immediately affects people’s pocketbooks,” says Jen Kern, director of ACORN’s living wage resource center in Boston.

In practice, the living wage resembles a minimum wage enforced at the local level. The federal minimum wage is now $5.15 an hour. Living wage bills typically up this to anywhere from $7 to $11 an hour. In New Orleans, a $6.15 citywide minimum wage was adopted by popular referendum. But hotel owners sued and had it overturned by the Louisiana Supreme Court.

Wary that municipal minimum wages will run into such state constitutional impasses, most living wage ordinances apply only to city workers and contractors — and sometimes to companies that have received tax abatements from the city government. In addition to requiring vendors to pay $3 to $5 above the minimum wage, some cities are starting to mandate health benefits, extended vacations, and other extras. Omaha adopted a living wage in 2000 but rescinded it when the city council discovered it was costing too much to hire summer lifeguards.

Jared Bernstein of the Economic Policy Institute justifies the living wage by arguing that “Employers who receive tax benefits or contracts from the locality ought to give a little something back to their workforce.” Many municipalities, of course, have been shameless in handing out property and sales tax exemptions in order to lure major employers, but these employers usually pay far above the minimum wage anyway.

Instead, the living wage generally applies only to government employees and contractors. Thus, it’s no surprise to find the living wage strenuously supported by the American Federation of State, County, and Municipal Employees, which sees private contractors as its major source of competition. Just as trade unions traditionally support federal and state minimum wage laws in order to avoid being undercut by non-union competitors, so municipal unions attempt to raise the costs of outside contracting services to make privatization less attractive to local governments. The unions also see the issue as an opportunity for recruitment. As an AFL-CIO newsletter told its members, “Living-wage campaigns are part of an overall strategy [that will] potentially enhance union organizing among workers.”

Because they are generally limited to government contractors, living wage ordinances do not seem to be having much impact on local labor markets. One study in Baltimore, which in 1994 was the first municipality to adopt the living wage, found only a small effect, mostly on school bus drivers and other part-time workers. However, the law did discourage smaller companies from bidding on government contracts.

Bernstein and Kern argue that living wage ordinances have actually improved productivity. “Studies show that the higher wage cuts down on lateness and absenteeism,” says Kern. “Contractors tell us, ‘We would have made these improvements before, but other contractors would have underbid us.'” Still, since the smallest competitors cannot meet the new wage standards, and since the costs are imposed on all bidders, any increased expense is quickly passed through to the municipal government. In the end, the living wage is funded by taxpayers.

This doesn’t bode well for the financial health of municipal governments, which are already growing at nearly three times the rate of inflation. “Over the past five years municipal spending has grown 35 percent, 22 points ahead of inflation and 15 points faster than inflation plus population growth,” says Phil Kerpen, analyst with the Club for Growth. “This is not a great time to be putting more burdens on municipal budgets.”

One example of how living wage campaigns can balloon is New York, where Governor George Pataki in his 2002 reelection campaign agreed to pay health care workers a “living wage” through higher Medicaid reimbursements. The decision won the support of the 224,000-member health care workers’ union. However, it only inflated New York’s Medicaid bill, which is already two and a half times the national average. New York City’s $3 billion appropriation for Medicaid spending now exceeds the entire municipal budget of every city in the country except Chicago and Los Angeles.

THE CONCEPT of trying to guarantee a living wage to full-time workers at the bottom of the economic ladder has a long history. “A Living Wage,” published in 1912 by John A. Ryan, added the idea to the reform agenda of the Progressive Era, at a time when mechanization was making it possible for women and even children to supplant skilled tradesmen in the workforce.

The Progressives hit upon the idea that each head of household should have the opportunity to earn a “living wage,” meaning enough to support himself and his family. Rather than adopting minimum wage rules across the board, reformers began by passing eight-hour days and other restrictions for women and children. This both strengthened families and limited the power of factories in hiring women and children to undercut men’s wages.

The Progressive Era’s “Family Wage” system eventually became a national norm, enforcing an informal rule of “one breadwinner per family.” Through the 1950s, informal rules said that married women should not participate in the labor force except in cases of grave necessity. This both provided more time for childrearing and made sure employers didn’t use women to cut their husbands’ wages. The system worked well until a married newspaper reporter named Betty Friedan was told in 1950 that she had to leave her job after having her second child. The rest, of course, is history.

In today’s atomized world, we are back to a system in which most families — especially those with low incomes — rely on more than one wage-earner. Yet living wage advocates rarely take this into account. Advocates assemble elaborate tables comparing minimum wages with average housing prices, trying to show that a person cannot support a family at the minimum wage. Yet how many families are supported by one wage-earner? By failing to differentiate between heads of households with dependents and high schoolers making a little extra money, the living wage movement falls into the old minimum-wage trap of knocking the lowest-skilled workers off the scale.

Give ACORN credit. They have built a vast network of grassroots organizations that have become a potent force in hundreds of cities, large and small, across the country. They run charter schools, register voters, organize health clinics, intervene in tenant-landlord disputes, and have generally won the loyalty of thousands of underprivileged Americans. But their plan for raising family incomes by putting the screws on government contractors is simply another way of soaking taxpayers and growing the government.

William Tucker is a Fellow at the Discovery Institute and columnist for the New York Sun.