Clearing the Air: Myths and Concerns

Table of Contents for Facts and Myths

FACT: According to The Sky Hasn't Fallen, a study by the Economic Policy Institute in Washington, DC, reporting the results of the most recent Federal minimum wage increase from $4.25 to $5.15 per hour, it was clearly shown that these workers were not adversely affected by the increase.

More Myths and Truths

The formula allows for local communities to make upward adjustments. So if the City of Pleasantville should collectively decide it does not want a Community where a single Woman with a child are homeless and unable to afford housing, then Pleasantville can then vote to substitute the one bedroom figure into the formula. As a result, they have then customized the formula to their needs. They can do this while all America still uses the same formula.

Why is worker value not respected on the same level? Today, business watches from the sidelines as the Federal Government sets a federal minimum wage below that minimal amount necessary to afford the most basic level of housing. This has not always been the case. Over the last 15 years, Congress has gotten behind the proverbial Eight ball as spiking inflation has occurred in many urban areas but left huge portions of our population as they were. As a result Congress cannot "fix" the Federal Minimum Wage with a single figure. One size does not fit all any more. Congress cannot pick a flat rate of say $10.00 per hour. This will continue to not get a single minimum wage worker off the streets in Washington DC, L.A., Austin etc. and at the same time it would only destroy small businesses in places like Harlington, Texas or Biloxi, Mississippi. It is for this reason that I have devised a formula that indexes the Federal Minimum Wage to the local cost of housing throughout the United States. This ensures that anyone working a 40 hour week won't have to do it either from under a bridge or by holding down a second full time job.

It is time to begin to end homelessness and to prevent it for all 10.1 million minimum wage workers.

Note: These support businesses do not ordinarily relocate independently of the principle businesses that they support. Clearly, in times of recession employees will be laid off but remember support businesses will maintain the number of employees necessary to satisfy the needs of the principle business.

• people working a 40 hour week
• HUD Fair Market Rents
• and the government guidelines that no one should spend more than 30% of their income on housing.

FACT: Actually, no. At present, there are 151 transnational business corporations. These companies attach themselves to no single country. Instead, they operate without ties and allegiance to any nation or any group of nations. While they stridently and unabashedly pursue maximum capitalism, some of their business application practices come into question. Their pursuit of riches coupled with their lack of allegiance leads them to make their businesses mobile. They locate their operations in the direct vicinity of the lowest paid workers around the world. The fact that these transnational companies are bringing employment to unemployed workers is applauded. However, we are quick to point out that these, the poorest paid of all workers, routinely live in abject squalor. Unless specific steps are taken to ensure living wages, little will occur to change that dynamic.

We believe that wherever there are workers and employers there exists a symbiotic relationship that is bordered by a delicate framework. The employer needs the employee for their labor and the laborer needs to make at least a minimal living through the employment. While the need is mutual, the power balance is not, and therefore, for the most part, workers must hope that the employer will embrace the principals of the Universal Living Wage formula. This ensures that if an employee works a standard number of hours, that employee should, as a result of their work, be able to afford basic rental housing wherever that work is done.

Additionally, workers should spend no more than a certain percentage of their income on housing (the United States Department of Housing and Urban Development uses 30%). In this fashion, that they will not only be able to attain housing but also retain it while managing to afford all three of the basic necessities of life: food, clothing, shelter. (This is consistent with the Universal Declaration of Human Rights which identifies these as “definitive components of the right to a minimum standard of living and dignity,’ ‘for every (nation) state.”

Finally, governments should create a standard that enables them to identify a reasonable price for housing similar in concept to the United Sates Department of Housing and Urban Development, Fair Market Rent calculation. Similarly, these amounts should be automatically reviewed annually to ensure that inflation has not overly affect the rents.

We are not suggesting a king's ransom here, in fact just the opposite. We are suggesting that minimally, workers should be paid at a rate such that if they are able to work a full week, based on local standards, the amount paid would afford them basic financial stability while providing enough to eat, clothing to wear, and shelter as provided through a Universal Living Wage.

Myth #22:" Won't a ULW mean that less people could be employed and thus less customers served with the new wage levels?

There have been several attempts in the New York City area - and other cities across the nation - to have a "living wage" standard set through all recipients of government contracts. In NYC, this amounted to a $10.00 - $11.00 per hour wage depending on part or full time status, on health benefits levels, etc. By no means an unreasonable request and standard amounting to only $21,000 - $23,000 per year. The focus was placed on contracts let by government to non-profits, probably because of the empathy factor as well as the under payment of wages to this sector across all categories, not just the lowest wage earners. The sectors most impacted by this were homecare workers, assistant day care workers, kitchen staffs (senior centers, day care centers, food pantries, etc.), some entry level clerk-typists or reception workers, etc. and the nonprofit organizations that typically raise additional dollars to support what government has never supported - 100% of the cost of delivering the contracted service.

