Living wage

The concept of a living wage, though it was not defined as such, can be traced back to the works of ancient Greek philosophers such as Plato and Aristotle. Both argued for an income that considers needs, particularly those that ensure the communal good.[10] Aristotle saw self-sufficiency as a requirement for happiness which he defined as, ‘that which on its own makes life worthy of choice and lacking in nothing’.[13] As he placed the responsibility in ensuring that the poor could earn a sustainable living in the state, his ideas are seen as an early example of support for a living wage.

The evolution of the concept can be seen later on in medieval scholars such as Thomas Aquinas who argued for a 'just wage'.[10] The concept of a just wage was related to that of just prices, which were those that allowed everyone access to necessities. Prices and wages that prevented access to necessities were considered unjust as they would imperil the virtue of those without access.[14]

In Wealth of Nations, Adam Smith recognized that rising real wages lead to the "improvement in the circumstances of the lower ranks of people" and are therefore an advantage to society.[15] Growth and a system of liberty were the means by which the laboring poor were able to secure higher wages and an acceptable standard of living. Rising real wages are secured by growth through increasing productivity against stable price levels, i.e. prices not affected by inflation. A system of liberty, secured through political institutions whereupon even the "lower ranks of people" could secure the opportunity for higher wages and an acceptable standard of living.

Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.

— Adam Smith, Wealth of Nations, I .viii.36[15]

Based on these writings, Smith advocated that labor should receive an equitable share of what labor produces. For Smith, this equitable share amounted to more than subsistence. Smith equated the interests of labor and the interests of land with overarching societal interests. He reasoned that as wages and rents rise, as a result of higher productivity, societal growth will occur thus increasing the quality of life for the greater part of its members.[16]

Like Smith, supporters of a living wage argue that the greater good for society is achieved through higher wages and a living wage. It is argued that government should in turn attempt to align the interests of those pursuing profits with the interests of the labor in order to produce societal advantages for the majority of society. Smith argued that higher productivity and overall growth led to higher wages that in turn led to greater benefits for society. Based on his writings, one can infer that Smith would support a living wage commensurate with the overall growth of the economy. This, in turn, would lead to more happiness and joy for people, while helping to keep families and people out of poverty. Political institutions can create a system of liberty for individuals to ensure opportunity for higher wages through higher production and thus stable growth for society.

In 1891, Pope Leo XIII issued a papal bull entitled Rerum novarum, which is considered the Catholic Church's first expression of a view supportive of a living wage. The church recognized that wages should be sufficient to support a family. This position has been widely supported by the church since that time, and has been reaffirmed by the papacy on multiple occasions, such as by Pope Pius XI in 1931 Quadragesimo anno and again in 1961, by Pope John XXIII writing in the encyclical Mater et magistra. More recently, Pope John Paul II wrote, "Hence in every case a just wage is the concrete means of verifying the whole socioeconomic system and, in any case, of checking that it is functioning justly."[17]

Suffrage campaign seeking the right of women to vote and a living wage. (c.1903)

Different ideas on a living wage have been advanced by modern campaigns that have pushed for localities to adopt them. Supporters of a living wage have argued that a wage is more than just compensation for labour. It is a means of securing a living and it leads to public policies that address both the level of the wage and its decency.[16] Contemporary research by Andrea Werner and Ming Lim has analyzed the works of John Ryan, Jerold Waltman and Donald Stabile for their philosophical and ethical insights on a living wage.[10]

John Ryan argues for a living wage from a rights perspective. He considers a living wage to be a right that all labourers are entitled to from the 'common bounty of nature'.[18] He argues that private ownership of resources precludes access to them by others who would need them to maintain themselves. As such, the obligation to fulfill the right of a living wage rests on the owners and employers of private resources. His argument goes beyond that a wage should provide mere subsistence but that it should provide humans with the capabilities to 'develop within reasonable limits all [their] faculties, physical, intellectual, moral and spiritual.'[18] A living wage for him is 'the amount of remuneration that is sufficient to maintain decently the laborer'.[19]

Jerold Waltman, in A Case for the Living Wage, argues for a living wage not based on individual rights but from a communal, or 'civic republicanism', perspective. He sees the need for citizens to be connected to their community, and thus, sees individual and communal interests as inseparably bound. Two major problems that are antithetical to civic republicanism are poverty and inequality. A living wage is meant to address these by providing the material basis that allows individuals a degree of autonomy and prevents disproportionate income and wealth that would inevitably lead to a societal fissure between the rich and poor. A living wage further allows for political participation by all classes of people which is required to prevent the political interests of the rich from undermining the needs of the poor. These arguments for a living wage, taken together, can be seen as necessary elements for 'social sustainability and cohesion'.[10]

