A Better Path Toward the Livable Wage

After two years of work, the Burlington Peace and Justice Center has pushed the idea of a "livable wage" to the political launch pad. Advocacy groups have sprung up in Central Vermont, Brattleboro, Randolph and St. Johnsbury. The campaign to put its prescriptions into effect is likely to achieve high visibility in 1999.

What is the "livable wage"? The Peace and Justice Center has now issued four very well researched reports on the subject. It defines "livable wage" as the hourly wage required to meet the basic needs of various kinds of families. The basic needs are determined by what various government agencies believe to be a household's reasonable living expenses.

For a rural two-parent, one-worker, two-child family, the study yields a "livable wage" of $14.94/hour, corresponding to an annual income of $31,082. This family would have to earn $7.50 to be at the federal poverty level . The study estimates that 43% of such Vermont families are earning less than the calculated "livable wage".

At this point the Livable Wage advocates ask "What can society (government) do to see that these people receive a livable wage?" The answers to that question have in the past included a higher minimum wage and the Earned Income Tax Credit. The first is a mandate on business which has the regrettable effect of disemploying low-skill workers who aren't able to produce enough value to cover the higher labor cost. The second is a tax expenditure entitlement which competes with other government spending. At their present levels neither comes close to the ambitious goals of the Livable Wage campaign.

The Peace and Justice Center report stops short of demanding a higher minimum wage, settling instead for a study of the costs and benefits of a substantial increase. (This is, incidentally, one of the most thoroughly studied phenomena in all economic literature.) The group also asks for a 12% increase in the EITC. Locally, "livable wage" advocates urge voters to insist that their municipalities and their contractors pay "livable wages" to their employees and to employees of companies which contract with the government. "Livable wage" activists got the Santa Clara County, California, council to agree to a $10.00 wage, their biggest success to date.

The "livable wage" campaign is unquestionably based on a genuine concern for the often hard life of the working poor. The concept appeals to everyone who knows a working family that is struggling to get by at a modest level of subsistence. Unfortunately the "livable wage" concern quickly becomes an argument for the government to force A and B to pay higher wages to C and D, regardless of whether C and D's work output can be valued at the higher amount. This sort of thing will work for employees of a government monopoly, albeit at taxpayer expense, but once it is attempted in the private marketplace it will have an enormously destructive effect on Vermont's economy. What business person will invest in a Vermont enterprise, knowing that the government is firmly wedded to the principle that it knows how much every worker deserves to receive, and will force the employer to pay it?

The truth is that there are thousands of "livable wage" jobs going begging in Vermont today. Employers are crying for dependable, honest, hard working employees with normal intelligence and even minimal job skills. The announcement of the recent IDX expansion in South Burlington was accompanied by a serious concern by the company that it will have a hard time finding trainable employees for the new high-wage positions opening up.

The sound way to achieve "livable wages" ultimately does not lie in government mandates on business to pay workers what the government thinks they are worth, regardless of what the market place says they are worth. It lies, first, in removing the government-imposed barriers to preserving a strong economy where employers bid up the price of labor, a strategy that runs in the opposite direction from the "livable wage" people's penchant for higher taxes, income redistribution, and government control.

Then, for people to take advantage of strong job market opportunities, they have to equip themselves to become productive to an employer or go into business on their own. Not long ago a Vermont college professor told me that half (!) of his students could not figure out how many females there were in a class if 30% of 150 students were females. Those students have been shortchanged by an educational system that is simply not preparing them to earn their way.

Give every child a real opportunity to acquire the values, skills and work habits needed for success in the 21st century economy. Give every entrepreneur the chance to invest and prosper, without suffocating him or her with costly government mandates, "crony capitalist " subsidies, maddening regulations, and high taxes. The two will find each other.
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January 1999