Response from Andrew Brod (UNCG)

A commenter suggested recently that we call on UNCG's Andrew Brod to get a response about the proposed minimum wage ordinance and we appreciated Mr. Brod's response, which is posted here:

I'm flattered that someone would care what I think about the concept of a minimum-wage ordinance for Greensboro. Thanks for asking.

Right off the bat, however, my understanding is that such an ordinance isn'tallowed by state law. I'll admit that my understanding is a few years old,however. In 1999 I was asked to chair a Living Wage Study Committeeestablished by the city council to study a living-wage ordinance that wouldcover city employees and contract workers. Therefore, the proposedordinance was distinct from a minimum-wage ordinance (MWO) that would coverall workers in the city regardless of their employers. I wanted to makethat distinction clear when I presented the study committee's report to thecity council in February 2000, and so I stated as fact what I'd been told bycity staff, that cities in North Carolina couldn't enact their own MWOsunless authorized by the state legislature. Was that claim wrong then, orhas the law changed? I've read a post on this blog that claims the former,but I'm not convinced. However, it's beside the point whether I'mconvinced. Let the attorneys worry over that. For the sake of argument,let's assume that municipal MWOs are kosher in North Carolina.

Even if legally kosher, a Greensboro MWO seems like a really bad idea to me,most fundamentally because minimum wages tend to hurt the low-skill workersthey're designed to help. More generally, I believe that public policy should, as much as possible, keep its mitts off of prices (and wages are prices). I have no general objection to inviting government to muck aroundwith the economy if there's a good reason. I'm no libertarian. But in a market economy like ours, the price system is such a delicate andinformative mechanism that I'd rather we just left it alone.

At the very least, some study is needed, because in spite of my basic opposition to minimum-wage laws, I agree with the emerging view amongeconomists that holds that attributes of local labor markets can, in some circumstances, trump the general theoretical view. For example, if the demand for labor is sufficiently insensitive to changes in wages, a minimum wage could cause a relatively small decline in employment, and then it'd be a simple cost-benefit calculation to determine if the gain enjoyed by thejob-keepers outweighed the loss suffered by the job-losers. We'd have to know a lot about the local economy, including labor-demand elasticity.

So I'm basically against minimum-wage laws, though I'd be open to the results of a study that incorporated local economic idiosyncracies. But mygeneral opposition shouldn't be construed as opposition to fighting poverty. Poverty is bad! And there are some useful and effective ways for governmentto make adjustments to market outcomes, even while leaving prices alone.Rather than depend on minimum-wage laws, I'd prefer to see an expansion of the earned-income tax credit, which has the potential to do a much betterjob of subsidizing the incomes of the working poor. And the EITC wouldspread the cost of the subsidy across all taxpayers rather than focusing iton the employers of low-wage workers (and their customers).

Finally, suppose a Greensboro MWO were enacted. The proposed wage of $9.36/hour is pretty high compared to the state's new $6.15 minimum. If you saw that wage gap and had a business that depended on cheap labor, wouldn'tyou give some serious thought to moving it out to Summerfield? Remember, it's not as easy to annex outlying areas as it used to be. Of course the move-to-Summerfield ploy wouldn't work for most fast-food restaurants, because driving 5 miles up Battleground at rush hour to get a Big Mac wouldsatisfy no one's idea of "fast." Therefore, even if minimum-wage laws were the way to go (and I believe they're not), then in enacting one for Greensboro, we'd be betting that the majority of employers of low-wage workers are as unlikely as fast-food restaurants to migrate out to the'burbs. Is that a good bet? Again, a little study might be needed.

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Ed Whitfield, a GMW committee member responded to Mr. Brod's comments:

I think Mr. Brod's extreme view in opposition to all minimum wage regulations is out of step with the broad community's sense of fairness. Employers who control the means of living for their employees should not have the right in our community to benefit from people's labor and not compensate it fairly. This is the basis for minimum wage regulations in general. The issue relative to a local minimum wage ordinance is how high should that minimum wage be and who should decide it.

The experience of the communities where minimum wage ordinances have been passed has not been as dire as that predicted by economists like Mr. Brod. There has not been the loss of low paying jobs and there have been no wholesale exodus of businesses. It might be argued that the economic realities of each community are unique. There can be no complete understanding of the effects of these changes on Greensboro until they are implemented. One certainty is that a number of lower wage workers will have additional income to spend in other businesses with the possibility that this will make the local economy more vital. At the very least, we have a need to take a stand that in this community those who work will be paid a respectable amount of money because that is just the type of community that we are.

As to the legality of local minimum wage ordinances, local ordinances often require amendments at the state level to the local charter. Such amendments tend to be routinely granted on the basis of requests from the city council. We need to decide what we want in this community, and then do all that is necessary to amend the necessary laws for it to come into being.

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I'd also encourage readers to take a look at a response from Roch Smith, Jr.