WORKING HARD OR HARDLY WORKING? Living Wage Ordinances

Wednesday, January 26, 2000

Since 1995, more than forty city and county governments across the country have enacted living wage ordinances. What are living wage ordinances and how does the living wage differ from the minimum wage? Is a living wage ordinance the best way to help low-income families or are there more effective methods of helping those in need?

Recorded on Wednesday, January 26, 2000

Peter Robinson: Welcome to Uncommon Knowledge. I'm Peter Robinson. Our show today, "Living Wage Ordinances." Since Baltimore enacted the first living wage ordinance back in 1994, more than 40 cities and counties across the country--including New York, Minneapolis, and Los Angeles--have enacted some form of living wage ordinance of their own.

Today, San Francisco is considering a living wage ordinance. What is a living wage ordinance? Well, let's consider what the San Francisco ordinance would do. Now, suppose I were a baggage screener at San Francisco International Airport. I'd spend my working life opening bags, and poking and prodding looking for bombs, drugs and other contraband.

Last year, I would have been paid between six and seven dollars an hour. Hardly enough to support myself, my wife, and for the sake of argument, my two children. Under the living wage ordinance, every company that has a contract with or leases property from the city of San Francisco would be required to pay all its employees at least $11 an hour, and provide them with health and other benefits. Six or seven bucks an hour in my pocket last year, eleven bucks an hour and benefits in my pocket this year. Sounds good to me.

There are, however, questions. Who would pay for the living wage ordinance? And who would receive it? Not every baggage screener, after all, has a family to support.

With us today, three guests. Ken Jacobs of the San Francisco Living Wage Coalition, you will not be surprised to learn supports the living wage proposal. Thomas MaCurdy, an economist at the Hoover Institution, considers living wage ordinances bad public policy. And John Wester, a Roman Catholic bishop in San Francisco, lends the living wage proposal a certain moral support.

Wages of Sin

Peter Robinson: Deuteronomy 24.14, thou shalt not oppress a hired servant that is poor and needy. In San Francisco are thousands of workers in jobs for which the city contracts caregivers for the elderly, guards at city buildings, and so on and so forth, earning six to eight dollars an hour--too little on which to support a family. Is paying such poor and needy workers too little on which to support a family an act of oppression? Tom?

Thomas MaCurdy: I don't think it is.

Peter Robinson: You don't think so. Ken?

Ken Jacobs: I think there's no question about it.

Peter Robinson: That it is oppression?

Ken Jacobs: That it is oppression. I spent Thanksgiving with a man, Steven Williams, and his nine-year-old son in a homeless shelter. He works as a security guard at a city building in San Francisco, and ended up homeless because you can't afford housing on $6.80 an hour in San Francisco. I think that's just wrong.

Peter Robinson: Bishop John, is it oppression?

Bishop John C. Wester: I think it is. I don't think it's intended to be, but I think it certainly is perceived as such by those who are making those wages, yes.

Peter Robinson: Hmm, you're not a Jesuit, are you?

Bishop John C. Wester: No.

Peter Robinson: You're beginning with a very fine distinction. Very fine, right out of the box, very fine moral distinctions.

In your life as a pastor, moving around the city of San Francisco, what is the problem that you encounter that leads you to support the living wage proposal?

Bishop John C. Wester: I think all priests are very familiar with getting the doorbell rung for a homeless person, and that's what's one issue. This is an issue much different. This is a person who comes to the rectory and is working, has a family, is really trying very, very hard to support her or his family, and just can't make ends meet. And it's very, very frustrating. And I was told just recently in our Catholic Charities in San Francisco that in San Mateo, it's not uncommon to have a family living in a motel, cooking off a hot plate, and yet they do have jobs, but the wages are just not sufficient for their needs.

Peter Robinson: And the solution, Ken, is?

Ken Jacobs: What's been done in 42 other cities and counties around the country is a law that simply says any business or organization that gets public benefit, that has a lease with the city, or leases property from the city, that has strong economic value, that in return, they need to pay people enough to survive and support their families.

