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This is our third and final installment in a 3 part series that is exploring
the effects of the Universal Living Wage on business. We will explore
savings and how the Universal Living Wage would look on a world scale.
Tax Savings
With 3.5 million people experiencing homelessness in the United Sates
this year alone14 and with 42% of them working at some point15 (clearly
the work ethic is there), it is conservatively estimated that no fewer
than 1,000,000 people (one-third) will be able to work themselves off
the streets of America with the passage of the Universal Living Wage.16
While we tend to think of minimum wage workers as individuals, we find
that they often are attempting to sustain more than just themselves on
the minimum wage. According to the collaborative work of Dr. Stephanie
Luce (Living Wages/ Building a Fair Economy) and Economics Professor Robert
Pollin (his fifth such writing) there exists a U.S. minimum wage family.
This family comprises four people, two children, and two adults, one of
whom is working at the minimum wage.17 This means a significant amount
of government subsidies is currently required to minimally sustain this
family. With the enactment of the ULW, it is conservatively estimated
that a tax savings of $10.7 billion per year can be realized.
($10.7 billion per year in food stamp and welfare savings based on: a
four-person family- one minimum wage worker, one spouse, and two children.)
According to the 2000 census there are:
10.1 million minimum wage workers18
65% of these include one or more members who work and yet must be subsidized
($1,627 savings per family)with food stamps, EITC, and MediCal19
10.1 mil x .65= Z
$1,627 x Z (6.565) = $10,681,255,000
Tax Savings with Passage of the ULW
According to Robert Pullin and Dr. Stephanie Luce in the analytical book
The Living Wage:
*the family reliance on non health related subsidies will fall by 16.1%
*the family will become dramatically more credit worthy . . . thus being
able to avail themselves of more goods and services which in turn will
serve to stimulate the local economy.20
Furthermore, according to Beth Schulman, author of: The Betrayal of Work:
How Low-Wage Jobs Fail 30 Million Americans and Their Families, these
minimum wage jobs are no longer the employment/economic stepping stones
of the past but rather the economic job plateaus at which people/families
are stagnating now for years.21
*Note: It is universally agreed that earning a dollar of income is far
superior to being given a dollar of government support in terms of one’s
self-image or attitude toward life and work.
We are not suggesting the termination of programs such as food stamps,
but rather that they revert to the transitional, emergency stop gap assistance
programs they were initially intended to be by U.S. Congress in serving
layed-off workers, battered women, natural disaster victims, etc. By conservative
estimates, it is likely that the Universal Living Wage campaign will end
homelessness for more than one million minimum wage workers, and it will
prevent economic homelessness for all 10.1 million minimum wage workers.
The result of which will generate millions of dollars in savings to tax
payers.
General Effects- Regional Living Wage Campaigns
We find that there are serious concerns in the business community about
local living wage campaigns. It has been suggested these local campaigns
that draw circles around geographic areas are potentially damaging to
small businesses. In fact, this was the basis of resistance to a living
wage initiative in San Antonio, TX where it was feared that large business
could and would pull up stakes and relocate just outside of the newly
proposed wage boundary or that businesses would be drawn away from the
region. The President of the San Antonio Restaurant Association was quoted
as saying,
"We need to work with businesses to get businesses in San Antonio.
Let’s say for
instance that Houston does not have a living wage and San Antonio
does, and
the PGA (Professional Golf Association) says, ‘I can go to Houston
and get these incentives to come, and I’m not forced to pay this
living wage.’ So what’s going to happen? Where are they
going to go? They’re going to go to Houston. (On the other hand)
the federal minimum wage establishes a balance. It’s all
industries. It’s nationwide. So there’s a balance . . .
"22
-As reported in the San Antonio Express News 9/29/02
by Michelle Koivin
What effect will ULW have on business locating to a region?
For the most part, minimum wage jobs are support jobs. These low paying
jobs are found in businesses such as the restaurant industry, janitorial,
construction labor, landscaping, laundry, and the like. These are support
type businesses. They support "principle" businesses that pay
well above the minimum wage. Even when we immediately enact the Universal
Living Wage, it will not affect the wages paid by these principal businesses
to their lowest paid employees because they already pay more than the
wages proposed under the Universal Living Wage. These minimum wage businesses
will employ and lay off people based on their need to meet the support/service
requirements of the principal businesses. If Intel Corp. moves to town,
it does not make the decision to do so based on minimum, wage salary scales
in as much as it does not generally employ workers at that low wage level.
