Paul Jacob

One would guess that those not earning a living wage would be easy to spot — they're the dead people. But the living wage is not about living, but about living in comfort. The TV sets and DVD players and cell phones are a given in modern life, and for many below this new poverty line, so is a car and its insurance. And a four buck latte at Starbucks. These are the luxuries we expect and demand — and somehow usually get. And then there are those troublesome "necessities," like health insurance. You know: the "things we can't afford."

The living wage is the new-and-improved "poverty line," the theoretical wage that would allow a worker to live in middle-class comfort, paying the bills and accepting no special subsidies.

The minimum wage, on the other hand, is a legal barrier to trade in labor. It's not theoretical at all. It's the law. It prevents employers from hiring at wage rates below the minimum set. Though we like to think of it as "raising wages," it is, in point of actual fact, a prohibition to hire at some rates. As such it decreases employment.

And in long-term effects, higher minimum wage laws do indeed lead to less employment. Even many living-wage advocates have been forced to admit this uncomfortable fact. As a study for the Public Policy Institute of California recently concluded, "[T]he beneficial distributional effects of living wage laws most likely do not arise from gains for the lowest-wage workers and least-skilled individuals, because they bear the brunt of the employment losses."

The best that can be said for the minimum wage is that, for a few people "on the margin" (ie., actually earning only a minimum wage) and who retain their jobs after a minimum wage hike, they benefit. At whose expense? Those who lose their jobs.

I have all the sympathies in the world with people struggling to make ends meet. I've been there. But as soon as the talk switches to raising the minimum wage, my gag reflexes take over. I choke on solutions that make matters worse.

When economists are challenged by wishful thinkers regarding minimum wage laws, they offer a little thought experiment: why not raise the wage limit to fifty bucks an hour? Smart people at once understand why not, and come to their senses. After an embarrassed laugh.

But "living wage" folk heedlessly posit that, to live well in most cities, you do need to make at least that much, and then they go on to talk about minimum wage increases. They bring up the old reductio ad absurdum, but without laughing.

Well, if poverty activists can cavalierly advocate measures that would increase the ranks of the unemployed, then I don't see why we can't, either. Want to help the poor? Fire (or just de-fund) the "living wage" activists.


Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.