Peter Robinson: How does the living wage differ from the minimum wage?

Ken Jacobs: Well, the minimum wage in California is currently $5.75 an hour.

Peter Robinson: Established by the state.

Ken Jacobs: Established by the state. The basic, according to a study from the National Low Income Housing Coalition, the basic wage you need to rent a one-room apartment in California is more than double that. So basically, what we proposed are conditions that anyone who receives public benefit from the city, new business, needs to pay $11 an hour plus health benefits, or a cash--

Peter Robinson: Why are you going at this on a city basis? Why don't you get on a bus and go up to Sacramento and lobby for a higher statewide minimum wage? Or for that matter, go to Washington and lobby for a national minimum wage?

Ken Jacobs: We very much support higher national and statewide minimum wages, and one of the reasons you see this being done in cities and counties around the country is because the federal and state governments have failed to act.

On the other hand, the cost of living in the Bay Area is so much higher than in the rest of the country, and there is a specific need there.

Peter Robinson: So I hear two answers there. You've got a special circumstance, higher cost of living here, locally. But also politically, that seems to be an easier wall to knock down on a local?

Ken Jacobs: That's right, but it's also the case that our tax dollars in the local economy that the city and county are spending on contracting firms.

Peter Robinson: You have heard the problem, Tom, you have heard the solution. Anything wrong with this?

Thomas MaCurdy: Well, there are certain issues I want to kind of move off the table. Everybody is in favor of taking care of the families that you just described, John. I mean I want to do it. Everyone wants to do that. The question is what is the most effective way to do it?

So if you have a low-income family, we want to support the low-income family, and there's a variety of mechanisms for doing that. In fact, we have a variety of programs for doing that. We have food stamps, we have housing programs, and I would be quite enthusiastic about the city of San Francisco providing more income support, or housing support to more low-income families.

The issue here is is the most effective way to support low-income families by raising low wages? And that's where exactly the source of the problem is. The answer to that is no. Most low wage workers do not live in low-income families.

Peter Robinson: Let's look at just who those low wage workers are.

Working Hard or Hardly Working

Peter Robinson: These living wage ordinances, so far as I can tell, the first one was enacted in Baltimore in 1995. So they're pretty recent. Getting statistics on them is difficult. And it strikes me as fair, or at least the best I could do to use as proxy statistics for minimum wage.

According to the Bureau of Labor Statistics, heads of families, that is to say, these people who are working for low wages, and trying to raise kids on those wages, account for about a quarter of minimum wage workers.

So assuming that these figures have some bearing in San Francisco, you're proposing a quite elaborate government intervention in the marketplace to help people. And it's just not going to help that many of the people that you want to help.

Bishop John C. Wester: As far as I'm concerned, if I've got a parish, and I've got a parishioner, and he or she is working so hard, that's one person too many, if they're not getting a decent wage. So I would say yes, even if it's 30 percent, we need to do what we can for them.

Again, the statistics, I've read other statistics that say, you know, 70 percent are over 20 years old, I think, was in Philadelphia. And I'm interested in what Tom has to say. I mean I think we have to find as many programs, as many ways as we can to help these people. And I'm not quite sure that it's that elaborate, or that complicated, or that bureaucratic.

Thomas MaCurdy: What is being proposed is that the government tells people what to pay their workers. And that's a fairly substantial use of the authority of the state, course of the authority of the state. So you better know what you're doing before you do it, is my view.

Ken Jacobs: All we're saying here is if you want to contract with the city or county, one of the conditions of that contract, among others, is you have to pay people enough so they can survive on their own. And they don't have to come back to the county and say, because when people are paid too low, then they come back to the taxpayers or charity, to get the rest of what they need to survive and make it through the month.

