Owen Courreges: Will a “living wage” reduce poverty in New Orleans?

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Owen Courreges

Another week passes, and another vapid, unthinking ordinance begins snaking its way through the city council.

This round, it’s a “living wage” ordinance recently introduced by Councilman Jared Brossett.  At a legislative breakfast held earlier this month, Brossett depicted the law as a palliative for New Orleans’ notorious and persistent epidemic of poverty.

“Income inequality — I don’t need to tell y’all this. It’s vast. I mean, we were compared to Zambia, as far as income inequality,” Brossett said. “That is ridiculous, as we are part of one of the richest and strongest nations on this planet.”

Brossett’s proposed ordinance is actually modest in scope.  It would require any employer with more than $25,000 in city contracts or receiving more than $100,000 in city grants to pay a minimum of $10.10 per hour and provide at least 7 paid sick days per year.

Hence, New Orleans is hardly in danger of becoming a bastion of socialist labor policy. Sweden won’t be taking cues from Brossett anytime soon.

Moreover, because the ordinance only affects employers that accept grants or enter into contracts with the city, it at least arguably would not violate La. Rev. Stat. 23:642, which prohibits political subdivisions from setting “a mandatory, minimum number of vacation or sick leave days . . . or a minimum wage rate which a private employer would be required to pay or grant employees.”

That statute was passed in response to a previous effort by the City of New Orleans to enforce a living wage ordinance for all employers.  The Louisiana Supreme Court struck the prior ordinance in 2002.

With previous efforts to set a citywide minimum wage having failed, it’s understandable that eventually the issue would come back before the council in a different form boasting plausible legality.  The City of New Orleans has never been pleased with the prospect of being overridden by those Nosey-Nellies in Baton Rouge.

However, it’s far from clear that this more limited proposal for a living wage is anything other than a symbolic gesture.  Even if living wage laws do have an impact, it’s unclear whether that impact is positive or significant.

In 2013, National Public Radio interviewed David Neumark, an economics professor at the University of California, Irvine, on the subject of local living wage laws.  Neumark noted that living wage laws started catching on in the late 1990’s and have now expanded to a “very large share of the country’s large cities.”

Neumark is somewhat ambivalent about the impact of these laws. “A lot of people are making higher wages, and a much smaller number have perhaps lost their job or lost the opportunity to find a new job,” Neumark told NPR.  “So there’s winners and losers.”

“[F]or the most part, I think, what these laws are doing, they’re kind of redistributing money among low-income families – that is, some are better off, some are worse off, and the net effect is pretty minor.”

Neumark’s lukewarm appraisal makes living wages laws sound like little more than posturing.  Living wage ordinances are pitched as a means to lift people out of poverty, when it fact they improve the lot of some low-income workers while hurting others.  I’m not convinced that we should be passing laws that leave any proportion of the poor in an even worse position.

Additionally, the impact can’t be positive on the city’s budget.  A law that limits competitive bidding to firms that agree to artificially inflate their labor costs will, on balance, increase the costs of city contracts.  The impact is likely minor, but still real.

Set against this backdrop, Brossett seems to simply be indulging a trend.

“Many living wage ordinances exist throughout the country in other cities, so why can’t it in New Orleans?” Brossett asked rhetorically.

The answer is that New Orleans needs to carefully consider how to proceed, as opposed to simply jumping on the bandwagon.  Just because all the other cities are pandering with living wage laws doesn’t mean we have to do so too.  Surely, those after-school specials about peer-pressure have at least taught us that.

Making a dent in entrenched poverty in New Orleans won’t be achieved by making certain classes of employers pay slightly higher wages.  It’s going to require a host of reforms: a better business regulatory environment, the repeal of laws and policies that increase cost-of-living, and a commitment to improving public infrastructure and services.

Of course, it’s always easier to just pass a law saying that jobs must pay well.  It’s much harder to engender an atmosphere where employers offer those jobs regardless, where there is genuine economic health.

That’s the difference between superficial and substantive reform.

Owen Courrèges, a New Orleans attorney and resident of the Garden District, offers his opinions for UptownMessenger.com on Mondays. He has previously written for the Reason Public Policy Foundation.

5 thoughts on “Owen Courreges: Will a “living wage” reduce poverty in New Orleans?

  1. Does Neumann have studies to back up his assertions, or is he just another blowhard economist? And why is making a gesture “pandering,” but making disastrous concessions to big energy, big oil, and big real estate just the cost of doing business? Isn’t doing something better than doing nothing? Maybe that bandwagon takes us a little farther down the road to a better, fairer economic reality.

    • Marcello,

      Neumark had done research on living wage laws, so no, I don’t believe he was just being a blowhard. As to why this gesture is “pandering,” it’s because it doesn’t have much impact overall, and to the degree is does have an impact, it simply makes some of the poor better off and some worse off. We should not pretend the case is otherwise, and we shouldn’t just “do something” when that “something” doesn’t actually improve matters.

      With respect to “disastrous concessions” to various industries, they’re not what I’m discussing here, and in any case, we’d need to be speaking of specific policies for such a discussion to have any grounding. For the record, I do agree that some industries engage in rent-seeking behavior that results in unfair treatment, usually in favor of established players — but that doesn’t have much to do with whether living wage laws are good policy (and they’re not).

        • Joanne,

          It’s being completely renovated. It’s supposed to reopen as a grocery and deli.

          New business name is GARDEN DISTRICT GROCERY & DELI, LLC. Elizabeth Blum is named as manager.

  2. Owen, I generally agree with most of what you write about needing to make the city much easier to deal with when opening and maintaining a business. From our zoning code and processes that essentially ‘dare’ a business to open and operate within the narrow confines of some planner’s idea of what New Orleans is supposed to be to often conflicting rules to hostile self-appointed neighborhood poobahs & preservationists who treat the city like a jealous lover would, stifling any change, the Big Easy is a hard place.
    But the other side of the business equation is the tens of thousands our fellow citizens making poverty wages in the service and hospitality industry, to provide visitors with the experience the city officials tout. These, are in many places, already lean organizations in terms of staffing. But the issue with poverty wages is that you end up paying for them on the other side. I’m gonna go out of a limb and figure you probably don’t like housing subsidies. And you probably know more than most that the rental market also has much higher costs associated with it (some of it because of the city but most of it due to external forces) than it did a decade ago. So we, as a city, have put in a lot of subsidized housing to keep workers we need in the city because their employers are paying poverty wages.

    Employers should be paying wages to their employees so that they can sustain themselves in the city. That is in ALL of our best interest. Employers should be paying wages that allow their employees to weather our weather, including having the resources to evacuate when they need to.

    One of the things that storm opened my eyes to was the number of people we left behind economically for decades. I certainly think we should be doing everything to attract business, particularly by making zoning and other regulation easier, and make life easier for everyone in the city but we can’t think we can continue to have a poverty wage economy and also build a city that we can be proud of in all respects. Making sure those who don’t have a whole lot have just a little more to make their lives just a little easier is a good step to start to address a lot of the other social issues (crime, blight, education) we have in this city.

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