By Sam Houston
An article posted on the Davis Vanguard last week written by the Davis Citizens for a Living Wage (DCLW) commented on five “myths” about the economic effects of raising the minimum wage. Instead of debating the possible economic impacts of raising the minimum wage by 60% in a town of about 66,000 people using national, regional and specific economic data, we need to look at the actual effects of raising the minimum wage on different groups of people in Davis.
When a law is created either by elected official or through the initiative process it is usually done to in order to achieve a determined outcome. In this case a group of local citizens are trying to get an initiative passed that would require that the minimum wage in Davis be raised to $15 an hour in order to “bring many working poor out of poverty in addition to stimulating the local economy.”
I think that it is a very noble effort to try and change laws so that we can help the working poor and lift them out of poverty. I am not in any way disagreeing with or discouraging the motives of the group. However, I think that it is worth looking at the effect of raising the minimum wage in an isolated labor market like the City of Davis.
A single person making the current minimum wage in Davis makes about $18,720 per year. According to DCLW this would be $2,854 less than the annual “Living Wage” required to live in Yolo County without government subsidies.
An increase in their wages from $9/hr. to $15/hr. would have them making $31,200 per year. The increase of $12,480 would increase their buying power by $10,296 after accounting for additional taxes and would be above the “Living Wage” threshold. (I understand that there will also be an effect on employment, labor and prices if the minimum wage is raised, but that is not the focus of the article and can be discussed another time) A raise in the minimum wage for this individual would achieve the goal outlined by DCLW.
Now let’s look at a single mother with a full time minimum wage job with one school aged child. She would make the same $18,720 per year as the single person with no child. According to the “Living Wage Calculator” she would be making $24,606 less than is required for a “Living Wage” in Yolo County.
Luckily she would qualify for a variety of government programs that will help her decrease the amount of income needed to live with a child in Yolo County. The biggest assistance is qualifying for Section 8 housing. This will save the single mother about $7,500 per year in rent. She would also be eligible for an Earned Income Tax Credit in the amount of $3,160 and a child tax credit of $1,000. Another benefit available to her would be Medi-Cal.
This would save her from paying about $1,800 per year in insurance premiums through Covered California. Other programs such as Cal Fresh ($4,300), a daily no cost school breakfast and lunch ($650), free government phone ($600), reduced PG&E rates ($720) are available at her income level. I am sure that I am missing a few, but the value of those mentioned equal almost $20,000 leaving her about $4,600 short of earning a “Living Wage”.
Now let’s see what happens when we increase the single mothers wage from $9/hr. to $15/hr. Her wage would increase from $18,720 per year to $31,200 per year. After accounting for taxes this should leave her with an additional buying power of $10,296. However, since all of the government assistance programs that she and her child were eligible for are based on Federal or State poverty levels and those will not be increased when a local ordinance is passed in Davis she will lose about $17,000 of those benefits.
So the net effect of increasing her wage from $9/hr. to $15/hr. is a loss in buying power equal to about $6,700 and would leave her more than $12,000 under the “Living Wage”. You can do a calculation for a mother with two children or a couple with two children with one or both working a minimum wage job and they will come out similar. In each instance increasing the minimum wage in Davis to $15 would hurt, not help those families.
I am not advocating that poor families in Davis should stay on government assistance to survive. I am also not saying that the current laws should not be changed in order to help struggling families. All I am saying is that the suggested solution by the Davis Citizens for a Living Wage is a bad idea because it is going to hurt the low income families in Davis that need help the most.
Yes! What I have pointed out a number of times is that a drastic increase in the minimum wage will hurt the most disadvantaged and least skilled people in society the most. These are people that already find it difficult to find employment at $9 per hour. It will be impossible for them to find work after a drastic increase to $15 per hour.
The whole premise of this article is that all low income workers receive all of these public assistance benefits. This is patently false. For instance, I know dozens of low income students and workers who do not receive a dime in public housing benefits because there is virtually no such subsidized low income housing stock available in Davis (or in most cities for that matter).
The number of low income folks who qualify for such assistance dwarfs the supply of housing units available. In fact, our stock of such low income housig is so pathetically short that there is a 4 year wait list for some more desireable units. I know one senior couple who rause their grandchild who receive subsudized housing in Davis and they claim that their rent is reduced by only about $200 per month compared to market housing. So to say that all peopole who now make $9/hour will lose $7,500 per year in subsized housing if their pay is raised is ludicrous on the face of it because virtually no low income wage earner gets this assistance anyhow.
