The Truth Behind the Living Wage

Once more, the Living Wage Campaign (LWC) has taken up the cause of underpaid workers on Stanford’s campus. As reported by John Leganski, the LWC has been a recurring theme on this campus, as students have staged protests, conducted hunger strikes, and occupied President Hennessy’s office. Although Stanford has had a living wage policy instituted for many years, the campaign continues to take fault in the amounts that workers are paid. Unfortunately for the campaign, the University has tended to be unreceptive toward demands made.

And for good reason. In many instances, the LWC’s views on wage policy are disconnected from economic realities. As noted by Thomas E. MaCurdy, professor of economics at Stanford, the notion of the “living wage” is a flawed account of how much money is needed to live in the United States. For one, such calculations do not take any forms of government welfare into account.  Government subsidies, such as food stamps or housing programs, substantially boost the overall income of low-wage workers. Furthermore, the living wage assumes that the Stanford employee provides the vast majority of the income of a family and that the family has children. Therefore, wages suggested by the campaign are in significant excess of what is actually necessary to live in the United States.

And not only may the increased wages be unnecessary, but they come with a substantial cost – one which the LWC campaign often refuses to acknowledge. The choice to pay Stanford employees more is not simply a question of choosing a number arbitrarily. Any increase in wage requires tradeoffs in Stanford’s budget, which means that dollars must be removed from important university programs, such as academic departments, financial aid, and so on. Perhaps the benefits of increased wages exceed the costs of cuts elsewhere, but such a determination requires considering cuts in other programs, which the campaign has conveniently chosen not to mention.

While some of these cuts may not be visible to a student body that does not know the intricacies of Stanford’s massive yearly operating budget, student groups do feel the effects of living wage policy on a daily basis. Ever been shocked by the exorbitant prices charged by Event and Labor Services (ELS) for seemingly mundane tasks? Baffled by why it should cost more than $50 to get a door unlocked or pay someone to set up a microphone? Well, those high prices reflect the high cost of labor on Stanford’s campus. The amount of student dollars pumped away from students toward ELS is massive, and any student group financial officer can tell you how the price tag on ELS services constrains programming budgets. Just last issue, Everett Frost reported that even Student Activities and Leadership sought an off-campus alternative to ELS to save money. Taking into account the number of people that the university employs, the effect on the university budget of even further increasing wages could force significant cuts elsewhere.

Finally, the supposed benefits for workers of a living wage may not be as great as LWC supposes. In Econ 1A, we learn that the effect of a minimum wage is the creation of economic efficiencies in the form of underemployment. In other words, when firms are forced to pay their workers more than the market dictates, the firms will choose to employ fewer workers. It’s just basic incentives – a firm will want less of something if it is more expensive.

The same would be true in the case of Stanford; the effect of a living wage may very well be to decrease the number of workers that the university employs. Therefore, while those employed will see a significant boost, the policy could have devastating effects on those that may no longer have opportunities for work at Stanford. It’s easy for the LWC campaign to point to the supposedly underpaid on campus, but there are unseen economic impacts away from campus – that is to decrease economic opportunities for others.

For the LWC, it must be frustrating how economic reality always gets in the way of “progress.”

— The Editorial Board

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Unsigned editorials represent the views of The Stanford Review’s Editorial Board and do not necessarily reflect opinions of The Stanford Review or its staff. The Editorial Board consists of the Opinion Editor, the Executive Editor, and the Editor-in-Chief. To submit a letter to the editor or guest op-ed, please e-mail our Opinion Editor, Matt Sprague, at mattfs@stanford.edu.

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