University Makes Sense of Living Wage Figure

Early one morning last week, Ed Childs met his fellow committee members for the first time? hodgepodge of faculty members, blue collar union representatives, two administrators and four democratically selected students, all charged with evaluating Harvard? wage policies.

Wearing a red ?ever Surrender?union t-shirt, the Adams House chef filed into the sumptuous, wood-paneled Faculty Club?ormally the domain of Harvard? most privileged?or the inaugural meeting of a committee born out of the 21-day occupation of Massachusetts Hall by members of the Progressive Student Labor Movement (PSLM).

University President Neil L. Rudenstine stopped by briefly to see the personalities he had put together, the professionals, laborers and activists who this summer will research issues pertaining to low-wage workers at Harvard?ncluding outsourcing of labor and the possibility of the University implementing a living wage. The group plans to share their findings over e-mail this summer.

Their clothes ranged from pressed suits to bright union t-shirts to a crimson janitor? uniform. For two hours, Rudenstine? charges brainstormed?aking a list of research assignments for the summer.

The seemingly disparate committee members will have to hang together until December 19?hen their report is due to University President-elect Lawrence H. Summers?nd last week? meeting marked the beginning of the group? mission to fuse economic principles with concepts of moral responsibility to form a viable set of recommendations about how Harvard should pay its poorest workers.

More and more economists are starting to research the strengths and weaknesses of the type of wage floor that PSLM advocates. And on the advocacy side, the unions involved in contract negotiations with Harvard and the student activists who occupied Mass. Hall have realized that each of their positions against Harvard is strengthened by the presence of the other.

What Rudenstine? hodgepodge ends up recommending in December will be a compromise between the academics, the laborers and the activists?inking the economics, morality and activism behind Harvard? wage policies.

The idea of a living wage is convoluted in itself, calculated on loose, not standardized estimates of how much a family needs to earn to live?ith variables like family size, hometown, and the number of wage earners dramatically altering the wage between towns located just next to each other.

While cities like Cambridge have adopted policies that impose a mandatory wage floor for some of its workers, even economic experts say that the implications of Harvard adopting a living wage are unpredictable. Some employees might be laid off because of the wage increase. Others might enjoy a higher standard of living.

Though the living wage figure itself is subjectively, and somewhat arbitrarily, calculated, PSLM? dogged push this spring for a Harvard wage floor of $10.25 an hour forces the suits, the union t-shirts and the khaki-clad undergraduates to hammer out a compromise from the economic implications of a wage floor and the ideological arguments surrounding the concept of a living wage.

The Birth Of A Living Wage

The chants for a living wage that echoed on campus this spring are part of a growing national movement that has attracted attention from students, unions and labor economists alike.

The living wage figure?n average based on different combinations (depending on who is doing the calculation) of family structures and sources of income?ims to bring a family of four to the Federal poverty level.

The concept of a living wage as distinct from the national minimum wage first emerged in Baltimore, Md. in 1994.

The federal minimum wage?urrently $5.15?s set by Congress and is therefore dependent on politics, says Michael Reich, professor of economics at UC-Berkeley and research chair for the Institute of Labor and Employment.

?t a national level, it? a question of what Congress and the President are willing to do,?Reich says.

In some states, the minimum wage?urrently $6.75 in Massachusetts?s aimed to be sufficient for a family to live on.

But volunteers in soup kitchens and homeless shelters in Baltimore noticed that families with full-time wage-earners were still unable to afford food and housing, says Robert Pollin, professor of economics at the U. Mass.- Amherst.

The original living wage figure was calculated to allow a three-person family in Baltimore to live just above the Federal poverty level.

But that definition of a living wage was criticized as too low, Pollin says, because it did not take into account any measures of what it is to live ?ecently?s opposed to living at the poverty level.

There is no universal definition of the living wage. PSLM gets their estimate from the city of Cambridge, but municipalities, private employers and organizations can all weigh factors differently to come up with a different ?iving wage.?

Some cities currently base their living wage calculation on a family of two, some on a family of three and some on a family of four, Pollin says. But the current trend in defining the living wage figure is to allow a family to live above the national poverty level.

The greatest variable in the living wage figure depends on the cost of living, and how it is calculated) in different areas.

