“Everyone deserves a living wage” sounds simple—but what happens when government tries to determine what that wage should be?

In this episode of Liberty & Reason, we break down the economics behind living-wage mandates and ask a basic question: Who ultimately pays when labor costs rise?

We discuss why a living wage isn't one universal number. MIT's Living Wage Calculator varies its estimates by geography and family type because housing, food, childcare, healthcare, transportation, taxes, and other expenses differ dramatically from household to household.

We also examine how higher mandated wages can affect workers, businesses, and consumers through higher earnings, lower profits, price increases, changes in hiring, reduced employment opportunities, or other adjustments. CBO's analysis finds an important tradeoff: higher minimum wages can increase earnings for many low-wage workers and reduce poverty while potentially reducing employment for others.

Finally, we look beyond wage mandates and discuss alternatives for improving living standards—including productivity, vocational training, apprenticeships, entrepreneurship, competition for workers, and reducing major expenses such as housing.

The goal shouldn't simply be raising the bottom rung of the economic ladder. It should be giving people more opportunities to climb it.

Sources:

• MIT Living Wage Calculator — Methodology

• Congressional Budget Office — Minimum Wage Effects

• CBO — Minimum Wage Interactive Analysis

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