On the other hand, when Intel builds its offices it may contract employees
such as construction laborers and ultimately landscapers who are minimum
wage "support" workers, and once the facility is built, its
workers will also need laundry services and restaurants, etc.
*Note: These support businesses do not ordinarily relocate independently
of the principal businesses that they support. Clearly, in times of recession
employees will be laid off but remember, support businesses will maintain
the number of employees necessary to satisfy the needs of the principal
business.
No doubt, there are a few businesses that are minimum wage industries.
In Los Angeles there are the coat hanger industry and the garment industry.
However, there is evidence of strong support of living wage jobs among
employers even here. For example, Sweat X, with 43 employees, a multimillion
dollar business in the heart of the garment industry has endorsed the
Universal Living Wage.23 They recognize the benefits of paying living
wages in that a stabilized work force is part of the cost of doing business
and in the long run will reduce overall costs. In addition to Sweat-X,
which is making sweat shirt apparel for America college students, is American
Apparel which is also in the garment industry with more than 1,000 employees.
It too is a multimillion dollar corporation and recognizes the benefits
of paying living wages and has endorsed this initiative.24 The employees
and the wages they are paid are of equal importance to that of any other
budgetary consideration. Furthermore, these budgetary considerations must
be valued in an appropriate fashion whether the business is for-profit
or nonprofit such as a community development corporation (CDC).
By recognizing the critical importance to the overall stability of a
business, (especially a new one), steps can be taken that will greatly
reduce the high percentage of failed small business start-ups. Each year,
50% of all new business start-ups fail in the United Sates. Within five
years, no less than 80% of all new business start-ups fail.25 Clearly,
they need to start with the most solid financial footing possible.
When small businesses approach the U.S. Small Business Administration
for loans, they must be encouraged to raise the level of budgeting for
employee wages to the same level of importance as that of the manufacturing
budget. It should be raised to the same level of as that of the advertising
budget and to that of transportation, geographic location and that of
product design, development and engineering.
In so doing, we can dramatically increase the percentage of success of
these start-up businesses; increase the overall profitability of existing
businesses and stimulate the economy generally.
Economic Stimulus Package
According to statistical surveys, minimum wage workers spend almost 100%
of past wage increases right back into the economy thus creating quick
economic growth and job creation.26
As seen with the passage of the U.S. Fair Labor Standard Act in 193827
in response to the Depression, establishing a "living" wage
similarly stimulates the overall demand for goods and services in the
economy. Again, the family will become dramatically more credit worthy
thus being able to avail themselves of more goods and more services.28
And the overall demand for goods and services will, in and of itself,
increase demand for low wage workers as industry responds to this demand
and stimulation.29
Additionally, it is important to recognize that the difference between
the existing U.S. Federal Minimum Wage and the Universal Living Wage is
a considerable sum of money when calculated across the US. This difference
represents an incredible national resource in as much as minimum wage
consumers all need the same thing . . . affordable housing. Presently,
housing, at this economic level, does not exist.30 Therefore, the enactment
of the Universal Living Wage Initiative creates an incredible opportunity
for the local construction industry across America. By responding to this
need, the local construction industry will be able to benefit economically
while providing an immeasurable service to the entire country. HSR Construction,
a national housing construction company, based out of Austin, TX has recognized
this early on and eagerly endorsed the Universal Living Wage Campaign.31
Clearly, this presents a true Economic Stimulus Package of enormous proportions.
Inflation Effects
Concern has been raised about what possible inflationary effects passage
of the Universal Living Wage will have on consumer purchasing.
First it is clear that when looking at manufacturing, there are a large
number of economic factors that comprise the budgetary costs of producing
a product. Among these are manufacturing, transportation, design, marketing,
geographic location, warehousing, profit taking, employee training and
finally employee wages. We feel that employee wages should rank of equal
importance to that of these other important components. There is room
within any budget to absorb the payment of reasonable minimum wages. Beyond
this, there may indeed be an inflationary component to the stabilization
of our nation’s businesses. Just as business will need to cut back
on their profit taking, likewise consumers will be asked to pay just a
little more for goods and services. However, reportedly consumers have
expressed a willingness to pay their "fair share" to help house
our nation’s minimum wage workers meeting a similar pledge of many
of our nation’s businesses. There are now more than 1,100 businesses,
unions, religious groups, and nonprofits endorsing this initiative representing
more than forty-five million registered voters.32
Overseas Job Loss
Of grave concern to both American business and American workers is the
ever increasing loss of jobs overseas. However, as stated previously,
minimum wage jobs in most cases are support jobs. Restaurant jobs, dry
cleaning, landscaping, maids, retail sales people, warehousemen, construction
workers, and many others are all support positions. If principal businesses
expand, the need for these support minimum wage workers increases. As
the principal businesses contract, so does the need for these support
positions. However, these jobs are not about to be exported. These are
local jobs and will remain local.33
The critical thing to recognize is that they are local worldwide. This
will be the true challenge to unions and workers in the new millennium.
