Over the last decade, a savvy left-wing political movement, supported by radical economic groups, liberal foundations, and urban activists, has lobbied for a government-guaranteed “living wage” for low-income workers considerably higher than the current minimum wage. The movement has scored enormous success: 80 cities nationwide, from New York to San Francisco, now have living-wage legislation in place. Many of the earliest laws were narrowly focused on workers at companies with government contracts. But as the movement has grown, it has successfully imposed its mandate on a wider array of businesses; one city has even passed a citywide living wage.
This is bad news for cities.The living wage poses a big threat to their economic health, because the costs and restrictions it imposes on the private sector will destroy jobs —especially low-wage jobs — and send businesses fleeing to other locales. Worse still, the living-wage movement’s agenda doesn’t end with forcing private employers to increase wages. It includes opposing privatization schemes, strong-arming companies into accepting employee unions, and other economic policies equally harmful to urban health.
The living-wage movement got its start in mid-1990s Baltimore, whose radical urban politics and anti-business ethos provided fertile ground. Supporters hailed a 1993 living-wage increase as a costless victory for low-income workers. Far from turning into a workers’ paradise, though, Baltimore saw its economy crash and burn during the mid-1990s, with 58,000 jobs disappearing, even as the rest of Maryland added 120,000 jobs and other cities across the country prospered.
Sensible observers would call Baltimore in the nineties an urban disaster, but to the nascent living-wage movement, the city became the poster child for future activism. Looking to the “success” of the living-wage campaign in Baltimore, a host of left-wing groups, including the Association for Community Reform Now, or Acorn, joined forces in 1995 in a national “Campaign for an America That Works,” which made the living wage central to its demands. On the local level, where the political environment is usually far to the left of Washington, it popularized the living-wage idea, which began to catch on in city after city.
As it spread beyond Baltimore, the living-wage movement at first purposely kept its aims narrow. Early legislative victories applied to just a few workers. New York City’s law, passed over Mayor Giuliani’s veto, applied only to government-contracted security personnel, cleaning workers, and temporary employees.
Soon, though, living-wage supporters began to win ever broader laws, covering ever more workers and businesses. In early 2002, New Orleans, Acorn’s national home, enacted the first citywide living wage in the nation. Today, 42 states now have at least one municipality with living-wage legislation.
Living-wage campaigns have repeatedly outflanked the business community by practicing what Acorn calls “legislative outmaneuver.” Local groups work behind the scenes for months before going public. They draft partisan economists to release timely studies on the prospective benefits of the living wage before opponents can come up with any countering data, and they try to keep any actual legislation off the table until the last minute, so that there’s no fixed target for opponents to get a bead on.
Acorn’s stealth tactics worked particularly well in Detroit. The Motor City business community had no idea that a living-wage ordinance was about to wallop them until just weeks before it showed up on a citywide referendum. Same story in Boston: “The living-wage ordinance wasn’t picked up on the radar until it was too late,” complained a local business publication.
Providing the intellectual muscle for the living-wage movement is a small group of Marxoid economists, led by University of Massachusetts-Amherst professor Robert Pollin. Mr. Pollin, a New School Ph.D., co-authored (with Stephanie Luce) the book that has become the movement’s bible: “The Living Wage: Building a Fair Economy.”
In “The Living Wage,” the class war rages on—and on. Businesses, assert Pollin and Luce, have grown increasingly hostile toward workers in recent years.Their sole evidence for this claim—that the unionization rate has plummeted over the last three decades—ignores the conventional explanations for union decline in the America: more intense global competition, the shift to a service-oriented, knowledge-based economy, and more generous benefits at non-unionized companies. But never mind: to keep the ravenous capitalists under control, they argue, government clearly needs to impose a national living wage on the private sector. And that’s just the beginning. Caps on profits, mandated benefits, rules to make unionization easier, massive taxation—government will manage the economy from top to bottom in the warmed-over socialism of “The Living Wage.”
The complete rejection of a free-market economy by these living-wage gurus—and by the living-wage movement itself—is too much even for many liberal economists. One of the most telling critiques of The Living Wage came from self-professed liberal economist and New York Times columnist Paul Krugman. In an article archived on the “cranks” section of his website, Krugman observes that “what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price—determined by supply and demand.”
But then, if living-wage advocates truly understood the free market, they’d know that it ultimately is far more moral than the centrally controlled economic system they endorse. If there is one thing that the last 50 years tell us, it is that the free market provides far greater economic opportunity and a decent standard of living for far more people than government-controlled markets.
Joining the radical economists on the front lines of living-wage campaigns are the unions, which have their own reasons for supporting the legislation. No wonder that many living-wage campaigns erupt in places where unions are fighting tough organizing battles with local businesses. Uniontailored living-wage laws are so blatantly pro-labor that they may be illegal. When a law forces employers to choose between paying higher wages and accepting a union, says Atlanta labor lawyer Arch Stokes, it amounts to a collective-bargaining ordinance. Municipalities don’t have the legal right to supersede federal labor law and pass such legislation.
Municipal unions like living-wage laws, too, for a different reason. By raising the cost of city contracts, these laws make privatization efforts less appealing and thus protect the cushy jobs of city workers. After all, if cities can’t save much money by contracting out work traditionally done by high-paid municipal workers, what is the point of privatizing? Acorn puts it bluntly in its manual: “The Living Wage undercuts the incentive to privatize.”
Activists are working hard to expand the number of those covered by existing livingwage legislation. In New York City, one of the first places to enact a living-wage law, the new City Council and Mayor Bloomberg recently extended it to 50,000 or so privately employed health-care workers. The powerful union SEIU/1199, representing some home health-care workers who fall under the extended legislation, lobbied heavily for the change. Thanks to Mayor Bloomberg, New York will now have the largest number of workers covered by any living-wage law in the nation.
It’s not just the number of those covered that the movement wants to expand.
Acorn activists have begun advocating more capacious living-wage laws that incorporate affirmative-action requirements, restrictions on employers’ use of part-time workers, mandatory vacation time, and prohibitions on using revenues from public contracts to hire law firms to resist unionorganizing efforts.
As living-wage laws get broader and more expansive, supporters are also trying to offload some of the cost, increasingly burdensome to cities, onto the states and the federal government. The revision of the New York City law, for instance, zeroed in on health-care workers because many of them work in state-funded institutions. City Council members who sponsored the legislation justified it by saying that the state’s share of the cost will be five or six times higher than the city’s.
Emboldened by their successes, living-wage advocates have gone on to help organize local coalitions to lobby for much broader left-wing economic programs, under the slogan “sustainable economics.” Sustainable economics covers a whole agenda of government social and fiscal policies to redistribute income and regulate business that add up to socialism by another name. The Milwaukee coalition responsible for that city’s living-wage law, for example, is now pushing for an economic development plan that includes more money for community job-training programs, laws that bolster union organizing and that require “socially responsible banking,” government investment to create “ environmentally friendly” jobs. Its agenda even leaps beyond economics to require multicultural public school curricula, more ethnically diverse teaching staffs, and greater inclusion in curricula of topics such as workers’ rights, the history of the labor movement, and family leave laws.
Having created the policies on taxation, crime, and education that propelled the middle class out of urban America in the first place, the left is now looking for a way to slow that flight by governmental fiat. It’s yet more bad news for cities—especially since the rest of the country fortunately is still free and has plenty of room.
Mr. Malanga is a contributing editor of the Manhattan Institute’s City Journal, from whose Winter 2003 number this is adapted.
This piece originally appeared in The New York Sun