Editor’s Note: The issue of a living wage ordinance has recently stirred debate in the west Michigan community of Holland. Below is a letter by Mackinac Center president Lawrence Reed, published in the Holland Sentinel in late November 2002:
November 21, 2002
Letters to Editor
According to a November 21 story by reporter David Jesse, a committee is studying the advisability of requiring the city of Holland, Michigan, and all its contractors to pay their employees a "living wage." Before going down that path, I hope the city will consider what the weight of economic science and sound policy strongly suggest.
Living wage ordinances are usually motivated by the best of intentions but nothing in any of them I’m aware of makes workers more productive. They only make them less affordable.
Good intentions aside, no law can by the wave of a wand make a person worth a certain amount by making it illegal to pay him any less. By mandating something even higher than the federal minimum, living wages price some people out of work altogether. The people who push these ideas never seem to ask why any employer would hire someone at $10 if that person's services are only valued in the marketplace at, say, $5.00. Though some workers keep their jobs and even see their wages hiked after passage of a living wage law, others pay the price in the form of fewer jobs or higher taxes.
Nationally, the living wage effort is being led by a group known as the Association of Community Organizations for Reform Now (ACORN). This organization actually filed a lawsuit in California in an attempt to exempt itself from paying its own employees the state's then-current $4.25 per hour minimum wage. In its legal brief, the organization declared that "[T]he more that ACORN must pay each individual outreach worker . . . the fewer outreach workers it will be able to hire." That’s precisely the point.
As humble as some jobs may be at, say, $5.50 an hour, for unskilled or poorly educated individuals low-wage employment is a gateway to higher-paying jobs. Low-wage earners frequently see their wages rise quickly: Researchers at two universities, Florida State and Miami of Ohio, found that full-time workers hired at the minimum wage received a median pay increase of 13 percent within their first year, proof that even without the living wage law, low-wage employees are able to work through minimum wage jobs into better ones. Artificially raising wages by decree cuts off this difficult but direct path to greater prosperity for many poor families.
Lawrence W. Reed
Mackinac Center for Public Policy