This week, the Raleigh City Council adopted a Universal Living Wage policy. They’re not the first city in the North Carolina to do so, and they’ll likely not be the last.
A couple of points of clarification are important when we talk about this issue.
First, there’s the question of what a “living wage” even is. The precise definitions vary some from group to group, but basically we’re talking about a wage sufficient for a person working full time to live locally and meet basic needs. It’s completely separate from the minimum wage, which is a legal requirement. “Living wage” is much more subjective. It’s about what people actually need to make in order to be able to live in a particular city at some reasonable standard of living.
Of course, that immediately leads to all sorts of questions. What’s included? How much is a reasonable amount to spend on food? How much on rent? Should I be able to afford cable? Various groups calculate what is a living wage, and they don’t all agree. The amount changes from state to state and city to city. It’s very difficult to even arrive at an agreed number.
Second, in North Carolina, cities are prohibited by law from setting minimum wages higher than the state minimum. So when Raleigh or any other municipality adopts a living wage policy, it only affects city employees, not those working for any other public or private employer.
So that’s the background. Raleigh’s decided that its full-time employees should make a minimum of $28,630, or $13.76 an hour. Durham has a similar minimum for its workers of $13.50. Charlotte’s is $13.00. And frankly, with most employers, I’d say pay whatever you want. A couple years ago, Dan Price decided to set a company-wide minimum wage at his small company of $70,000. He paid for it largely through cutting his own salary. And that’s his prerogative. He can pay whatever he and his employees agree.
But the thing about city wages is that they’re funded through taxes. There’s no CEO making millions who can single-handedly fund across-the-board pay raises on his own. So in order to raise wages like this, one of two things will have to happen. Either the city will have to raise everyone’s taxes in order to give higher pay to a few. Or the city will have to cut staff.
Cities raise money primarily through property taxes. Those taxes are paid by homeowners each year. They’re also paid indirectly by renters, since the owners of those rental properties – houses or apartments – have to offset the higher taxes with higher rents. Businesses pay property taxes, so they have to raise their prices to cover that increased cost. Ultimately, all of us pay those increased taxes to fund higher salaries for city workers.
The News & Observer said “Mayor Pro-Tem Kay Crowder referred to the change as an act of compassion.” But here’s the thing about compassion. It’s voluntary. It’s compassion when I give food to a hungry neighbor. It’s not compassion when the city uses other people’s money (the taxpayers’) to give above-market rate pay increases to city employees. That’s just wealth redistribution.
It’s also not compassionate to deny people jobs, but that’s the other option available to the city. The city only has a limited amount of money, so if they’re going to pay more and not raise everyone’s taxes, then they’ll have to trim staff. The real choice for some city employees may not be between $23,000 and $28,000, but between $23,000 and no job at all. Again, that’s not particularly compassionate.
I don’t doubt the good intentions of the city council. I think Raleigh wants to pay its people well because they believe that’s a good and right thing to do. But they need to consider the unintended consequences of their actions – lost jobs for a few, higher housing and other costs for all. Unfortunately, I think this particular policy may end up doing more harm than good to the people the Raleigh City Council is supposed to serve – not just employees, but all Raleigh taxpayers.