Waiting for a living wage poster (1913)

Donald Stabile argues for a living wage based on moral economic thought and its related themes of sustainability, capability and externality. Broadly speaking, Stabile indicates that sustainability in the economy may require that people have the means for 'decent accommodation, transport, clothing and personal care'.[10] He qualifies the statement as he sees individual necessities as contextual and therefore able to change over time, between cultures and under different macroeconomic circumstances.[10] This suggests that the concept and definition of a living wage cannot be made objective over all places and in all times. Stabile's thoughts on capabilities make direct reference to Amartya Sen's work on capability approach.[10] The tie-in with a living wage is the idea that income is an important, though not exclusive, means for capabilities. The enhancement of people's capabilities allows them to better function both in society and as workers. These capabilities are further passed down from parents to children. Finally, Stabile analyses the lack of a living wage as the imposition of negative externalities on others. These externalities take the form of depleting the stock of workers by 'exploiting and exhausting the workforce'.[10] This leads to economic inefficiency as businesses end up overproducing their products due to not paying the full cost of labour.[10]

Other contemporary accounts have taken up the theme of externalities arising due to a lack of living wage. Muilenburg and Singh see welfare programs, such as housing and school meals, as being a subsidy for employers that allow them to pay low wages.[20] This subsidy, taking the form of an externality, is of course paid for by society in the form of taxes. This thought is repeated by Grimshaw who argues that employers offset the social costs of maintaining their workforce through tax credits, housing, benefits and other wage subsidies.[21] The issue was raised during the Democratic party primary election of 2016 in the United States, when presidential candidate Bernie Sanders mentioned that "struggling working families should not have to subsidise the wealthiest family in the country", and therefore, implied that the large retailer Walmart, who is owned by the wealthiest family in the country, was not paying fair wages and was being subsidised by taxpayers.[22]

Those in favor of living wage ordinances primarily research the negative impacts of insufficient minimum wages. In a cross-comparison between minimum wage and living wage ordinances, there are profound psychological impacts to living wage implementations.[23] Those in favor of living wage oriented policies assert that it is important to acknowledge the region-specific costs that is severely lacking in minimum wage measurements. This line of thinking argues that a living wage can both enhance engagement and performance if implemented.

Research shows that minimum wage laws and living wage legislation impact poverty differently: evidence demonstrates that living wage legislation reduces poverty.[40] The parties impacted by minimum wage laws and living wage laws differ as living wage legislation generally applies to a more limited sector of the population. It is estimated that workers who qualify for the living wage legislation are currently between 1-2% of the bottom quartile of wage distribution.[40]Real life implications to living wage legislation is important to address. Raising wages can decrease job opportunities for low wage workers as it cuts costs for profit seeking organizations and companies. The pool gets smaller despite an increase in wage rates.[41]

Neumark and Adams, in their paper, "Do living wage ordinances reduce urban poverty?", state, "There is evidence that living wage ordinances modestly reduce the poverty rates in locations in which these ordinances are enacted. However, there is no evidence that state minimum wage laws do so."[42]

A study carried out in Hamilton, Canada by Zeng and Honig indicated that living wage workers have higher affective commitment and lower turnover intention.[43] Workers paid a living wage were more likely to support the organization they work for in various ways including: "protecting the organizations public image, helping colleagues solve problems, improving their skills and techniques, providing suggestions or advice to a management team, and caring about the organization."[43] The authors interpret these finding through social exchange theory, which points out the mutual obligation employers and employees feel towards each other when employees perceive they are provided favorable treatment.[43]

As of 2003, there are 122 living wage ordinances in American cities and an additional 75 under discussion.[44] Article 23 of the United Nations Universal Declaration of Human Rights states that "Everyone who works has the right to just and favourable remuneration ensuring for himself and for his family an existence worthy of human dignity."

In addition to legislative acts, many corporations have adopted voluntary codes of conduct. The Sullivan Principles in South Africa are an example of a voluntary code of conduct that state that firms should compensate workers to at least cover their basic needs.

