At the heart of the argument for living wage laws is the idea minimum wage is not enough to keep a family of four above the poverty level. This leads to the idea that the minimum wage should be raised to a point where a family of four can at least live at poverty level on the minimum wage.
While the concept of a “living wage” may seem comforting, it overlooks some very important facts. When the cost of a job increases, a company is not easily able to provide the same number of jobs after the increase.
Less jobs on the market combined with more qualified people looking for those jobs create a vice that squeezes poor people out of jobs. The poor and welfare recipients usually have fewer skills.
One out of three have the skill level of a high school dropout.
Some companies provide training for such people, but have less money to do so with the cost added by living wage laws and less incentive to do so since the artificially high wages attract more skilled laborers to the job market.
Besides ignoring basic economic principles, the argument for a “living wage” is also based on a faulty premise: that most minimum wage workers have a family of four to support. Only about one in five minimum wage workers have a family to support, much less a family of four.
Also the idea that if the head of the household earns minimum wage, then the family will be living below the poverty level is also faulty.
The correlation between heads of household earning minimum wage and their families living below the poverty level is now less than 13 percent.
If we examine all workers and not just heads of household, the correlation between people earning minimum wage and their families living below the poverty level grows even weaker to only about five percent.
This makes sense when one considers about seven out of 10 minimum wage workers live with a spouse or relative who works.
Living wages laws may be intended to help the “working poor,” but what they actually do is rob the lower class of opportunities. The average income of minimum wage workers already increases by 30 percent after their first year of employment because the learning of basic skills and having an employment history makes them more marketable.
The relevance of increased skill to earning potential is exemplified by the fact only 2.8 percent of workers over the age of 30 are working for minimum wage. Meanwhile, barriers to learning basic skills, such as living wage laws, make it that much more difficult for the poor to get a foot on the first rung of the ladder of success.
There is a real price to be paid for artificially increasing wages through laws rather than skill development. As usual, the people who can least afford it pay that cost.
Daniel Watkins is a senior computer information systems student from Hepzhibah, Ga. Contact him at firstname.lastname@example.org