For a few weeks in the summer of 1995, Jen Kern spent her days at a table in
the Library of Congress in
A few months earlier, she and her colleagues at Acorn witnessed an energetic
grass-roots campaign in
So Kern and another colleague were dispatched to find out if what happened
in
Whether a wage campaign was winnable turned out to be a more complicated
matter. In the late 1990's, Kern helped Acorn in a series of attempts to raise
the minimum wage in
It is a common sentiment that economic fairness - or economic justice, as
living-wage advocates phrase it - should, or must, come in a sweeping and
righteous gesture from the top. From
The immediate goal for living-wage strategists is to put initiatives on the
ballots in several swing states this year. If their reckoning is correct, the
laws should effect a financial gain for low-income workers and boost turnout
for candidates who campaign for higher wages. In
Does
I first met Kern on a sunny morning in late September in
One of the more intriguing questions about campaigns like the one in
In the mid-1990's, the last time Congress raised the minimum wage, the
Clinton White House was reluctant to start a war over the federal rate,
according to Robert Reich, the former labor secretary. For an administration
bent on policy innovation, that would have seemed "old" Democrat.
"Then we did some polling and discovered that the public is overwhelmingly
in favor," Reich told me recently. "At which point the White House
gave the green light to Democrats in Congress." Reich, now a professor at
the
The idea, Reich points out, isn't new, even if the recent fervor for it is.
By dint of its piecemeal, localized progress, the modern living-wage
movement has grown without fanfare; one reason is that until recently, most of
the past decade's wage laws, like Baltimore's, have been narrow in scope and
modest in effect. Strictly speaking, a "living wage" law has
typically required that any company receiving city contracts, and thus
taxpayers' money, must pay its workers a wage far above the federal minimum,
usually between $9 and $11 an hour. These regulations often apply to employees
at companies to which municipalities have outsourced tasks like garbage
collection, security services and home health care. Low-wage workers in the
private sector - in restaurants, hotels, retail stores or the like - have been
unaffected. Their pay stays the same.
In
The Economists Are Surprised
In the years before the enactment of the federal minimum wage in the late
1930's, the country's post-Depression economy was so weak that the notion that
government should leave private business to its own devices was effectively
marginalized. During the past few decades, though, in the wake of a fairly
robust economy, debates on raising the minimum wage have consistently resulted
in a rhetorical caterwaul. While the arguments have usually been between those
on the labor side, who think the minimum wage should be raised substantially,
and those on the employer side, who oppose any increase, a smaller but vocal
contingent has claimed, more broadly and more philosophically, that it is in
the best interest of both business and labor to let the market set wages, not
the politicians. And certainly not the voters.
This last position was long underpinned by the academic consensus that a
rise in the minimum wage hurts employment by interfering with the flow of
supply and demand. In simplest terms, most economists accepted that when
government forces businesses to pay higher wages, businesses, in turn ,hire
fewer employees. It is a powerful argument against the minimum wage, since it
suggests that private businesses as a group, along with teenagers and low-wage
employees, will be penalized by a mandatory raise.
The tenor of this debate began to change in the mid-1990's following some
work done by two
Card and Krueger's conclusions have not necessarily made philosophical
converts of Congress or the current administration. Attempts to raise the
federal minimum wage - led by Senators Edward M. Kennedy on the
left and Rick Santorum on the right - have made little headway over the past
few years. And the White House went so far as to temporarily suspend the
obligation of businesses with U.S. government construction contracts to pay
so-called prevailing wages (that is, whatever is paid to a majority of workers
in an industry in a particular area) during the rebuilding after Hurricane
Katrina. David Card, who seems nothing short of disgusted by the ideological
nature of the debates over the wage issue, says he feels that opinions on the
minimum wage are so politically entrenched that even the most scientific
studies can't change anyone's mind. "People think we're biased,
partisan," he says. And he's probably right. While Card has never
advocated for or against raising the minimum wage, many who oppose wage laws
have made exactly those assertions about his research. Nonetheless, in
Krueger's view, he and Card changed the debate. "I'm willing to declare a partial
victory," Krueger told me. Some recent surveys of top academics show a
significant majority now agree that a modest raise in the minimum wage does
little to harm employment, he points out.
