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Upping the ante

With more than a third of North Carolina households earning less than they need to get by, calls for a "living wage" are growing stronger



At mid-afternoon on a Friday before a holiday weekend, the waiting room at the Carrboro Community Health Center on Lloyd Street is more than half full. Blue signs posted on the clinic walls give instructions in English and Spanish. A line gathers outside the pharmacy window and trails down a hallway. From behind one of the examining room doors comes the muffled sound of a child coughing.

The health center--one of the few area clinics that offer sliding scale fees--saw close to 19,000 patients last year, a jump of more than 14 percent over the previous year. The vast majority of them had no private health insurance. "Right now, we're writing well over 500 prescriptions a day," says Moses Carey, an Orange County commissioner and executive director of Piedmont Health Services, which runs the Carrboro clinic and three others in the area. "It's somewhat overwhelming because our numbers are increasing so fast."

Safety-net agencies across the state are reporting similar surges in demand. The Food Bank of North Carolina in Raleigh distributed 19 million pounds of food in 1999 after Hurricane Floyd. Last year, instead of going down, that number climbed to 20 million pounds. The waiting list for state child-care assistance has swelled to 13,092 families--up more than 3,000 in the last year.

Why is this happening at a time when North Carolina's economy is booming and Money magazine describes the Triangle as the best place to live in the South? A new study by two statewide research groups offers an answer: The economic pie may be expanding, but not everyone can afford a slice. Too many working families aren't being paid enough to make ends meet.

"Working Hard is Not Enough," a report released this week jointly by the North Carolina Justice and Community Development Center and North Carolina Equity, finds that a startling 1.1 million families--more than a third of the state's taxpaying households--are earning less than they need to cover basic expenses.

To reach that conclusion, the report's authors created a "living income standard" based on one originally developed by the national advocacy group, Wider Opportunities for Women. The standard calculates the wages families must earn to survive without government aid. Tar Heel researchers used two family types that are representative of the majority of households in the state. For a single-parent with one preschool-age child, the report's wage benchmark is $11 per hour in urban areas of the state and $8.50 in rural areas. For a family with two parents and two young children, the bar is set at $8.12 per wage earner in urban areas and $7.12 in rural areas.

Those standards are almost double the federal government's official poverty threshold for the same family types--and that's just the point, says Sorien Schmidt, an attorney at the Justice Center and one of the authors of the report.

"The poverty level was developed in the early 1960s and everyone knows it's totally obsolete," she says. "State agencies are routinely using 150 percent and 200 percent of poverty level" because the 30-year-old guidelines don't account for the larger bite that housing, child-care and health-care costs now take out of family income.

Ironically, the new report points out, the state's economic growth has made things harder for people at the bottom of the wage scale by pushing the costs of many essential items beyond their reach. The median price of a new home in Wake County, for example, reached $150,000 in 1998 and is projected to grow to $194,980 by 2005, according to the county's Affordable Housing Task Force. While the suggested living income standard is significantly higher than the federal poverty level or the state minimum wage of $5.15, it's still on the spartan side. Schmidt notes that the wage calculations don't include money for debts (including car loans), entertainment or savings, and they assume that families are covered by employer-provided health insurance. In addition, just-released federal estimates of housing costs in Charlotte and the Triangle are $100 per month higher than those used in the report. "So these are very conservative figures," Schmidt says. "This really is a bare bones budget we're talking about."

Impossible choices

Brenda Hooker knows all too well what it's like to get by on a limited budget. Last year, she was single and raising two kids while working as a travel officer at North Carolina Central University in Durham. Her salary--about $26,000--is just under the living wage level recommended in the new report for a single parent with one child.

The two-bedroom apartment Hooker rented off of Fayetteville Road cost $800 a month--36 percent of her earnings--and she often had unexpected medical bills because her youngest son, Cameron, had cerebral palsy and other disabilities. He died last year just after his 10th birthday.

"People think because you work for the state, you're making good money," says Hooker, who got married in August and now lives with her husband and 13-year-old son in Chapel Hill. "But really, you're living from paycheck to paycheck. I learned how to buy in bulk and turn the lights off and use candles to save electricity. Still, a lot of times you have to juggle. You have to decide what bill you're not going to pay so you can make it through the month."

