2003 March – Backgrounder #38 – The L⁠i⁠v⁠i⁠ng Wage Movemen⁠t⁠ and I⁠t⁠s Impl⁠i⁠ca⁠t⁠⁠i⁠ons for Flor⁠i⁠da

By: The James Madison Institute / 2003

Executive Summary

The move by some political jurisdictions to create arbitrary wage levels is destabilizing to any economy subjected to wage mandates. Employers who are mandated to increase labor costs will be forced to pass those costs along to consumers, most likely in higher costs of products or services.
Those who favor mandates fail to consider the actions of consumers who will continue to look for the lowest costs possible in making purchasing decisions. This scrutiny will send consumers shopping in neighboring communities or states where arbitrary wage mandates do not exist. Consumers would seek goods and services where wage costs, and hence, prices, are lower.
While some biased research shows that wage mandates have no ill effect on employment, further independent research reveals quite the opposite. In a living wage survey of some 360 labor economists across the United States, the University of New Hampshire Survey Center found that three-fourths of the labor economists surveyed believe that a national living wage would result in employers hiring better skilled applicants than they hired before the increase. As a result, low-skilled employees’those ostensibly helped by minimum wage mandates’ would be further shut out of the job market. Similarly, more than three-fourths of the labor economists in the survey believe that a national living wage policy would result in employment losses.
A study of the economic implications of a living wage ordinance in Chicago found that such a law would have cost affected employers nearly $40 million a year and would have resulted in the loss of at least 1,300 jobs. The ordinance would also have cost the city an additional $20 million a year with more than 20 percent or $4.2 million going to administrative costs.
A study for the Vermont State Legislature found similar serious implications. The report stated that an increase in minimum wage to a level approaching an average livable wage would result in significantly fewer jobs for that state’s lower-income workers.
Floridians affected by living wage mandates are mainly young wage earners. These workers tend to be less educated than the average Floridian, and more likely to have never married and thus less likely to be supporting a family.
To prevent the destabilization of Florida’s economy, state lawmakers should enact legislation to prevent local jurisdictions from creating wage “zones” and mandating arbitrary levels of pay in those zones.