Living Wage Is as Wrongheaded as the Minimum Wage

What future will America have when so many of her citizens lack the ability to engage in critical thinking, refuse to connect the dots, and fail to use common sense?

This unwillingness to think clearly is no better demonstrated than by the continued support for the minimum wage. After all the studies and the near-unanimous opinion of economists — and even after the negative real-world effect of the minimum wage — it still remains popular.


Sadly, most people are simply unaware of the argument against the minimum wage. They just don’t know about the vast body of research that shows the harm.

American Federation of Teachers President Randi Weingarten recently called for a “living wage.” In a speech to the National Press Club, Weingarten said, “We need to fight for a living wage, for retirement security, for affordable and accessible health care and college, and for universal pre-K, to name a few.”

Maybe the problem is that liberals, like Weingarten, simply pay no attention to what conservatives say. So let’s use liberals. Two of the most well-known liberal economists have criticized the minimum wage and its twin, the living wage.

Jonathan Gruber, the architect of Massachusetts’ Romneycare and co-architect of Obamacare, said in 2011: “Let’s say the government rolled in and set a minimum wage. … Workers want to supply more hours than firms want to hire. … You end up with excess supply. And we call that excess supply ‘unemployment.'” Gruber discussed the pressure that raising minimum wage puts on employers to turn to automation: “We have a downward-sloping demand curve, and why is it downward sloping? Because the higher the wage, the fewer workers the firm wants to hire. It would rather use machines instead.”

Gruber once argued against paid leave, as well. Employers, he said, will simply reduce wages so that the overall compensation cost to employers is the same, giving the worker no net benefit. In 1994 Gruber wrote: “I study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans, raising the relative cost of insuring women of childbearing age. I find substantial shifting of the costs of these mandates to the wages of the targeted group.” In other words, if an employer is forced to pay for family leave, the employer will simply reduce the employee’s wages to offset the cost.

The New York Times left-wing columnist and economist Paul Krugman also made the case against the minimum wage. In 1998, Krugman reviewed a book that supported the living wage, titled “The Living Wage: Building a Fair Economy.” Krugman opposed it: “The living wage movement is simply a move to raise minimum wages through local action. So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.”

Krugman even dismissed a widely cited study that purports to show the positive effect of minimum wages: “Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages ‘do,’ in fact, reduce employment. …”

“In short, what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price – determined by supply and demand, the same as the price of apples or coal.”

Minimum- and living-wage proponents also support equal pay for men and women. By doing so they make inconsistent arguments. On the one hand, employers are so cheap and greedy that they would pay virtually nothing for labor if the government did not force their hand.

On the other hand, the same greedy employers are happily overpaying men who, according to the equal-wage activists, are being paid more than women for doing the exact same work. Why a greedy employer would both underpay and overpay at the same time is never explained.



Photo credit: Fibonacci Blue (Creative Commons) – Some rights reserved

LarryElderLarry Elder is a best-selling author and radio talk-show host. To find out more about Larry Elder, or become an “Elderado,” visit Follow Larry on Twitter @larryelder.

The views expressed in opinion articles are solely those of the author and are not necessarily either shared or endorsed by Black Community News.

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