Cambridge adjusts its living wage yearly, based on a set formula that considers the cost of living within the city.

Decades ago, Reich says, the minimum wage was closer to being a ?iving wage.? In other words, the minimum wage was considered by the Federal government to be sufficient to live on.

But although the cost of living continued to increase nationally throughout the 1980s, the minimum wage did not increase at a comparable rate, Reich says, leading to a ?reak?between the minimum and living wage.

Labor economists who argue for a living wage note the 1968 minimum wage figure, which would currently reach at least $7.92 per hour when adjusted for inflation. In contrast, the current federal minimum wage is $5.15 per hour, though the national economy is nearly 60 percent more productive than it was three decades ago, Pollin says.

Cities, Employers And The Living Wage

Since the Baltimore city government adopted a living wage six years ago, the campaign has spread to 55 other municipalities, including Cambridge, Boston and Somerville.

Throughout the course of the sit-in, Cambridge Mayor Anthony D. Galluccio regularly made appearances at PSLM? rallies, speaking vehemently against the Harvard Corporation and urging the University? governing bodies to follow the city? lead.

But Harvard did not necessarily think that it should, or had to, heed the calls for a living wage from Cambridge officials.

?hy should we let City Hall tell us what to pay??says Polly Price, associate vice president of human resources. ?ll they do is make our lives difficult and not let us build where we want to.?

PSLM activists often draw parallels between Cambridge? implementation of a mandatory wage floor and the success such a policy might have at Harvard.

Of the city? adoption of a living wage, Deputy City Manager James P. Maloney, Jr. says, ?t was proposed to the city by a lot of the same groups that proposed it to Harvard. We faced all the same issues that Harvard did.?

But though PSLM has called for the $10.25 wage floor to apply to all Harvard workers, Cambridge? living wage does not apply to every person who works in the city.

Instead, Cambridge? recently adjusted living wage of $10.68 per hour applies only to three clearly defined groups of workers?hose directly employed by the city, subcontracted workers whose firm has a contract of greater than $10,000 with Cambridge and organizations who receive grants of more than $10,000 from the city.

Contracts generally run from one to three years and primarily involve construction work, service delivery, day care and medical services. The stipulation that the workers are paid no less than the living wage figure is made part of the contracts for these services.

Cambridge recalculates its living wage yearly. The city? ordinance is readjusted each March to correlate to the average percentile increase in the cost of living. Just this March, city government adjusted the living wage figure from $10.25 to $10.68 per hour? move that was all but ignored by protesters on campus.

Since the living wage figure shifted from $10.68 to $10.25, Director of Personnel Michael Gardner says the city has accounted for 260 directly employed workers whose wages have been raised. When the living wage changes, it immediately affects directly employed city employees and new contracts.

Like the city of Cambridge, Harvard also reexamines wages every year, Price says. Raises are based in part on the increase in the cost of living. Additionally, Price says, union contracts make provision for annual adjustments.

As for the oft-cited concern that adopting a living wage will force an employer to alter its entire wage scale?alled wage compression?ardner says that Cambridge considers raising workers?wages on a case-by-case basis, and the city does not automatically raise everyone? wages when the living wage figure is adjusted annually.

?e had to make some adjustments, because of the need to make differences for people with different levels of responsibility,?Gardner says. ?t has an expense and some administrative complications, but it? working.?Price says it would be possible for the University to adjust wages like Cambridge, on a case-by-case basis, without wholesale raises based on the implementation of a living wage.

?hat happens a lot now already,?she says, noting that when the University negotiates a contract, the wages of managers and supervisors will often be adjusted as well.

Case Study: Johns Hopkins University

Though PSLM gets its living wage figure from Cambridge? calculations, because there is no set standard for calculating the living wage, an employer can implement a wage floor without complying with city ordinances.

Johns Hopkins University, for example, put in place a $7.75 wage floor in 1999, independent of the city of Baltimore? own living wage figure.