If nothing else, Card and Krueger's findings have provided persuasive data,
and a degree of legitimacy, to those who maintain that raising the minimum
wage, whether at the city, state or federal level, need not be toxic. The
Economic Policy Institute, which endorses wage regulations, has succeeded
recently in getting hundreds of respected economists - excluding Card and
Krueger, however, who choose to remain outside the debate - to support raising
the federal minimum to $7 an hour. That would have been impossible as recently
as five years ago, says Jeff Chapman, an economist at the E.P.I. Even
Wal-Mart's president and C.E.O., Lee Scott, recently spoke out in favor of
raising the minimum wage. It wasn't altruism or economic theory or even public
relations that motivated him, but a matter of bottom-line practicality. "Our
current average hourly wage for workers is $9.68," Lee Culpepper, a
Wal-Mart spokesman, told me. "So I would think raising the wage would have
minimal impact on our workers. But we think it would have a beneficial effect
on our customers."
What a Higher Minimum Wage Can Mean to Those Making It
One evening in
I also met with Ashley Gutierrez, 20, and Adelina Reyes, 19, who have
low-paying customer-service and restaurant jobs. By most estimates, 35 percent
of those who make $7 an hour or less in the
Montaņo was confident - perhaps too confident, as it would turn out - that
businesses would become acclimated to higher payroll costs. He has run a
restaurant and a tour-bus company himself, and he knew that the tight labor
market in
The Moral Argument Carries the Day in
Not surprisingly, Lucero's opponents on the round table saw things in a different
light. For example, Carol Oppenheimer, a labor attorney, viewed the proposed
law as a practical and immediate solution. "I got involved with the
living-wage network because unions are having a very hard time," she told
me. She assumed that local businesses could manage with a higher payroll. Yet
after only a few meetings of the task force, both sides dug in, according to
Oppenheimer.
It was then that the living-wage proponents hit on a scorched-earth,
tactical approach. "What really got the other side was when we said, 'It's
just immoral to pay people $5.15, they can't live on that,' " Oppenheimer
recalls. "It made the businesspeople furious. And we realized then that we
had something there, so we said it over and over again. Forget the economic argument.
This was a moral one. It made them crazy. And we knew that was our issue."
The moral argument soon trumped all others. The possibility that a rise in
the minimum wage, even a very substantial one, would create unemployment or
compromise the health of the city's small businesses was not necessarily
irrelevant. Yet for many in
The Rev. Jerome Martinez, the city's influential monsignor, began to throw
his support behind the living-wage ordinance. When I met with him in his
parish, in a tidy, paneled office near the imposing 18th-century church that
looks over the city plaza,
I asked if it had been a difficult decision to support the wage law. He
smiled slightly. "It was a no-brainer," he said. "You know, I am
not by nature a political person. I have gotten a lot of grief from some
people, business owners, who say, 'Father, why don't you stick to religion?'
Well, pardon me - this is religion. The scripture is full of matters of
justice. How can you worship a God that you do not see and then oppress the
workers that you do see?"
I heard refrains of the moral argument all over
Several Santa Fe councilors had, over the course of the previous year, come
to Morty Simon's view that the wage ordinance presented an opportunity to stop
the drift between haves and have-nots. Carol Robertson Lopez, for example, had
initially opposed the living-wage law but changed her mind after 30 hours of
debate. "We take risks, oftentimes, to benefit businesses," she told
me, "and we take risks to benefit different sectors. I felt like this was
an economic risk that we were taking on behalf of the worker." She
acknowledged that some residents thought the city had started down a slippery
slope toward socialism; jokes about the People's Republic of Santa Fe were
rampant. But Robertson Lopez says that by the night of the vote she had few
reservations. "I think the living wage is an indicator of when we've given
up on the federal government to solve our problems," she says. "So
local people have to take it on their own."
The living-wage ordinance had its final hearing on Feb. 26, 2003, in a
rancorous debate that drew 600 people and lasted until 3 a.m. The proposal set
a wage floor at $8.50 an hour, which would increase to $9.50 in January 2006
and $10.50 in 2008. It would also regulate only businesses with 25 or more
employees.