Most other public assistance programs gradually reduce payments as income raises. It is not simply an either-or situation. The author of this article would do readers a service by noting what various cutoff levels exist for given benefits for the myriad of different public assistance programs he claims are available to them and provide links to all of these references (just as I have provided verifiable links in my recent article on Minimum Wage last week). Making bold, challenging statements without providing any refereces for the reader to verify the veracity of those statements leads one to believe they are just plain false.
This statement is patently false. And you loose complete credibility failing to acknowledge the valid points being made. Are you after an agenda, or do you really want to help low income people?
What if those points being made are based on a false premise? All of the math in this article (calculating public assistance benefits) is based on a terrible assumption. That being that low wage workers get full time employment, year round, especially single mothers. AS someone who works in an industry dominated by low wage workers, I can honestly tell you that the examples used are white rhinos. They might exist somewhere, but their numbers certainly are not reflective of the wider low wage worker experience.
Points made that are based on false assumptions are not neceassrily valid. In the case of availability of low income housing assistance, the author’s assumptions that every low income wage earner gets it is false so his point that if you raise low income wages they will lose out on public housing assistaance is also false. C’mon Frankly, I think you can figure that out youself.
And yes I do have an agenda and that agenda is to help low income people get better wages and raise their standard of living. I think you have figured that out yourself also.
“The author of this article would do readers a service by noting what various cutoff levels exist for given benefits for the myriad of different public assistance programs he claims are available to them and provide links to all of these references (just as I have provided verifiable links in my recent article on Minimum Wage last week).”
“This would save her from paying about $1,800 per year in insurance premiums through Covered California.”
http://hbex.coveredca.com/toolkit/PDFs-Collateral/FactSheet_Individual_editable.pdf
2 person household qualifies up to $21,708.
Most programs also “Direct Certification” so if you qualify for CalFresh, you automatically qualify for reduced cost lunch in DJUSD as well as most of the other programs I have mentioned.
http://www.cdss.ca.gov/foodstamps/PG3628.htm
http://davincicharteracademy.net/wp-content/uploads/2014/06/engl.-letter-to-household.pdf
Sam – Thank you. This is a helpful start.
“I am not advocating that poor families in Davis should stay on government assistance to survive. I am also not saying that the current laws should not be changed in order to help struggling families. All I am saying is that the suggested solution by the Davis Citizens for a Living Wage is a bad idea because it is going to hurt the low income families in Davis that need help the most.”
I understand that you are not advocating that the working poor stay on assistance to survive…..but that is the inevitable outcome of not making dramatic changes to our current system of compensation.
So what you have laid out is an excellent argument for completely doing away with the hodgepodge of various partially effective and inefficient programs that we currently offer as assistance. I would replace them all with a very simple formulation. Everyone who is contributing to our society receives enough to live on as calculated by the location in which they are living. It comes as a single payment from the federal government. It does away with all of the overlap of various agencies and people dropping in and out of various programs based on minor changes in their income and status. Each individual is treated separately, no comings and goings off various programs depending on whether or not there is one adult or two in the family.
Oh…..but horrors ! That’s socialism isn’t it ? And what in your minds would be different about having a well organized, well run system than the amount that is being payed out now through a multitude of confusing, contradictory, over lapping , and ever changing programs ? If looking at Scandinavian countries or other European countries is too frightening ideologically, how about a look at the educational and health care systems of Israel ? Many of you seem to believe that Israel is our great friend and democratic nation. And yet their education through college is paid for as is their heath care. So we say “can’t be done “….. which I paraphrase to “won’t be done” because those of us here would rather continue the chant of “greatest nation on earth” than we would consider that others may actually have some aspects of a society down better than we do.
But this is essentially what the “Davis Citizens for a Living Wage” are advocating. By making it difficult or impossible for the least skilled and most disadvantaged people in society to find work because they are priced out of the market, they are saying that those people should stay on assistance to survive. Alternatively, they can take up panhandling, robbery, burglary, prostitution, drug dealing, or another illegal activity to get by.
I take exception to this straw man argument, based on a false premise. All reputable studies show that minimum wage increases (even local ones) have a net zero impact on overall employment. Furthermore, its one of our goals to make every worker economically independent (not on government assistance). Implying that we at Davis Citizens for a Living wage want rampant criminality in our community is preposterous. (we live here remember). Such commentary is unproductive to say the least, slanderous at worst.
Define “contributing to our society”. That could have all sorts of different definitions depending on the person.
You can cherry-pick your favored example from a list of countries, but not identify one that does it all. Nor can you identify one that comes close to matching the US.
Hypothetically, if we could immediately remove all of the first generation immigrants that are near or below the poverty line… many of the social problems decried by liberals would vanish.
Finland is 5.439 million people of mostly homogenous ethnicity and you want to make them a model for a country of 319 million hyper-diverse people?
