A Living Wage for Richmond

The RTD weighed in today with a shockingly ill-informed attack on the efforts of Richmonders Involved to Strengthen Our Communities (RISC) to promote a local living wage ordinance. The RTD calls on all the old standbys–that working adults won’t really benefit, that it will cause unemployment, that RISC doesn’t trust the free market.

Most of these arguments have already been discussed in this space, so I won’t rehearse them now. Instead I’m going to be working in the next couple of days on an op-ed submission to the paper on this topic.

Here’s a quick preview of a point that I haven’t made already: even if living and minimum wage laws caused a small increase in unemployment (and even the few studies that do find negative effects, find small negative effects), that doesn’t mean a mandated wage increase is bad policy.

Almost all public policies produce both winners and losers; a public policy that produces a net gain but hurts a few people can and should be rounded out by supplemental policies designed to help the “losers”. These might take the form of, for instance, more generous unemployment benefits, expanded training and educational opportunities for the unemployed, and more effective job networking assistance. This is a conventional argument among proponents of “free trade” like Thomas Friedman of The New York Times who argue that aggregate benefits to consumers outweight job losses due to international trade and globalization, but that there need to be trade adjustment policies to assist firms and workers who are directly affected by trade openness.

This observation allows us to look at the living/minimum wage debate in a new light. The academic argument at this point is not whether the costs to low-wage workers outweigh the benefits of a wage increase; it’s about whether there are any costs at all!

Another point I’ll try to work in is how the anti-wage increase argument depends on an orthodox, texbook view of the labor market that ignores lots of evidence that employers have considerable power and discretion in setting wages.

Coincidentally, wage data released by the Bureau of Labor Statistics this week shows that wages have fallen 2% nationally since 2003, even as productivity continues to rise.