In response to student campaign for a living wage, the Johns Hopkins administration agreed that all direct and subcontracted employees would not earn less than $7.75 per hour by 2002. While the figure was close to Baltimore? then-living wage, the University administration chose not to adopt the mandatory wage floor Baltimore city officials had defined, nor did they label their figure a ?iving wage.??his was not related to any broader city-wide ordinance or movement,?says Dennis OShea, executive director of communications and public affairs. ?e chose not to tie ourselves to a moving target. It would be irresponsible for the university to tie its fiscal well-being on something we could not predict.?Before the university? resolution in 1999, 762 full-time workers and 246 part-time workers made less than $7.75 per hour. Currently, all workers except the subcontracted workers at the Hopkins Health Center are earning wages above the mandatory level.

The move toward bringing all workers to the mandatory wage floor was stymied somewhat by the decentralization of the University. Not only is the University composed of an undergraduate and graduate schools, but it also includes a completely separate medical center.

The administrative difficulties resulting from the decentralization have proven the biggest stumbling block in implementing a $7.75 per hour wage floor, OShea says.

But student activists said they felt that the wage increases were moving too slowly and staged a sit-in last spring that resulted in the Johns Hopkins administration promising to accelerate the move to $7.75.

OShea said that Johns Hopkins has not conducted any studies to see whether the raise in wages has caused wage compression or resulted in an above normal level of lay-offs. The autonomy of each of the schools makes the figures simply too hard to calculate, he says.

When asked about the success of the move toward a minimum wage floor, OShea is reticent.

? would say it has been a worthwhile exercise for students and faculty to bring their interests to the attention of the University,?he says.

Fashionable Research

As the concept of a living wage has gained favor in cities throughout the nation, the financial implications of implementing a mandatory wage floor have slowly become a topic of research for some labor economists.

While traditional economic arguments would discourage the adoption of a mandatory wage floor, a small but growing group of economists are becoming cautious proponents of the living wage.

After studying the economic effects of the minimum wage since the early 1990?, David Neumark, a visiting fellow at the Public Policy Institute of California, says he began researching the living wage two and a half years ago.

He has written three papers?ll currently awaiting publication?hat argue that the living wage presents a ?rade off?to low-wage workers.

Neumark says he found in his study of all U.S. municipalities that have a mandatory wage floor, that for a hypothetical 50 percent increase in a living wage, wages as a whole go up three and a half percent, on average. This finding applies to low-wage workers as a whole in cities that adopt living wages, many of whom are not actually affected by the law.

However, Neumark said he found that employment levels drop seven percent for every corresponding 50 percent increase in the living wage, perhaps establishing that low wage workers may actually lose jobs if their wages become too expensive for the employer.

However, PSLM activists have argued that Harvard? demand for labor is relatively constant and independent of wage levels, within a certain spectrum.

?arvard employment is particularly inelastic,?says PSLM member and third-year law student Aaron D. Bartley. ?t? far more valuable for the University to have a clean campus than it would be to have a dirtier campus for less.?Additionally, Bartley says that through the student-union collaboration, labor unions have become strong enough that they simply would not allow workers to be fired without a legitimate reason.

?he students would prevent that from happening,?Bartley says. ?here would be demonstrations. Harvard knows that and wouldn? even try it.? Though Neumark? study examines the elasticity of cities?labor demands relative to wages, no studies have been conducted to look at the employment effects of a wage floor on large private employers.

It is possible that Harvard? demand for labor could be more or less dependent on wage levels than the municipalities that Neumark has studied.

But examining the effect the living wage has on a family? quality of life?s opposed to the absolute gains in earnings of a low-wage worker?s more heartening, Neumark says.

A 50 percent increase in the level of the living wage results in a 1.4 percentage point drop in the poverty rate, Neumark calculates.

But the living wage as an idea is not ideal, Neumark says, because it fails to take into account the individual situation of the low-wage worker?whether they are single parents trying to support a family or adolescents working for extra spending money.

The living wage is not a panacea for all the problems facing low-wage workers, Neumark says.

? can tell you as an economist that fewer people will be employed,?he says. ?ut is there a net good outcome or not? You need to think of the potential pool of Harvard employees. Some will earn more, and some presumably won? work for Harvard any more.?

Thus, Neumark is an advocate of the Federal Earned Income Tax Credit, a wage subsidy, as the best way to benefit lowest-wage workers. Through the Earned Income Tax Credit, adults who are working but not making a sufficient amount to sustain their families are given supplementary income from the government.

Some counties have even decided to adopt their own earned income tax credit in addition to the national tax credit, instead of implementing a living wage.

