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The Two Percent Solution: Part Three

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Start The Living Wage Cul de Sac

In the United States today, 15 million people live in or near poverty despite living in homes headed by full-time workers. Millions more live close to the edge, including countless former welfare recipients who have learned that having a job doesn’t mean being able to pay your bills. In response, a growing movement has won the passage of "living wage" ordinances in about 80 communities over the last decade, including Baltimore, Los Angeles, Detroit, and Chicago. These laws typically require government contractors and some other employers to pay workers substantially more than the minimum wage, which is now $5.15 nationally, but higher in states such as California and Massachusetts ($6.75) or Rhode Island and Washington, D.c= ($6.15). Often the "living wage" is set at the level needed to lift a family of four at least to the federal poverty line, which requires about $18,000 a year, or more than $8 an hour. Some cities require health benefits (or a further stipend per hour) to be offered atop this wage. To judge from the screams of the business lobbies and the breastbeating of living wage advocates, something sweeping is taking place. But here again, the battle is almost entirely symbolic, because none of the ordinances matches the scale of the problem.

At first glance, the "living wage" fight replays many of the reduction ad absurdum arguments made famous in the regular minimum wage wars. Bosses shout that if raising the minimum wage from $5.15 to $10.00 an hour plus $2 for health care is good, what is to stop legislators from making it $20, or $50? Labor answers that if a decent wage floor is so intolerable, what is to stop employers from calling for a return to child labor and sweatshops—or, for that matter, slavery?

The problem is that while liberals are right about the injustice facing unskilled workers, they’re wrong about the economics of fixing it. As much as well-intended activists dislike hearing this, it is simply not possible to solve the problem on a sustainable basis by mandating that private firms pay wages as high as $10 or $12 an hour for employees who, in economic terms, are "worth" only $6. Imposing such a mandate produces all sorts of perverse consequences. To avoid a doubling of their payroll costs, for example, some restaurants may decide to stop serving lunch, thereby shrinking their business below the minimum sales volume at which many living wage laws apply. They’ll make this choice because lunch is less profitable (since less liquor gets sold). As a result, a bunch of workers get fired so the firm stays viable. In addition, such laws naturally lead managers to upgrade their workforce, replacing $6-an-hour staff with $10-an-hour talent. If they have to pay up anyway, employers reason, they may as well hire workers with more skills. In this way a law meant to help the $6 worker ends up costing him his job. Of course, employers make sure local politicians understand these realities, which is why the scope of coverage of living wage laws is always tiny, affecting only a small fraction of an area’s workforce. Typically they target those working for government contractors, so that the cost ends up being shifted largely to taxpayers.

The sad truth, then, is that advocates for living wage laws have gotten them on the books by arguing, in effect, that they really don’t do much. That’s a strange rallying cry for a movement, but proponents feel it’s a start. "It puts the arguments and the message out there as a handle to move the debate forward," said Madeline Janis-Aparicio, who headed L.A.’s Living Wage Coalition.

The best estimate is that living wage ordinances cover perhaps 100,000 to 250,000 workers, out of the roughly 25 million full-time workers who are within striking distance of poverty-level wages today. After a decade of the living wage movement, in other words, we’re operating entirely at the margins. Unions reply that the movement helps galvanize local organizing efforts, which they say is the real long-term answer; but there’s nothing in recent history to suggest that labor is poised to make major inroads outside the public sector.

But at least the left is trying. While liberals settle for baby steps, the right merely sidesteps. Faced with millions of unfortunate people who hold low-wage jobs and can’t provide their families with the basics, the conservative slogan (echoed by some on the left) is "training and education." But when asked what this will do in the here and now for the janitors, dishwashers, and home health aides not destined to be retooled into software whizzes, the education caucus falls silent. If we’re honest, we have to admit that education and training, while important, could take years, even decades, to make much dent, and then mostly only for tomorrow’s workers.

So there is our national "living wage" debate: a showdown between the inadequate and the ineffectual. Shouldn’t there be a better way?

