Analyzing the Living Wage

Very shortly University of Miami administrators will grapple with a faculty proposal recommending pay increases to hundreds of UM employees and contracted workers to match state minimum wage standards (p.c. definition- “living wage”). By now these same administrators recognize the precariousness of their position as measure proponents maneuver them into a “lose-lose” situation.
The proposal essentially asks the administration to demand, through contract negotiation, that UNICCO, one of the largest labor services contractor at UM, and other service contractors, raise their wages for their lowest paid UM workers to an arbitrary figure that matches a supposed state of poverty. This bureaucratic fallacy is highly problematic, flies in the face of reason, and harms the least skilled and poorest of the workers it is intended to help. Across the United States, similar proposals are floated time and again. The usual shakedown artists are the same self-anointed; denizens of departments such as linguistics and English literature in places like MIT, Harvard, Berkeley, Duke and the University of North Carolina. These “progressives” remain unflagging in their unwillingness to accept the realities of human incentive and the concept of supply. And it seems that more than a few reside here at UM as well. They believe that politics should flow from the conscience and not the rational interests of mankind. And in a highly charged atmosphere of political correctness, they know the UM administration can’t appear insensitive to the plight of the benighted
This salary “shakedown” will come in the form of increased tuition and or fees necessary to pay for increased contractor service charges. UNICCO will readily agree to pass on this cost to UM, which has finite dollars with which to negotiate. Wages will rise and the least skilled or least experienced workers fired to pay the increased cost of the new minimums for the remaining and more efficient laborers who will labor longer and harder to meet the same demand. The American Enterprise Institute restates an economic truism of which the vast majority of economists are in agreement. “All else being equal, if you raise the price of something (labor), then the demand for it (by employers) will decline. Price controls (minimum wages here), no matter how “soft”, inevitably distort the process of supply and demand, creating disincentives to conserve and to supply.” As one student government insider alluded to me, the minimum wage has also encouraged a lackadaisical attitude toward self-improvement despite the many programs the private sector, including UNICCO, has provided to enhance opportunity to move up and out. We still see some people choosing to remain in the same low skill jobs for years.
That’s a bitter word. Choose.
Of course, this economic buggery is the result of a shop-worn technique of the well intentioned; the guilt-laden obtuseness of “social responsibility”. Supporting arguments for such chicanery in the media and on American university commons usually sound something like this. A father (or mother, as is oft cited) of numerous children struggles to juggle several minimum wage jobs to support a family. On its face, this is clearly wrong and socially unjust. Wealth should therefore be confiscated via executive fiat and re-distributed. This would be applied using the most “broadly shared sacrifice possible”, one UM faculty senate member was quoted sharing our pain in concise descriptive terms.
If the stroke of the President’s minimum wage pen cures poverty, why not set the rate at $10 an hour? How about $50 dollars an hour? At that rate everyone makes at least $100,000 a year.
The reality is more like this. The U.S. Department of Labor says that over 60 percent of all minimum wage earners are between the ages of 16 and 24. Most of these are not working poor struggling to feed a family but younger people trying to get entry-level job experience. Fewer than 14 percent of minimum age workers are heads of households trying to support families.
So what is the UM predicament? Well for starters, UNICCO is one of more than 100 UM contractors. UM has no legal standing to check or ensure that they, nor any other service providers, comply with said wage increases except to price out would be cheaters through contract negotiation and approval. Is UM to renegotiate nearly two hundred service contracts? Can UM keep these companies that have now accepted unfunded contractual requirements from firing workers that can no longer be afforded? The cost of providing the service hasn’t dropped and neither has the demand for service, if you follow me.
If companies, corporations, governments, and universities negotiate, than why can’t low-skill individuals for their own wages? The truth is that most individuals already do. Ask any graduate student assistant trying to earn their degree. Labor, like Coca-Cola and Pizza Hut, is subject to the same law of supply and demand. There is no such thing as intrinsic price or value of anything. Price, worth and cost are always negotiated and are constantly changing. Stanford economist Thomas Sowell puts it succinctly: “Free market economics is not about ‘distributing’ anything to anybody. It is about letting people earn whatever they can from voluntary transactions with other people.”

Steve Stanley is a graduate student in the international administration program of the School of International Studies.