February 22, 2005

Why A Living Wage is Good for the Economy

In a previous post, I explained the concept of Living Wages, and why they are important for economic justice. I also believe living wages are good for business, and for the economy. For the record and for what it's worth, I am a Republican small-business owner.

People and their families need a certain amount of money to simply live. They need shelter, food, transportation, and so on – and this all costs money. Without that money, they will likely depend on some sort of public assistance, and in some cases they will ‘do without,’ damaging their health. Both of these actions also require money – public assistance comes to people from a government’s tax funds.

When someone ‘goes without’ with regard to their well-being, they end up getting care in hospital emergency rooms or forgoing such care at all. If they depend on the hospital emergency room, they most likely won’t be able to pay much of the bill – if any. So, that shortfall is subsidized by higher health insurance premiums paid by those who have insurance. If they forgo health care, they are less productive in the work force, causing lower productivity and higher costs for their employer.

If employers had to pay a living wage, those people who work would be able to use their wages for shelter, food and transportation instead of relying on public assistance. They might even be able to afford basic health insurance, which improves their productivity and keeps them out of the emergency room. Less demand for public assistance means lower taxes, increased productivity means lower costs for businesses.

In simple terms, we have a choice: a low minimum wage with high levels of public assistance and health care premiums, or a higher living wage with lower levels of public assistance and health care premiums. The money for these basic needs has to, and will come from somewhere; it’s simply a matter of which route it takes. Living wages are good for business, or at least they have a neutral impact, as reported by the Economic Policy Institute.

One principle of Catholic social teaching is that of subsidiarity – in simple terms, don’t do at a high level what can be done at a lower level. If we force business to pay living wages, the transfer of money happens at the lowest, most direct level - between employer and employee. Without a living wage, we have increased taxes on employers and employees, and those tax revenues are eventually collected and (hopefully) redistributed to those who need it. But that money takes a long path to get from the employers/employees all the way back to the working-poor who need it. And that path is filled with various political agendas that may derail it. Why make it so complicated?