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living/minimum wage



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Over a year ago this forum debated the question
of a minimum wage in India. The two opposing views
were [briefly]:
1. it is a bad idea since it imposes a control on the market vs.
2. it is a good idea because no human should be forced to
work for less than what it costs pay for basic living needs.

[I was a minority voice making the latter argument].

The attached article [from imo an unlikely source!] bolsters
my argument with hard data that a living wage does not
result in job losses as alleged by the opposing view.

-charu

http://www.businessweek.com/@@UnfoUmcQrNXoeQQA/premium/00_36/b3697086.htm



>From Businessweek Magazine [sept 4, 2000; US Edition]

What's So Bad about a Living Wage?
Paying above the minimum seems to do more good than harm

 Juana Zatarin lives in a one-bedroom
apartment that rumbles whenever a jumbo jet lands at Los Angeles
International Airport. But life is looking up for the 44-year-old
mother of three, who works as a baggage screener at the
airport. Thanks to Los Angeles' so-called living-wage law, which
requires city contractors to pay employees a minimum of $8.97 an
hour, Zatarin's salary has jumped nearly 50% in the past year. She
will earn some $18,000 this year, putting her above the $17,028-a-year
federal poverty line for a family of four for the first time in
years. This summer, Zatarin took her family on vacation for the first
time since 1994. ''I'm more relaxed now that I can make our
payments,'' she says.

 While most mainstream economists would laud
Zatarin's good fortune, they typically disapprove of laws that
require firms with municipal contracts to pay their workers enough to
stay out of poverty. Ever since Baltimore passed the first such
ordinance in 1994, economists have derided them as little better than
the federal minimum-wage law, which many believe forces employers to
ax jobs.

 Now that view is changing. A small but growing body of
academic research suggests that living-wage laws do more good than
harm. So far, they have imposed little, if any, cost to the 50 cities
that have passed them, the studies find. And they have led to few job
losses and have lifted many families out of poverty. ''I'm no longer
ready to dismiss these policies out of hand,'' says David Neumark, a
Michigan State University economics professor--and prominent
minimum-wage opponent--who recently published empirical research
showing a positive overall impact of living-wage laws.

 The fresh
thinking is giving new ammunition to the living-wage movement, which
has steadily gained momentum since its initial Baltimore success
(table). Advocates, mostly grassroots religious and labor groups, are
pushing for new laws in more than 70 cities and a dozen states. The
success of living-wage ordinances also may spur efforts to lift the
federal minimum wage, since the laws show little adverse job impact
even from pay levels of up to $10.75 an hour in San Jose, vs. the
federal minimum of $5.15.

 NO LOSS. The new research shows that
living-wage laws don't cause many job losses because employers learn
to live with them by trimming profit margins and finding efficiency
gains from improved morale and lower turnover. Unlike the federal
minimum, which covers most workers, living-wage ordinances apply only
to employees of companies with city contracts. Studies of Baltimore,
Los Angeles, and Detroit found no evidence of job losses.

Neumark's research, which compares 12 cities with living-wage laws to
a control group of cities without them, finds minimal job losses,
which are more than compensated for by significant income gains among
the lowest-paid workers. Even higher taxes aren't a necessary
outcome. In Baltimore, city contracts have risen less than inflation,
at 1% to 2% a year--mostly because contractor profit margins
declined, according to a study by the Economic Policy Institute, a
Washington think tank.

 The findings are analogous to a new
perspective on minimum wages that emerged in the mid-1990s. Back
then, several economists challenged conventional thinking with studies
that found little or no job loss from higher minimum-wage levels, at
least in a growing economy like the U.S. is enjoying today. However,
since 1997, continued opposition from small business and congressional
Republicans has blocked increases in the federal minimum, which is
now 40% below the federal poverty line.

 Although the economic
debates about living and minimum wages aren't exactly the same, the
success of the former may boost efforts to lift the federal
minimum. Already, Representative Luis V. Gutierrez (D-Ill.) has
introduced a living-wage bill for federal service contracts. ''During
a period of prosperity, when people are sleeping in cars after
working a full day, paying a living wage is a basic matter of
fairness,'' asserts Jen Kern, a director at the Association of
Community Organizations for Reform Now (ACORN), a Washington advocacy
group.

 Opponents disagree. Business groups argue that a living wage
would be more expensive in a down economy and more disruptive if
applied nationally, or even to workers not employed by city
contractors. For example, the Santa Monica Chamber of Commerce argues
that a proposed $10.69-an-hour living wage, which would apply to all
companies in the city's coastal tourist zone, would force local
businesses to close. Still, those arguments may carry less clout now
that so many other cities have passed living-wage laws--and escaped
the dire consequences.

By Steven V. Brull in Los Angeles

Table:

Fifty cities and counties now require contractors to pay more than the
federal minimum wage. Some leading cities:

CITY/            COVERAGE                    HOURLY
DATE PASSED                                WAGE LEVEL

BALTIMORE       Service contracts            $7.70
1994            over $5,000

LOS ANGELES     Service contracts            8.97
1997            over $25,000

SAN JOSE        Service contracts            10.75
1997            over $20,000

CHICAGO         Contracts covering           7.60
1998            clerical, custodial,
                and other service
                workers

DETROIT         Service contracts            10.70
1998            over $50,000

SAN FRANCISCO   Airport and home-care        $9, $10 in 2001,
2000            workers, and service         plus 2.5% yearly
                contracts over $25,000       increases


DATA: UNIVERSITY OF MASSACHUSETTS



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