The Livable Wage Movement: Where It's Headed

With the publication of the most recent "Vermont Job Gap Study" by the Peace and Justice Center in Burlington, the "Livable Wage" legions are on the march. Their goal is higher wages for Vermonters. Just exactly how to get those higher wages is a question that rightly excites considerable controversy.

The main conclusion of the "Job Gap" study is that thousands of Vermonters are not earning enough to pay for the "basic needs" defined by the authors of the study. The amount needed is said to range from $8.68 an hour for a single person in rural Vermont to $15.49 for a single parent with two children.

The traditional public policy solution for the problem has two main features. The first operates on the demand side: encouragment of a state economy where the demand for labor bids up its price. This means stimulating the high wage sectors of the economy, notably manufacturing. The stimulation consists of low and stable tax rates; reasonable, swift, and certain regulatory requirements; modest and predictable business mandates; good transportation and communications infrastructure; public safety; and the preservation of the environmental and lifestyle amenities that attract business managers and decision makers.

The second operates on the supply side: investment in a skilled and dependable labor force. This means spending tax dollars on elementary, secondary, technical, and adult education, and expecting individuals to equip themselves to take advantages of a strong demand for their skills and labor. Certainly in today's strong labor market almost anyone of near normal intelligence, good character and reliable work habits can go to work at well above the current $5.75 minimum wage level. Employers are crying for such employees. Rep. Dean Corren (P-Burlington), speaking recently in Lyndonville, offered a radically different policy to guarantee "livable wages". He would simply have the legislature mandate by law that employers must pay "livable wages". In addition, employers would be required to provide and pay for employee health care and child care. Employers who refused would be subjected to a new tax, based on the difference between what the employer paid in wages and what the employer would have had to pay to give each employee what the government has decided is a "livable wage." Corren didn't say what would be done with the proceeds of such a tax, but presumably the government would spend most of it (after the usual handling charge) to benefit the employees in whose name it was levied.

Wouldn't that drive out employers? No problem, says Corren. If it drove some firms out of the state, there would be more opportunity for the better sort of firms to succeed in their place.

Ellen Kahler, the Peace and Justice Center project director for the study, is more cautious. In remarks at public meetings in Bellows Falls and Brattleboro, she recognized the challenge of improving the productive skills of employees, and conceded that simply raising the minimum wage (and by implication, imposing any other mandated wage) is not the solution. Corren is apparently several pages ahead of her in the "livable wage" playbook.

Progressives like Corren love government because it has a monopoly on coercive power over its citizenry. They yearn to control the government so that they can simply mandate their preferred results. But unless the Progressive-controlled state is able to seal off its borders, Corren's "livable wage" policy would drive out high-wage firms competing in a national market, taking their jobs, capital, profits, tax payments, and productive and entrepreneurial people with them. The certain result would be a high-cost, all-service Vermont economy, and a retail and service boom just across our borders.

There is really no workable alternative to the traditional demand and supply policy prescriptions: creating a favorable free market climate for economic growth and wealth creation, and investing in a work force able to seize the opportunities that a growing economy offers, both as workers and entrepreneurs. The Livable Wage advocates may wish they could just use government power to order employers to pay higher wages; but if they were ever able to do so, the result would be "livable wages" for a few, and an economic catastrophe for all.

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November 1999