On both counts this was a good strategy except for one potentially negative outcome. Dollars required to pay the new wage were not to be added to the contract but taken from either the existing contract or reduced value contracts. This meant simply that less people could be employed and thus less customers served with the new wage levels. This unintended consequence was opposed by the majority of non-profits in this area. We agreed with the spirit and intention of the proposed legislation but NOT the unfunded mandate. A legislative or other imposed requirement without the dollars allocated to support the new mandate would mean that already strapped non-profits, in a time of diminishing government contracts and demands to do more with less will actually be in the position of doing less with less.

As the victory is sought to boost federal minimum wages across the nation, we must be sure that dollars are allocated to those federal government entities (like Health and Human Services, like the Department of Education, like the Department of Labor, like Faith Based Initiatives, etc.) that fund localities (States, Counties and Cities) in the most critically vulnerable areas of our society."

FACT: There are many factors (nuances) to consider when talking about fixing the Federal Minimum Wage. First we are concerned that we provide the workers a living wage. We can't possibly ask our workers to continue to provide good, compassionate service when they feel resentful that they are not being paid a basic living wage.

Next, we recognize that social service jobs are often the single point of entry SPOE (at least initially) for many of the people who we serve. How can we introduce these struggling folks to poverty wage jobs? What's the incentive for them to leave their condition? What is the result if they get that job only to find out it can't sustain them without a second income?

According to the Federal Government, 42% of people experiencing homelessness are working at some point during the week. This year, 3.5 million people are expected to experience homelessness. With the enactment of the Universal Living Wage, over one million minimum wage workers will be able to work themselves off the streets of America, (conservatively) This will have a dramatic impact on case loads. They will be reduced and dollars will be saved. As word of individual successes grow that one can get off the streets by putting in 40 hours of work, more people will join the ranks of the minimum wage worker. The bureaucracy that provides these services can then be reduced.

The original Congressional intent of food stamps was to help people experiencing temporary loss of jobs, spousal abuse, catastrophic events such as house fires, earth quakes, assistance for impoverished seniors and people experiencing disabilities. It was never intended as a subsidy for business. That is in fact what it has become. A few years back, we found that over 200 staff employees at the University of Texas, (the richest University in the World), were on food stamps. This is unconscionable but not at all unique. In any event, if you will review the document Globalization and Labor found on the front page of the web site www.UniversalLivingWage.org you will see a section ULW/Benefits to Tax Payers and Employers. We anticipate tens of billions of dollars of savings annually. These funds can be redirected back into the same social service programs so as to keep service levels up and provide workers basic living wages.

Next, the reason that Spina Bifida of America, (people who may never work), endorsed the ULW, is because they recognize that the federal government is not about to set a livable income standard for people who are not working before it sets a living wage standard for people who are working. So the ULW is the next step in truly serving the least among us.

We believe that we, the social service providers (the social engineers) must also be educators. We must begin a dialogue with our funders such as the one that you and I are having. We must call for fully funded projects that include all components including our service providers. We are only talking about a minimum standard.

In the 1980s the funders asked us how much it would cost to fund a particular project and our deliberate, well thought out, bare bones response was $1.00. They reached into their pockets and said they only had .85 Our response was that we could not complete the task for .85 and they said "Take it or leave it." We took it. We then cut the nurturing component or the after care piece or the follow-up monitoring. This only resulted in limited successes or in failed projects. This is unacceptable. Now, we must continue to learn from our mistakes that resulted in wasted tax dollars and clients that became more disenfranchised than even before we started to help them. Our workers are no less important. They are "the working poor." As administrators, we shoulder a responsibility not to help some, at the expense of others. Our voices must be loud and clear. We must be strong and we must hold the funders to a higher level of accountability.

Myth #23: "I do not see any incentive for developing housing for low income workers. In fact, won't a ULW create an inflationary cycle and reduce, if not eliminate, small employers?"

I agree that something needs to be done regarding the mismatch between housing prices and wages. I also agree that anyone working 40 hours per week should be able to afford housing. However, I have reviewed your proposal and I have some serious reservations regarding your proposed formula.

I do not see any incentive for developing housing for low income workers. In fact, I see the opposite. If the universal living wage is indexed to FMR's, why should developers build lower cost housing? By building only higher end housing, FMRs will rise. If the FMRs are high, as you have described your formula, wages would be required to be high also. By only building higher end housing, developers would maintain a higher profit margin and communities would gain more in property taxes. Wages can not rise unless the cost of goods and services also rise, so you would be creating an inflationary cycle and reducing, if not eliminating small employers. The cost of living also then becomes higher for all. What then happens to the retired, unemployed and underemployed?