So if a company comes in with a low bid for a security job, and because they are paying the people only $6.80 an hour, first we've got a problem with turnover, and poor quality of service because people aren't staying in those jobs. Then you've got a problem that those people have to go to General Hospital to seek health care. They've got to rely on and earn income tax credit and food stamps. The taxpayers are paying again, so what happens is the taxpayers are forced to subsidize poverty wage employers, rather than having employers meet the real costs.

Peter Robinson: Oh, but you're asking for a subsidy. You're asking for a subsidy. The money doesn't just get created out of thin air.

Thomas MaCurdy: I'd rather see the city of San Francisco take the extra money it would pay to those employers for those low wage workers and use that money to directly support the low-income families that we want to target. The problem is a large fraction of those low wage workers are not in need of support. And what I mean by that is if the city of San Francisco were to determine how it wanted to spend its budget for low-income families, it wouldn't include them. Let me repeat the number, 40 percent of low wage workers in San Francisco are in, live in families--

Ken Jacobs: I'd like to address this, because it actually isn't true and it's one of these things they raise. That family definition includes the fact that we have families tripling up in homes. So we are looking at family income. When you actually look at it, 54 percent of minimum wage earners provide at least half of the income for that family.

Peter Robinson: Look, here's his point. His point is this. When you require companies to pay all their employees a certain minimum wage, some of those employees, you may dispute the percentage, but some significant percentage of those employees don't need the help. Some are going to be teenagers who are living with their parents who may live in Atherton as far as we know. Now that is a waste--stop me if I'm wrong--but I characterize your position, that is wasted public money. It would be far better to take, to target the people who need it, and only those people. Doesn't that sound plausible?

Ken Jacobs: The people who are guarding our buildings in the city of San Francisco and people at the airport aren't--

Peter Robinson: I want the bishop to tell me it's plausible before you shoot it down.

Ken Jacobs: --aren't teenagers. Come and look.

Peter Robinson: Some of the people don't need the money.

Ken Jacobs: A very small--

Peter Robinson: And if you're wasting public money on people who aren't in need, why aren't you interested in digging that fact out?

Ken Jacobs: Because the beauty of this has been, if you look at what happened in the cities that have done this, half of the cost of raising those wages is accounted for by increased productivity and by decreased turnover.

Peter Robinson: You're the economist. Does that sound plausible to you?

Thomas MaCurdy: What you're telling me is by raising the wages of businesses, businesses are better off and are more productive. I guess I have some faith that businesses can probably figure that out on their own, but you want to be fair.

Peter Robinson: If it's enacted, what will the living wage proposal cost San Francisco?

Opportunity Lost

Peter Robinson: In the studies that have been done, is there a number, sort of a global number on the increased cost to the city of the proposal?

Ken Jacobs: There are several studies which show between 40 and 60 million a year.

Peter Robinson: Okay, so 40 and 60 million a year. Now, as an economist, how would you expect that increased cost to be borne?

Thomas MaCurdy: In some sense, I don't really care how large the number is.

Peter Robinson: Okay.

Thomas MaCurdy: In terms of how much the expense is. Because if it's 50 million or 200 million, okay, that's the amount that, say, San Francisco has decided that it wants to help its low-income population. So let's suppose that 50 million is the right number, whatever.

The question is how do you most effectively raise that money? And how do you most effectively distribute the money to the low-income population you most want to serve by that? You want to--

Peter Robinson: That's your question too, right?

Thomas MaCurdy: You want to have very effective targeting mechanisms, that's really the key.

Peter Robinson: So give us your counteroffer.

Thomas MaCurdy: ...person you defined that you would like to help, and exactly the way you'd like to help them. So you may want to provide them a housing voucher, and you do that directly.

So you want to definitely distinguish among the issue of how you raise the money, and how you spend the money. And raising monies through minimum wages is a very indirect way. Where in fact, it really is effectively city money.

Bishop John C. Wester: But it's, to me, a way that speaks to the person that's working for that money. It's a question of dignity too, I think. In other words, if you're working for this job, it's a job that you're giving your blood, sweat and tears to, your life to, it seems to me you should be paid appropriately for that job. There are other ways I know, and I'm not ruling those out. But I agree with you. I think the important thing is to get the money where it's needed. That's the point. To help the people.

