Monday, June 16, 2008

Cities Should Stay Out of Living Wage Business

I feel that a “living wage” is a noble concept, but that it is one that is much harder to pin down as to specifics. Places like Santa Fe, New Mexico, who attempt to regulate business by forcing them to pay higher wages, or who put a heavier burden on their local taxpayers by raising the wages of their own municipal employees based on an arbitrary non-contractual concept like the living wage are out of line. The principles of Universality as espoused by John Stuart Mill, in seeking the greatest happiness for the greatest number of people, can be used to support fewer regulations of this type.

A “living wage” should be considered as one that would allow employees to earn enough income to be able to afford adequate housing, food, and other life necessities in order to enjoy a satisfactory standard of living. It is sometimes also referred to as a “minimum wage”. However, what may be the “minimum wage” by law may not constitute what some consider a minimum “living wage” for workers. And the question of what constitutes a “satisfactory” standard of living is hardly agreed upon by the public.

In January, 2006 in Santa Fe, New Mexico the city raised its minimum wage above the federal level of $5.15 per hour to $9.50 per hour, which at the time made it the highest such rate in the United States. The issue in Santa Fe was the same as that raised all across the country by proponents of increased minimum wage laws: Should an employer be allowed by pay a full-time employee a wage that is no longer enough to live on?

Though in the beginning supporters of the law espoused moralistic ideals such as those previously put forth in other sections of the country: “work should be rewarded” and “no one who works full time should have to live in poverty”, in the end these supporters had taken on a more cynical tone, seeing the issue for what it can garner them politically.

Beginning in 2002, the Santa Fe city council passed a wage law raising the hourly pay for city employees and contractors. The law required that any company receiving a contract with the small city of 66,000 residents would have to pay its workers a wage well above the federal minimum. Some of the officials hoped that Santa Fe would become a ‘test case’ for the rest of the United States on this issue. They saw the city as almost a “perfect storm” scenario with a high cost-of-living, large community of low-paid immigrants, and a politically liberal city council. They saw wages raised from $5.15 an hour as a minimum up to $10, $12, or even $14.50 per hour and extending to private as well as public-sector workers.

Opponents of the law, in particular the business community, believed that it is in the best interests of both business and labor to let the market set wages, not the politicians. They believed that a rise in the minimum wage hurts employment in that forcing business to pay higher wages would be followed by business hiring fewer workers. Business never eats its costs, so raising costs on business would mean that they would cut back their business in some way, or raise their prices, or both. Any of these outcomes would hurt many of the people who were supposed to be helped by the wage increase.

From a moral point of view, I believe that you can look at things in two ways. You can say that when people work hard, and it costs a certain amount of money to live in a reasonably comfortable fashion, then the only morally acceptable position would be to pay workers a wage that would allow them to live in such fashion. If a business needs to make less of a profit in doing so, then so be it, that is a cost that needs to be paid and should not only be expected by the business, but should almost be embraced by them.

Another way to look at things from a moral standpoint would be that a business owner takes a great deal of risk in establishing and growing their business. They take financial risks and risks to their personal reputation, and thus are entitle to great rewards when their ventures are successful. Also, these businesses do not only have current expenses, but ideally many would like to expand or otherwise better the business, and being forced to accept less in profit would cut into their ability to do this.

If you make it too difficult for a business owner to operate and make a strong profit, then you will take away not only that particular business owner’s incentive, but also the incentive of others to start a business venture and have to deal with the increased interference and costs, and thus would hurt the entire community. Increased prices, fewer choices, inferior service, and increased unemployment are just some of the proven effects over time of government regulating business. The free market has almost always proven far better at sorting out the issues and providing quality to tax-paying consumers.

In Santa Fe, living wage proponents changed their fight from a more morally conscionable one of financially helping the poor and working-class to a less heroic political battle. They found that framing the issues morally, even though there would be a cost in unemployment and business failures or struggles, drove voters out to the polls.

