The Costs of the Living Wage

The cost of strategies such as living wage campaigns are born primarily by small to medium sized businesses. And guess which businesses are more likely to be locally owned? And although most large business absorb the increases by raising prices or accepting lower profit levels, some small business, especially those with under a 100 employees are forced to replace high-skilled workers. So although the employment levels looked good overal in areas where living wage ordinances were passedl, and in some cases employment levels even improved, it was also true that some high skilled jobs were lost. Most ordinances, however, do exempt employers below a certain size, in Santa Fe business with fewer than 25 employees were exempted. In this way some protection was offered for the smaller family owned shops. However, we need to remember that local ordinances that ensure living wages primarily affect local merchants.

Even given these concerns, it still makes economic sense overall to raise minimum wages. We just need to do more than just raise wages. As several business groups have rightly pointed out, the real problem is not wages so much as escalating housing and healthcare costs. Larger businesses absorb the cost of living wage ordinances, primarily, because they can either simply make up for the loss in other locations or spread the price increases over a larger base. Small and medium sized businesses do not have the ability to absorb costs as readily, and many are already vulnerable to the low price strategies of big box stores such as Wal-Mart. Conversely, housing subsidies and universal healthcare are strategies whose costs are born by all taxpayers. Modest increases in minimum wages in concert with housing subsidies and universal health care would go along way toward actually changing the economic landscape for poor families without over burdening already struggling local businesses.

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