Peter Robinson: Right.

Bishop John C. Wester: And that's where the church has been very clear. Just recently, Pope John Paul II came out with a document that said the church is really not in the business of economy. We're not experts on economy, you both are. But we're the experts, if you will, of people. So I agree with you. How it's done, that has to be worked out. But I do think that if someone is working hard, they should be paid appropriately. They shouldn't have to somehow stand in line at a government building and get added aids. They should be able to say, "This is a worthwhile job. And it means a lot to me, and I'm getting paid appropriately." They're not going to be Bill Gates. They are not going to make billions of dollars, but it should be a sense of dignity to what they're getting paid, it seems to me.

Even teenagers should be paid appropriately. Now maybe there needs to be some mechanism that would exclude a child who is living in Atherton and who's working mainly just to get the experience of working.

Ken Jacobs: And our proposal does in fact have those--

Bishop John C. Wester: That makes sense to me.

Peter Robinson: I'd like to hear Tom, because the bishop has now introduced a new element here. You were saying the question is how most effectively do you get money to those who need it. But the bishop is saying there's a moral component to receiving that money not in connection with your needs, but in connection with the work you perform. Do you buy that? There is something somehow healthier in considering the human person in giving people the money they need in return for work performed, rather than just a housing voucher because you need housing.

Thomas MaCurdy: This is probably my economist side that comes out, and that's the reason why I answered the first question the way I did, saying that what I think of is the price of labor. In some sense, it's how much it was worth. And what I mean is how much it's worth to the employer. And that's in some sense what an individual should get paid. As you artificially adjust that price, and you say okay. So employers now hire workers to work at six dollars an hour, and they'll hire workers up to where it's sufficiently valuable to them, and they make money, and the workers make money so that they can essentially compensate the workers. If you double that price, they're going to hire less workers. There's not money that comes from heaven here.

[laughs]

It's inappropriate with the characters are here.

Let's take the typical case of workers in San Francisco who's going to be affected by this. Half are home care givers, all right? And we're talking about doubling the price of home care givers, actually more than doubling the price for home care givers, all right? Now somebody's paying for that.

Ken Jacobs: First of all, the home care workers in San Francisco, partly because of the work we've done, have been raised from seven to nine dollars an hour already and we're working to get them an additional two dollars an hour.

The home care workers save the city and county of San Francisco an extraordinary amount of money because they make it much less expensive to care for a person than if that person is in a more costly institution.

But one of the key problems that home care has faced is the massive turnover of workers, because people can't survive on the very low wages, makes it much more difficult to keep people out of those institutions. So by raising the wages and stabilizing the workforce, you actually save some money over the long haul in enabling people to live on their own.

Peter Robinson: Are you the only one who knows that?

Ken Jacobs: No.

Peter Robinson: The people who run the home care system know that, too. They are in a competitive environment.

Ken Jacobs: Home care is not private. There's a public authority in the city and county of San Francisco who does this.

Peter Robinson: I see.

Ken Jacobs: That's why the mayor of San Francisco pushed to raise--

Peter Robinson: Let's get back to whether a living wage ordinance is the best way to help low-income families.

Wages? We Don't Need No Stinkin' Wages!

Peter Robinson: We know that there is some significant number of people who would be receiving the living wage who don't need it, they just don't need it. They're not the people you're trying to help.

Ken Jacobs: You say that's true. I don't agree.

Peter Robinson: You don't agree? Everybody, now if you can say a moment ago that it's in study after study after study after study--I repeat that to you--it's in study after study, after study that there's a large proportion of people who receive these minimum wages who are kids, or who are living in a family situation, they're just not poor.

Ken Jacobs: Again, you're not looking at minimum wage laws, you're not looking at the living wage law proposed in San Francisco which specifically excludes you from--

Peter Robinson: All right, for the sake of this argument--so the notion is that a lot of poor people are poor not because they don't get a good hourly wage, but because they don't have a steady job. Poor people are often poor because they don't have jobs in the first place. So let me suggest to you ways of stimulating the creation of jobs.

