Living wages hurt those they are supposed to help

The Lucas County Board of Commissioners has a living wage resolution on their agenda for today. Lucas County Commissioner Ben Konop introduced the idea in January and the Toledo Regional Chamber of Commerce opposes the measure.

A living wage is defined by this resolution as at least $11.66 per hour. For those employers who do not provide adequate healthcare coverage, a living wage is defined by this resolution as at least $13.78 per hour. Because these figures are defined by Department of Health and Human Services guidelines which change yearly, these wage numbers merely apply for 2009.

Here are some of the components of the resolution:

Section 1. The Board hereby adopts a policy which requires that all businesses that: 1) request public incentives from the Board, and/or 2) receive a contract from the Board of $10,000 or more pay all employees a living wage and provide adequate healthcare coverage. This living wage policy will not apply to small businesses, non-profit employers, seasonal employees, or interns.

Section 2. The Board defines a living wage as a wage equivalent to at least 110% of the most recent federal povery guidelines for a family of four, as defined by the Department of Health and Human Services. The Board defines adequate healthcare coverage as single-person health benefits available to employees at less that 15% of the employees’ monthly wages. If no healthcare coverage is provided, the living wage is hereby defined as a wage equivalent to at least 130% of the most recent federal poverty guidelines for a family of four, as defined by the Department of Health and Human Services.

Section 3. The Board defines public incentive as including but not limited to tax abatements, economic development loans or grants, tax increment financing, or other forms of taxpayer funding including CDBG funds.

Section 4. The Board defines a small business as an employer with 25 employees or less for the purposes of contract with the Board of $10,000 or more, and as an employer with 50 employees or less for the purposes of the award of public incentives.

(Side note: this is copied directly from the resolution - spelling errors and all)

They justify this action by saying:

Lucas County has an interest in ensuring that businesses that receive contracts or other benefits from our taxpayers are meeting minimum compensation levels for their employees. Such minimum compensation levels should allow citizens to support themselves and their families with dignity. (emphasis added)

Actually, the 'county' has no such interest but, more importantly, they have no such authority. The Lucas County Prosecutor has previously told the Board (with different members including me) that county commissioners have no authority to implement such a policy. The Cuyahoga County Prosecutor told the Cuyahoga Commissioners the same thing. A phone call to the County Commissioners Association of Ohio will get you the same answer: no such authority.

Konop, having requested a legal opinion as to the authority and receiving it, has refused to release it citing 'attorney-client confidentiality.' In checking, this is a valid exemption under the public records law of Ohio. However, as Konop is the client, he could waive that confidentiality and release the opinion if he wanted.

So why doesn't he?

Well, obviously because to release it will prove that he has no statutory authority to implement his planned action. So why are the commissioners so intent on doing this? Well, it's all out their personal intentions and desires to help the poor. According to the resolution:

"Sub-poverty level wages do not serve the public interest and place an undue burden on taxpayers and the community, who must further subsidize employers who pay inadequate wages by providing their employees social services such as health care, housing, nutrition, and energy assistance."

There are so many questionable statements in this - from the concept of 'inadequate' wages, to 'sub-poverty' wages (which were and are NEVER intended to be able to support a family of four), to 'public interest' (which ignores the public's interest in having the lowest best prices for government contracted services), to the the idea that employers are somehow responsible for ensuring that their employees get housing and nutrition.

But let's just focus on the stated goal of the Commissioners: to reduce poverty.

Here are some facts and their sources when it comes to living wages and their impact:

"Living wages may at first seem a natural way to fight poverty, but there are two reasons why such mandates may not help to achieve this goal, aside from the fact that they do not cover many workers. First, economic theory predicts that because a mandated wage increase operates essentially as a tax on the use of low-skilled labor, living wages will discourage the use of such labor. Thus, whatever wage gains accrue to workers who retain their jobs (and do not have their hours produced) may have to be offset against potential job and income losses for other workers.

Second, living wages may ineffectively target low-income families.
...
Laws that extend only to city contractors cover very few workers...However, for the broader living wage laws that also apply to employers receiving business assistance from the city, we do detect evidence that living wage laws raise wages but lower employment of low-wage, low-skilled individuals." (source)

So Konop's "desire" to help may end up hurting the intended recipients.