At this time, there is a proposed settlement in the four and a half month
strike of the United Food and Commercial Workers Union immediately affecting
70,000 workers. The union is faced with agreeing to a divisive two-tiered
wage system for future employees who do not yet exist or losing health
benefits for its current workers. These are the jobs that cannot be outsourced
to India or China. These jobs will be saturated with applicants from overqualified
workers whose original jobs have been outsourced. It will become the "last
stand" of unions and workers to protect and secure living wages and
health benefits for these jobs in every nation throughout the world.
Living wages are good for both business and tax payers. With the passage
of the Universal Living Wage the base of America’s work force will
become stabilized and motivated. More than one million minimum wage workers
will be able to work themselves off the streets of America. All 10.1 million
minimum wage earners will be able to avoid economic homelessness. The
local construction industry will receive a true economic stimulus package
nationwide. And finally, tax payers will realize a financial windfall
both from averted subsidies and from avoiding extensive retraining costs.
Globalization and Labor
We have explored here one pragmatic approach to taking the existing U.S.
Federal Minimum Wage standard and adapting it to the most basic needs
of the United States minimum wage worker. We have done this to show the
intricate steps needed to set a new economic bench mark that compliments
a high moral standard. We have chosen the United States because it already
embraces the moral premise that anyone working a certain number of hours
should be able to afford the basic necessities of life. We are suggesting
that once the United States has established this ethical standard in a
workable fashion, the moral standard and general tenets can and will be
exported/ replicated and embraced throughout the industrial world by every
nation. Once this occurs, every nation and their people will gladly invite
these transnational companies to bring their employment opportunities.
Clearly it will still be to the economic advantage of employers to seek
workers in places where wages are lower, but with this approach, people
will be left financially intact when the companies leave. While they are
there, the workers will enjoy basic living standards. Worldwide poverty
will be positively affected and immigration issues will be favorably impacted.
This concludes our three part series entitled Universal Living Wage as
it relates to globalization. To view the text in its entirety, find credits,
end notes, to learn more about the Universal Living Wage, and to endorse
on-line go to www.UnvirsalLivingWage.org.
1 Eric Schlosser, It Fast Food Nation (Boston: Houghton Mifflin 2001)
2 2000 U.S. Census
3 Living Wages/Building a Fair Economy, Dr. Stephanie Luce & Professor
Robert Pollen
4 Ibid
5 Reich, et al., Living Wages and Airport Security, Preliminary Report.
6 The Betrayal of Work: How Low Wage Jobs Fail 30 Million Americans and
Their Families,
Beth Shulman
7 Ibid
8 Ibid
9 Eric Schlosser, Fast Food Nation (Boston: Houghton Mifflin 2001)
10 Ibid
11 Ibid
12 www.NationalHomeless.org
13 www.UniversalLivingWage.org
citing HUD Fair Market Rend Formula and Guidelines
14 www.NationalHomeless.org
15 U.S. Conference of Mayors Report, 2000
16 www.NationalHomeless.org
17 Living Wages/Building a Fair Economy, Dr. Stephanie Luce & Professor
Robert Pollen
18 200 U.S. Census
19 Living Wages/Building a Fair Economy, Dr. Stephanie Luce & Professor
Robert Pollen
20 Ibid
21 The Betrayal of Work: How Low Wage Jobs Fail 30 Million Americans and
Their Families,
Beth Shulman
22 San Antonio Express News 9/29/02 by Michelle Koivin
23 www.UniversalLivingWage.org
24 Ibid
25 Small Business Administration, SBA
27 U.S. Congress, Fair Labor Standards Act, 1938
28 Living Wages/Building a Fair Economy, Dr. Stephanie Luce & Professor
Robert Pollen
29 Ibid
30 The Betrayal of Work: How Low Wage Jobs Fail 30 Million Americans and
Their Families,
Beth Shulman
31 www.UniversalLivingWage.org
32 Ibid
33 The Betrayal of Work: How Low Wage Jobs Fail 30 Million Americans and
Their Families,
Beth Shulman
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