Durham News: Opinion

A living wage is a profitable wage. And taxpayers win too.

Frank Hyman
Frank Hyman

Tarheels’ entry-level wages would rise to $12 an hour by 2020 and $15 an hour by 2022 if Democratic legislators have their way. In early March they filed HB 289 to boost North Carolina’s minimum wage.

Unlike North Carolina, 29 states, including several in the South, have minimum wages higher than the national one of $7.25, last raised eight years ago. Legislators want to raise this out-of-date minimum wage to a living wage, meaning a level that keeps a working person out of poverty and less reliant on a taxpayer-funded safety net.

No doubt many business leaders will come out against this. But the Christian move – and, yes, the profitable one – will be to raise the wage floor. That will help every business in North Carolina. Taxpayers will also come out ahead.

Barry Suddreth, a supervisor with a for-profit contractor for the city of Durham, which passed a Living Wage Ordinance in 1998, has been quoted as saying, “I had reservations at first. But when you pay people more, they stay with you longer and they do better work … I’m actually surprised more cities haven’t pursued these ordinances.”

Suddreth’s comments echo Adam Smith, considered the father of modern economics, who said: “Where wages are high we always find the workmen more active, diligent, and expeditious, than where they are low.”

House Bill 2

Despite these benefits the Republican controlled General Assembly recently outlawed city or countywide minimum wage increases as part of the HB2 fiasco (which the HB2 “repeal” has left in place). But Durham’s nearly 20 years of living-wage policies – that spread from city hall to county government, to Durham Public Schools, to Duke University and even spawned a nonprofit that has certified over 100 businesses as paying a living wage – didn’t harm workers or the economy. Durham’s unemployment numbers have mimicked those in Wake County.

And boosting entry-level wages for thousands of workers didn’t keep Bloomberg’s Business Week from saying that Durham (not the Triangle) was the third best place in the country to ride out a recession in October 2008.

Durham’s experience is confirmed by the NC Justice Center’s report “It’s Time for a Raise”: “Economists have repeatedly found that those states that increased their minimum wages have seen better economic performance, lower unemployment and higher job creation rates than those states that didn’t raise their wages. ... The evidence clearly and repeatedly contradicts critics who claim that increasing the minimum wage forces employers to ... reduc[e] the number of employees.”

This “better economic performance” comes partly from the productivity gains of more motivated employees. These gains haven’t just come from front-line workers though. Front-line managers also become more productive. With less turnover and absenteeism, managers aren’t filling in for absent workers or spending time training yet another new employee. Front-line managers actually devote themselves to providing better results for customers, which leads to a better bottom line.

Crocodile tears

Arguments have been made that some businesses will fail if they have to raise wages. But this isn’t the case when all businesses have to raise wages equally; none gain a competitive advantage over the others.

And some have shed crocodile tears claiming that workers will get laid off if the minimum wage increases. But studies show instead that a wage increase generates many new jobs when workers spend larger paychecks.

So clearly workers and businesses benefit from raising the minimum wage, but how about taxpayers?

Right now every third working man or woman of North Carolina needs subsidized housing, food and health care to avoid homelessness, hunger or being too sick to go to work. Better-paid workers rely on taxpayers less. Some will argue that the social safety net is there to take up the slack of those low wages. But why should Tarheel taxpayers subsidize companies that pay low wages? McDonalds is one of the most profitable companies in history. So why does their CEO need my tax dollars to keep their workers afloat?

Adam Smith offered business owners this standard for setting wages: “they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed and lodged.” (Perhaps advocates of raising wages should adopt Adam Smith as their mascot.)

So there you have it. A higher wage floor, begets higher productivity. Higher productivity begets higher profits and reduces pressure on taxpayers. Another way of putting it: paying a living wage buys a better bottom line for everyone. Not just workers, but businesses and taxpayers too.

Frank Hyman has held two elected offices in Durham and authored the first living wage ordinance in the Southeast. He is a carpenter, stonemason and the policy analyst for Blue Collar Comeback.