Ken Jacobs: Cut the--

Peter Robinson: I'm doing the suggesting. Cut the payroll tax, cut the capital gains tax, how about that? Cut taxes to stimulate the creation of jobs, you like that idea?

Ken Jacobs: First let me tell you that you're wrong.

Peter Robinson: No.

Ken Jacobs: Over 50 percent of the people in poverty in California work full-time. Unemployment rates are at record lows. The problem in the economy today is not the lack of jobs. It's the lack of living wage jobs. It's the lack of jobs in which people can survive and support their families.

Peter Robinson: Do you buy that Tom?

Thomas MaCurdy: No, I mean essentially one out of four families in California have a low wage worker. And that one out of four families is evenly distributed across the income distribution.

So the difficulty with raising wages is you, and also another thing to realize is that 25 percent of the increased wage are taken away in various forms of taxes. Social Security taxes, federal income tax, and state income tax.

So the difficulty is by raising wages, you're essentially giving resources to one out of four families, irrespective of where they are in the income distribution--

Peter Robinson: Tom doesn't like the living wage proposal. What kinds of programs does he like?

Waging Bull

Peter Robinson: Tom, give us a couple of alternative ideas. If you were dictator of San Francisco, name two or three.

Thomas MaCurdy: There are many. I mean San Francisco--

Peter Robinson: Can you name one that addressed the bishop's concern of somehow tie in payment to work done?

Thomas MaCurdy: Sure, sure, I mean our current welfare laws have that sort of thing. It may be the case of what you essentially have. Say a housing voucher program that the city sets up. And the housing voucher form, the housing voucher may be in the form. If a worker or family in any kind of combination of husband, wife, wife by themselves, et cetera works a certain number of hours, they get a housing voucher.

The housing voucher may help them out on their rent in any way that one would deem appropriate. Maybe a larger voucher for a larger family size. Or a larger voucher for lower income, but it perfectly targets exactly who you want to help.

Peter Robinson: Like it?

Bishop John C. Wester: I like the idea. I think it's a great idea. I don't think it has to be either/or. I think it should be both ends, it seems to me. This is a complex question. There's so many people that fall through the cracks, I think it's a great idea. And I'm interested in hearing it out.

Thomas MaCurdy: I think it is either/or though, in the sense that I'd rather put--if you tell me you're spending part of the money on supporting low wage workers, and part of the money on a housing program, I'd want all the money in the housing program.

Peter Robinson: At some point it does clearly become a question of targeting your priorities, right?

Bishop John C. Wester: But from what I can gather, I do not think that to establish this living wage is going to put us in such a crisis position that we're going to, everything's going to fall apart.

It's true, you have to live within a budget, but I think we can have a living wage and still live within a budget.

Thomas MaCurdy: Bishop John, I agree it won't fall apart, all right. But I think the position I really want to get across is you can spend the money better. Any resources that you're devoting to this program, you can spend the money better. Because the problem is the low wage program is a very poor targeted anti-poverty program.

Bishop John C. Wester: But why should there be a job that somebody works that doesn't pay sufficiently? I mean to me, I agree, to me there should be a basic standard, a basic standard that is acceptable and decent, and it gives a person a sense of dignity. But anything about that standard, I agree, that's going to depend on the marketplace, and the type of job, and who's affected most.

Peter Robinson: But there are some jobs that are okay for teenagers who are living with their families. Your standards are starting to slip up and be sliding standards.

Bishop John C. Wester: I've often said, I believe I said earlier, that I do think that there has to be some provision made for, say, a teenager who's really not using this as their main job.

Ken Jacobs: Which is included in the proposal.