In the table below, cross national comparable living wages were estimated for twelve countries and reported in local currencies and purchasing power parity (PPP). Living wage estimates for the year 2000 range from US$1.7 PPP per hour, in low-income examples, to approximately US$11.6 PPP per hour, in high-income examples.[44]

Living wage estimates vary considerably by area, and may be calculated in different ways. In a 2019 report, the U.S. advocacy group National Low Income Housing Coalition calculated the necessary full-time hourly wage to spend 30% of income on rental of a fair-market, 2-bedroom apartment. Estimates range from a high of $36.82/hr in Hawaii (where minimum wage is $10.10/hr) to $14.26 in Arkansas (the lowest state, raising its minimum from $9.25 to $11/hr) and $9.59/hr in Puerto Rico (where minimum wage is $7.25/hr).[45]

Criticisms against the implementation living wage laws have taken similar forms to those against minimum wage. Economically, both can be analyzed as a price floor for labor. A price floor, if above the equilibrium price and thus effective, necessarily leads to a surplus. This means the number of employees an employer is willing to hire at a living wage is below the number they would be willing to hire at the equilibrium wage price. Many argue that, in the context of a labor market, this would reduce the macroeconomic aggregate demand for labor across all employers, and so presume setting the minimum wage at a living wage would possibly raise unemployment.[86][87] Rehn and Meidner instead proposed a higher minimum wage would induce productivity growth from structural change, reorganizing workers into different jobs across employers with different microeconomic labor demands, rather than reducing aggregate demand for labor. A large amount of empirical study has focused on the employment effects of minimum wage, much of it following a study by David Card and Alan Krueger finding no difference in unemployment rates in two states following a minimum wage increase in one.

A contention that often impedes the progression of a living wage ordinance has to do with the scope; it is controversial whether it should apply to an individual or an entire family as wages can be nuanced when there are multiple types of households among a state.[88] Potential solutions to the complexity of a living wage ordinance include a “specific employer provision,” which seeks to evaluate the pros and cons to a living wage on a company to company basis. An argument In favor of this approach asserts that it can help bolster employee morale and increase social capital.[88]

Critics have warned of not just an increase in unemployment but also price increases and a lack of entry level jobs due to labor substitutions effects.[10] The voluntary undertaking of a living wage is criticized as impossible due to the competitive advantage other businesses in the same market would have over the one adopting a living wage.[89] The economic argument would be that, ceteris paribus (all other things being equal), a company that paid its workers more than required by the market would be unable to compete with those that pay according to market rates.[10]

Another issue that has emerged is that living wages may be a less effective anti-poverty tool than other measures. Authors point to living wages as being only a limited way of addressing the problems of rising economic inequality, the increase of long-term low-wage jobs, and a decline of unions and legal protection for workers.[10] Since living wage ordinances attempt to address the issue of a living wage, defined by some of its proponents as a family wage, rather than as an individual wage, many of the beneficiaries may already be in families that make substantially more than that necessary to provide an adequate standard of living; this argument focuses on the portion benefitting who are in poverty, rather than the portion in poverty who are benefitting. According to a survey of labor economists by the Employment Policies Institute in 2000, only 31% viewed living wages as a very or somewhat effective anti-poverty tool, while 98% viewed policies like the US earned income tax credit and general welfare grants in a similar vein.[90] On the other hand, according to Zagros Madjd-Sadjadi, an economist with the State of California's Division of Labor Statistics and Research, the living wage may be seen by the public as preferable to other methods because it reinforces the work ethic and ensures that there is something of value produced, unlike welfare, that is often believed to be a pure cash "gift" from the public coffers."[91]

The concept of a living wage based on its definition as a family wage has been criticized by some for emphasizing the role of men as breadwinners.[10]

• S Webb and B Webb, Industrial Democracy (Longmans 1902)
• Ryan, John A. Living Wage Macmillan, New York 1906 OCLC 39046728
• Gertner, Jon, "What is a Living Wage?", The New York Times, 15 January 2006
• Madjd-Sadjadi, Zagros, Living Wages: The Issues and the Impact Division of Labor Statistics and Research, California Department of Industrial Relations, San Francisco, 2001
• Sklar, Holly; Mykyta, Laryssa; Wefald, Susan, "Raise The Floor: Wages and Policies That Work For All Of Us", 2002, South End Press. South End Press | Raise the Floor ISBN 0-89608-683-6
• Nadeem, Shehzad, "The Living Wage Movement and the Economics of Morality,", Research in Social Movements, Conflicts, and Change 28: 137–67 (2008)
• Miller, Doug (5 February 2013). Towards Sustainable Labour Costing in UK Fashion Retail. SSRN. Northumbria University. doi:10.2139/ssrn.2212100. S2CID 166733679. SSRN 2212100.

Wikiquote has quotations related to Living wage.

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• Living Wages, Rarity for U.S. Fast-Food Workers, Served Up in Denmark. The New York Times. (October 2014).