Due to the struggle of the low-income families, many workers seek to enforce employers to pay wages based on what is “needed” rather than skills. These laws required that employers to increase wages to allow employees to earn above the state poverty and minimum wage line. The wages are determined by the federal poverty guidelines for a specific family size. In some states, it is set at 130% of the poverty line; even at this rate, families are still eligible for food stamps.
The law requires any business that provides a service to a city or vise versa, to pay wages high enough to keep workers’ families (family of four) above the poverty line without additional aid from government subsidies or having to work more than two jobs. The company must pay at least $1 or $2 more per hour without the requirement of health benefits. Some states have added the twelve-paid vacation day requirement.
The living wages laws were first adopted in 1994 in the city of Baltimore, MD to mandate a higher wage for government workers. Now, nearly 100 cities and counties have shifted into the movement. The first adopted federal minimum wage was raised to $5.15 an hour in the early 1990s, adding $1.80 to the original wage that was set in the 1980s.
The living wage law is the necessary element which will prevent the city government from creating jobs that pay extremely low wages which result in workers living in poverty, The enforcement is a way to reverse the descending drift in wages for poor working families; from a study compiled by the Economic Policy Institution, it indicated that the wages for the lowest-paid 10% of workers fell 3.9% between 1979 and 1999. Hence, the number of low-wage jobs increased and workers are earning below what they could earn to support a family. Without the law, the government will create new jobs which will not guarantee to pay a decent wage.
By putting more money into workers paychecks, there was no need for them to find additional employment nor did they need to apply for charity funds. Workers are able to reduce their hours and spend more time with their families and/or enroll in classes to advance their careers. Without the extra hours worked, they are able to become more productive at their jobs and companies can benefit from the increased circulation of money. Now the workers are able to support themselves, taxpayers will not have to pay more taxes to support social programs such as foods stamps and welfare. The cities will have less crime, more homeownership, and parents can spend more time with their children.
In addition to securing employment for poor families, the economy at large will benefit. It will add more income to the pockets of the working families who will increase spending and decrease the overall poverty level. Thus, it will stimulate the economy that will create new jobs and better service from the government. Contractors that receive subsides from the local government will increase productivity to generate efficient and effective services for the public.
However, opponents have argued that the living wage laws do not bring any advantages to low-income workers. There are many consequences of enforcing the living wage laws, causing a dramatic shift in the economy and could worsen the current situation. It is an inefficient policy to aid poor families, would bring less employment, and would cost the government, as well as, businesses a tremendous amount of money.
A study conducted by the Bureau of Labor Statistics, indicates that most workers who are affected by the minimum wage are young adults ranging from age 16 to 24. It displayed that individuals living with their parents make up the largest group of minimum wage workers. It also specifies that individuals who are affected are not employed full-time nor do they fall within the range to qualify in low-income families. Only 22 percent of those affected actually fall below the poverty line. Thus, the living wage law does not significantly influence the families that are classified as being the poorest.
Through raising wages seems like music to employees’ ears, for each dollar that is paid to the workers new earnings, the cost of the employer will rise without a halt. Thus, causing a more magnetic-finding look when employers hire new workers, they seek for well-qualified candidates instead of the less secured employees. An example was when Richard Jackson, president of Action Janitorial had to raise the wages from $6 to $8.26. He had to substitute his entire workforce, and cherry-picked the higher qualified applicants. The cost of enforcing the law will be higher than excepted, employers will rack out the bottom level workers; if they are going to pay more, why not hire someone who can accomplish the task the first time around, rather than n spending additional funds to train them? While there is an increase in demand for skilled workers, the current workforce becomes laid-off; the law becomes nothing more than an empty promise.
Due to the additional cost of paying higher hourly wages, companies are forced to find supplementary funding. Private companies that provide service to the government also have financial ties with them. The additional funding will be paid by the government or in other terms, the pockets of the taxpayers. Though, the city can reduce its service to its citizens with a budget cut, but businesses cannot decrease service at a lower cost. In a study conducted by the Chicago City Council in July 1996, the following was found. The living wage law cost nearly $20 million yearly, this in resulted the city spending more than 20% from the budget and increasing taxes permanently. Taxpayers, not only will have to pay for the increase earning of the government workers, but also all of the expenses used for the policy-assistance for payroll data, determining whether a company and its workers quality, and bureaucratic monitoring of the companies.
With the law enforced, companies will have to relocate in order to keep a balance on revenue and output. Companies tend to employ in location where employees can locate food, transportation, and other services in a central area. High taxation, business, as well as, customers avoiding the area will cause reduction in job growth and profit. The companies also relocate to avoid the burden of the law. If they continue to remain in the same location, they will need to pass the extra cost to their customers by raising prices of their products. This results in a decline in profit and eventually, the inability to pay off loans and the reduction in the workforce. Therefore, relocation would be the better choice for the company.
Alternatives to the living wage law include wage subsides. It does not target a specific group of workers because it does not increase the cost of employer spending. Workers benefit only if they are working and receive it through a payment or credit. They also do not have to be full-time workers nor do they need to five up other government assistance programs such as Temporary Assistance for Needy Families, food stamps, and housing assistance. An example of subsides is the Earned Income Tax Credit or EITC; it provides benefits directly to the worker without the employer, the middleman. The program is refundable-cash payments can be made to families if their credit exceeds their federal tax liability and they do not have to receive payments until the end of the tax year. EITC also has no effects on the number of jobs in the economy. However, it can create new employment by encouraging individuals to work who have been laid-off. The living wag law is based on hourly wage rates while EITC is not. If an individual can work to the maximum number of credits, then EITC reduces the after-tax wage, creating a higher net income.
The living wage law is not worth enforcing due to the decline of job openings for low-income workers, increase in cost for companies, raise in taxation for citizens, and relocation of businesses. In additional to the extensive list, it does not benefit the poorest working families because the living wage only implies to full-time employees and those that are associated with the local government. The enforcement of the law is not the most effective way to aid low-income worker from falling below the poverty line, it does not provide a boost in their earnings, but hinders their ability for the job and supplies it for more skilled workers. A better alternative mentioned above is the EITC it provides low-wage workers with additional income; it rewards rather than creates another obstacle for them.