Recognizing the Benefits of Living Wages in Georgetown

Why promote “Living Wages” instead of increasing Minimum Wages?
The federal minimum wage has been stuck at $7.25 an hour since 2009. There is a general lack of support at the federal level to address worker compensation issues via national legislation, primarily because wages often vary widely from state to state and there is resistance to federally imposed laws impacting local economies. Increases in the cost-of-living index alone over the past decade have made the $7.25 an hour minimum wage meaningless in most local economies. Many employers today find they are unable to hire and retain even unskilled workers at this poverty-level wage rate. Depending on the prevailing regional costs of living, often driven by housing costs, the effective “minimum” wage today ranges from $8-$9 an hour and is often higher. According to the U.S. Census Bureau, in 2014, 46.7 percent of Americans lived in poverty, largely because too many workers were paid very low wages. Federal and state minimum wages are too low to lift working families out of poverty, much less into the middle class. But many cities do not have the legal authority to set higher minimum wages because states like Texas prohibit such wage standards beyond the federal minimum wage level. One of the economic consequences of the Pandemic in the labor market has been the number of “essential” workers who quit their lower-wage jobs and looked for better-paying positions. The shortages of lower-wage workers in numerous industries have forced many employers to raise their starting hourly wages significantly above the pre-pandemic prevailing wages. So, the current prevailing hourly wage in Georgetown has now risen to $15/hour.

Are there cities and states in the U.S. that have adopted the “living wage” standard?
Yes. The recognition that the $7.25/hr. minimum wage for workers needs to be increased to keep up with the costs of living is evident in the fact that 29 states have now raised their minimum wage levels and boosted income for low-wage workers without damaging their economies. In addition to this public ballot support for providing economic relief to low-income workers, there has also been some corporate-level recognition of the need to increase wages. Walmart, for instance, decided last year to raise its starting wage to $11 an hour across the United States. Over the past twenty years, more than 140 cities around the country have passed living wage laws, which help ensure that public expenditures create good jobs. The laws set minimum standards for the wages of private-sector workers – such as janitors, bus drivers, gardeners, and cafeteria workers – who are employed by businesses that contract with the city or receive public subsidies. Living wages are the second-best alternative to higher minimum wages for all workers. In states like Texas where the minimum wage level amounts to poverty wages, it will be up to employers to pay wages that are fair and that allow full-time workers to earn enough to support themselves and their families. Additionally, most local governments have the authority to implement socially responsible wages if they so choose. (see https://localprogress.org/wp-content/uploads/2013/09/Living-Wage-Ordinances-1.pdf )

How are Living Wages calculated?
In 2004, Amy Glasmeier, now a professor of economic geography and regional planning at the Massachusetts Institute of Technology, developed a Living Wage Calculator. This tool uses specific cost-of-living data for basic needs in localized regions across America to determine the minimum hourly earnings people need to support themselves without government assistance or charity. It estimates the cost of food, clothing, housing, transportation, taxes, child care, health care (both insurance premiums and typical health care costs), and other essential living necessities to determine “living wages” in that region. While this Living Wage Calculation provides a generalized estimate of a basic living wage by counties across the U.S., the varying differences in local costs for housing often require a more refined calculation to determine an accurate living wage in a particular community.

What is a “Living Wage” in Georgetown, Texas?
From examining the MIT calculations of a living wage in Williamson County and factoring in local housing costs, in particular, Prosper Georgetown has determined that a “living wage” for a single worker without dependents is around $19/hour (this living wage varies somewhat if an employer provides full health care coverage or other basic needs in the employee’s compensation).

Is it realistic to expect employers of all types in Georgetown to increase wages to this standard?
No. All employers have to balance the cost of labor with their need to make a profit to stay in business. Any effort to move towards adopting a “living wage” as a compensation goal will require both gradual increases in hourly wages and consumer support of businesses that are striving to pay their workers a living wage. In fact, consumer support of businesses who seek to pay living wages is critical to achieving such a compensation goal. As long as consumers only shop at businesses that provide the lowest possible prices for goods and services most employers who decide to pay living wages instead of minimum or prevailing wages will be at a competitive disadvantage. Consumer education and incentive initiatives have been shown to be a necessary part of any local effort to stimulate living wages instead of minimum or prevailing wages for lower-skilled workers.

Would raising wages from prevailing wage levels to living wage levels be good for our local economy and businesses?
Labor studies have shown that lower-wage workers who receive higher hourly wages than the locally prevailing wages have better job morale, dependability, and longevity with their employers. Reducing employee turnover and boosting worker productivity have real benefits for most businesses. According to an Economic Policy Institute report in 2017, –
“Right now there is much debate over what to do about rising income inequality in America. These discussions too often miss that the key to shared prosperity is to foster wage growth. The pay of the vast majority of Americans has been stuck for decades, even though productivity and earnings at the top are escalating. All told, gradually raising the minimum wages to $15 in 2024 would directly or indirectly lift wages for 41.5 million workers, 29.2 percent of the wage-earning workforce. The hourly workers who would receive a pay increase are overwhelmingly adult workers, most of whom work full time in regular jobs, often to support a family”. Encouraging consumers to pay more for goods and services to provide local workers with wages that allow for self-sustainability and dignity is a key element in a commitment to shared prosperity for all.

How do we convince consumers and employers to embrace the benefits of a living wage standard in our local economy?
To penetrate the natural resistance among consumers and employers to pay more for goods and services a community-wide educational initiative about the benefits of shared economic prosperity will be needed. Incentives for paying living wages rather than minimum wages have to be framed in ways that motivate changes in consumer behavior and business practices such as promoting shared prosperity as both an economic justice issue and as a practical means for addressing worker loyalty and productivity while providing lower-wage workers with sufficient incomes to support their families without relying on government or private subsidies. Adopting a Living Wage Certification Program is one community strategy towards this goal.

What is a “Living Wage Certification Program”?
Living Wage Certification programs have been developed around the U.S. as a way to create incentives for workers to be paid a living wage instead of minimum wages. These programs determine living wages based on the income that every worker should have to secure housing, adequate food, clothing, medical care, transportation, and education for themselves and their families. Living Wage Certified employers are given tools and incentives to increase workers’ wages up to the local living wage standard and to connect consumers to employers that provide living wages to their employees as a tangible way to promote a just and sustainable local economy (see https://www.livingwagenetwork.org/get-certified for examples of these programs).