FACT: You can see from our web site that we also support the Bringing America Home Act. This is referenced in our recent piece: ULW Ten Year Plan. Under this umbrella bill, is the call for National Health Care, the National Affordable Housing Trust Fund and Livable Incomes which include the Universal Living Wage for people who can and are able to work. We also call for fixing the Supplemental Security Income program on several levels for people who are unable to work. (However, we recognize that the Federal Government is not about to provide livable incomes for people who aren't working before it creates a living wage standard for people who are working. The soundness of our logic is reflected in the national endorsement by the Spina Bifida Association of America. For them the Federal Minimum Wage is their glass ceiling.

You have stated that no affordable housing will be created. In addition to the National Housing Trust Fund which calls for a permanent affordable housing income stream and the creation of 1.5 million units of housing over the next ten years (with 214 cosponsors in the US House of Representatives and 22 cosponsors in the Senate), the ULW will create truly affordable housing from the private construction sector. For the first time, there will be a huge repository of income available for housing at below 30% AMI. Once the ULW goes into effect, we will put the difference between the Federal minimum wage ($5.15 per hour) and whatever the ULW has been determined to be in any Fair Market Rent region throughout the United States. For the first time, there will be millions of people with the financial ability to afford basic rental housing. However, that housing stock does not currently exist as there has been no financial incentive to build that housing stock. There will be plenty of financial incentive when the ULW is passed. The soundness of our logic is reflected in the endorsement of the ULW by the national construction company: HSR Construction. We had a series of deliberate, formal discussions with them prior to their endorsement.

You have expressed concern that with the passage of the ULW housing costs will soar raising housing costs beyond the reach of renters, and cause unbridled inflation. First, the cost of everything else has already inflated and only the Federal Minimum wage has not increased. Because the ULW is indexed to the local cost of housing, if anyone is willing/able to work 40 hours then they will be able to afford basic rental housing no matter how expensive basic rents rise.

Secondly, we believe that once established, the free market will continue to respond to this enormous pool of funds by building housing at this economic level. Additionally, for the first time, there will be incentive in the market for other corporate interests to apply pressure on the rental industry to keep rental prices in check. Failing that, because the Federal government is already monitoring and establishing Fair Market Rents, it will be in position to respond to any unscrupulous market gougers as may then be deemed appropriate.

Three and one half million people will experience homelessness this year. The Feds say that 42% are working at some point. Clearly, the work ethic is in place. Passage of the ULW can end homelessness for over 1,000,000 minimum wage workers. The ULW may not be the perfect solution but it's a great start and it can get the discussion started in Congress.

Tipping in the United States has become a multi-billion dollar paradigm. According to Lynn, Zinkham and Harris (1993) there are basically 33 tipped service professions. Tipping in the restaurant industry alone now amounts to $25 billion dollars per year (Azar, 20003a).

Today, we find that people tip because it is now a social norm, an expression of gratitude, born out of economic compassion and a way of ensuring future good service. For the most part, it is generally believed that tipping improves the quality of service, and while marginally small, there is a statistically significant correlation between tipping and the quality of service. (Lynn and McCall (2000b)

Today, under the Fair Labor Standards Act of 1938, where people are earning a living based on tips, we now require that employers pay tipped employees $2.13 per hour such that the tipped amount brings the base wage up to the federal minimum wage level. The federal minimum wage is presently set at $5.15 per hour.

At the Universal Living Wage Campaign, we advocate to fix the federal minimum wage by using the ULW formula which is based on existing government guidelines and ensures that anyone working a 40 hour week will be able to afford basic rental housing.

When looking at tipping, we are tempted to suggest that the tip ratio should remain the same as it is today. In other words: $2.13 per hour is 41% of $5.15 therefore by keeping the same ratio, it could be suggested that the base tip amount should be 41% of whatever the new Universal Living Wage amount calculates out to be in each ULW region, throughout the United States. This would seem to be a reasonable approach. However, businessmen such as Jeff Trigger, Managing Director of the renown Driskill Hotel in Austin, Texas suggests that it would be hard to justify asking employers to pay a higher percentage of wages when a tipped employee in his establishment may currently make as much as $30,000 per year in tips.

In response to this business concern, the ULW campaign looks to the original premise of the Federal Minimum Wage: a person willing to work a 40 hour week should be able to afford basic food, clothing, and shelter. The current federal standard was established in 1938 under the Fair Labor Standard Act; it should continue to prevail. Therefore, once an employer has brought the federally established tip amount up to the base level of the adjusted federal minimum wage to the new Universal Living Wage amount in that particular Fair Market Rent Region, (as established by the US Department of Housing and Urban Development), then the employer has met their financial obligation to the employee.

For example, in Austin, Texas the adjusted federal minimum wage using the Universal Living Wage is now $10.90 per hour. Under this new approach, an employer would continue to be obligated to pay no more than $2.13 per hour so long as tips provided by patrons produce a total hourly wage of $10.90.

Current enforcement standards will continue to prevail. Additionally, it will continue to be the responsibility of the employee to accurately report all wage earnings to the Internal Revenue Service as required under law.