You seem to have a big blind spot understanding human behavior and the corresponding failure of bossy people to control human behavior to achieve optimum social outcomes. Do you read history? Do you know how many times during our 2000+ years of modernity there have been attempts to do this? Do you understand how those attempts led to much misery and suffering at the hands of those that would control… the ones that would decide what “contribution to society” is?
The US system of democratic capitalism is far from perfect, but is also by far the best system every designed in those 2000+ years. Your advocacy is to throw the baby out with the bathwater after focusing on the imperfections… but completely ignoring that which is positive… primarily freedom. You take the positive for granted when you should be more reflective and more thankful. It has been earned with blood, sweat and tears of many that have come before us. You would reduce or eliminate it only because there are some that cannot seem to get it and fit in. How about this…. instead of destroying it, why not work on helping those people to figure out how to fit in? You and I have a good life, why not help them figure out how to go get the same?
It is fallacious to think that you can just give people a good life. They have to earn it themselves. And they earn it by trading things of value (their labor is the first thing they can trade, because everyone has it). The value is set by the market. There are some problems with value set by market in consideration of social needs, and we do require policy to help smooth the impacts of the ebb and flow of the economy. However, setting value by committee is a recipe for disaster.
Good points. Take away those with drug and alcohol problems, and those in need drop even more.
(One quibble point. My understanding was that in the past, we first had millions of immigrants when there was no social safety net. We didn’t have these big government programs. Even after they were implemented, immigrants (I thought) were under-represented in welfare programs. Today my understanding is the opposite, that immigrants are over-represented on the welfare rolls. I’m told Clinton’s welfare reform barred immigrants from obtaining welfare for five years, but after a few years Congress scrapped that requirement.)
You keep beating this dead horse.
Tia’s idea could work, BP… all we need is to reform the IRS code, eliminate all deductions and set the Fed Tax rate to 99%. Simple.
LOL hpierce, I agree with your tongue-in-cheek remark but with one difference, the Fed tax rate would have to be 100%.
nah… 99%… then we could all be 1%-ers!
Good point. I always wanted to be a 1%er
. . . and have God print US dollars.
BP
Only dead because you declare it so. Social safety net programs were dead prior to their existence also. They exist now whether or not they are loved, whether or not they are the most efficient form of support.
… whether or not they create more dependence and poor choices.
Well there is this…
Milton Friedman’s “Negative Income Tax” proposal always made sense to me, as a cost effective, non-intrusive way of raising the living conditions for poor people.
;>)/
On this Robb Davis and I agree in principle. I would be open to scrapping every of the 70 government programs to provide benefits to the poor with one that makes a graduated means-tested payment to meet a living wage standard. That would be it. Nothing else. Simple. Transparent. Easy to do the math. Easy to catch politicians finding new ways to rob working people to give to the lazy class in return for votes.
The benefit would kick in beginning at age 22. Younger adults with children could apply for an exception.
But if working age, unless permanently disabled, you have to work to qualify for the the benefit.
College students and funding for college is another challenge.
Frankly
Why not count college, or skills training as work and compensate for it ?
I think we need another reform to help kids afford college. But if we do direct vouchers to students, which I am in favor of, no schools should get any public assistance aside from that. I don’t want the schools to get lazy increasing costs. They should compete on value to the students. The student would hold the power of the purse to change behavior of the colleges if the colleges want to attract the student.
The voucher would need to be set at an average cost of tuition and then keyed to inflation from that point. Any student going to a more costly college would need to supplement the cost, or the school would need to provide financial aid and means-tested or other tested scholarships.
The way I would like to see it work, every student that is a legal resident pulling a full load up until they are 24 would get a voucher that would cover their average tuition costs, and then they would also get a means-tested monthly allowance. After age 24, they enter the adult program. If they want to move on to higher degrees, they would have to pay for it out of their own pocket or with student loans.
I’m told low-income kids have lots of options with good grades, but it is the middle income kids who are socked.
Why have college costs skyrocketed so much the past 3 decades?
Students also now often – even at Davis – they want a car, demand a smart phone, and many other amenities we did without.
low income students do have a lot of options, middle class kids are being screwed.
however, when you say students want a car – less so than 20 years ago. they want a smart phone (marginal additional cost on a family plan), they want other amenities (some), but the huge cost increases dwarf those marginal costs – cost of housing and tuition.
The $1,000 per bedroom rental cost when the West Village opened surprised me, that doesn’t sound “affordable”, unless students bunk 2 to a room. (Does that include meals?)
Now the campus is tearing own some of the last truly affordable student housing? Doesn’t make sense… all to be “net zero”?
And I agree with this approach in principal too. Politically, implementing this has virtually no chance of implementation.