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Lack of Living Wage Contributes to Homelessness

Living WageIf there is one best way to solve the social crisis of homelessness it is this: Our society must pay people a living wage.

Some people balk at this assertion. They try to maintain that paying a living wage is “baloney,” and falsely claim that increasing wages will stifle economic growth. Yet, scores of studies by major economists demonstrates that minimum wage works.

But does the minimum wage in its current form work well enough? Many housing advocates say no. So, too, does a group not generally thought to be supportive of minimum wage hikes: business owners — even giant retailers like Costco.

Forgetting the social and ethical contract of caring for our brothers and sisters in need, let’s consider the economic advantages of switching from a federal, one-size-fits-few approach to minimum wage toward a sliding scale with minimum wages tailored for the local cost-of-living. Let’s review why the concept is gaining a momentum of support.

Why a Living Wage Instead of the Minimum Wage?

The answer is simple: Federal Minimum Wage (FMW) once stabilized incomes sufficiently that working people could afford housing. Not anymore.

The FMW no longer pays workers enough to meet the costs of housing and utilities of minimum-wage earning men, women, and their families in most areas of our country. This conclusion is based on HUD’s review of Fair Market Rents and applies to all housing markets both big and small. The reason? Inflation.

President Obama has proposed that today’s minimum wage be increased from $7.25 an hour to $9.00 an hour. That’s a step in the right direction, but minimum wage should pay a minimum of $9.31 an hour to yield the same purchasing power as minimum wage paid in 1974.

In short, inflation has stolen the present value of minimum wage. Combine that with extremely varied cost-of-living expenses across the country, and simply raising the FMW won’t cut it. Instead, we must adjust hourly wages to the local cost-of-living, rather than a one-size-fits-no-one federal mandate.

“Declining wages, in turn, have put housing out of reach for many workers: a household would need more than one full time minimum wage worker to afford a two-bedroom rental apartment at fair market rent (National Low Income Housing Coalition, 2009),” reports the National Coalition for the Homeless.

Further, with a lack of affordable health care and several states attempting to overturn the Affordable Care Act, medical bills can wipe out a family’s savings and put them on the street. That’s an unwinnable war for someone earning the minimum required by law. To add insult to injury, those earning the least are also the same people plagued with unhealthy diets and multi-generational diseases associated with obesity.

“[M]any apartment complexes run credit checks which can prevent people with poor credit from renting; things like unpaid medical bills can prevent working people from finding a place to rent,” writes Kylyssa Shay, a formerly homeless person now working as freelance writer and homelessness activist.

Once we had a social belief in this country that hard work would be rewarded, at least at a level that permitted the simple dignity of providing for your family. Once it was considered wrong to fire 20% of your staff in order to give yourself a raise, for instance. Not anymore. “Human nature does not change, but social structures can, and they did,” writes George Packer, author of the book, The Unwinding.

This historical shift has brought some seemingly unlikely supporters of a living wage: local business owners.

Local Economies Benefit, Too

One reason for the support of an increased minimum wage to a living wage is that, by default, excludes retailing giants like Wal-Mart whose business model is based on paying the lowest wages possible and allowing the taxpayers to pick up the tab, reports Michael Shuman in the book The Small-Mart Revolution.

Preventing massive players with extractive agendas from entering a local market means that a local economy can stabilize and grow. That is because more money is being retained locally (as opposed to being sent to Arkansas and into the coffer’s of our nation’s best example of wealth inequality). Smaller business owners do not begrudge the success of giants like Wal-Mart.

Instead, they point to the economic destruction caused by companies like Wal-Mart that pass the buck. These companies have no incentive to care for local workers, their environment, or the economic resiliency of the local market to which they and other local business owners contribute.

Paying better wages to employees means that retraining costs are lowered. It also benefits business owners because it builds employee loyalty. What some business owners fear as limiting has been shown to improve the situation for everyone.

“Furthermore, from a historical perspective, every minimum wage increase is spent right back into the economy, so this will stimulate the economy generally too,” says House the Homeless founder Richard R. Troxell.

Raising the minimum wage is necessary to prevent more working people from experiencing homelessness. Implementing a living wage will do even more to prevent homelessness and strengthen our local economies. Learn more about the issue at UniversalLivingWage.org.

Image by STEM Limited.