[Paleopsych] NYT: What Is a Living Wage?
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What Is a Living Wage?
http://select.nytimes.com/preview/2006/01/15/magazine/1124993105428.html
[This article is thorough proof that the Triune God botched our brains.
David Card's infamous article is the only evidence cited. It looked
ridiculous to me on its surface. Since it overturned some very basic
economic principles, it cried out for replication and followups. The
Journal of Economic Perspectives carries a regular column called
"Anomalies," which goes to show that economists are quite willing to Check
their own Premises (except in the case of group differences in innate
intelligence: shouldn't this play the greatest role in "The Wealth of
Nations," the title of the founding book in the field? There is a book,
"IQ and the Wealth of Nations," by Richard Lynn, who is NOT an economist.
IQ is the top explanatory variable, followed next by the stupidity of the
economic system.
[After reading about Card, I just hastily glanced through the rest, which
seemed to be nothing but preposterous moralizing. If I'm wrong, and you
can get through it, alert me.]
By JON GERTNER
If It Happened in Baltimore, Maybe It Can Happen Anywhere
For a few weeks in the summer of 1995, Jen Kern spent her days at a
table in the Library of Congress in Washington, poring over the fine
print of state constitutions from around the country. This was, at the
time, a somewhat-eccentric strategy to fight poverty in America. Kern
was not a high-powered lawyer or politician; she was 25 and held a
low-paying, policy-related job at Acorn, the national community
organization. Yet to understand why living-wage campaigns matter -
where they began, what they mean, and why they inspire such passion
and hope - it helps to consider what Kern was doing years ago in the
library, reading obscure legislation from states like Missouri and New
Mexico.
A few months earlier, she and her colleagues at Acorn witnessed an
energetic grass-roots campaign in Baltimore, led by a coalition of
church groups and labor unions. Workers in some of Baltimore's
homeless shelters and soup kitchens had noticed something new and
troubling about many of the visitors coming in for meals and shelter:
they happened to have full-time jobs. In response, local religious
leaders successfully persuaded the City Council to raise the base pay
for city contract workers to $6.10 an hour from $4.25, the federal
minimum at the time. The Baltimore campaign was ostensibly about
money. But to those who thought about it more deeply, it was about the
force of particular moral propositions: first, that work should be
rewarded, and second, that no one who works full time should have to
live in poverty.
So Kern and another colleague were dispatched to find out if what
happened in Baltimore could be tried - and expanded - elsewhere. As
she plowed through documents, Kern was unsure whether to look for a
particular law or the absence of one. Really, what she was trying to
do was compile a list of places in the U.S. where citizens or
officials could legally mount campaigns to raise the minimum wage
above the federal standard. In other words, she needed to know if
anything stood in the way, like a state regulation or court decision.
What she discovered was that in many states a law more ambitious than
Baltimore's - one that didn't apply to only city contractors but to
all local businesses - seemed permissible.
Whether a wage campaign was winnable turned out to be a more
complicated matter. In the late 1990's, Kern helped Acorn in a series
of attempts to raise the minimum wage in Denver, Houston and Missouri.
They all failed. "It wasn't even close," she says. In the past few
years, though, as the federal minimum wage has remained fixed at $5.15
and the cost of living (specifically housing) has risen drastically in
many regions, similar campaigns have produced so many victories
(currently, 134) that Kern speaks collectively of "a widespread
living-wage movement."
Santa Fe has been one of the movement's crowning achievements. This
month the city's minimum wage rose to $9.50 an hour, the highest rate
in the United States. But other recent victories include San Francisco
in 2003 and Nevada in 2004. And if a ending bill in Chicago is any
indication, the battles over wage laws will soon evolve into campaigns
to force large, private-sector businesses like Wal-Mart to provide not
only higher wages but also more money for employee health care.
It is a common sentiment that economic fairness - or economic justice,
as living-wage advocates phrase it - should, or must, come in a
sweeping and righteous gesture from the top. From Washington, that is.
But most wage campaigns arise from the bottom, from residents and
low-level officials and from cities and states - from everywhere
except the federal government. "I think what the living-wage movement
has done in the past 11 years is incredible," David Neumark, a
frequent critic of the phenomenon who is a senior fellow at the Public
Policy Institute of California, told me recently. "How many other
issues are there where progressives have been this successful? I can't
think of one."
The immediate goal for living-wage strategists is to put initiatives
on the ballots in several swing states this year. If their reckoning
is correct, the laws should effect a financial gain for low-income
workers and boost turnout for candidates who campaign for higher
wages. In Florida, a ballot initiative to raise the state's minimum
wage by a dollar, to $6.15, won 71 percent of the vote in 2004, a
blowout that surprised even people like Kern, who spent several weeks
in Miami working on the measure. "We would like it to become a fact of
political life," Kern says, "where every year the other side has to
contend with a minimum-wage law in some state." Though victories like
the one in Florida may have done little to help the Kerry-Edwards
ticket - George Bush won 52 percent of the state's vote - Kern and
some in the Democratic establishment have come to believe that the
left, after years of electoral frustration, has finally found its
ultimate moral-values issue. "This is what moves people to the polls
now," Kern insists. "This is our gay marriage." Already, during the
past few months, a coalition of grass-roots and labor organizations
have begun gathering hundreds of thousands of signatures to ensure
that proposed laws to increase wages are voted on in November. The
first targets, Kern told me, will be Arizona, Colorado, Michigan and
Ohio. Next in line, either this year or soon after, are Montana,
Oklahoma and Arkansas, the home of Wal-Mart.