It passed the City Council easily, by a vote of 7 to 1. A few weeks later, a
group of restaurant and hotel owners filed suit in state court on the grounds
that the living-wage ordinance exceeded the city's powers and was a violation
of their rights under New Mexico's constitution. A judge suspended the wage law
until a trial could resolve the issues.
Businesses Fight Back
To business owners in Santa Fe, the most worrisome aspect of the living-wage
law is that the city has sailed into uncharted territory. Most of the
minimum-wage campaigns in the U.S. have been modest increases of a dollar or a
dollar and a half. The numerous state campaigns for 2006 will probably propose
raises to between $6.15 and $7 and hour. (When San Francisco raised its minimum
wage to $8.50 an hour in 2004 - indexed to inflation, it is now $8.82 -
California's state minimum wage was $6.75, so the increase was 26 percent.) And
even staunch supporters of a higher minimum wage accept that there is a point
at which a wage is set so high as to do more harm than good. "There is no
other municipality in the country that believes that $9.50 should be the living
wage," says Rob Day, the owner of the Santa Fe Bar and Grill and one of
the plaintiffs who sued the city. In fact, the most apt comparison would be
Great Britain, which now has a minimum wage equivalent to about $8.80 an hour.
"They have minimum wages that are Santa Fe level," says Richard
Freeman, a Harvard economist. And at least for the moment, he says, "they
have lower unemployment than we do."
As the lawsuit against the city progressed, though, Europe wasn't even a
distant consideration. The focus was on the people of Santa Fe. I read through
a transcript of New Mexicans for Free Enterprise v. City of Santa Fe one day
this fall in a conference room at Paul, Weiss, Rifkind, Wharton & Garrison,
the white-shoe law firm in Midtown Manhattan that defended, pro bono, Santa
Fe's right to enact the living-wage ordinance. In many respects, the trial,
which took place over the course of a week in April 2004, was an unusual public
exchange on profits, poverty and class in America. Paul Sonn, the lawyer at the
Brennan Center at New York University who wrote the Santa Fe ordinance, had
enlisted Sidney Rosdeitcher, a partner at Paul, Weiss, to be lead counsel for
Santa Fe's defense. Rosdeitcher told me that before the trial began he wasn't
convinced that there were many factual issues in dispute; as he saw it, the
living-wage controversy was about the law and, in particular, whether Santa Fe
had a legal "home rule" authority, under the provisions of the New
Mexico constitution, to set wages, even for private industry. Nevertheless,
several low-wage workers took the stand to relate the facts, as they saw them,
of what the wage increase would do to improve their quality of life. The Rev.
Jerome Martinez took the stand as an employer of 65 people in his parish and
Catholic school. And a number of restaurant owners, in turn, explained how the
new law could ultimately force them out of business.
The plaintiffs - the New Mexicans for free enterprise - were not
unsympathetic: the restaurateurs who took the stand, like Rob Day or Elizabeth
Draiscol, who runs the popular Zia Diner in town, opened their books to show
that their margins were thin, their costs high, their payrolls large. They
cared about their employees (providing health care and benefits), trained
unskilled workers who spoke little or no English, gave regular raises and paid
starting salaries well above $5.15. They had built up their businesses through
an extraordinary amount of hard work. Draiscol testified that her restaurant,
for instance, had $2.17 million in annual revenue in the fiscal year of 2003.
Though her assets were substantial - a restaurant can be valued at anywhere
from 30 to 70 percent of its annual revenues, and Draiscol said Zia had been
appraised at 66 percent of revenues, or about $1.4 million - she earned a
salary of $49,000 a year. Draiscol testified that the living wage would raise
her payroll, which accounted for 55 to 65 employees (depending on the season),
by about $43,192 a year. Rob Day put the expenses of a living-wage increase
even higher. In addition to labor costs, he estimated that the price of goods
would go up as his local suppliers, forced to pay employees higher wages
themselves, passed along their expenses to the Santa Fe Bar and Grill.
