Saturday, September 24th, 2016

“Living wage” ordinance will hurt taxpayers, entry-level workers

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Milwaukee County Supervisor David Bowen’s proposal to create “a living wage” requirement for contractors and subcontractors that do business with the county is bad for workers, bad for employers, and bad for taxpayers. Over at the MacIver Institute, I explain why. Here is an excerpt:

Bowen’s proposal for county contractors and subcontractors promises to “end growing poverty,” but he did not have an answer on whether the “living wage” requirement would have exemptions for internships, jobs aimed at youth employment, or obviously entry-level positions. Those types of opportunities are essential to giving people work experience and get them participating in the labor pool. However, if a rigidly-held wage floor is in place, employers will resort to more experienced workers to fill those positions to justify paying the higher wage or do away with those positions entirely.

Bowen also could not tell me what enforcement mechanisms would be in place, including what kind of audit process and how much it would cost. Nor would Bowen say if the contractor would be responsible for the subcontractor, and who would be responsible for fines (if any) that are imposed for non-compliance.

Milwaukee County Executive Chris Abele expressed some concerns to me about the proposal. Abele’s office hasn’t yet seen the proposal, either. He said he was open-minded about the proposal. However, he said that given the likely small number of people it will affect, if it would make more sense to take a more targeted approach. He was curious to see if peer-reviewed research would support Bowen’s proposal.

Abele also said that he would look at any proposal to see if it can even be implemented within the county budget. That’s an important question, because the one thing we do know about Bowen’s proposed ordinance is that it will raise costs for county services. That will be in direct contradiction to Abele’s oft-repeated goal of providing better services for less cost to the taxpayers.

By raising the floor for wages for employees of businesses that contract with the county, those contractors will need to increase what they charge. To Bowen and unions that support these kinds of “living wage” ordinances, that may be a feature and not a bug. By raising the costs for outside contracting, the financial difference between using the private sector for county services and using government union labor for those services would be smaller, reducing the incentive for contracting with private companies.

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