Does America Care About the Gap Between Rich and Poor?
I first met Kern on a sunny morning in late September in Albuquerque,
a city of 4770,000 that made her list when she was working in the
Library of Congress 10 years ago. She was now, at age 35, campaigning
for a ballot initiative that would raise the minimum wage in the city
to $7.50 an hour from $5.15. There was no face for the placards, no
charismatic presence to rally the troops at midnight or shake hands at
dawn outside 7-Eleven. Instead, there was a number, $7.50, a troop of
campaign workers to canvass the neighborhoods and an argument: that
many low-wage workers were being paid poverty wages. That a full-time
job at the federal minimum rate added up to $10,712 a year. That local
businesses could afford the pay raise. And that it was up to the
voters to restore balance.
One of the more intriguing questions about campaigns like the one in
Albuquerque, and those planned for swing states next fall, is whether
they reflect a profound sense of public alarm about the divergence
between rich and poor in this country. Certainly most Americans do not
support higher wages out of immediate self-interest. Probably only
around 3 percent of those in the work force are actually paid $5.15 or
less an hour; most low-wage workers, including Wal-Mart employees, who
generally start at between $6.50 and $7.50 an hour, earn more.
Increasing the minimum wage to $7.25 an hour would directly affect the
wages of only about 7 percent of the work force. Nevertheless,
pollsters have discovered that a hypothetical state ballot measure
typically generates support of around 70 percent. A recent poll by the
Pew Research Center actually put the support for raising the national
minimum wage to $6.45 at 86 percent. Rick Berman, a lobbyist who
started the Employment Policies Institute and who is a longtime foe of
living-wage laws, agrees that "the natural tendency is for people to
support these things. They believe it's a free lunch." On the other
hand, the electorate's reasons for crossing party lines to endorse the
measures may be due to the simple fact that at least 60 percent of
Americans have at one time or another been paid the minimum wage.
Voters may just know precisely what they're voting for and why.
In the mid-1990's, the last time Congress raised the minimum wage, the
Clinton White House was reluctant to start a war over the federal
rate, according to Robert Reich, the former labor secretary. For an
administration bent on policy innovation, that would have seemed "old"
Democrat. "Then we did some polling and discovered that the public is
overwhelmingly in favor," Reich told me recently. "At which point the
White House gave the green light to Democrats in Congress." Reich, now
a professor at the University of California, Berkeley, happens to view
the minimum wage as a somewhat inefficient tool for alleviating
poverty (compared with earned income tax credits, say). But he
acknowledges that it has a powerful moral and political impact, in
states red as well as blue, and especially now, in an era when workers
see the social contract with their employers vanishing. "They see
neighbors and friends being fired for no reason by profitable
companies, executives making off like bandits while thousands of their
own workers are being laid off," Reich says. "They see health
insurance drying up, employer pensions shrinking. Promises to retirees
of health benefits are simply thrown overboard. The whole system has
aspects that seem grossly immoral to average working people." As Reich
points out, whatever the minimum wage's limitations may be as a policy
instrument, as an idea "it demarcates our concept of decency with
regard to work."
The idea, Reich points out, isn't new, even if the recent fervor for
it is. Massachusetts enacted a state minimum wage in 1912, several
decades before the federal minimum wage of 25 cents an hour was
adopted in 1938. And most of the wage ordinances of the past decade
specifically trace their origins back to Baltimore, in 1995. After
that moment, in fact, the phrase "living wage" soon caught on - or,
you might say, returned. It was a popular workers' refrain in the late
19th century and was the title of a 1906 book by John Ryan, a Roman
Catholic priest. In the late 1990's, a loose national network of
advocates sprang up, incorporating organized labor, grass-roots groups
like Acorn and the Industrial Areas Foundation and, more recently, the
National Council of Churches. Legal advice often came out of the
Brennan Center for Justice at New York University's law school, where
a lawyer named Paul Sonn helped write wage ordinances and ballot
measures for various states and cities.
By dint of its piecemeal, localized progress, the modern living-wage
movement has grown without fanfare; one reason is that until recently,
most of the past decade's wage laws, like Baltimore's, have been
narrow in scope and modest in effect. Strictly speaking, a "living
wage" law has typically required that any company receiving city
contracts, and thus taxpayers' money, must pay its workers a wage far
above the federal minimum, usually between $9 and $11 an hour. These
regulations often apply to employees at companies to which
municipalities have outsourced tasks like garbage collection, security
services and home health care. Low-wage workers in the private sector
- in restaurants, hotels, retail stores or the like - have been
unaffected. Their pay stays the same.