Rosdeitcher showed that the restaurants had made serious errors
overestimating their costs. Still, the increase in expenditures was not
negligible. Over the past few years, a variety of experts have tried to perfect
the science of predicting what will happen to a community in the wake of a
minimum-wage change, and one of those experts, Robert Pollin, a professor of
economics at the University of Massachusetts, Amherst, served as the expert
witness on behalf of Santa Fe. Pollin projected that the living wage would
affect the wages of about 17,000 workers. About 9,000 of those workers would
receive raises because of the ordinance, he said; the rest would receive what
he called "ripple effect" increases - which meant that those making,
say, $8.50 or more before the raise would most likely receive an additional
raise from their employers to reflect their job seniority. Pollin calculated
that wage increases would cost businesses a total of $33 million. And to pay
for those amounts, restaurants and hotels and stores would probably need to
raise prices by between 1 and 3 percent. The question, therefore, was whether
business owners were willing to raise prices or make less in profits. In the
trial, Pollin cited an obscure 1994 academic experiment in which several
economists had set a different price within the same restaurant for a
fried-haddock dinner. In varying the price of the haddock between $8.95 and
$10.95, the researchers' goal was to find out whether variations in cost
affected demand in a controlled environment. As it turned out, they didn't.
Customers ordered the haddock at both $8.95 and $10.95.
Results From the Santa Fe Experiment
That the city of Santa Fe has effectively become a very large
fried-haddock-dinner experiment is difficult to deny. A state court judge ruled
in favor of the city soon after the trial, allowing the living-wage ordinance
to take effect in June 2004; recently, the judge's decision was affirmed by a
state appellate court, giving the city, and its living-wage advocates, a
sweeping victory. Many business owners have found these legal losses
discouraging. This fall, not long after I visited the city, the Santa Fe Chamber
of Commerce sent a note to its members to gauge their opinion on the $8.50
living wage and the hike on Jan. 1 to $9.50. Some members reported that they
had no trouble adjusting to the first raise and supported a further increase.
(Some of these owners, whose high-end businesses employ skilled workers, paid
more than the $8.50 to begin with.) Others insisted that they were not averse
to a state or federal raise in the minimum but that Santa Fe's citywide
experiment had put local businesses at a competitive disadvantage: companies
could move outside the city limits or could outsource their work to cheaper
places in the state. But most respondents opposed the law. The living wage had
forced them to raise prices on their products and services, which they feared
would cut into business.
To look at the data that have accumulated since the wage went into effect is
to get a more positive impression of the law. Last month, the University of New
Mexico's Bureau of Business and Economic Research issued some preliminary
findings on what had happened to the city over the past year and a half. The
report listed some potential unintended consequences of the wage raise: the
exemption in the living-wage law for businesses with fewer than 25 employees,
for instance, created "perverse incentives" for owners to keep their
payrolls below 25 workers. There was some concern that the high living wage
might encourage more high-school students to drop out; in addition, some
employers reported that workers had begun commuting in to Santa Fe to earn more
for a job there than they could make outside the city.
Yet the city's employment picture stayed healthy - overall employment had
increased in each quarter after the living wage went into effect and had been
especially strong for hotels and restaurants, which have the most low-wage
jobs. Most encouraging to supporters: the number of families in need of
temporary assistance - a reasonably good indicator of the squeeze on the
working poor - have declined significantly. On the other hand, the city's gross
receipts totals, a reflection of consumer spending and tourism, have been
disappointing since the wage went into effect. That could suggest that prices
are driving people away. Or it could merely mean that high gas and housing
prices are hitting hard. The report calculates that the cost of living in Santa
Fe rose by 9 percent a year over the past two and a half years.
Rob Day of the Santa Fe Bar and Grill sees this as the crux of the matter.
In his view, the problem with Santa Fe is the cost of housing, and there are
better ways than wage regulations - housing subsidies, for example - to make
homes more affordable. In the wake of the wage raise, Day told me, he
eventually tweaked his prices, but not enough to offset the payroll increases.
He let go of his executive chef and was himself working longer hours. "Now
in the matter of a year and a half, I think there is a whole group of us who
thought, if we were going to start over, this isn't the business we would have
gone into," he says.
