[Nir Kaissar] A living wage for all is attainable

While the US Congress and White House wrangle over spending on infrastructure and social programs, the most pressing problem for the US remains little acknowledged and unaddressed: Tens of millions of people work full-time and can’t afford food, clothes, housing, health care and a proper education for their children. Their struggle is sowing division, fanning political and social tensions and raising doubts in many Americans’ minds about the merits of capitalism and democracy.

It doesn’t have to be this way. A living wage is attainable for everyone who works full-time, but it will require business and government leaders to recognize the problem and work together to fix it.

About half of the employees of the biggest US companies couldn’t support a family of four. As for Congress, Democrats have offered mostly temporary relief measures and Republicans don’t appear to be bothered that many of their constituents are struggling. But make no mistake, huge numbers of Americans go to work every day and don’t earn a living.

You don’t have to dig deep in the data to see that the US economy isn’t working for everyone. In the first quarter, median weekly pay for the 112 million full-time workers was $989, according to the Bureau of Labor Statistics, which amounts to $49,450 over a 50-week work year. For a single person living in, say, Nashville or a comparable city, that’s enough to cover the basics and even have a bit left over for entertainment or savings. But remember that half of full-time workers -- 56 million of them -- earn less than the median, which in most cases isn‘t enough to support one person in the most affordable places.

The math becomes trickier once children enter the picture. A single parent with one child would need about $10,000 a year more than the median income to get by in Nashville, and about $30,000 more in a pricier city like Washington. Adding a nonworking spouse makes things harder, requiring about $20,000 a year more in Nashville and $40,000 in Washington. And in all cases, the gap widens with the number of children. Best positioned are two working adults in affordable cities like Nashville.

Here’s the bottom line: The median income is probably enough if you’re single with no children or partnered with another full-time worker and live somewhere other than a coastal city.

There’s no silver bullet for inadequate wages, but it is possible to lift full-time workers and their families out of poverty. For starters, companies that can pay workers a living wage should do so, not as an act of charity, but as a recognition that they crucially depend on a healthy and motivated workforce to produce their goods and services and make enough money to consume them. Businesses also need economic and political stability, both of which are compromised when much of the workforce is impoverished. Paying workers a living wage is no less worthy an investment. In fact, it’s an important component of companies’ relations with labor.

It’s not just how much workers earn, but also how long they can expect to keep their jobs. Highly paid workers, particularly those without children, may be less burdened by frequent job changes. But those scraping by on subsistence wages often don’t have extra money to fill gaps between jobs or move to find new work. Those gaps are particularly hard on families, and children often bear the brunt. That doesn’t mean workers should have guaranteed employment, but companies should view workers as partners rather than interchangeable cogs in the corporate machine, or worse, a threat.

There’s something else companies can do that wouldn’t cost them anymore and might even save them money: Allow workers to relocate. As the pandemic has revealed, lots of work can be done remotely as effectively as in an office, and much of it is in industries like technology and banking that tend to be clustered in expensive coastal cities. Workers who move to lower-cost locales would instantly enjoy a higher standard of living -- and possibly help revive their adopted cities and towns. Companies could still provide local offices for those who want to work outside the house occasionally, or even full-time, and it would likely be cheaper than maintaining sprawling corporate headquarters.

All businesses should aim to pay a living wage, but for those that can’t afford to, government should supplement workers’ wages through programs like the earned income tax credit. Government assistance is likely to be spent on necessities, which could also help local economies and spark a virtuous cycle of more spending and higher wages.

Sure, government assistance could end up subsidizing labor costs for companies that can already afford to pay workers more, but that’s not new. Highly profitable companies such as Amazon.com, Walmart, McDonald‘s and Home Depot routinely rely on taxpayers to sustain their workers. If big, powerful companies insist on misusing government programs, it’s hard to stop them. Ultimately, a free market relies on good faith cooperation between public and private sectors, and nowhere is that more urgently needed than ensuring that all full-time workers earn a living wage.

While no solution is perfect, leaving workers to fend for themselves is not a credible option. Yes, wages have picked up recently, and perhaps they will self-correct. But that’s far from certain, and in the meantime, workers, families and the country’s social fabric are suffering. Some workers may already be signaling that they will no longer work for poverty wages as job openings pile up.

The big reveal is coming when supplemental benefits expire in the fall, and I suspect employers will find out that persuading workers to return will take a pay raise.

Everyone who works full-time should be able to afford the basic necessities of daily life. For the sake of individuals and families, companies, the economy and the whole country, business and government need to use their power to make sure every worker earns a living wage.


Nir Kaissar
Nir Kaissar is a Bloomberg Opinion columnist covering the markets. -- Ed.

(Bloomberg)