In Santa Fe, the City Council passed a similar kind of wage law in
2002, raising the hourly pay for city employees and contractors. Some
officials in Santa Fe, however, had decided from the start that its
wage rules should ultimately be different - that the small city
(population 666,000) could even serve as a test example for the rest
of the U.S. Early on, several city councilors told me, they
anticipated that Santa Fe - with a high cost of living, a large
community of low-paid immigrants and a liberal City Council - would
eventually extend its wage floor to all local businesses, private as
well as public, so that every worker in the city, no matter the
industry, would make more than $5.15. The initial numbers the
councilors considered as they began to strategize seemed
stratospheric: a living wage that began at $10 or $12 or even $14.50
an hour. For some laborers, that would constitute a raise of 200
percent or more. Nothing remotely like it existed in any other city in
the country.
The Economists Are Surprised
In the years before the enactment of the federal minimum wage in the
late 1930's, the country's post-Depression economy was so weak that
the notion that government should leave private business to its own
devices was effectively marginalized. During the past few decades,
though, in the wake of a fairly robust economy, debates on raising the
minimum wage have consistently resulted in a rhetorical caterwaul.
While the arguments have usually been between those on the labor side,
who think the minimum wage should be raised substantially, and those
on the employer side, who oppose any increase, a smaller but vocal
contingent has claimed, more broadly and more philosophically, that it
is in the best interest of both business and labor to let the market
set wages, not the politicians. And certainly not the voters.
This last position was long underpinned by the academic consensus that
a rise in the minimum wage hurts employment by interfering with the
flow of supply and demand. In simplest terms, most economists accepted
that when government forces businesses to pay higher wages,
businesses, in turn ,hire fewer employees. It is a powerful argument
against the minimum wage, since it suggests that private businesses as
a group, along with teenagers and low-wage employees, will be
penalized by a mandatory raise.
The tenor of this debate began to change in the mid-1990's following
some work done by two Princeton economists, David Card (now at the
University of California at Berkeley) and Alan B. Krueger. In 1992,
New Jersey increased the state minimum wage to $5.05 an hour
(applicable to both the public and private sectors), which gave the
two young professors an opportunity to study the comparative effects
of that raise on fast-food restaurants and low-wage employment in New
Jersey and Pennsylvania, where the minimum wage remained at the
federal level of $4.25 an hour. Card and Krueger agreed that the
hypothesis that a rise in wages would destroy jobs was "one of the
clearest and most widely appreciated in the field of economics." Both
told me they believed, at the start, that their work would reinforce
that hypothesis. But in 1995, and again in 2000, the two academics
effectively shredded the conventional wisdom. Their data demonstrated
that a modest increase in wages did not appear to cause any
significant harm to employment; in some cases, a rise in the minimum
wage even resulted in a slight increase in employment.
Card and Krueger's conclusions have not necessarily made philosophical
converts of Congress or the current administration. Attempts to raise
the federal minimum wage - led by Senators [3]Edward M. Kennedy on the
left and Rick Santorum on the right - have made little headway over
the past few years. And the White House went so far as to temporarily
suspend the obligation of businesses with U.S. government construction
contracts to pay so-called prevailing wages (that is, whatever is paid
to a majority of workers in an industry in a particular area) during
the rebuilding after Hurricane Katrina. David Card, who seems nothing
short of disgusted by the ideological nature of the debates over the
wage issue, says he feels that opinions on the minimum wage are so
politically entrenched that even the most scientific studies can't
change anyone's mind. "People think we're biased, partisan," he says.
And he's probably right. While Card has never advocated for or against
raising the minimum wage, many who oppose wage laws have made exactly
those assertions about his research. Nonetheless, in Krueger's view,
he and Card changed the debate. "I'm willing to declare a partial
victory," Krueger told me. Some recent surveys of top academics show a
significant majority now agree that a modest raise in the minimum wage
does little to harm employment, he points out.
If nothing else, Card and Krueger's findings have provided persuasive
data, and a degree of legitimacy, to those who maintain that raising
the minimum wage, whether at the city, state or federal level, need
not be toxic. The Economic Policy Institute, which endorses wage
regulations, has succeeded recently in getting hundreds of respected
economists - excluding Card and Krueger, however, who choose to remain
outside the debate - to support raising the federal minimum to $7 an
hour. That would have been impossible as recently as five years ago,
says Jeff Chapman, an economist at the E.P.I. Even Wal-Mart's
president and C.E.O., Lee Scott, recently spoke out in favor of
raising the minimum wage. It wasn't altruism or economic theory or
even public relations that motivated him, but a matter of bottom-line
practicality. "Our current average hourly wage for workers is $9.68,"
Lee Culpepper, a Wal-Mart spokesman, told me. "So I would think
raising the wage would have minimal impact on our workers. But we
think it would have a beneficial effect on our customers."
What a Higher Minimum Wage Can Mean to Those Making It
One evening in Santa Fe, I sat down with some of the people Wal-Mart
is worried about. Like Louis Alvarez, a 58-year-old cafeteria worker
in the Santa Fe schools who for many years helped prepare daily meals
for 700 children. For that he was paid $6.85 an hour and brought home
$203 every two weeks. He had no disposable income - indeed, he wasn't
sure what I meant by disposable income; he barely had money for rent.
