Why a ‘Living Wage’ Can Hurt the Poor
Religion & Liberty Online

Why a ‘Living Wage’ Can Hurt the Poor

will-workNear the top of my long and ever-growing list of pet peeves is articles titled, “The Conservative Case for [Insert Proposal Usually Rejected by Conservatives Here].” It’s almost an iron-clad rule that before you even read the article you can be assured of that the case being made will use words that appeal to conservatives while being based on principles that are contrary to conservatism and/or reality.

Take, for example, a recent op-ed in the New Statesman by British Conservative Party politician Guy Opperman titled, “The Conservative case for a living wage.” In his opening paragraph he writes,

As a Conservative MP, I believe that lower taxes stimulate growth and jobs, that smaller government is invariably better government and that governments must “ensure that work always pays” by making sure those in work are better off than those on benefits. I also believe in hard work. Yet, for too many people in our society, a hard day’s work no longer means a fair day’s pay.

This sounds reasonable enough in theory. But when formulating public policy we have to have to use more precise terms. For instance, what do the phrases “hard work” and a “fair day’s pay” mean when it comes to determining a living wage? Does the difficulty of work automatically mean that the work is deserving of a set level of pay?

Opperman seems to believe that if a person is working a full-time job, that they are thereby entitled – regardless of the work they are doing – to receive a living wage:

Britain is a country in which some workers earn so little that the government has to step in and provide aid. That is the system of tax credits we have; a subsidy by any other name and a £4bn one at that. How and why did we let it become acceptable for a full-time job not to pay enough to live on? The living wage isn’t just a wonkish idea – it’s the political world catching up with many Britons’ reality.

When the national minimum wage was adopted in 1998, many were sceptical. The fear was that it might hit the number of jobs available. There is ample evidence to show this is not the case. For instance, in 2012 the Institute for Social and Economic Research at the University of Essex studied the minimum wage and “found almost no evidence of significant adverse impacts on employment”. Today, the minimum wage is supported by all three mainstream parties and rightly so. Yet, for many, the minimum wage does not represent a fair wage.

Opperman claims there is no evidence that the minimum wage has any significant adverse effect on employment. I’m sure that will come as quite a surprise to the 973,000 young people aged 16-24 in Great Britain that are unemployed. The unemployment rate for that age group in May 2013 was 21.4 percent. If Mr. Opperman is correct, than there are minimum wages jobs available to every young person that wants one and the only reason they remain unemployed is because they refuse to work for such low wages. Does anyone think that is actually the case? If not, then we can set aside the silly notion that minimum wage laws do not adversely affect employment.

And therein lies the rub for the “living wage.” If there are not enough jobs to be had at the minimum wage, there will be even fewer jobs to be had when the wage rate is artificially inflated to an even higher living wage standard. If an employer is not willing to pay $7 for labor that is only worth $4, why would they pay $11? By raising the minimum wage they won’t be incentivized to add more employees, but merely incentivized to eliminate all the jobs whose labor is not valued at $11 or more.

The effect of a government-imposed living wage would, like the effect of the current minimum wage, be to hurt the poor by reducing the number of jobs available for low-skilled, low productivity workers.

However, Opperman is right that a living wage is a worthy goal, and one that conservatives should seek to achieve. To do this effectively, though, requires more than forcing employers to pay a premium for labor. Instead, we should focus on faster economic growth and improving productivity of low-skilled workers. By increasing the value of a worker’s labor, we make it possible for them not only to feed their family but also to help fulfill the needs and desires of their neighbors.

Progressives propose government-mandated redistribution as the solution to almost every economic problem involving the poor. But such short-term fixes do not change the long-term challenges that are passed on from generation to generation. Low-skilled parents tend to raise low-skilled children, trapping them in a cycle of low wages. Only by increasing the real value of a worker’s labor – primarily through gains in productivity – can we truly help them gain financial security and increase social mobility.

The goal should not be to merely give people a living wage but to help them gain the ability to make a life for themselves based on the value of their labor. What the working poor need most is marketable skills and productive jobs, not more handouts disguised as “wages.”

Joe Carter

Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).