To prevent families from having to make impossible choices (groceries or shoes? the phone bill or the doctor?), the Justice Center and N.C. Equity are urging state lawmakers to raise the hourly minimum wage to $8.50 and create an earned income tax credit for North Carolina. A federal credit has been available since 1975 to low-income working families with children. It reimburses households earning less than $30,000 for taxes paid and work expenses. The credit is based on family size and decreases as income goes up.

"The earned income tax credit has pulled more people's income above the poverty level than any other federal program," Schmidt says.

The report also calls on local governments to pay "living wages" to their employees and to require businesses with which they contract for services to do the same. Durham passed such a wage law in 1998 and a few other local governments, including Orange County and the city of Greensboro, have debated similar proposals.

By focusing on wages, the North Carolina research groups are adding their weight to a growing national push for better-paying jobs. Since 1994, when Baltimore passed the nation's first living wage law, 53 towns, cities and counties have followed suit, including Boston, Detroit and San Francisco. Another 75 organizing drives are in the works. The number of employees covered and the hourly standards vary, ranging from $12 in Santa Cruz to $10.75 in San Jose to $6.25 in Milwaukee. Some ordinances also include job creation language, health benefits and disclosure standards for companies receiving public funds. All of the laws revolve around the notion that government should be a model by paying wages that families can actually live on.

That idea is a needed counterbalance to the prevailing drift of municipal economic development programs, which offer businesses generous tax breaks and ignore workers, says Jen Kern of the Association of Community Organizations for Reform Now (ACORN), a key player in the national living wage movement. It's also an antidote to harsh new welfare laws that put benefits on a time clock.

"After welfare reform began pushing low-skilled people into a market that was already low-paid and there was no guarantee of any wage floor except the [federal minimum] $5.15 an hour, we started putting together proposals and asking, 'Why should government be subsidizing poverty-wage jobs?'" Kern says.

Where's the evidence that higher wages will help reduce government spending on safety- net programs? Local living wage supporters don't have specific numbers to point to. But a study of Los Angeles' living wage ordinance published in 1998 by economists Robert Pollin and Stephanie Luce, found that total government subsidies for a family of four fell by 39 percent when wages were raised from $5.43 per hour to $7.25 per hour. Meanwhile, the percentage of income earned from wages rose from 60 percent to 72 percent.

Living wage proponents in North Carolina hope the Justice Center/N.C. Equity report will spark questions among Tar Heel decision makers. If strong economic growth, low unemployment and welfare "reform" programs haven't moved people out of poverty, they say, policymakers should be asking, 'What will?'"

"These are not Ronald Reagan's welfare queens we're talking about," says Susan Markham, president of N.C. Equity, which published a series of wage standards four years ago that laid the foundation for the new report. "These are people who are working sometimes two and three jobs and still aren't making ends meet. This is the real picture of working America. How long can they ignore it?"

Starting Small

The debate over living wages boils down to two key questions: Who pays and who benefits?

In North Carolina, Durham was the first community to take up that discussion. The Bull City passed a living wage ordinance in 1998 targeted to a specific group of low-wage workers: those employed by businesses that contract with the city for services, like the folks who clean the ballpark. A progressive city council had a track record of paying decent wages to city employees. The new law was designed to ensure that city service contractors wouldn't be paying any less. The hourly living wage, which is equal to the minimum paid to other city workers, has risen from $7.57 to $9.

Durham's living wage law has been largely symbolic, since it applies to only about a dozen contractors, and nonprofits are exempt. Still, from the beginning, it faced strong opposition.

Members of the business-oriented Friends of Durham "raised a fuss that government shouldn't be subsidizing people--that they should work for their money," recalls former City Council member Frank Hyman, who spearheaded the living wage drive. "I had to laugh at that because that was the whole purpose of having a living wage."

There were also fears that the living wage law would make it harder for minority-owned firms to compete for city service contracts--concerns that haven't played out in the three years the law has been up and running.

When asked about costs, city officials are hard-pressed to come up with clear figures because companies required to pay the living wage now simply fold the higher rates into their contract bids. The total Durham spends on living wage contracts has varied over the past three years, but so have the number of contracts and the amount of work they cover.