Statistically speaking, he was far below the poverty line, which for a
family of two is about $12,800 a year. For Alvarez, an increase in the
minimum wage meant he would be able to afford to go to flea markets,
he said.
I also met with Ashley Gutierrez, 20, and Adelina Reyes, 19, who have
low-paying customer-service and restaurant jobs. By most estimates, 35
percent of those who make $7 an hour or less in the U.S. are
teenagers. A few months ago, Reyes told me, she was spending 86 hours
every two weeks at two minimum-wage jobs to pay for her car and to pay
for college. Gutierrez, also in school, was working 20 hours a week at
Blockbuster video for the minimum wage. People like Alvarez and
Gutierrez and Reyes were the ones who spurred two city councilors in
Santa Fe, Frank Montaño and Jimmie Martinez, to introduce the
living-wage ordinance. "Our schools here don't do so well," Montaño
told me, explaining that he believed higher-wage jobs would let
parents, who might otherwise have to work a second job, spend more
time with their children. (At the same time working teenagers like
Gutierrez would have more time with their parents.) For Santa Fe
residents who were living five or six to a room in two-bedroom adobes,
Montaño said he hoped a higher minimum wage might put having their own
places to live at least within the realm of possibility.
Montaño was confident - perhaps too confident, as it would turn out -
that businesses would become acclimated to higher payroll costs. He
has run a restaurant and a tour-bus company himself, and he knew that
the tight labor market in Santa Fe had pushed up wages so that many
entry-level workers were already earning more than $8 an hour. "The
business owners believe that government, especially at the local
level, should not dictate to business, so to them it was a matter of
principle," Montaño says. It was to him too. "We knew that other
communities were watching what we were doing," he explains. He and his
colleagues on the council were already receiving help from Paul Sonn
at the Brennan Center in New York. "I knew that their involvement
meant that they saw this as something that was important nationally,"
Montaño says. "As we got our foot in the door in terms of this
ordinance being applied to the private sector," he surmised, that
would give the living-wage network the ammunition to help other
communities across the country do likewise. "I always knew, early on,"
Montaño says, "that if Santa Fe enacted such an ordinance, that it
likely would go to court, and that if it passed the legal test, it
would be the kind of ordinance that other communities would copy." The
problem, at least from Montaño's perspective, was getting it enacted
in the first place.
The Moral Argument Carries the Day in Santa Fe
Santa Fe's City Council asked nine residents, representing the
interests of labor and management, to join a round table that would
settle the specifics of the proposed living-wage law - how high the
wage would be, for instance, and how soon it would be phased in. Some
members of the round table, like Al Lucero, who owns a popular local
restaurant, Maria's New Mexican Kitchen, found the entire premise of a
city wage law objectionable. "I think the minimum wage at $5.15 is
ridiculous," Lucero told me. "If the state were to raise it overall,
to $7 an hour or $7.50 an hour, I think that would be wonderful. I
think we need to do it." But $9 or $10 or $11 was too high, in his
view - and it would put Santa Fe at a disadvantage to other cities in
the state or region that could pay workers less. Also, there were the
free-market principles that Frank Montaño had anticipated: "They were
trying to push and tell us how to live our lives and how to conduct
our business," says Lucero, who employs about 60 people.
Not surprisingly, Lucero's opponents on the round table saw things in
a different light. For example, Carol Oppenheimer, a labor attorney,
viewed the proposed law as a practical and immediate solution. "I got
involved with the living-wage network because unions are having a very
hard time," she told me. She assumed that local businesses could
manage with a higher payroll. Yet after only a few meetings of the
task force, both sides dug in, according to Oppenheimer.
It was then that the living-wage proponents hit on a scorched-earth,
tactical approach. "What really got the other side was when we said,
'It's just immoral to pay people $5.15, they can't live on that,' "
Oppenheimer recalls. "It made the businesspeople furious. And we
realized then that we had something there, so we said it over and over
again. Forget the economic argument. This was a moral one. It made
them crazy. And we knew that was our issue."
The moral argument soon trumped all others. The possibility that a
rise in the minimum wage, even a very substantial one, would create
unemployment or compromise the health of the city's small businesses
was not necessarily irrelevant. Yet for many in Santa Fe, that came to
be seen as an ancillary issue, one that inevitably led to fruitless
discussions in which opposing sides cited conflicting studies or
anecdotal evidence. Maybe all of that was beside the point, anyway.
Does it - or should it - even matter what a wage increase does to a
local economy, barring some kind of catastrophic change? Should an
employer be allowed to pay a full-time employee $5.15 an hour, this
argument went, if that's no longer enough to live on? Is it just under
our system of government? Or in the eyes of God?
The Rev. Jerome Martinez, the city's influential monsignor, began to
throw his support behind the living-wage ordinance. When I met with
him in his parish, in a tidy, paneled office near the imposing
18th-century church that looks over the city plaza, Martinez traced
for me the moral justification for a living wage back to the
encyclicals of Popes Leo XIII and Pius XI and John Paul II, in which
the pontiffs warned against the excesses of capitalism. "The church's
position on social justice is long established," Father Jerome said.