Campaign Finance Reform — Much Ado About Little

The McCain–Feingold bill, which ended large, unregulated "soft money" contributions to the national political parties, became a cause celebre in 2002, partly because of the stature of its cosponsor, Senator John McCain, and partly because The New York Times editorial page made the bill the centerpiece of a crusade. Like so many other makebelieve fixes in Washington, however, the measure acquired such symbolic power as "reform" that it seems subversive merely to utter the fact that it won’t do anything to get money out of politics.

Yet as even many McCain–Feingold champions told me, the influence of special interests in politics will never be offset without a major role for public financing of campaigns. Even before the new law passed, lobbyists and legislators breezily announced their strategies for evading its spirit. A ban on soft money for the national parties has not stemmed the flow of political cash, but merely diverted it into other modes of giving (to state parties and issue campaigns, for example) that pass legal muster. "Parties Create Ways To Avoid Soft Money Ban," shouted a New York Times headline in October 2002, as if this were a surprise. "I’ve said from the beginning that this was exactly what was going to happen," said Republican Party chairman Marc Racicot, calling the idea that "this reform was going to change things" a "pipe dream." As the ongoing battle over the new law’s constitutionality proves, it’s become another festival for lawyers, as is invariably the case with byzantine rules that defy human nature.

Some proponents of McCain–Feingold insist that the new law is a step forward nonetheless, because it stops members of Congress from directly extorting vast gobs of soft money, a transaction felt to be particularly corrupting (though even this solicitation ban may be interpreted to mean pols can "suggest" a donation so long as they don’t "solicit" it!). But for most reformers, the case that McCain–Feingold made any difference involves well-meaning rationalization. As their logic runs, we can’t propose measures (like public financing of campaigns) that would solve the problem because they wouldn’t pass, so let’s propose something that is passable in hopes that it can create momentum for further changes down the line. Don’t get me wrong: I’m usually in favor of taking half a loaf where necessary—but in this case it’s not clear that we got anything more than crumbs out of this transaction. The trouble, meanwhile, is that enormous amounts of emotional and political energy were invested in passing McCain–Feingold, creating a national hoopla over its "importance." Although it can’t begin to solve the problem, proponents feel forced in various ways to pretend that it does. Eventually the public will realize that little has changed, and cynicism about Washington’s false claims will deepen.

Don’t take my word for it. Take the word of Ellen Miller (no relation to me), who is one of the leading campaign reform activists of this generation, having served as executive director of the Center for Responsive Politics and Public Campaign. In the summer of 2002, after McCain–Feingold passed, Miller wrote an article in The American Prospect titled "The Road To Nowhere." Her heretical view: Three decades of reform effort have come to little. Monied interests have more power than ever in Washington and in state capitals. And this may get worse, she predicted, after McCain–Feingold.

Part of the reason for the McCain–Feingold bandwagon, she told me, is that the foundations who were major funders of campaign reform groups "put pressure on them to stop fighting and get behind a single reform." "It was purely a symbolic victory," Miller said. "The reform groups needed a reform passed so badly for political reasons that they were willing to accept anything."

We’ve looked in this chapter at the phony fixes being peddled on the issues at the heart of the Two Percent agenda. But these charades are ubiquitous. And their cumulative message is depressing. Our aspirations for public problem-solving seem to shrink even as national wealth grows and problems worsen. Make-believe answers corrosively dominate public debate. Yes, there has always been flimflam in politics, but today’s "solutions gap" has not always been the rule. Countless public policies in the past have been reasonably scaled to their goals; think of the GI Bill; Medicare; the interstate highway system; regulations for food, worker safety, and the environment; the lowering of marginal tax rates under Ronald Reagan. Solutions are always provisional, of course — complex social problems are never in any ultimate sense "solved" — but history shows that major progress is plainly possible. Yet today, especially when money is involved, the scams seem chronic. The curious reality nowadays is that our leaders almost never propose ideas that, if enacted, would make major progress on the problem they purport to address.

Which leads to a simple question: Why?

Part 1 | Part 2 | Part 3

Copyright 2003 PublicAffairs Publishing. Reprinted with permission.

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