Al Lucero, the owner of Maria's New Mexican Kitchen, says that the
living-wage battle has risked turning him into a caricature. Opponents backing
the living wage "paint us as people who take advantage of workers,"
he told me. By contrast, Lucero sees himself as an upstanding member of the
community who provides jobs (he has 60 employees) and had always paid well
above the federal minimum. Other business owners said similar things but would
not speak out publicly. They feared alienating customers. As some told it, they
had started businesses with a desire to create wealth and jobs in a picturesque
small city. Then they had awakened in a mad laboratory for urban liberalism.
The Issue in Albuquerque
Long after he did his influential research with David Card on the effect of
minimum-wage raises, Alan Krueger says, he came to see that ultimately the
minimum wage is less about broad economic outcomes than about values. Which is
not to say that workers' values should trump those of owners'. Rather, that
when wealth is being redistributed from one party to another - and not, in the
case of Santa Fe, from overpaid C.E.O.'s and hedge-fund managers but from
everyday entrepreneurs who have worked long hours to succeed in their
businesses - things can get complicated. Indeed, while it is tempting to see
the wage disputes in Santa Fe and elsewhere as a reflection of whether one side
is right or wrong, on either economic or moral grounds, they are, more
confusingly, small battles in a larger war (and, in America, a very old war)
over where to draw the line on free-market capitalism. On one side there is Al
Lucero, on the other someone like Morty Simon, or the economist Robert Pollin,
who says: "The principled position is, 'Why should anyone tell anyone what
to do? Why should the government?' I just happen to disagree with that. A
minimally decent employment standard, to me, overrides the case for a free
market."
And yet, the fact that voters or elected politicians should decide who wins
these battles, rather than economists or policy makers, seems fitting. During
Albuquerque's living-wage campaign this past fall, Santa Fe - the smaller,
wealthier, northern neighbor - served as a rallying point. But it was also a
question mark: Was Santa Fe's experience repeatable? Was it even worth pointing
to as an exemplar? In the final days of the Albuquerque effort, Jen Kern of
Acorn told me she had little doubt that the wage victory in Santa Fe, like the
one in San Francisco, was an indication that a battle for creating high base
wages in America's cities, in addition to the states, could be won. But these
were also rich cities, liberal cities - "la-la lands," as she put it.
"I think with citywide minimums, if this is going to be the next era in
the living-wage movement, it's got to look like it's winnable," Kern says.
"The danger or the limitations of just having San Francisco and Santa Fe
having passed this is that people in other parts of the country are going to
say, 'Well, I'm not Santa Fe, I'm not San Francisco."' In Kern's view, a
win "in a city like Albuquerque, which I think everyone thinks of as sort
of a normal city," was a truer test.
And it didn't pass that test. When the $7.50 ballot initiative lost by 51
percent to 49 percent on Oct. 4, it made many in the living-wage movement
wonder how these battles will play out over the next year or two. One political
consultant involved in the movement questioned whether the Albuquerque wage
itself, at $7.50 an hour, had been set too high by Acorn to win broad support.
Matthew Henderson of Acorn, who ran the day-to-day campaign, said he thought
they were outspent by their opponents. Most likely, though, the outcome was
determined by the actual grounds on which the battle was fought. The businesses
that opposed the $7.50 wage, represented mainly by the Greater Albuquerque
Chamber of Commerce, challenged a small provision in the proposed living-wage
law that would allow those enforcing a living wage to have wide
"access" to a workplace. The campaigns soon began trading allegations
through television ads and direct mailings about how far such access might go.
And so the living-wage campaign had become a surreal fight over privacy (it
would allow "complete strangers to enter your child's school," one
mailing against the measure alleged) rather than wages. When I met with Terri
Cole, the president and C.E.O. of Albuquerque's Chamber of Commerce, a few days
before the vote, she acknowledged that the chamber opposed the living-wage law
on philosophical grounds. But she said she saw the access clause as a
legitimate grounds for a fight.
Will It Play Nationally?
