Wednesday, April 13, 2005

Goode Addresses One of Philadelphia's Biggest Challenges: Low Wages

The Philadelphia Weekly had a piece today on the minimum wage increase bill that Councilman Goode introduced in Council a few weeks back. His bill would require city contractors and other recipients of city aid to pay workers a 150% increase over the current federal minimum wage which would come to $7.72 an hour instead of $5.15 an hour for city minimum wage earners.

This from the Weekly:

Goode says there's nothing radical about his proposal because the 150 percent wage "threshold" is already required under local and state tax-credit programs that encourage job creation. "It's a widely accepted dollar figure," he says.

This sounds like a great move to me. First of all, if the City raises the minimum wage first, there is more pressure on state and federal legislators to act quickly (there are minimum wage bills at both levels right now). Secondly, and more importantly, this is exactly the kind of visionary thinking we need to truly solve the problems faced by Philadelphia today. Despite this common sense logic, deference to business interests, as always, has emerged.

From the Weekly:
Gov. Ed Rendell says he supports a higher minimum wage, but it must be enacted at the federal level, so as not to put the state's businesses at a competitive disadvantage.

What disadvantage? As the Weekly points out, our neighboring states like New York, New Jersey and Delaware have already enacted minimum wage increases independent of the federal government. So the argument that businesses will leave PA if the minimum wage is increased seems kind of silly (not to mention the fact that a lot of minimum wage employers like McDonalds and Blockbuster need to be located within a close physical proximity to their customer base).

The Economic Policy Institue in Washington confirms the fact that minimum and living wage increases don’t cause job losses and, in fact, often improve the business climate:

Do living wage ordinances cause job loss?
EPI's evaluation of Baltimore's living wage ordinance found no job loss as a result of the ordinance (Niedt et al. 1999). The majority of workers interviewed for the study reported no changes in the number of hours they worked after the ordinance went into effect.

Employers interviewed for another study reported that although wages increased, these costs were absorbed by improvements in efficiency; raising wages decreased employee turnover, which decreased recruitment and training costs.

The evidence from minimum wage increases also suggests that there should be little or no job loss as a result of living wage ordinances. A recent EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase (Bernstein and Schmitt 1998).

Do living wage ordinances have a negative impact on the business climate?
Some living wage detractors argue that the living wage will create a "hostile business climate." But most living wage ordinances cover too small a portion of the labor force to have such a profound effect; most living wage ordinances cover less than 1% of the local workforce. Wages are only one factor in a business' decision to move to a location, and there is no evidence that an existing living wage ordinance has discouraged firms from locating in a city.

The real barrier to Pennsylvania business competitiveness is a conservative state legislature that refuses to invest in effective economic development strategies and quality education and training opportunities for all Pennsylvanians. If cities like Philadelphia can help pump wages up, city and state tax revenue will soon increase and create the fiscal flexibility needed to improve the workforce.

I am glad to see that Councilman Goode is demonstarting some real leadership and taking one of Philadelphia's biggest challenges head-on. It should be interesting to see how the rest of Council, the Mayor and the Chamber respond in coming weeks.


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