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Wealth and Want | |||||||
... because democracy alone is not enough to produce widely shared prosperity. | |||||||
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http://www.progress.org/archive/fold114.htm The
"Living Wage"
by Fred E. Foldvary Senior Editor, The Progress Report There is a proposal in San Francisco, California, to establish a minimum wage of $11 per hour for companies that provide services or lease land from the city. Those who favor this argue that the high cost of living in San Francisco warrants requiring this wage floor so that those workers can afford housing and other living expenses. Starting with Baltimore in 1994, some 30 local governments in the USA have enacted such "living wage" laws in which firms which contract with the government pay their workers no less than the set wage. In San Francisco, the proposed wage of $11 per hour is almost double the $5.75 minimum wage in California. According to the "Economic Letter" by economist Rob Valletta published by the Federal Reserve Bank of San Francisco, October 15, 1999, the highest "living wage" amount is currently San Jose, which requires a wage of $9.50 with and $10.75 without fringe benefits.
In addition, workers whose wage is raised from $5.75 to $11 will lose some tax benefits, such as the earned income tax credit. So their net gain will be less than the gross gain from the wage increase. The overall loss from higher taxes to the State and federal governments will result in an outflow of funds and resources from San Francisco to those governments. So there may not be much overall net economic improvement for the city. If many workers in the city were to receive a net increase in wages, this extra money would be a pot of gold for their landlords.
So the effect of local
"living wage" laws are
generally higher taxes, higher rents and fewer services for the
residents, greater inequality, and not that much improvement in the
well-being of the poorest workers and of the city community. The
superficial appeal of this programs that only treats the effects of
poverty dissolves when subjected to economic analysis. -- Fred
Foldvary
Copyright 1999 by Fred E. Foldvary. All rights
reserved. No part of this
material may be reproduced or transmitted in any form or by any means,
electronic or mechanical, which includes but is not limited to
facsimile transmission, photocopying, recording, rekeying, or using any
information storage or retrieval system, without giving full credit to
Fred Foldvary and The Progress Report.
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