In the aftermath of Albuquerque, Jen Kern took solace in the fact that 10
years after she visited the Library of Congress, and 10 years after she began
working on living-wage campaigns, the opposition fought not on the economic
merits or risks of a higher wage, but on a side issue like privacy. Still, a
loss is a loss. It is possible that the Albuquerque wage campaign may still
prevail, in effect: New Mexico's governor, Bill Richardson, has said he
would consider a statewide raise this spring, presumably to $7 or $7.50, from
$5.15, that would affect all New Mexicans. (It would, in all likelihood, leave
Santa Fe's higher wage unaffected.) Yet such an act does little to clarify
whether progressives can actually transform strong levels of voter support for
higher wages into wins at the polls. Kristina Wilfore, the head of the Ballot
Initiative Strategy Center, a progressive advocacy group, says that over the
years there has been anywhere from a 2 to 5 percent increase in voter turnout
specifically correlated with wage measures. "But people think it's some
big panacea, and it's not," says Wilfore, who regards success as dependent
on how well a local wage coalition (organized labor, grass-roots groups,
church-based organizations) can work together at raising money and mobilizing
voters.
For specific candidates in a state or city where a wage measure is on the
ballot, it can be similarly complicated. Representative Rahm Emanuel of
Illinois, chairman of the Democratic Congressional Campaign Committee, told me
that the local battles over living wages reflect the broader debate in the U.S.
over health care, retirement security and an advancing global economy.
"Every district is different," Emanuel says of the slate of
Congressional races for 2006, "But there is not one where the living wage,
competitive wages or health care doesn't play out. The minimum-wage issue, if
it's on the ballot, is part of the economic argument."
David Mermin of Lake Research Partners, who frequently conducts polls on
minimum-wage issues, told me that the dollar level of a wage proposal is
important, though it can vary from place to place. ("People have different
feelings about what's a lot of money," he says.) But he has found that
quirks can emerge. An increase to $6.15 sometimes doesn't poll as well as an
increase to $6.75, which can generate more intensity and broader support from
voters. Mermin also says that wage measures have had success in recent years,
Albuquerque notwithstanding, not because Americans feel differently but because
campaigners are getting smarter about stressing morals over economics. And when
handled adroitly, a wage platform can motivate the kind of voters who are
difficult to engage in other ways: younger voters, infrequent voters, low-income
urban voters. His research, Mermin adds, shows that most people who vote for
the minimum wage know it's not going to affect their lives tomorrow: "It's
not like fixing the health-care system, or repairing the retirement
system," he says. "It doesn't rise to that level directly. And if you
list it in 10 issues, it doesn't pop out in priority. But when it is on the
ballot, it crystallizes a lot of things people feel about the economy and about
people who are struggling." In his experience, voters seem to process
these measures as an opportunity to take things into their own hands and change
their world, just as Morty Simon did.
Still, as an endgame, many in the living-wage movement see the prize not in
a series of local victories in 2006 but in Congressional action that results in
a substantial increase in the federal minimum wage - and even better - one that
is indexed to inflation, so that such battles about raising the wage don't need
to be fought every few years. The long-run trajectory, Paul Sonn told me, is
for cities and states to create enough pressure to ultimately force a raise on
the federal level. Or to put it another way, the hope is that raising wages
across the U.S. will ultimately demonstrate to voters and to Washington
lawmakers both the feasibility and the necessity of a significantly higher
minimum wage. In the meantime, Sonn says, cities like Santa Fe play an
important role in policy innovation, "really as sort of laboratories of
economic democracy." Richard Freeman of Harvard echoes this point.
"If you go back, a lot of the New Deal legislation, good or bad, came
about because there was a lot of state legislation," Freeman says.
Policies from New York or Wisconsin were adapted into the federal system of
laws. "A lot of it came from state variations in the past, and I think
we'll see a lot more of this in the next few years. The things that work the
best might be adopted nationally."
Of course, it also seems plausible that any kind of national coherence on
economic - or moral - matters may have ended long ago. Just as the voters of
states and cities have sorted themselves politically into red and blue, and
into pro- and anti-gay marriage, in other words, they are increasingly sorting
their wage floors and (perhaps soon) their health-care coverage. This trend may
produce not progressive national policies but instead a level of local
self-determination as yet unseen. Or as Freeman puts it, "Let Santa Fe do
what it wants, but let's not impose that on
This was why, in December, Kern and Acorn were considering the prospects for
laying the groundwork for living-wage ordinances in other cities. And it's why,
also in December, Paul Sonn was helping to write an ordinance for
It wasn't quite