RALEIGH — As that great philosopher, but not-so-great rotisserie chicken magnate, Kenny Rogers once observed, “You gotta know when to hold ’em/Know when to fold ’em.” In the world of public policy, this is an important rule to follow when you pursue a certain research agenda, it generates results that don’t seem to make any sense in the real world, and you have to decide whether to go ahead with it or start over.
My friends at the North Carolina Justice and Community Development Center, with whom the John Locke Foundation has sparred for many years, have held a bad hand when they should have gracefully folded it.
The issue in question is the so-called “living wage,” an estimate of what a family would have to earn in a year to be considered “self-sufficient.” Originally, the idea was to improve on the old idea of a minimum wage, which most leftists think is far too low and based on far too old a formula to be of any politicial use today. A “living wage,” you see, can be employed to argue that far more people are at economic risk than even the broadest definition of poverty would allow.
It was a clever, if economically obtuse, notion. Of course, no one in an actual labor market sets wage rates based on perceptions of need. Wages in a competitive market reflect the productivity of the worker, what the worker actually contributes to the production and sale of a good or service to a willing buyer. If a worker cannot command enough of a wage to live above the poverty line, then the problem lies in a failure to acquire the knowledge, skills, technology, and other capital necessary to be more productive. You can’t just paper over the problem with a government regulation. It doesn’t increase the value of the work being offered for sale.
Still, let’s for the moment accept the idea that estimating a “living wage” has some public policy meaning. We are then left with the task of computing it.
In a report released Wednesday, the N.C. Justice and Community Center did just that. Researchers estimated that it would take $39,674 for a two-parent, two-child family in North Carolina to be self-sufficient in an urban area and $36,211 in a rural area. For a one-parent, one-child family, the living income standard is $27,334 in an urban area and $22,890 in the country.
By this standard, they computed, nearly 60 percent of families with children do not earn a living wage.
As I write Wednesday night, I can’t yet access a copy of the new report on the Justice Center’s web site, but I have read a previous version of it. Moreover, I have lived in North Carolina virtually all of my life, and am a reasonably competent adult. Thus, I can say without fear of contradiction that the Center’s findings are preposterous.
Moreover, someone at the Center should have realized how preposterous it was to suggest that most North Carolina families were living below a standard labeled a “living wage.” Are we to believe that they all receive government assistance, sell drugs, burgle houses, or print their own money in the basement? Are 60 percent of North Carolina families earning a “dying wage,” and if so what does that mean?
Something obviously went very wrong with the concept of a “living wage” or its calculation. Perhaps the researchers used overly generous criteria for deciding what the minimum level of housing, clothing, or food should be for a “self-sufficient” family. Or perhaps they used income data that left out common enhancements to standard of living such as savings, assets, child-support payments, and intergenerational households. Or perhaps they ignored home production of food and other goods, which play a role in the economics of some households.
I don’t pretend to know what specifically went wrong. But anyone who truly believes that 60 percent of North Carolina families with children live below a “living wage” baseline, in such a precarious economic state that immediate government intervention is warranted, is in need of a generous dose of common sense.
Next time, folks, unless you truly believe that North Carolina’s chains of economic slavery will soon give way to the revolution of the proletariat or some such rot, just fold your hand and deal again.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.