A Living Wage is Economic Development

By: Jeff McLaren

ABSTRACT:
An Opinion Piece: A living wage is good, just, and supports local economic development

The best economic development amounts to the actions and policies of a community that raises the standard of living and the economic health of all the people.

It is supremely important that economic growth be bound tightly to and evaluated by rising living standards. It should be absolutely true that the economy exists for the benefit of people; not that people exist for the benefit of the economy. Reversing the arrow of benefit is a perversity especially in a society that values equality and individual self-determination.

The living wage, the wage needed to support a worker and their family’s basic needs at an adequate standard of living, is all about raising the living standard of people who are below what Canadians would consider an adequate standard of living in our country. A living wage is the minimum that working people need to live.

Economic growth at the service of increasing the living standards of all the people is one of the major problems of our age. What economic policies do we enact such that we achieve higher living standards for all? Part of the solution is a living wage. A living wage in Kingston will re-balance the economy at a new dynamic equilibrium that puts people first.

An economic development strategy that puts people first and benefits all needs to increase the average, total, marginal and individual amount of disposable income in the population. Disposable income refers to money left over after fixed and essential costs are paid. It is money used for savings and/or the enjoyment of life.

Putting more money in the hands of lower income people pays back far more to the community and to the goals of economic development than giving more money to the highest income people. More money in the hands of the lowest income earners is the easiest and best solution to poverty and economic development.

A living wage policy is a very efficient way to bring about the most effective increases in marginal disposable income; income necessary for economic health and healthy living standards. Consider the effect on spending (one measure of economic growth) of giving $1000 more dollars to a billionaire, a hundred thousand-aire and a low income person. For a billionaire, who can buy pretty much anything, a $1000 will not result in increased spending. For a hundred thousand-aire, another $1000 may have a small effect on spending. But for a person with a low income who is making less than a living wage, another $1000 will make a huge difference in their spending: most likely they will spend it all. Our local economy benefits more from $1000 circulating than from $1000 in savings. Every time someone spends $1000 dollars it is also simultaneously someone else’s income. And when they spend it then that same $1000 becomes a third’s income which is then spent producing ever growing circles of positive economic activity. The more the money circulates the more economic activity takes place in the local economy. The original $1000’s economic influence is multiplied each time it changes hands. The beneficiaries are the businesses that better serve the needs of the people and the people who have their needs met better.

Putting more money in the hands of the lowest income earners pays the community back the most, not only in terms of economic development but, in all the benefits social scientist have identified of living in a more egalitarian society. Benefits such as: better social relations, mental health, physical health, life expectancy, educational performance, social mobility; and less drug use, obesity, teenage births, violence, crime and imprisonment. Everyone, rich and poor alike, benefit from this kind of economic development. It may be argued that businesses cannot afford to pay a living wage. I assure you that Wall-mart can afford to pay a living wage. Many businesses that are legitimately struggling right now may be having difficulty due to lower consumer spending; because many people just do not have the disposable funds to purchase all their needs. With a greater number of people earning a living wage comes an increase in disposable income. More people with more money to spend is a positive force for economic health and rising living standards.

A living wage policy for Kingston is one great way for all of us in Kingston to create and benefit from sustainable economic development.

Added on: Sept 12, 2015