'Living wage' won't help those who need help.

Byline: RON SCHMAEDICK For The Register-Guard

THE "LIVING WAGE" proposal, which will return to the Eugene City Council for further debate soon, is not the best way to deal with low-wage employment.

The proposal would increase the minimum wage for city employees, and the employees of the city's vendors, to $11.52 per hour plus benefits or $14.21 per hour for employees with no benefits. Oregon's current minimum wage is less than $7 per hour. The "living wage" proposal would cost the city an estimated $830,000 per year. Eugene has some choices: It can do nothing, it can spend an estimated $830,000 annually, or it can invest $830,000 annually for the long term.

The proposal would be a commitment to an annual expense. It would be a windfall for many employees. However, there would be negative consequences for the Eugene-Springfield area, and for the very people the "living wage" is intended to help.

The $830,000 cost estimate is based on the expense of providing a "living wage" for workers currently being paid less than $14.21 per hour. But skilled and experienced employees currently making $14.21 per hour and more will reasonably argue that they are entitled to equal increases: "Is it fair," they will ask, "to pay the newest, least skilled employees the same rate as better-trained, better-educated and more experienced employees?"

Would every employee of the city and its vendors get a raise of $7 per hour or more? Only when that question is answered can the real impact on the city budget be calculated. And the effects would spread beyond the city and its vendors, creating a de facto prevailing minimum wage for the entire Eugene-Springfield area, which would accelerate toward $14.21 per hour.

Consider that the Eugene School District's beginning teachers are paid $29,580 per year plus benefits. The city would pay people with minimal skills or education $23,750 per year ($11.52 per hour), plus similar benefits. The incentive to study, sacrifice and take on the burdens of teaching would be reduced - and the same would happen in every job category requiring skill, education or experience. The only way to maintain a premium for skilled, educated workers would be to increase the entire local wage scale. The ripple effect would cause increased labor expenses far in excess of $830,000.

Wages represent two thirds of most businesses' operating costs. As average wages increase, so do prices. Consumers would first notice price increases by vendors who serve both the city and the general public. As the utilities, trash collectors and others are required to pay higher wages to all their employees, they, in turn, would have to raise prices to all their customers.

As prices rose, $14 per hour will not be a living wage for long. The immediate losers would be people living on fixed incomes and small, locally owned businesses.

Small businesses would not be able to compete in the local or world market. The national firms and large chain stores would absorb these higher wages or simply move to an area where labor costs are less. This applies especially to those firms selling products and services out of this area - for example, the many call centers recently attracted to Eugene-Springfield.

Inflationary adjustments in pensions, disability compensation or other sources of fixed income are not based on the local cost of living. For folks on fixed incomes, the quality of life is tied to affordability. As local prices in response to wage increases, these folks' quality of life would decrease - and they would have no recourse.

A $14 per hour minimum wage would be a disincentive for young people to improve skills and productivity. Many would find it more attractive to quit school and go to work at a high minimum wage. In a few years, however, when prices catch up with wages, they would be trapped with families, car and house payments, and no resources for returning to school or learning a trade. Luring people from self-improvement efforts with artificially subsidized wages is deception, not justice.

A "living wage" law initially looks like a kind and charitable act, but in the long term it is a cruel hoax for people on the low end of the wage scale. When costs (i.e., wages) increase, jobs are eliminated, prices increase or both. It is no coincidence that when Oregon had the highest minimum wage in the country, it also had the highest unemployment rate. Washington now has the highest minimum wage, and it's No. 1 in unemployment.

A far better alternative would be to invest that $830,000 annually in people at the low end of the wage scale. The city could provide funds to help ambitious people develop valuable and marketable skills through apprenticeships, education or training. Funds could be provided for tuition, books, child care, medical insurance and other living expenses through scholarships, loans, grants or stipends. As the recipients accomplished their goals, they would be graduated out of the program and other people could be added.

This investment alternative would:

1) Help those who are eager to improve their economic status and are willing to commit time and energy.

2) Avoid the many negative consequences of doubling the local minimum wage.

3) Give the city control of its annual financial commitment to this program.

4) Participants would have the freedom to move to other non-city-affiliated employers, or move to another city once they obtained marketable skills and knowledge.

5). Put needed money into the education institutions in the area via more tuition, student fees etc.

Measure 25, approved by the voters Nov. 5, will provide a reasonable solution to the minimum wage issue. The minimum wage was never intended to be a family wage. By maintaining adequate safety nets, society provides short-term assistance for people down on their luck.

Eugene city councilors must ask themselves two questions about the "living wage" proposal: Are the funds available? If so, is it in the city's best interest to subsidize a growing underclass, or to give people the means and incentives for self-improvement?

Ron Schmaedick of Springfield and his wife owned Rams Realty from 1967 through 1994, and Realty Executives from 1994 through 1996. He has served on the Lane Transit District budget committee and city of Eugene committees and task forces dealing with low-cost housing, city beautification and other issues.