Studies of Baltimore's seminal living wage law showed the total of cost of those contracts, when adjusted for inflation, actually fell by close to 2 percent after the law was enacted. Researchers couldn't attribute the drop directly to the living wage ordinance, but it was clear that the measure hadn't led to any major contract bid increases, at least in the first few years it was in effect.

When the living wage measure was first debated in Durham, city leaders estimated it would cost taxpayers less than $177,000 a year--a fraction of the $385 million annual budget. Despite such benign predictions, Durham Mayor Nick Tennyson is one of those who hasn't changed his philosophical objections to the living wage idea.

"I am still unconvinced that there is a number that represents a livable wage," he says. "It's a completely value-laden judgment. I think we should be spending time working on other issues."

On the other hand, some supporters are disappointed that Durham's living wage drive didn't involve more of the people it was aimed at helping. "There wasn't a massive grassroots effort behind the law in Durham. It was basically a city council thing," says Cynthia Brown, another former council member and head of the advocacy group Southerners for Economic Justice. "There isn't a lot of pressure to enforce it or follow up."

Complex calculations

In Greensboro, more than a year of pressure from labor and community groups wasn't enough to assure passage of a living wage. Last spring, a coalition of labor and church leaders proposed a baseline wage for city workers and employees of firms that contracted with the city of $8.03 with health benefits, or $9.23 without--a standard based on the 1999 federal poverty guidelines for a family of four.

A task force that included both supporters and opponents was appointed to analyze the plan. After months of study, the group concluded that the costs of a living wage for city employees and contract workers would be minimal--about $4.27 per household. On the other hand, the task force found that the impact of a living wage law on the city's working poor would also be slight, since most of its 2,800 employees already earned above the suggested minimum. Still, the report said, a living wage law would be a worthwhile gesture, "an opportunity for the city to make a statement that it is aware of and sympathetic to their plight."

Despite such official backing, when the plan came before the city council in April, it was defeated on a 6 to 2 vote. Business leaders on the council led the opposition, arguing that the new law would "artificially inflate" wages and amount to unwanted government interference in corporate affairs. An alternate wage scheme proposed by the mayor that would have cost less by covering fewer workers was shot down on a 5 to 3 vote--the mayor being the only one to move into the "yes" column.

Living wage supporters were taken aback by the ideological ring of arguments against their proposals. "The city council basically said this was like socialism," says Richard Koritz, a member of the National Association of Letter Carriers and one of the key organizers of the living wage drive. "They have no problem giving out big handouts to business--all kinds of tax incentives. But to them, the living wage was against the free market."

In Orange County, an ongoing debate over living wages has turned on a more complex tally of costs and benefits. In 1997, the Orange County Greens led a drive to raise wages for all county workers to the federal poverty level for a family of four--then $7.94 an hour. The proposal would also have applied to all employees of businesses receiving government subsidies or service contracts of more than $5,000. Later versions narrowed the scope of affected firms to those with county service contracts of $25,000 or more.

The idea of a living wage was popular with many county leaders, including the director of the Social Services Department, and even some members of the Economic Development Commission. But when the proposed ordinance came before the commissioners, it hit an unexpected snag. Local child-care advocates argued that if nonprofit day-care centers with county contracts were required to pay higher wages, most would have to raise fees beyond what many parents could afford.

"It was a very difficult issue for us," recalls Sue Russell, executive director of the Chapel Hill-based Child Care Services Association, which advocates for better child-care services statewide. "The median wage for child-care workers in our state is $6.25 an hour and they certainly deserve to be paid more. But we have to recognize what raising that would mean for families who can't afford day care."

Russell says she and her colleagues didn't oppose the county's living wage law. "We simply posed the question to commissioners: 'Are you prepared to come up with the resources to make up the difference for families'" if day care workers get higher wages?

In the end, the answer was, "No." The commissioners rejected the broader living wage ordinance in favor of a clause in the county personnel code that set minimum hourly wages for all county employees at $8 (that number, indexed to the cost of living, has since been raised to $8.45). The new rule affected some three dozen temporary employees who were making below the minimum, and this year's update cost the county an additional $5,000.

While the Orange County living wage campaign didn't go as far as many supporters had hoped, it has had ripple effects. County leaders have formed a committee to explore ways to raise salaries for local day care and home healthcare workers. One local business, the Carol Woods Retirement Community, adopted a living wage policy last year that set minimum hourly wages for all employees at $8. The move had a thread of self interest running through it.