"I think unfortunately it's one of our best-kept secrets."
I asked if it had been a difficult decision to support the wage law.
He smiled slightly. "It was a no-brainer," he said. "You know, I am
not by nature a political person. I have gotten a lot of grief from
some people, business owners, who say, 'Father, why don't you stick to
religion?' Well, pardon me - this is religion. The scripture is full
of matters of justice. How can you worship a God that you do not see
and then oppress the workers that you do see?"
I heard refrains of the moral argument all over Santa Fe. One
afternoon I walked around the city with Morty Simon, a labor lawyer
and a staunch supporter of the living wage whose wife is Carol
Oppenheimer. "This used to be the Sears," Simon told me as we walked,
pointing to boutiques and high-end chain stores. "And we had a
supermarket over here, and there was a hardware store too." Simon came
to Santa Fe 34 years ago as a refugee from New York, he said, and for
him the unpretentious city he once knew was gone. The wealthy retirees
and second-home buyers had come in droves, and so had the movie stars.
Gene Hackman and Val Kilmer had settled here; Simon had recently found
out that someone had plans for a 26,000-square-foot house, a new local
record. For him, the moral component of the law, the possibility of
regaining some kind of balance, was what mattered. "It was really a
question of, what kind of world do you want to live in?" he said.
Several Santa Fe councilors had, over the course of the previous year,
come to Morty Simon's view that the wage ordinance presented an
opportunity to stop the drift between haves and have-nots. Carol
Robertson Lopez, for example, had initially opposed the living-wage
law but changed her mind after 30 hours of debate. "We take risks,
oftentimes, to benefit businesses," she told me, "and we take risks to
benefit different sectors. I felt like this was an economic risk that
we were taking on behalf of the worker." She acknowledged that some
residents thought the city had started down a slippery slope toward
socialism; jokes about the People's Republic of Santa Fe were rampant.
But Robertson Lopez says that by the night of the vote she had few
reservations. "I think the living wage is an indicator of when we've
given up on the federal government to solve our problems," she says.
"So local people have to take it on their own."
The living-wage ordinance had its final hearing on Feb. 26, 2003, in a
rancorous debate that drew 600 people and lasted until 3 a.m. The
proposal set a wage floor at $8.50 an hour, which would increase to
$9.50 in January 2006 and $10.50 in 2008. It would also regulate only
businesses with 25 or more employees.
It passed the City Council easily, by a vote of 7 to 1. A few weeks
later, a group of restaurant and hotel owners filed suit in state
court on the grounds that the living-wage ordinance exceeded the
city's powers and was a violation of their rights under New Mexico's
constitution. A judge suspended the wage law until a trial could
resolve the issues.
Businesses Fight Back
To business owners in Santa Fe, the most worrisome aspect of the
living-wage law is that the city has sailed into uncharted territory.
Most of the minimum-wage campaigns in the U.S. have been modest
increases of a dollar or a dollar and a half. The numerous state
campaigns for 2006 will probably propose raises to between $6.15 and
$7 and hour. (When San Francisco raised its minimum wage to $8.50 an
hour in 2004 - indexed to inflation, it is now $8.82 - California's
state minimum wage was $6.75, so the increase was 26 percent.) And
even staunch supporters of a higher minimum wage accept that there is
a point at which a wage is set so high as to do more harm than good.
"There is no other municipality in the country that believes that
$9.50 should be the living wage," says Rob Day, the owner of the Santa
Fe Bar and Grill and one of the plaintiffs who sued the city. In fact,
the most apt comparison would be Great Britain, which now has a
minimum wage equivalent to about $8.80 an hour. "They have minimum
wages that are Santa Fe level," says Richard Freeman, a Harvard
economist. And at least for the moment, he says, "they have lower
unemployment than we do."
As the lawsuit against the city progressed, though, Europe wasn't even
a distant consideration. The focus was on the people of Santa Fe. I
read through a transcript of New Mexicans for Free Enterprise v. City
of Santa Fe one day this fall in a conference room at Paul, Weiss,
Rifkind, Wharton & Garrison, the white-shoe law firm in Midtown
Manhattan that defended, pro bono, Santa Fe's right to enact the
living-wage ordinance. In many respects, the trial, which took place
over the course of a week in April 2004, was an unusual public
exchange on profits, poverty and class in America. Paul Sonn, the
lawyer at the Brennan Center at New York University who wrote the
Santa Fe ordinance, had enlisted Sidney Rosdeitcher, a partner at
Paul, Weiss, to be lead counsel for Santa Fe's defense. Rosdeitcher
told me that before the trial began he wasn't convinced that there
were many factual issues in dispute; as he saw it, the living-wage
controversy was about the law and, in particular, whether Santa Fe had
a legal "home rule" authority, under the provisions of the New Mexico
constitution, to set wages, even for private industry. Nevertheless,
several low-wage workers took the stand to relate the facts, as they
saw them, of what the wage increase would do to improve their quality
of life. The Rev.