"...the living wage in Santa Fe significantly increased unemployment and decreased hours worked for those who were able to keep their job. Even more troubling, this research found that almost the entire negative effect of the living wage was concentrated on the city’s least-skilled and least-educated employees. These are the very individuals the living wage is purportedly helping.

"...living wage advocates point to an increase in overall employment in Santa Fe since the ordinance as “evidence” of success. This a faulty analysis that fails to control for factors such as overall economic growth in the state or a growing population. The importance of controlling for these factors is the very basis of credible economic analysis and one of the first things taught in any rudimentary statistics course.
...
For those that do keep their jobs, Dr. Yelowitz found that they end up working fewer hours than before. On the whole, the living wage ordinance reduced hours worked by 1.6 hours per week. Similar to the unemployment results, these hours reductions were felt most by the least-educated employees. Those with 12 years or fewer of education saw their hours reduced by 3.5 hours per week." (source)

There is also this op-ed piece that appeared in The American Spectator:

"The activists say that requiring businesses to pay wages based on local cost-of-living expenses lifts low-income families out of poverty.

Has that actually happened in the 145 cities and counties that already have a living wage on the books? The data suggest "no." In fact, the living wage has turned out not only to be a terribly ineffective anti-poverty tool, but to actually hurt poor, low-skilled workers by cutting into other forms of compensation or -- in more than a few cases -- getting them fired.

And most of the people it helps don't really need the help at all. Research from Mark Turner of Georgetown University and Burt Barnow of Johns Hopkins University indicates that over 70 percent of families benefiting from living wages have family incomes almost double the poverty level, and that as high as 64 percent of families affected by living wages have "incomes above the 20th percentile."

After studying the economic climates of over 100 jurisdictions around the country (both with and without living wage laws), economists David Neumark of the University of California and Scott Adams of the University of Wisconsin concluded that living wage laws "reduce employment among the least-skilled, especially when the laws... are accompanied by similar laws in nearby cities." "

There are numerous articles and studies that detail the negative impact of such laws, like this one from Cato which concludes:

"Decades of research have shown that the minimum wage harms the least-skilled workers from poor families while heavily benefiting young workers from middle-income households. Several studies critical of the living wage come to similar conclusions. The main beneficiaries of the living wage are public-sector unionized employees because of the reduced incentives for local governments to contract out work. Instead of exploiting grievances of the marginally employed against "greedy" employers, advocates for the poor should focus their energies on building the skills of the poor."

It's also important to know who supports these living wage initiatives:

ACORN has a website devoted to the subject in the ACORN Living Wage Resource Center.

United for a Fair Economy, which envisions "communities and nations without disparities of income, wages, wealth, health, safety, respect, and opportunities for recreation and personal growth," has their Responsible Wealth Living Wage Covenant, which includes a statement that "no one working full time should live in poverty."

Let Justice Roll, which supports a $10 in 2010 federal minimum wage, has a downloadable "Resources for Living Wage Worship Services and Community Events" to celebrate the Living Wage Days campaign.

The problem is that these organizations focus on getting more money to people without a corresponding increase in the skills or experience which would normally accompany such an increase in wages. Additionally, under the Lucas County resolution, all these groups, being non-profit, would be exempt from having to pay the wages they're advocating.

Interestingly, quite a significant number of social service organizations who are contracted to provide services to the clients of the county's Job and Family Services department are non-profit and would also be exempt.

The worst part of the action scheduled for this morning in the Commissioners meeting room is that no public hearings have been held on the issue. Despite the protestations of Konop, the business meetings of the Board of County Commissioners (unlike city councils) do not include an opportunity for public comment. Commissioners, in taking public comment, have to set a public hearing and publicize the event. That was not done, so such pros and cons of the living wage proposal have not been heard and debated.

And then there is that legal opinion which is conveniently being hidden from public view.

My hope is that Commissioners Pete Gerken and Tina Skeldon Wozniak will not vote in favor of the resolution having learned they have no authority to implement such a requirement, despite their publicly-stated support of the issue.

But if they vote along with Konop and pass this mandate, will there be anyone who will challenge it?

*** If you're a fan of tongue-in-cheek, check out the latest addition to the Stuck-on-Stupid dictionary.