"We realized that in order for this to be a good place to live for the residents, it had to be a good place to work," says CEO Pat Sprigg. "Even though our wages were near the top for our industry, we felt we weren't doing what we needed to do if we weren't paying a livable wage." The change affected about a third of the home's workers, who got raises of up to $1.25 an hour, Sprigg says. Carol Woods residents paid the $100,000 price tag.

Orange County leaders say it's unlikely that many other businesses will voluntarily begin paying livable wages. But with so many local families struggling, the issue isn't going away.

"It's becoming more and more difficult for the people who provide many of the basic services of our community--police, firefighter, housekeeper, janitor--to live in our community," says Commissioner Barry Jacobs, a member of the county's Affordable Housing Task Force. "I think people recognize the inherent inequity in that."

Raising the bar

Opponents of living wage laws haven't been sitting still. Groups like the National Restaurant Association and local chambers of commerce are fighting hard to stop the spread of living wage ordinances and spin-off strategies designed to wrest other worker-friendly concessions from businesses. In the past six years, living wage campaigns have grown more sophisticated and have gone beyond the original municipal government model to encompass workers in specific industries or geographic areas.

Last month, a business-backed measure repealing four existing living wage ordinances and prohibiting any new ones failed in the lame-duck Michigan legislature. Living wage opponents have vowed to try again this year.

In Louisiana, a law banning local governments from setting minimum wages above the federal baseline has been the subject of a court battle for the past five years. The measure was a response to a citywide living wage campaign in New Orleans backed by ACORN, the National Organization for Women and several labor unions. The National Restaurant Association spent $50,000 on a TV commercial warning of the dire consequences that drive would have for workers and consumers.

Business leaders in North Carolina are no less adamant about the repercussions of raising wages to the living standards suggested in the Justice Center's new report.

"I can assure you we will oppose that," says Phil Kirk, head of North Carolina Citizens for Business and Industry, the state's most powerful business lobbying group. "It will run many small businesses out of business. It would cause the price of food and restaurant meals to skyrocket. It would end up hurting low-income people."

Those crash-and-burn theories aren't supported by studies done in Baltimore and other cities where municipal living wage laws have been in place a few years. When asked about research showing those laws have had no negative effects on the business climate--and in some cases, have brought positives such as lower turnover and higher productivity--Kirk can barely contain his annoyance.

"We would doubt that research," he says. "Labor costs are by far the single biggest factor in the cost of doing business. So any increase in the cost of labor will result in those costs being passed on to the consumer."

As to the likelihood that the North Carolina General Assembly would approve a minimum wage of $8.50, "That's even higher than the federal minimum wage," Kirk says. "It would have about as much chance of passing here as the paper it's written on."

Living wage supporters aren't much more optimistic about raising the statewide minimum. What the Justice Center's report can do, they say, is boost public awareness and offer inspiration for living wage campaigns starting up in Asheville, Charlotte and Raleigh.

David Baker, coordinator of the North Carolina Alliance for Economic Justice, spent the summer holding regional meetings on the living wage idea in Asheville, Winston-Salem, Wallace and Rocky Mount. What he heard convinced him there's a lot more room for discussion about income inequality in North Carolina.

"One thing I found in talking to people is that many see poverty as an individual issue and don't understand it as a systemic problem," he says. "The attitude that drove welfare reform speaks to the idea that poverty is the result of behavior. I think what we have now is an opportunity to change that. You've got folks working hard but still not earning enough money. You can't say they're being lazy. So we have to look at the system."

For the moment, living wage supporters are working on reframing the issues. Instead of debating the costs of enacting a living wage, they say, a better question to ask is what are the costs of not having one? If government and businesses aren't paying people enough to get by, taxpayers will end up footing the bill for services to plug those gaps.

For Barbara Earls, head of the N.C. Council of Churches' Project Jubilee anti-poverty program, the equation is simple: "Either you provide people who are poor with services or you enable them to work to support themselves so they don't need those services," she says. "We can't say we have this work ethic and not reward it. We shouldn't tolerate any longer the fact that people who are working hard can't sustain their families." EndBlock

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