Jerome Martinez took the stand as an employer of 65 people in his
parish and Catholic school. And a number of restaurant owners, in
turn, explained how the new law could ultimately force them out of
business.
The plaintiffs - the New Mexicans for free enterprise - were not
unsympathetic: the restaurateurs who took the stand, like Rob Day or
Elizabeth Draiscol, who runs the popular Zia Diner in town, opened
their books to show that their margins were thin, their costs high,
their payrolls large. They cared about their employees (providing
health care and benefits), trained unskilled workers who spoke little
or no English, gave regular raises and paid starting salaries well
above $5.15. They had built up their businesses through an
extraordinary amount of hard work. Draiscol testified that her
restaurant, for instance, had $2.17 million in annual revenue in the
fiscal year of 2003. Though her assets were substantial - a restaurant
can be valued at anywhere from 30 to 70 percent of its annual
revenues, and Draiscol said Zia had been appraised at 66 percent of
revenues, or about $1.4 million - she earned a salary of $49,000 a
year. Draiscol testified that the living wage would raise her payroll,
which accounted for 55 to 65 employees (depending on the season), by
about $43,192 a year. Rob Day put the expenses of a living-wage
increase even higher. In addition to labor costs, he estimated that
the price of goods would go up as his local suppliers, forced to pay
employees higher wages themselves, passed along their expenses to the
Santa Fe Bar and Grill.
Rosdeitcher showed that the restaurants had made serious errors
overestimating their costs. Still, the increase in expenditures was
not negligible. Over the past few years, a variety of experts have
tried to perfect the science of predicting what will happen to a
community in the wake of a minimum-wage change, and one of those
experts, Robert Pollin, a professor of economics at the University of
Massachusetts, Amherst, served as the expert witness on behalf of
Santa Fe. Pollin projected that the living wage would affect the wages
of about 17,000 workers. About 9,000 of those workers would receive
raises because of the ordinance, he said; the rest would receive what
he called "ripple effect" increases - which meant that those making,
say, $8.50 or more before the raise would most likely receive an
additional raise from their employers to reflect their job seniority.
Pollin calculated that wage increases would cost businesses a total of
$33 million. And to pay for those amounts, restaurants and hotels and
stores would probably need to raise prices by between 1 and 3 percent.
The question, therefore, was whether business owners were willing to
raise prices or make less in profits. In the trial, Pollin cited an
obscure 1994 academic experiment in which several economists had set a
different price within the same restaurant for a fried-haddock dinner.
In varying the price of the haddock between $8.95 and $10.95, the
researchers' goal was to find out whether variations in cost affected
demand in a controlled environment. As it turned out, they didn't.
Customers ordered the haddock at both $8.95 and $10.95.
Results From the Santa Fe Experiment
That the city of Santa Fe has effectively become a very large
fried-haddock-dinner experiment is difficult to deny. A state court
judge ruled in favor of the city soon after the trial, allowing the
living-wage ordinance to take effect in June 2004; recently, the
judge's decision was affirmed by a state appellate court, giving the
city, and its living-wage advocates, a sweeping victory. Many business
owners have found these legal losses discouraging. This fall, not long
after I visited the city, the Santa Fe Chamber of Commerce sent a note
to its members to gauge their opinion on the $8.50 living wage and the
hike on Jan. 1 to $9.50. Some members reported that they had no
trouble adjusting to the first raise and supported a further increase.
(Some of these owners, whose high-end businesses employ skilled
workers, paid more than the $8.50 to begin with.) Others insisted that
they were not averse to a state or federal raise in the minimum but
that Santa Fe's citywide experiment had put local businesses at a
competitive disadvantage: companies could move outside the city limits
or could outsource their work to cheaper places in the state. But most
respondents opposed the law. The living wage had forced them to raise
prices on their products and services, which they feared would cut
into business.
To look at the data that have accumulated since the wage went into
effect is to get a more positive impression of the law. Last month,
the University of New Mexico's Bureau of Business and Economic
Research issued some preliminary findings on what had happened to the
city over the past year and a half. The report listed some potential
unintended consequences of the wage raise: the exemption in the
living-wage law for businesses with fewer than 25 employees, for
instance, created "perverse incentives" for owners to keep their
payrolls below 25 workers. There was some concern that the high living
wage might encourage more high-school students to drop out; in
addition, some employers reported that workers had begun commuting in
to Santa Fe to earn more for a job there than they could make outside
the city.
Yet the city's employment picture stayed healthy - overall employment
had increased in each quarter after the living wage went into effect
and had been especially strong for hotels and restaurants, which have
the most low-wage jobs. Most encouraging to supporters: the number of
families in need of temporary assistance - a reasonably good indicator
of the squeeze on the working poor - have declined significantly. On
the other hand, the city's gross receipts totals, a reflection of
consumer spending and tourism, have been disappointing since the wage
went into effect. That could suggest that prices are driving people
away. Or it could merely mean that high gas and housing prices are
hitting hard. The report calculates that the cost of living in Santa
Fe rose by 9 percent a year over the past two and a half years.
