'Living Wage,' Part Duh

by Joseph S. Bommarito

In "Living Wage," Dying City, I defined a living wage ordinance as: 

". . . local legislation requiring private contractors and grantees of the enacting government to pay a new form of minimum wage to its employees. Some 82 cities and counties across the country have already enacted such ordinances. In the case of Atlanta, the living wage has been calculated at $10.57 per hour, or about double the current Federal minimum wage." 

I recently spoke to a local member of the Green Party, advocates of the "living wage" movement. She told me she was a former Libertarian Party member and understood "the libertarian viewpoint." 

A free market exchange? 

She said, I recall, that the living wage ordinance was the epitome of free market exchange. Silly me. I had thought that prices were determined by the unfettered interaction of sellers and buyers contracting on mutually agreeable conditions, including price, and not determined by ordinance. 

Wages, salaries, and benefits are the price of labor. An individual agrees to provide labor to an employer offering an acceptable wage. The laborer may want higher wages and the employer may want to pay less; that's human nature. But the outcome is determined by market conditions, including worker skills, employer requirements, and the size of the labor pool—yes, those old devils, supply and demand, are still determinants. 

If an employee doesn't agree to the offered compensation, he or she has the option of going elsewhere. If he doesn't have the credentials to command a higher price in the marketplace, then he has the option of improving his skills or learning new skills, thereby increasing his value. If he can’t do that, then he is being paid the market-determined wage. 

A living wage ordinance introduces a third player—the government—that affects the price of labor and which is consequently reflected in a higher cost of goods and services. This effect does not rely on the marketplace determinants of skills, supply, or demand for labor. It is an arbitrary intervention in the market. 

Well, I was told, it's not really an intervention. The government is the consumer. Consumers stipulate conditions for purchases. They may demand a particular brand or quality or unit cost. Some make decisions based on product support or environmental awareness of the manufacturer or even on whether or not they like the salesman's wig. These all may be relevant conditions to the consumer.  

However, the "consumer's" condition in a living wage scenario is for the supplier to amend its contract with its employees, thereby raising the cost to the "consumer." This flies in the face of normal human economic action, which is to get the best bang for your Federally-inflated buck. Consumers don't comparison shop to find, and pay, the highest price for a product. Likewise, local governments typically request bids for large purchases of goods and services in order to save money.  

While a living wage ordinance would raise the prices of many items and services that local governments pay for, the governments don't pay! That's where the analogy to a free market disintegrates.  

The real consumers  

The real consumers of a government purchase are the taxpayers. The local government is only acting as an agent for its citizens. I've attended some 600 to 700 city council meetings during my various tenures as chief financial officer to three different cities. I've never seen a taxpayer show up at a council meeting and demand that the city start paying more for goods and services. Quite the contrary. 

Taxpayers demand that the city pay less for labor, for goods, for services, for anything that affects taxes. Taxpayers are captive consumers of municipal goods and services, and they know it. They can't go out and comparison shop on a daily basis. In the long run, they can choose to find another service provider, and they will uproot themselves, move to another city or to the suburbs, and leave the city with a declining tax base. Barring that, they want an efficient and fiscally prudent government.  

Just to check the statements made to me, I e-mailed the local Green Party and requested clarification. I received the following response from a different member: 

"The living wage is the grassroot [sic], democratically derived choice of the consumers of government goods and services. It is the fair SOCIAL PRICE we will pay." [Emphasis not mine.]  

See that! The government is not the consumer! Just what I thought. It's the "consumers of government goods and services"—taxpayers— making a "democratically derived choice" for a living wage ordinance! That's settled. Well, maybe. 

The city council, which adopts ordinances, is elected democratically. Ordinance changes are typically available for public inspection, public comment, and are subject to public hearings. An ordinance will pass or fail based on what council members think about it, or what they think their constituents think about it. And those constituents, the taxpayers, will have made a quasi-democratic choice to give themselves a tax increase, probably without realizing it.  

It's "Society's" fault...again.

First I was told that the living wage was about the purchase of goods and services in a free market; then, that it was a consumer choice; finally, that it was a “social price” exacted to remedy some unspecified ill. With that jargon, the specter of "social justice" raises its head, implying that the ills of some lay at the feet of others. What am I being asked to buy in addition to consumer services with my hard-earned dollars? Fairness and a level playing field? Social justice?

The playing field always was level, it's people that are not equal. Equal in rights, yes. In opportunities, yes. Under the law, certainly. In physique and mentality and resources and character—NO! If you believe that's not fair, that it is unjust, then take it up with the Creator of your choice, the one who made people unequal in skills and talents, the one who generates cosmic injustices. Society doesn’t do it. Individuals don’t do it.

How about equality of outcome? Isn't that fair? No. It only happens when the playing field is tilted to favor those who can’t get across the field on their own. It's the equal-outcome purveyors who started planting the playing field with land mines and pitfalls and giving the maps only to a select few. It is the more capable of us trying to play on that field with blindfolds and hobbles who are paying the price. Not a "fair social price," but a coerced price that does nothing to really improve the playing field, change “society,” or those who suffer from cosmic injustice, or just plain bad luck.

I am not "society." Society is not an entity; it is the accumulation of billions of economic transactions made daily among hundreds of millions of individuals. Society is not capable of doing harm, individuals do harm. If you want justice from me, then charge me with the injustice—the clear and provable harm that I committed—take me to court, have a verdict rendered, and restitution established. Don't demand a back-door income transfer scheme at my expense. Don't charge me as a representative of "society," some amorphous non-entity with no mailing address, and call that justice. It is nothing more than "democratically derived" thievery—legal plunder—and a salve for the lack of self-responsibility.