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Problems with living wage

Observer Viewpoint | Monday, February 27, 2006

There seems to be an emerging campus discussion on the proposition of a “living wage” at Notre Dame, an idea with a long pedigree of class resentment and rhetoric lacking in support from peer-reviewed economic research. I feel compelled to offer here a few reasons not to adopt such a policy. Let me first say that I do not write to question the motivations of its supporters; I have yet to come across anyone on either side of the issue without the best interest of campus workers sincerely at heart. However, supporters of the policy have in my experience demonstrated an ambiguous understanding of the economic repercussions of a “living wage” and surprisingly little more than anecdotal evidence to support it.

Recent letters published in support of the policy stated that the University pays a starting wage of $6.45 to $10.17 per hour. That is exactly correct – it is a range of starting wages meant to be increased as employees gain experience, take on greater responsibility and prove their reliability in the workplace. It is a range significantly higher than the national minimum, which is a reality for most entry-level workers. Furthermore, these letters neglected to mention that the average income of minimum wage employees nationwide increases 30 percent within one year of employment.

Neither have I seen any discussion of tax credits based on annual income – a more reliable indicator of poverty than wages – which are tremendously more effective at reducing poverty than wage floors. Between the Earned Income Tax Credit and the per-child tax credit, which Congress raised from $600 to $1,000 in 2003, a family of four can expect to receive a benefit as high as $4,536 for income earned in 2006.

Wage floors, on the other hand, do very little to contribute to the financial well-being of workers living near or below the poverty level. They in fact price the lowest-skilled workers out of the job market and take a wage boost away from workers who would have otherwise seen a performance-based increase. Those most hurt by wage floors are high school dropouts aged 20-54; the intended beneficiaries of such policies. A wage in itself is meaningless if it does not fairly represent the skills that one has to offer. Low wage-earners would be far better served by initiatives to increase the level of their marketable skills than those who would artificially price their skills higher than they are worth to employers.

These include manual skills, technical expertise, interpersonal skills and even adopting a more professional appearance – all of which are significantly valued in the marketplace. An affordable child-care service for nonprofessional employees would also be of far greater benefit than a wage floor which could potentially trigger a reduction in one’s healthcare, child tuition or retirement benefits.

Finally, supporters of a wage floor do not seem to understand that the role of the University is to provide a service to students, not to act as a welfare agency. If wages are increased across the board, where exactly is that money supposed to come from? It could only be either a tuition hike or cuts in other areas. Given the uproar over something as insignificant as moving funds into the College Readership Program, I find the latter scenario involving a far greater amount of money unlikely.

With all the hard economic facts laid out on the table, I highly doubt that there would be a majority of tuition-paying students willing to take on debt and redistribute it in a manner that would hurt campus workers – many of whom would find themselves unemployed once they fail to merit their inflated rate of compensation. Job skills and economic reality are the issue here, not guilt-laden emotional pleas and certainly not “helping” some campus workers at the cost of taking away the livelihood of others.

Matthew SmithsophomoreSt. Edward’s HallFeb. 26