My post on employee pay and risk generated some very thoughtful emails. One of the more common points was the observation people can't live on what Wal-Mart pays them, which is almost certainly true. But what are we to do about it, as a matter of social policy? One option popular with the Left is living wage legislation. My UCLA colleague Richard Sander, however, has demonstrated that living wage laws don;t work and even prove counterproductive. His extensive research culminated in a report on a proposed living wage ordinance in Santa Monica, whch Sander summarized in an excellent op-ed, in which he explained:
Most people who have low-wage jobs do not live in low-income households -- they are usually secondary earners in their families. This was obviously true for the teenagers working the rides at Santa Monica Pier, but it is even true for hotel maids. In Los Angeles as a whole, less than 20% of maids (and fewer than 15% of low-wage workers generally) are the primary wage-earner for a family with children, and fewer than 5% are the sole wage earner for a family. The argument that minimum wages should be determined by what is enough money to lift a family out of poverty is, therefore, logically a non-starter. Overall, Prop JJ [Santa Monica's living wage ballot proposition] was so poorly targeted that 65% of the benefits went to households with incomes in the top half of the Los Angeles income distribution, and only 7% went to households that were poor or near-poor (that is, within 50% of the federal poverty line).
He goes on to explain how the proposition would have cost an enormous number of jobs to leave Santa Monica. Granted, one example is hardly enough to condemn the whole enterprise, but Sander's research does raise doubts about the merits of such legislation. (Also of interest is Sander's report on the Los Angeles living wage law, which supported a modified version of that law.)
Constructively, Rick did not simply shoot down the living wage law. Instead, he advocates a local version of the Earned Income Tax Credit (in effect, a local negative income tax). A very promising idea for really helping low-income workers. As they say, go read the whole thing. Update: Check out Chris St Pierre's rebuttal.
