Business is good for Jim Amaral. His bakery, Borealis Breads,
has grown beyond its original Wells, Maine, store to include three
other locations, annual sales are averaging $3 million, and the
company's baked goods have been featured on CNN.
But more is rising at Borealis than bread. Three years ago,
Amaral, 44, decided to start paying his 60 employees a "living
wage" that averages almost $3 more than the federal minimum,
plus benefits. "I just kept bumping people up until they were
at $8 an hour," he says.
Amaral made the decision to raise employees' pay on his own.
Entrepreneurs in other areas of the country, however, now face laws
that require them to do the same. Since 1994, at least 62 U.S.
cities in 24 states have enacted living-wage ordinances that
require employers to pay up to 100 percent above the federal
minimum wage. In October 2000, Santa Cruz, California, passed the
nation's highest living wage, $11 an hour with health
insurance, or $12 without benefits.
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The Growing Debate
Advocates for these ordinances, including the Association of
Community Organizations for Reform Now (ACORN), believe today's
minimum wage is simply too low. "It's not keeping up with
the pace of inflation," says Jen Kern, director of ACORN's
Living Wage Resource Center in Washington, DC. "When people
are working three jobs and are still sleeping in their cars,
there's a problem."
Until recently, living-wage ordinances only applied if you had
contracts with your city for more than a certain dollar amount. But
new rules passed in Santa Monica, California, in June may signal a
new trend: All companies with more than $5 million in annual sales
in the city's downtown and beach-front business districts will
be required to pay a minimum of $10.50 per hour to workers with
health insurance, and $11.75 to those without health insurance
starting next year.
Not that new laws are the only thing drawing businesses to
living wages. Employers who make the move are rewarded with
happier, more productive workers, says Karen Kraut, a coordinator
for Responsible Wealth, a Boston-based network of businesspeople
and investors concerned about economic inequality. Responsible
Wealth encourages employers to sign covenants promising they'll
pay more than minimum wage. While it may result in lower profits
and some additional costs passed on to customers, Kraut maintains
that living wages reduce the cost of absenteeism, turnover and
retraining.
Amaral-who signed a covenant-sees improvement in recruiting and
retention, particularly in the baking and early-morning delivery
positions that are critical to his business. It's also been a
good marketing tool. "We're not just selling bread,
we're selling the company," he says. "Paying living
wages, and letting people know that you do it, makes a tremendous
amount of sense." His customers, he adds, don't mind
paying a little bit extra to a socially responsible company.
Not everyone is so convinced. The U.S. Chamber of Commerce, the
National Restaurant Association and other business organizations
view living wages as anti-competitive and costly. Low-wage
employees ultimately lose, they say, because employers must
eliminate jobs. When the Employment Policies Institute in
Washington, DC, surveyed 336 economists last August, more than 75
percent thought a national living wage would lead to lower
employment, and almost 70 percent felt it was an inefficient way to
address the needs of low-income workers.
Critics also question who really benefits from minimum wage
increases. The majority are teenagers or people in their early 20s,
says Mike Bartlett, director of labor law policy at the U.S.
Chamber of Commerce in Washington, DC. In the end, Bartlett says,
economics should govern what makes good business sense. "This
is an artificially increased wage, and the smaller the employer,
the less flexibility to handle the problem."
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