Research Paper Chris Hamilton

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Economics

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Feb 20, 2024

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Running Head: CONCEPT OF A FAIR LIVING WAGE 1 Concept of a Fair Living Wage Bus. 472-D13 Liberty University Professor Dr. Shawn Hussey

CONCEPT OF A FAIR LIVING WAGE 2 Introduction Living wages is a big controversial topic in the modern age of laborers and workers. In order to understand the impact of a living wage, one must understand why a living wage is necessary. Living wage - A theoretical wage level that allows the earner to afford adequate shelter, food and the other necessities of life. The living wage should be substantial enough to ensure that no more than 30% of it needs to be spent on housing. (Investopedia, 2015) The final goal of a living wage should allow employers to offer enough wages to meet their employee’s living needs. Fair wages is highly debatable and it seems as if no one has really gotten it down to a set number. The cost of living is higher in some areas then it is in other areas. Taxes are also higher in some areas and lower in other areas. Studies have shown positive and negative impacts on raising the living wage. The most debatable situation in raising the living wage is fairness. Some things to look at are the value of the minimum wage worker, the average cost of living, and the effects of raising the living wage. Some researchers say that raising the minimum wage will poorly affect the availability of jobs. Others would argue that the wage floor would not affect jobs negatively. The results have usually been puzzling regarding this topic. Usually, if the price of something is forced upwards, the demand for that certain something should fall (The Economist, 2012, para. 2). However, the trend of raising minimum wages has not reflected that decrease in demand. In some cases, companies have cut expenses out when the living wage has raised. For instance, if the minimum wage were to increase, some companies may skimp their employees on benefits or find a way to reduce the amount of hours offered to their employees. There has always been some kind of workaround for employers regarding the wage increases. The goal of this paper is to compare and contrast lasting effects, both positive and negative, regarding the increase of living wages.

CONCEPT OF A FAIR LIVING WAGE 3 The Positive Effects of Raising the Living Wage There are usually two sides to every argument. There is a positive side and a negative side. Sometimes a clear winner cannot be determined until both sides are measured and accounted for. Raising the living wage can have many positives. Some obvious answers would be that raising the living wage would give the worker or laborer more money to be able to live comfortably. Most people would argue that more money means better means of living. The more money a worker makes the more food they can afford, the better shelter they can live in, and the more clothing they can provide. If it were that simple, however, the debate for raising living wages would win every time. Some of the positives that can be related to increasing the living wage is: equal opportunity, economic stimulus, more opportunities, reduced expenses regarding social programs, and a decreased turnover rate. Equal Opportunity President Obama proposed raising the minimum wage to reflect living wages. His main stance was that America is the wealthiest nation on the face of the earth and its citizens should not have to live in poverty (Risher, 2013, para. 1). This mentality offers equal opportunity to all the citizens of the United States. In the wealthiest nation, it would be unfair to watch some rise in power and money while the others suffer to barely make it. Full-time jobs are harder to come by and the minimum wage is not sufficient enough to help support a family trying to prosper in today’s economy. With the minimum wage being at $7.25, a year’s salary would be at around $15,080, before taxes. According to some statistics, the average cost of rent in Charlotte, North Carolina is $725 (Rent.com, 2015). This amount comes to $8,700 per year, leaving only $6,380 left to budget for a car, gas, food, clothing, and other living expenses. Obviously, there would be

CONCEPT OF A FAIR LIVING WAGE 4 a huge advantage to raising that minimum wage to reflect current living wages. This raise would promote equal opportunity for living in the wealthiest nation on Earth. Economic Stimulus The more money a worker makes usually means the more money that person will put back into the economy. This ripple effect has a positive influence through the economy as it encourages the worker to spend more money. A living wage allows the worker to consume the essential things in life. “It stimulates growth and allows jobs and prosperity for the nation at large” (Wills, 2009, p. 36). When employees are able to spend more, the economy profits. When the economy profits, jobs flourish. Raising the living wage could potentially cause an increase in spending; therefore, this spending increase would create a higher demand in some markets. This demand would increase the amount of skilled workers. The idea of the living wage raise is a good one that encourages economic growth and its motives are certainly supportive of this fact. Minimum wage increases puts more money into the pockets of lower-wage employees. In return, they have the opportunity to spend that money in their community. Some research shows that raising these minimum wages will increase spending and stimulate economic growth. A raise in the living wage can boost spending on essential items as well as luxury items. Retail stores will profit more and will ripple into more jobs. The food industry will also profit creating various jobs. The only confliction with this idea is determining exactly how much companies will profit and if the profits are worth it when the wages are increased. This confliction can only be answered with more demonstrative research. However, economic growth would be a gigantic advantage that cannot simply be overlooked. More Opportunities

CONCEPT OF A FAIR LIVING WAGE 5 More opportunities can be dependent upon the economic growth. If the workers are making more and spending more, more opportunities for jobs can be a deciding factor for a living wage increase. Opportunities are essential to combat poverty. In New Zealand, the number of working families living in poverty is unimaginable. “The 2012 Ministry of Social Development Household Incomes report found that 40 percent of poor children in New Zealand came from working families.” (Wait, 2013, para. 4). Opportunities that would arise from a living wage increase would help situations like this one. Families could survive better and provide food and shelter with higher wages and, in return, this might help grow more opportunities in low- wage situations. Reduced Expenses Regarding Social Programs A major advantage of raising the living wage would be a decrease in social program expenses. Employees who work at a minimum wage are often the same people who use the government services for additional support financially. Raising the minimum wage would support workers more financially and would take that pull of the government. According to Cooper (2014): “Americans who work hard should be paid enough to make ends meet.” (para. 1). Since the late 1960’s today’s minimum wage workers make around 25 percent less in inflation-adjusted terms than they did 45 years ago (Cooper, 2014, para. 1). Raising the living wage would result in less expenses paid to social programs. Being able to live independently without government assistance would be a big plus for the low-wage working society. The low- wage working society would be highly in favor of raising the minimum wage if it meant getting them off of government help. A Decreased Turn-Over Rate

CONCEPT OF A FAIR LIVING WAGE 6 Workers who make more have a higher retention rate compared to those who make less. With jobs such as lawyers, bankers, and management, the turnover is a lot lower. This is because the pay is better than that of fast-food workers, retail employees, and other minimum wage workers. A large body of research suggests that raising wages leads to lower turnover and better customer service. This in return results in higher sales and lower expenses (Weber, 2015, para. 5). A decreased turnover rate would definitely help companies be in favor of raising the living wage. Turnover is a huge obstacle where employers offer lower wages. “Turnover in retail averaged around 66% for part-time hourly sales associates in 2014, according to the Hay Group, a management consulting firm. For full-timers, who are more likely to be tethered to a company with benefits like health insurance, turnover was 27%.” (Weber, 2015, para. 7). The Disadvantages of Raising the Living Wage There are quite a bit of advantages to raising the minimum wage, but there are many that would say the disadvantages are far more. When the living wage increases, less full-time positions can be offered and there can be fewer hiring attempts. More money does not always mean better work environments. “More money will help pay the bills, but it doesn't guarantee a good workplace” (Bell, 2014, para. 6). The workplace does not necessarily change when pay increases. People might be expected to take on bigger responsibilities and perform multiple tasks they had not previously performed. Companies could hire less and look to cut costs and still boost profits. This could cause a change in product and service costs. There are many negative effects that could potentially happen if living wages were to be increased. Some negative effects of raising the living wage may include: layoffs, increases in price for products and services, less hiring attempts, increased competition for jobs, and inconsistency nationwide. Layoffs

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