Ruminations on Living Wage

Further to my comments on rental car companies being subjected to San Jose’s ‘living wage’ rules, a reader writes:

    The main effect of raising car rental workers’ wages from $7.50 an hour to $9.66 an hour is that a certain number of honest working people, who are not on welfare and not on street corners selling drugs, will be making the princely sum of another $2.11 an hour — which will make it just a little easier for them to pay for their day care and their rent (although not enough to pay down their credit card balances).

    To me, that doesn’t seem like such a terrible thing. Why grope around for all of these abstruse and unproven second-order effects, plus make a guilt-by-association reference to apartheid, rather than focus on the main question — should the law require that employers pay employees enough money for employees to live a half-decent life? I understand that your answer to that question is “no,” but that’s for ideological reasons, not for practical ones like “higher rental car prices.” We can reduce rental car prices substantially if we taff the counters with prison labor, or indentured servants from Myanmar. But those are not the rules that most Americans want, and understandably so. If rental car employees make a living wage, then rental car prices may, or may not, be a little bit higher. So what? Is that what’s really important?

A little clarification is probably in order.

I think I hedged quite a bit on second order effects of applying San Jose’s ‘living wage’ rules to rental car employees because I don’t know of a specific empirical examination of minimum wages on rental car worker employment.

I was quite explicit that raising minimum wages often
does not increase unemployment.

But I think it’s quite demonstrable that in most cases there’s a clear substitution effect — even if the net number of jobs were not to fall, there’s a shuffling of who has which jobs.

I just think the story is a whole lot more complicated than “the workers will have more money.” As I wrote:

    If airport rental companies have to pay a higher minimum wage than other San Jose businesses, they’ll attract more job applicants and skim the cream of the labor pool crop. That comes at a cost to workers in the existing lower wage pool.

I suggest some possible directions where one might look for second order effects in this case which may undermine the goals the advocates of the policy have.

And while I’m not in favor of installing ‘indentured servants from Myanmar’ at rental car counts (just as I presume this reader isn’t interested in boosting the minimum wage to $1575.00 an hour…), I would be in favor of more immigration as the best way to alleviate poverty for the greatest number of people.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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