Living Wage vs Minimum Wage

["ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

                       Economic Outlook
                       Mon, 18 Sep 2000, 8:22pm EDT

                       `Living Wage' for Workers Drives Pay Debate:
Economic Outlook
                       By Art Pine

                       Washington, Sept. 4 (Bloomberg) -- Congress is
moving toward a compromise on a bill to increase the $5.15-an-hour
minimum wage for U.S. workers by $1 an hour, but to some activists and
labor leaders, there's a more intriguing question: Should employers be
required to pay a ``living wage'' instead?

                       The difference is more than semantic. The minimum
wage has become a floor for a low-skilled worker's pay, but usually
isn't enough to propel anyone out of poverty. By contrast, a living wage
is based on what it would take to pull a family of four above the
poverty threshold -- about $16,895 a year in 1999.

                       Although efforts to pass living-wage legislation
are confined to city and county goverrnments, there was talk in Congress
last year about introducing a living-wage bill, and opponents worry the
growing success at the local level may make more Americans sympathetic
to the concept.

                       ``For years, it was a sleeper, but it's begun to
blossom in recent months,'' said Larry Sabato, a University of Virginia
professor. ``It's motivating the Democratic base in a lot of places to
start participating in politics again. It may even breathe new life into
the bid to boost the minimum wage.''

                       That sentiment already has softened Republican
opposition to raising the  minimum wage, which is moving toward
enactment. After first linking passage of the minimum-wage increase to a
bill eliminating the estate tax, House Speaker Dennis Hastert, an
Illinois Republican, has offered to drop that demand if President Bill
Clinton agrees to tax breaks for small business.

                       Clinton and congressional Democrats reacted
favorably to Hastert's offer, and the two sides are negotiating. If
those talks succeed, the minimum wage increase could be sent to the
White House for Clinton's signature this month.

                       Adopted Across U.S.

                       At the same time, the living-wage movement is
growing. Pressed by local coalitions of community activist groups,
religious organizations and labor unions, some 50 U.S. municipalities
and counties already have adopted living-wage legislation. San Francisco
joined that number in late August.

                      Campaigns are under way in 75 other cities.

                       The living-wage level varies from city to city,
but it's usually well above the federal minimum wage. The lowest is
Milwaukee County, Wisconsin, at $6.25 an hour. The highest is San Jose,
California, at $10.75. Often, employers must  provide health benefits.
Wages are tied to the federal poverty threshold, which is recomputed
each year.

                       Analysts say the movement has gained strength
partly because the record-long economic expansion has spawned an
increasing social awareness among Americans -- and growing public
concern that lower-income workers have been left out of the benefits the
rest of the country has enjoyed.

                       ``Part of the American dream is the myth that
when times are good, everybody ought to be brought along together,''
Sabato said. ``Right now, people look around and see that there are some
who haven't shared in the country's wealth.  So they're feeling guilty
about it.''

                       Labor Shortage

                       A study by the Conference Board, a business
research group, suggests that even though the labor shortage has helped
more low- skilled Americans win jobs, it hasn't propelled them out of
poverty. Poverty among full-time workers increased during 1997 and 1998,
the last year for which figures are available.

                       The living-wage idea is only fair, given the
uneven nature of the economic gains, said Jen Kern, who heads the
campaign for the Association of Community Organizations for Reform Now,
an activist group. Higher-income Americans have reaped huge benefits,
but the poor have lagged behind, she said.

                       Census Bureau figures show that from 1989 to
1998, the average income of the highest-paid fifth of the population
rose by 14 percent -- to $127,529 from $112,170 -- while that for the
lowest-paid fifth rose just 0.3 percent -- to $9,223 from $9,200. For
the top 5 percent, the gain was 22.7 percent, to $222,283.

                       ``If not now, when? That's the question we're
raising,'' Kern said.

                       Minimum-Wage Debate

                       The debate over raising even the national minimum
wage has been raging for years. Backers assert that an increase is
needed because low-wage workers have fallen behind in purchasing power.
Opponents contend minimum wages harm the poor more than they help,
raising business costs and prompting companies to cut back on the
low-wage workers they employ.

                       ``Lower-skilled workers just end up being hurt,''
said Thomas Dilworth, research director for the business-oriented
Employment Policies Institute, which is spearheading the opposition to
such laws.

                       ``If raising the regular minimum wage causes
employers to seek higher-skilled persons to fill those jobs rather than
paying low-skilled workers to do them, then imposing a much-higher
`living wage' only magnifies those distortions,'' Dilworth said.

                       Even so, the impact of living-wage laws isn't
nearly as broad as that of the federal minimum wage. To begin with,
they're limited to specific cities. They only affect contractors who do
business with local governments. Some kinds of firms are exempt. As a
result, these local laws don't have the same ripple effect.

                       There's also considerable debate about the
formulas used for calculating a living wage. Most take the Census
Bureau's annual estimate of the poverty threshold for a family of four
[$17,184 in 1999] or else pick a number that they think is appropriate
-- sometimes as much as 125 percent of the threshold -- and  recompute
it as an hourly wage.

                       Family Size

                       While such calculations may be well-intentioned,
they don't account for the size of a worker's family or any other income
it has, said Michael Cox, economist at the Dallas Fed Bank. Often, a
single worker earns enough to care for a family of four. A couple can
earn a minimum of double the poverty threshold. ``It's all very
arbitrary,'' Cox said.

                       Critics also have raised questions about the
motivation behind the campaign. Barry P. Bosworth, a Brookings
Institution economist, said that although many support the living-wage
plan out of altruism, it's attractive to unions as a way to blunt the
move begun in the 1980s toward privatization of city services.

                       ``If you're talking about how to save money on
trash-pickup, the main benefit of giving it to a commercial firm is that
they can pay lower wages,'' Bosworth said.  ``But if you can force
companies to pay more than cities do, the whole move to privatize
collapses. It's mainly a way to restore the authority of unions.''

                       Analysts say it's too soon to tell how far the
living-wage movement will spread. Enactment of such laws in 50 cities so
far marks a significant increase from the handful of localities that
followed Baltimore's foray in 1984. Yet, even the most  ardent
proponents aren't predicting a national law any time soon.

                       Much of the outlook for the living-wage movement
will depend on whether the current prosperity continues, said the
University of Virginia's Sabato in a view widely shared among political
analysts. If it does, people will stay ``receptive'' to the idea, he
said. ``But one recession could wipe it out.''