?xcept for the extreme right, this has a very wide base of support,?Neumark says.

The option absolves employers like Harvard from taking action in regards to low wages, and the onus is instead put on local legislatures.

But Reich says this measure fails to take into account the increased productivity that results from employees being pleased with their wages.

Pollin says the living wage movement is gaining interest among economists.

He says he has been giving talks on the living wage throughout the country, and as he talked to The Crimson, Pollin received two other calls from journalists asking for background on the living wage.

But the core of economists researching the living wage remains small, Pollin says.

??e spoken at a lot of places lately, in part because so few economists are interested,?he says. ?t? slowly happening. Once people start saying that they care about economic justice, the logic of a living wage starts to acquire the force of inevitability.?But Pollin is careful to say that the push for a living wage is not limited to an ideological or moral call for social justice.

?onditions for low-wage workers today reflect a broader trend that society is becoming increasingly unequal,?he says. People in bad jobs are just treated worse than they were a generation ago.?

A Question Of Economics

While few studies have been conducted examining the effects of implementing a living wage, among those at Harvard, there remains a fundamental disagreement about the economic principles that justify?r nullify?he merits of a living wage.

Economists who argue against a living wage say that wages should be set according to productivity, and any form of governmental or institutional interference would result in a ?istortion in the market,?according to Pollin.

This argument places trust in the market to set fair wages.

The importance of the marketplace in determining wages was the University? and the first committee? main argument against imposing a living wage, Price says.

The decision not to adopt a living wage had nothing to do with potential cost, she says, but instead with an ideological disagreement about the merits and implications of a wage floor.

?he University policy for how we set wages is to set them either through face-to-face bargaining at the bargaining table or to base them on what the market is paying for similar jobs,?Price says. ?t? market-based rather than need-based.?But Pollin argues that the marketplace cannot be relied upon to set fair wages. The economy is 66 percent more productive than it was in 1968, he says, but the minimum wage has dropped in a relative sense. People are being paid less and less for doing work, he notes.

While living wage supporters and detractors square off against each other, other economists identify a middle ground.

Princeton Professor of Economics Elizabeth Bogan says though she has pushed for higher wages for Princeton employees, she is quite vehement in her dislike for the living wage.

The term is simply ?evoid of intellectual content,?and ?arries a bunch of emotional baggage,?she says.

Bogan says she objects on economic grounds to state or national laws that dictate a living wage that employers must pay.

Instead, she justifies raising wages to what is called an ?fficiency wage.?While the push to raise wages has moral overtones, Bogan says it is also valuable economically.

If employers like Harvard or Princeton pays more than the minimum competitive wage, she says, employees will be happier and will work more efficiently.

?here is nothing anti-market with Princeton deciding to favor its workers more,?she says. ?e as wealthy institutions caring for the quality of life of our workers should make sure we are paying more than the minimum competitive wage.?

The Odd Couple: Students and Unions

Much of the University? argument against implementing the living wage has rested on the contention that a mandatory wage floor subverts the collective bargaining process.

But labor unions have been quite vocal in their support of the living wage.

In fact, union representatives, like Childs, and student activists, now mostly PSLM members, have worked together for decades advocating change to the University? wage structure.

While the coalition existed even before PSLM? formation, the alliance between the student activists and labor unions became most pronounced during the sit-in.

Union organizers?ven those representing workers who make more than the $10.25 figure?oudly proclaimed their support throughout the course of the Mass. Hall occupation.

The Harvard Union of Clerical and Technical Workers (HUCTW) donated a few hundred dollars to the cause and some necessities like towels and washcloths for the students.

Most powerfully, AFL-CIO president John J. Sweeney came to speak at the sit-in? largest rally, pledging his support to the students inside the building and lauding them for their courage.

And AFL-CIO representatives served as go-betweens at the tail end of the sit-in, negotiating with administrators to reach the final agreement before the student protesters exited the building.

PSLM itself was formed in the offices of HUCTW, when a few student volunteers decided that the union could benefit from student advocacy, says HUCTW? Treasurer Donene Williams.

PSLM still uses HUCTW? Mass. Ave quarters for some of their meetings.

But Williams is careful to note that the living wage campaign is something PSLM decided to work for without any push from unions. After all, the majority of those earning less than a living wage are non-unionized workers.

