Hd Wage Gap

Theatrics

There is a growing economic debate these days over the widening gap between the very rich and the very poor or more to the point, what to do about it. The discussion often comes down to the question of whether government should play a greater role in easing the burden on those at the bottom, mainly through a hike in the minimum wage.

The immediate impulse from these quarters is to argue against intervention and for a modified marketplace system. That is, maintain a relatively low federally based minimum wage to serve as a floor, but then rely on the marketplace to raise those minimums based on experience, performance, and supply and demand determinants.

This is, in essence, our current system. Admittedly, it’s imperfect. Even an hourly wage that’s a couple of dollars above the minimum still hovers around the poverty level in Los Angeles. That was the specter raised in last week’s Business Journal profile of Blanca Martinez. After receiving a 30 percent pay raise, to $7.40 an hour, the building maintenance worker still only makes around $15,000 a year. (That’s in the same range as several jobs included in a review of local salaries, such as fast food worker, parking lot attendant and house cleaner.)

Thanks to subsidized housing and help from her mother, Martinez and her two sons manage to get by. But without additional training or schooling, her longer-term outlook is not much better; maintenance workers are simply not going to make much money, no matter what the circumstances.

The issue is not so much what she currently makes, but what her potential to make might be in three or five years. Which is why the current drive in Santa Monica to raise the minimum wage to over $10 an hour seems so misplaced.

First off, the very idea of an individual municipality having the authority to raise and lower the minimum at will is, in itself, self-defeating. What’s to stop the City Council from jacking up the minimum to $15 an hour? Or $20? At some point, council members can be removed from office, but not before inflicting significant damage to the overall economic health of their communities.

The prospect of businesses leaving Santa Monica because of higher labor costs has done little to stem the movement for a higher minimum. The prevailing attitude is that any departing business can easily be replaced. That’s true during the current boom times, but when the economy goes south as all economies do sooner or later it might be challenging to attract merchants, restaurateurs and others willing to fork over more than $10 an hour for service-type jobs.

It’s hard, of course, to deny the ever-widening divide between rich and poor. Just last week, a new study from the Congressional Budget Office showed that the richest 1 percent of all Americans will have as many after-tax dollars to spend this year as the bottom 100 million. And despite this decade’s prosperity, the report indicates that since 1977, the average after-tax income of the poor, adjusted for inflation, has declined 12 percent.

Compelling as those and other numbers might be, they defy easy solutions such as jacking up the minimum wage to the disadvantage, or even dislocation, of many local businesses. Tinkering with Main Street has never been something that government does very well, no matter how noble the motives.