Over the past decade, politicians have sought to reform the national poverty levels by lobbying for what is frequently referred to as a living wage. Living wages, on the most elementary level, are the absolute minimum a person must make per year or per hour to stay above the federal poverty level. While the number of people that receive living wages is still small, Wood (2002) suggests that this is a trend that is gaining momentum across the United States because it may help reduce employee turnover and increase worker productivity.
Living wages became a hot topic in 1994 when Baltimore, Maryland officials adopted a policy that required all companies that received public funds or worked on government contracts to pay a wage that would sufficiently provide for the basic needs of the people they employed. Living wages differ among cities since it is calculated by the cost of living in that area. The cost of living is based on available childcare, healthcare, housing, food, and transportation costs. According to www.responsiblewealth.org, (2005) in 2000, the living wage amounted to $17,050 a year for a family of four, or $8.20 per hour for a full-time, year around worker. Most studies show that the economical benefits of living wages, such as worker productivity and reduced turnover, are increasing, and I must agree with Neumark (2003) who explains that living wages overall can reduce poverty, and living wage laws are effective, but there is an obvious tradeoff that occurs with wage increases, specifically employment reductions for individuals with little or no skills. Issues such as these will be discussed in greater detail in this paper.
Reductions in Poverty
Neumark (2003) has performed numerous studies that show that increasing the minimum wage produces no significant reduction in poverty levels and may even increase the number of families living in poverty by eliminating many low-wage jobs. When the first minimum wage law was enacted in 1938, www.reponsiblewealth.org (2005) asserts that legislators reasoned that good paying jobs would increase consumer purchasing power, the notion that the economy can be healthy if wages are held synthetically high, which in turn would stimulate the creation of more jobs. This act was in the decade of the Great Depression, and people were struggling for necessities.
However, along the same line, people working for minimum wage today are not technically struggling to make ends meet in the first place. About 64 percent of people earning minimum wage in today's society are not the sole supporters of the family; they are children living at home with their parents. The people we, as society, consider to be poor are truly benefiting from living wages. According to Malanga, (2003) a recent study completed on low-wage workers in California found that 80 percent moved up the economic ladder in the 1990's with their income almost doubling to...