Rob Day of the Santa Fe Bar and Grill sees this as the crux of the
matter. In his view, the problem with Santa Fe is the cost of housing,
and there are better ways than wage regulations - housing subsidies,
for example - to make homes more affordable. In the wake of the wage
raise, Day told me, he eventually tweaked his prices, but not enough
to offset the payroll increases. He let go of his executive chef and
was himself working longer hours. "Now in the matter of a year and a
half, I think there is a whole group of us who thought, if we were
going to start over, this isn't the business we would have gone into,"
he says.
Al Lucero, the owner of Maria's New Mexican Kitchen, says that the
living-wage battle has risked turning him into a caricature. Opponents
backing the living wage "paint us as people who take advantage of
workers," he told me. By contrast, Lucero sees himself as an
upstanding member of the community who provides jobs (he has 60
employees) and had always paid well above the federal minimum. Other
business owners said similar things but would not speak out publicly.
They feared alienating customers. As some told it, they had started
businesses with a desire to create wealth and jobs in a picturesque
small city. Then they had awakened in a mad laboratory for urban
liberalism.
The Issue in Albuquerque
Long after he did his influential research with David Card on the
effect of minimum-wage raises, Alan Krueger says, he came to see that
ultimately the minimum wage is less about broad economic outcomes than
about values. Which is not to say that workers' values should trump
those of owners'. Rather, that when wealth is being redistributed from
one party to another - and not, in the case of Santa Fe, from overpaid
C.E.O.'s and hedge-fund managers but from everyday entrepreneurs who
have worked long hours to succeed in their businesses - things can get
complicated. Indeed, while it is tempting to see the wage disputes in
Santa Fe and elsewhere as a reflection of whether one side is right or
wrong, on either economic or moral grounds, they are, more
confusingly, small battles in a larger war (and, in America, a very
old war) over where to draw the line on free-market capitalism. On one
side there is Al Lucero, on the other someone like Morty Simon, or the
economist Robert Pollin, who says: "The principled position is, 'Why
should anyone tell anyone what to do? Why should the government?' I
just happen to disagree with that. A minimally decent employment
standard, to me, overrides the case for a free market."
And yet, the fact that voters or elected politicians should decide who
wins these battles, rather than economists or policy makers, seems
fitting. During Albuquerque's living-wage campaign this past fall,
Santa Fe - the smaller, wealthier, northern neighbor - served as a
rallying point. But it was also a question mark: Was Santa Fe's
experience repeatable? Was it even worth pointing to as an exemplar?
In the final days of the Albuquerque effort, Jen Kern of Acorn told me
she had little doubt that the wage victory in Santa Fe, like the one
in San Francisco, was an indication that a battle for creating high
base wages in America's cities, in addition to the states, could be
won. But these were also rich cities, liberal cities - "la-la lands,"
as she put it. "I think with citywide minimums, if this is going to be
the next era in the living-wage movement, it's got to look like it's
winnable," Kern says. "The danger or the limitations of just having
San Francisco and Santa Fe having passed this is that people in other
parts of the country are going to say, 'Well, I'm not Santa Fe, I'm
not San Francisco."' In Kern's view, a win "in a city like
Albuquerque, which I think everyone thinks of as sort of a normal
city," was a truer test.
And it didn't pass that test. When the $7.50 ballot initiative lost by
51 percent to 49 percent on Oct. 4, it made many in the living-wage
movement wonder how these battles will play out over the next year or
two. One political consultant involved in the movement questioned
whether the Albuquerque wage itself, at $7.50 an hour, had been set
too high by Acorn to win broad support. Matthew Henderson of Acorn,
who ran the day-to-day campaign, said he thought they were outspent by
their opponents. Most likely, though, the outcome was determined by
the actual grounds on which the battle was fought. The businesses that
opposed the $7.50 wage, represented mainly by the Greater Albuquerque
Chamber of Commerce, challenged a small provision in the proposed
living-wage law that would allow those enforcing a living wage to have
wide "access" to a workplace. The campaigns soon began trading
allegations through television ads and direct mailings about how far
such access might go. And so the living-wage campaign had become a
surreal fight over privacy (it would allow "complete strangers to
enter your child's school," one mailing against the measure alleged)
rather than wages. When I met with Terri Cole, the president and
C.E.O. of Albuquerque's Chamber of Commerce, a few days before the
vote, she acknowledged that the chamber opposed the living-wage law on
philosophical grounds. But she said she saw the access clause as a
legitimate grounds for a fight.
Will It Play Nationally?
In the aftermath of Albuquerque, Jen Kern took solace in the fact that
10 years after she visited the Library of Congress, and 10 years after
she began working on living-wage campaigns, the opposition fought not
on the economic merits or risks of a higher wage, but on a side issue
like privacy. Still, a loss is a loss. It is possible that the
Albuquerque wage campaign may still prevail, in effect: New Mexico's
governor, [4]Bill Richardson, has said he would consider a statewide
raise this spring, presumably to $7 or $7.50, from $5.15, that would
affect all New Mexicans. (It would, in all likelihood, leave Santa
Fe's higher wage unaffected.) Yet such an act does little to clarify
whether progressives can actually transform strong levels of voter
support for higher wages into wins at the polls. Kristina Wilfore, the
head of the Ballot Initiative Strategy Center, a progressive advocacy
group, says that over the years there has been anywhere from a 2 to 5
percent increase in voter turnout specifically correlated with wage
measures. "But people think it's some big panacea, and it's not," says
Wilfore, who regards success as dependent on how well a local wage
coalition (organized labor, grass-roots groups, church-based
organizations) can work together at raising money and mobilizing
voters.