?e want to be supportive without getting in their way,?Williams says.

And the cooperation strengthens the bargaining position of both groups.

For the unions, student activism calls attention to Harvard? wage policy, bringing the results of wage negotiations to the public? attention.

Similarly, union support lends a certain degree of legitimacy and authority to the student campaign.

Though HUCTW union members are already earning more than the living wage, Williams says she sees the campaign for a living wage as valuable.

?f it helps one worker, then it helps all workers somehow, by raising the threshold of what? acceptable,?Williams says.

Indeed, labor economists note that the collaboration between unions and local activists is a phenomenon seen particularly in successful living wage campaigns.

Neumark says unions would benefit from adopting a living wage, because a mandatory wage floor renders outsourcing?ontracting jobs to a private firm that often pays its workers less? less attractive option. Outsourcing is traditionally a threat to unions because it results in a loss of union jobs. But if employers were required to pay a wage near the union wage anyway, Neumark says, the impetus to outsource would greatly lessen.

?The living wage] strengthens the union? hand in negotiations,?Neumark says.

And some say unionized Harvard workers have already benefited from PSLM? actions. The agreement between PSLM and the Harvard administration that ended the sit-in included a clause that bans new outsourcing of labor until the ad hoc committee returns its report to Summers.

When the dining hall worker? contract came up for renegotiation just a week after the sit-in ended, Local 26 of the Hotel Employees and Restaurant Employees International Union (HERE) ratified a new contract that will raise the wages of all workers, as well as ensuring that no worker employed for more than one year will earn less than $10.25 per hour. Union leaders had agreed to strike if the agreement was not reached.

Union leaders called the agreement the biggest gain for workers in the history of Local 26. The negotiated wages and benefits will even apply to outsourced workers at the Business School.

The union organizers loudly proclaimed that they would not have been able to negotiate such a strong contract without the influence of the recent sit-in.

The vast majority of the 400 directly employed, unionized Harvard workers making under $10.25 an hour now belong to Service Employees International Union (SEIU), the union that represents the custodial staff.

And as a result of the agreement with which the student protesters exited Mass. Hall, SEIU? contract will be reopened a year early?nd the contract that is eventually negotiated will be retroactive to May 1 of this year.

This could prove to be one important piece of the sit-in? legacy, as a strengthened bargaining position for unions can result in higher wages for unionized workers, even those who already make a living wage.

But Price says she thinks that, without PSLM, the recently negotiated Local 26 contract would have been identical.

She says the authorization to strike was merely part of the theater of union negotiations.

?t? a theatrical event,?she says. ?he unions wanted very much for the students to feel they had helped them. If I were a member of a union, Id want to get help wherever I could get it.?But Price says the ongoing campaign for a living wage has done little to effect union negotiations?nd if union negotiators call for a living wage they do so only ?n jest.?

?e [the University] knew we had to increase salaries because we had fallen behind in terms of the market,?Price continues. ?e put the salaries at what we feel is the market rate. In some cases that? above the living wage and in some cases that? not.?

The Committee And Its Report

When Childs and his fellow disparate committee members meet again in the Faculty Club this fall, they are charged with weighing the economic and ideological principles surrounding the subjective definition of a living wage.

There is little economic research to guide the committee in its discussion and ultimate decision. The studies that have been conducted only examine the affects of a living wage on employees of a municipality?he wage floor itself is a ?rade-off?between the benefits of a higher wage for some and increased levels of unemployment for others, Neumark says.

No research has been done on the economic implications of a mandatory wage floor on employees of private firms like Harvard.

The living wage figure remains ambiguous. The wage level changes according to a range of variables?ncluding family size, where the family lives and how many earners there are in the household.

The concept of the living wage is not so much about an absolute base level of wages, but rather is a commitment that society? lowest paid workers should earn more.

Cambridge? adjustment of the living wage figure from $10.25 to $10.68 this past March did not seem to make any difference to the PSLM members campaigning for the mandatory wage floor?hey lobbied all spring and throughout the sit-in for a living wage of $10.25.

With little research to help them reach a decision, and a subjective wage figure the goal of union representatives and student activists, the committee? recommendation will be an ideological compromise between the economic interests and moral stance of labor unions, student activists and faculty members alike.