Though a strong proponent of free-market based solutions for business, I do feel that there is a place for a minimum wage. The fact is that there was a time in our nation’s history when business took advantage of workers, and made huge profits on the backs of those workers. They expected hard work, got it, and then paid a substandard wage that few folks could live on, let alone prosper in any reasonable way. Workers need to not only be protected, but also feel protected from the possibility that these types of practices will recur in the future.

Men like Henry Ford came along and began to revolutionize low and even non-confrontational labor-management relations. Ford came to realize that the only way that his automobile company would ever be able to fully realize its ultimate profit-making capacity was to raise his employee’s salaries so that they could afford to buy the very cars that they were helping to build. Ford realized a basic premise of free-market capitalism: you can’t sell even the best-conceived and created products in the world to people who don’t have the means to buy them from you.

However, there remained many business leaders who held their wallets tightly closed. Labor unions formed to fight for the rights of workers on wages and other issues, and there were numerous battles over the years between a business community trying to suck as much profit out of their company as they could make, and workers fighting to gain a bigger slice of the company pie in order to justly compensate their level of labor, as well as to more substantively provide for their families.

Given the situation in Santa Fe, in fact in any situation, I do not think that local municipalities should be setting wage standards. As has been proven over decades wherever it has been tried, overtaxing and over regulating business will drive it out of town to a location where costs are cheaper, thus lowering the overall standards in the community.

It happened right here in my hometown of Philadelphia over the past two and a half decades. Once the longtime, well established fourth largest city in America behind only the behemoths of east coast New York, west coast LA and Chicago in the middle, Philly has sunk under the weight of its business and population losses driven by a variety of liberal policies, particularly taxes and business regulations.

I do believe that the proper place for these types of issues is at the state level, not even at the federal level. The State of New Mexico and other states as well, should set minimum wage standards throughout their state. This is the way that I believe our Founding Fathers wanted issues such as this addressed. The politicians at the state level in New Mexico would thus be fair to their entire population by treating all within the state in the same manner. They would also would have to answer to that population should business be driven to neighboring Nevada, Texas, Colorado, Oklahoma, Utah, or elsewhere by their regulations and laws.

With control and regulations coming from the state level, the most important factors to consider for the lawmakers in each state would be the overall health and economic development of their entire state. They would need to balance the needs of their population with those of the business community, and work with both of these communities to ensure that everyone is moving together in the same direction towards the overall prosperity and continued health of the state economy.

Business would need to understand that healthy, fairly compensated employees are an asset to them and the larger community, and in fact are integral to the business’ very survival. And individuals would have to recognize the risk-reward associated with owning and operating a business, allowing for entrepreneurs to make healthy profits, thus contributing to an increased tax base and robust business climate that will draw other companies to the area.

I believe that the Utilitarianism of Mill is best set into this viewpoint. If actions are indeed right as they tend to promote happiness, wrong as they tend to produce the opposite, then the “the greatest happiness principle” would find a kindred spirit in a healthier working relationship between state governments, individual consumers and tax-payers, and the business community.

Keeping governmental costs to business as low as possible in the areas of forced salaries, regulation, and taxation, and allowing the market to drive these types of situations beyond a minimum that is set by responsible state legislators would indeed promote pleasure to a great number of citizens and businesses, indeed would also promote the lessening or prevention of pain state-wide by keeping unemployment and prices low, while keeping choices and competitiveness high.

In keeping with the spirit of Utilitarianism espoused by John Stuart Mill, the politicians of New Mexico, and indeed of every state, would ideally be concerned not with their own election or re-election first, but rather with putting forth ideas and programs that are designed for the betterment of the people. The politician might feel that his being elected is what will make the people happy, but that is only a part of the truth. The people will indeed by happy if he is elected and then helps enact legislation that promotes their good as often as possible.

In the end, I believe that places like the city of Santa Fe should stay out of the minimum wage business, and that these types of issues should be handled at the state level. In this way, the rights of each state as framed by our Founding Fathers would be emphasized with the federal government and local governments out of the picture. The state would then be left with their politicians, acting on the concept of what is best for the people and would make them most happy. The voters would ultimately then decide these issues at the ballot box, electing those who continued to make them happiest.

(THIS article represents a term paper that I turned in at St. Joe's in my Sociology class this semester)

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