What is a living wage?
The fight over what constitutes a desirable minimum wage is an unending, often bitter one whose implications divide scholars and economists across the ideological spectrum. As part of the debate, however, we never get to the far more difficult questions of what provides an actual “living wage” and what it would take to get there.
In 2003, San Francisco passed an ordinance linking its minimum wage to a regional inflation index and, since 2004, hourly pay there has risen from $8.50 an hour to $10.55, the nation’s highest.
And Los Angeles has long been in the forefront of the movement to require employers in specific economic sectors or geographic areas to pay more than the federally set national hourly minimum of $7.25. Since passage of a so-called living wage statute in 1999, the minimum hourly wage for employees at Los Angeles International Airport has been $15.67. Two years earlier, a similarly labeled law set the hourly living wage for workers at 13 nearby hotels at $11.97.
Now the L.A. City Council is considering an ordinance that would increase the minimum pay for employees at the 87 Los Angeles hotels with 100 or more rooms to $15 an hour.
These efforts are healthy improvements on the federal standard, but none provide – as advertised – a living wage. They are merely higher minimum wages.
The term “living wage” was first used in 1906 by Monsignor John A. Ryan, a Catholic theologian and labor economist. He defined such a wage as one sufficient to support a working man, his wife and three children in dignity and “prudently austere comfort.” Ryan argued that, in his era, a living wage would have to provide an annual income of between $1,400 and $1,500.
If you accept Ryan’s definition of a living wage – and it still seems a pretty good one – and factor in the 4.24 percent annualized rate of inflation since 1919, when reliable numbers became available, then today’s actual living wage would have to provide between $56,388 and $60,416 a year. Nothing currently being proposed in Los Angeles, San Francisco or elsewhere in the country comes even close to that.
One national group promoting the living wage has estimated that, if that’s what Los Angeles really wants to achieve, for our theoretical family of five, it would have to adopt a citywide hourly minimum of $27.97, which would yield an annual income of $58,171.
Under current federal standards, such a family is defined as poor if its annual income is $27,570 or less. That’s particularly important in Los Angeles because while the city’s actual poverty rate is about 30 percent, more than three-quarters of those living at or below the levels set by the federal standards reside in households with one or more working members.
Any increase in pay levels is going to help them, but nothing now being considered truly can be called a living wage. If, for example, the L.A. City Council directs that workers at large hotels get $15 an hour, and you assume they work 50 weeks each year at 40 hours, that comes out to an annual income of $30,000.
Congress currently is weighing legislation that would increase the federal minimum to $10.10 an hour by 2016. Even though that’s a nearly 40 percent increase, it would only provide someone employed full time at the minimum wage with $21,008 a year. That still leaves a family of four below the poverty line.
A municipal minimum wage higher than that required in surrounding towns and cities may well encourage businesses simply to move into adjoining jurisdictions. A statewide standard would make more sense. However, California can ill afford to make itself even less competitive with low-wage, low-tax states. Still, we can’t turn away from the fact that more than one in four of California’s residents live below the poverty line.
Obviously, any effective wage formula would have to be a federal one, but what would a national living wage look like in a sprawling country where the cost of living varies so dramatically? Reliable calculations put a living wage at $16.31 an hour in Williston, N.D., and $22.32 in New York City; $16.89 in Atlanta and $22.95 in Los Angeles. How does a law deal with that?
To cite just one other unavoidable issue: Given the globalization of the economy, if the United States adopted a living wage, why wouldn’t capital and jobs just move to lower-cost countries?
These are not easy questions, but if we don’t begin grappling with them, inequality will continue to grow and, along with it, the social resentments that undermine national stability.
Riordan is the former mayor of Los Angeles. Rutten is a long-time L.A.-based journalist and commentator.