For specific candidates in a state or city where a wage measure is on
the ballot, it can be similarly complicated. Representative Rahm
Emanuel of Illinois, chairman of the Democratic Congressional Campaign
Committee, told me that the local battles over living wages reflect
the broader debate in the U.S. over health care, retirement security
and an advancing global economy. "Every district is different,"
Emanuel says of the slate of Congressional races for 2006, "But there
is not one where the living wage, competitive wages or health care
doesn't play out. The minimum-wage issue, if it's on the ballot, is
part of the economic argument."
David Mermin of Lake Research Partners, who frequently conducts polls
on minimum-wage issues, told me that the dollar level of a wage
proposal is important, though it can vary from place to place.
("People have different feelings about what's a lot of money," he
says.) But he has found that quirks can emerge. An increase to $6.15
sometimes doesn't poll as well as an increase to $6.75, which can
generate more intensity and broader support from voters. Mermin also
says that wage measures have had success in recent years, Albuquerque
notwithstanding, not because Americans feel differently but because
campaigners are getting smarter about stressing morals over economics.
And when handled adroitly, a wage platform can motivate the kind of
voters who are difficult to engage in other ways: younger voters,
infrequent voters, low-income urban voters. His research, Mermin adds,
shows that most people who vote for the minimum wage know it's not
going to affect their lives tomorrow: "It's not like fixing the
health-care system, or repairing the retirement system," he says. "It
doesn't rise to that level directly. And if you list it in 10 issues,
it doesn't pop out in priority. But when it is on the ballot, it
crystallizes a lot of things people feel about the economy and about
people who are struggling." In his experience, voters seem to process
these measures as an opportunity to take things into their own hands
and change their world, just as Morty Simon did.
Still, as an endgame, many in the living-wage movement see the prize
not in a series of local victories in 2006 but in Congressional action
that results in a substantial increase in the federal minimum wage -
and even better - one that is indexed to inflation, so that such
battles about raising the wage don't need to be fought every few
years. The long-run trajectory, Paul Sonn told me, is for cities and
states to create enough pressure to ultimately force a raise on the
federal level. Or to put it another way, the hope is that raising
wages across the U.S. will ultimately demonstrate to voters and to
Washington lawmakers both the feasibility and the necessity of a
significantly higher minimum wage. In the meantime, Sonn says, cities
like Santa Fe play an important role in policy innovation, "really as
sort of laboratories of economic democracy." Richard Freeman of
Harvard echoes this point. "If you go back, a lot of the New Deal
legislation, good or bad, came about because there was a lot of state
legislation," Freeman says. Policies from New York or Wisconsin were
adapted into the federal system of laws. "A lot of it came from state
variations in the past, and I think we'll see a lot more of this in
the next few years. The things that work the best might be adopted
nationally."
Of course, it also seems plausible that any kind of national coherence
on economic - or moral - matters may have ended long ago. Just as the
voters of states and cities have sorted themselves politically into
red and blue, and into pro- and anti-gay marriage, in other words,
they are increasingly sorting their wage floors and (perhaps soon)
their health-care coverage. This trend may produce not progressive
national policies but instead a level of local self-determination as
yet unseen. Or as Freeman puts it, "Let Santa Fe do what it wants, but
let's not impose that on Gadsden, Ala." That wouldn't make a federal
increase in the minimum wage insignificant, but it would make it
something of a backdrop for major population centers. As Robert Reich
says, "The reality is, even if the wage were raised to $6.15, it would
not be enough to lift a family out of poverty." And as Jen Kern points
out, even a federal minimum wage that goes up to $7.25, which is the
proposal from the Senate Democrats and which probably isn't going
anywhere until 2008, doesn't approach what it now costs to live in
some cities.
This was why, in December, Kern and Acorn were considering the
prospects for laying the groundwork for living-wage ordinances in
other cities. And it's why, also in December, Paul Sonn was helping to
write an ordinance for Lawrence Township, N.J., aimed at forcing the
city's big-box retailers like Wal-Mart to pay a higher wage (more than
$10 an hour) and to contribute a larger share of employee benefits.
Last month, Sonn also pointed out to me that Santa Cruz, Calif., was
considering plans to introduce a measure that would establish a
minimum wage of $9.25 an hour.
It wasn't quite Santa Fe's level, but close. And that suggested that
the small New Mexican city, to the delight of its living-wage
advocates and the chagrin of many business owners, was no longer just
an experiment. Rather, it had already become something best described,
for better or for worse, as a model.
Jon Gertner is a contributing writer for the magazine.
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