Thomas MaCurdy: Bishop John, suppose you have a teenager and say a 25-year-old father doing exactly the same job. Is what you're telling me what you want to do is pay that 25-year-old father more? Not in terms of income support, but in terms of their wage? And you think it would have absolutely no impact on how the employer treated that 25-year-old father in terms of how much they worked and all--

Bishop John C. Wester: All the various opportunities have to be worked out, I agree. That's a complicated issue.

Thomas MaCurdy: That's why it is so complicated.

Ken Jacobs: But let's come back to what the real jobs are that we're talking about that would be affected by the law in San Francisco. Baggage screeners at the San Francisco International Airport currently earn $6.25 an hour. Raphael Pindones is a 62-year-old man. Gets to work at nine p.m. Works screening bags, an important security job, until six in the morning. An hour off, works another eight-hour security shift at the airport in order to make ends meet. Gets three to four hours of sleep at night.

What that means is we--

Peter Robinson: Amazing he would make it to 63.

Ken Jacobs: People perform--he is the common person at the--

Thomas MaCurdy: How do you handle that problem?

Ken Jacobs: --San Francisco International Airport.

Thomas MaCurdy: If his family income is low, there are various means of income support that you can provide him. If not vouchers for housing, it can be food stamps, or it could be direct cash pay--

Peter Robinson: Bishop John has just said that he's not fit to judge the economics of the living wage proposal. So what is his rationale for backing it?

A Higher Authority

Peter Robinson: How do you think this through as a bishop, the correct way in which to bring to bear your authority as the vicar of Christ in your diocese on this political question, and not that one when it sounds to me like a pretty close credential call, right?

Bishop John C. Wester: That is a close call it would appear, and that's why I enjoy hearing these different points of view. The church, you said it very clearly, the church is supporting people who have these needs, I think has been clearly stated.

The church is not about the business of mandating or saying, "This is how you should vote." Never would do that. Never say, "You should vote this way." But simply to say, "You have to make this a concern--that we have to look at the economy." Human beings--

Peter Robinson: Your boss, Archbishop Levada, did indeed write an editorial in the San Francisco Chronicle, is where I saw it. Undoubtedly he writes a number of places. Backing, supporting a specific political proposal, which now has the backing of the archbishop of San Francisco, right?

Bishop John C. Wester: Correct.

Peter Robinson: How do you decide to do that?

Bishop John C. Wester: Because we see this as an effective tool for helping these people to get just up to the survival level.

Thomas MaCurdy: Doing it through this sort of program is ineffective for helping the families that you most want to target.

Bishop John C. Wester: From the point of view of that fellow who has worked checking bags, when he gets a check that he can say, "Ah, now this I can at least survive on," that is effective.

That is to me--

Thomas MaCurdy: Not only that, for every one person you get that is in the circumstances you just described, I'll give you three where, in fact, it's just a little more money to add to their overall family income.

Bishop John C. Wester: Why should we--

Peter Robinson: Gentlemen, I'm sorry, it's television. I've got to close it out with a couple, asking you for a couple of predictions. We have about 44 municipalities with a form of living wage proposal already. Three years from now, will San Francisco be 45? Will it be added to that number? Do you actually think the living wage thing will pass? I'm asking for your political call.

Ken Jacobs: I think there's no question, there will be a living wage law in San Francisco.

Peter Robinson: Tom?

Thomas MaCurdy: I don't have any particular insight in this, so--

Peter Robinson: You'll take a pass.

Bishop John C. Wester: I think there will be, yes.

Peter Robinson: And will you be working in favor of it?

Bishop John C. Wester: I will be, yes.

Thomas MaCurdy: The debate won't be over. Even when it passes.

Peter Robinson: Okay, three years from now, will you be backing Tom MaCurdy's housing voucher?

Bishop John C. Wester: I'm going to talk to Tom more after the show.

Ken Jacobs: Probably, I think so.

Peter Robinson: Bishop John, Tom and Ken, thank you very much.

Living wage ordinances. A political activist and a bishop say they're good. An economist says they're bad. Will living wage ordinances fly? Or are they just so much ideological baggage? I'm Peter Robinson, thanks for joining us.