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THE UT LIVING WAGE CAMPAIGN
FREQUENTLY ASKED AND IMPORTANT QUESTIONS

A living wage ordinance is a law, typically passed by a city or county, requiring the city or county and all employers doing contractual business with or receiving economic development subsidies from the city or county to pay their employees a "living wage" set higher than federal or state minimum wage laws. A living wage policy is an internal policy adopted by an employer to pay no employees less than a "living wage" for their community of employment.

Because UT pays large numbers of its full-time, full-year, non-exempt/hourly workers less than poverty level wages. A poverty level wage is not, of course, a living wage. And UT ought to pay all its full-time, full-year employees a living wage. The sad fact, however, is that UT does not even pay poverty level wages to many of its non-exempt/hourly employees. UT has thirteen (13) pay grades for non-exempt/hourly employees. The starting annual salary for full-time, full-year workers in the first seven (7) pay grades is less than the federal poverty level for a family of four. Of course, workers don't earn a starting salary forever. But, the average annual salary earned by workers in the first five (5) pay grades falls below the same federal poverty line.

Because real wages for all UT non-exempt/hourly workers have steadily declined since 1975, in some cases declining by as much as 19.9%. Of all non-exempt/hourly employees, custodians and administrative aides experienced the smallest decline in real wages during this period, declining 9.2%. Their decline is still greater than the greatest decline in real wages experienced by any group of faculty. Of faculty, instructors experienced the greatest decline in real wages during the 1975-1998 period, falling by roughly 8.5%. Because UT does not keep comparable records for administrative staff, professional and executive administration positions, it is not possible to determine whether employees in these positions have suffered comparable losses in real wages over the same time period.

Because the benefits and burdens of employment at UT have not been shared fairly across all groups of employees, Non-exempt/hourly employees have born a disproportionate share of the financial burdens and enjoyed few of the financial benefits of employment at UT. Like any complex social undertaking, UT requires contributions from many workers--from housekeeping and food service employees, to faculty, to top level administrators. Unlike some other complex social undertakings, however, UT is, or ought to be, more than a mechanism for coordinating diverse contributions toward an institutional goal. It is, or ought to be, a cooperative enterprise. In a cooperative enterprise, participants share fairly in the benefits and burdens of their cooperative endeavors. A living wage policy would substantially remedy the unfair treatment of non-exempt/hourly employees who have born a disproportionate share of UT's financial burdens over recent decades and shared in few of its benefits.

Because as an institution of higher education, UT is, or ought to be, a moral leader in Knoxville, Tennessee, the United States and the world. Full-time, full-year work at UT ought to generate a salary sufficient to avoid poverty; indeed, it ought to generate a salary sufficient to provide the basic essentials to a life with dignity for a small family. When salaries must be cut to balance budgets, they ought not be cut only or primarily for non-exempt/hourly workers, many of whom are already earning poverty level wages. When salaries are to be raised, special attention must first be paid to those workers earning wages insufficient to enable them to provide the basic essentials to and a life with dignity for themselves or their family.

Because uniform across the board salary increases (e.g., all UT employees get a 3% raise) are inadequate to insure that no UT employee earns poverty level wages, or less than a living wage. Indeed, assuming ordinary increases in the cost of living, such increases perpetuate the status quo for workers earning poverty level wages while improving the condition of those earning higher wages (since those earning higher wages spend a smaller percentage of their income on the essentials of living and are able to save and invest at a higher rate than those earning poverty level wages). A 3% wage increase for a worker earning $16,000/year comes to $480--probably just barely enough to cover her annual cost of living increase and thus not enough to improve her position relative to the poverty line. For a worker earning $50,000/year the same 3% increase comes to $1,500--enough to raise the worker earning $16,000/year above the federal poverty line for a family of four. For a worker earning $100,000 it comes to $3,000--enough to raise two $16,000/year workers above the poverty line. Even if the $50,000/year and $100,000/year workers could fairly claim to need their $1,500 and $3,000 salary increases just to cover annual cost of living increases, the fact is that both already enjoy a standard of living far removed from that of the worker earning less than poverty level wages. Surely, when it comes to allocating salary increases, special attention must be paid to improving the salaries of those who currently earn the least at UT.

Because as one of Knoxville's primary employers, UT's role in setting wage levels and shaping future economic development for the entire Knoxville metropolitan area cannot be denied. The economic fate of many hourly workers in the metropolitan area is determined in large part by what UT pays its hourly workers. And the economic fate of all persons living in the Knoxville metropolitan area is determined in large part by what hourly workers, unskilled and skilled, are able to earn in the same area. The University of Tennessee cannot honor its commitment to advance the cause of healthy economic development in Knoxville and the surrounding area without a living wage policy.

A "living wage" is a wage that would enable a full-time, full-year employee to provide basic necessities for his or her family (typically taken to be a spouse and two dependents) without public assistance and in or near the community of his or her employment. Basic necessities include adequate shelter, basic utilities (gas, electric, phone, water), food, transportation, clothing, essential toiletries, basic household goods, healthcare and childcare. The amount of a living wage will vary from geographic area to geographic area, sometimes from community to community. It is always significantly higher than the federal minimum wage. The federal minimum wage is not and was never conceived of as a living wage standard. It aims simply to prevent the most severe forms of economic exploitation by setting a floor below which wages cannot fall in the national labor market.

The basic idea is simple: full-time honest labor ought to earn a person enough to live and raise a small family with dignity and without "means-tested" public assistance in or near the community of his or her employment. If we are not committed to this proposition, then the welfare reform and entitlement cutbacks of the last decade are little more than a cruel joke.

There are several approaches to determining the amount of a living wage. The best approaches make use of current, community-specific cost of living information. The worst approach is simply to appeal to the Federal Poverty Guidelines.

According to Federal Poverty Guidelines, in 2000 a full-time, full-year worker with a spouse and two children needed to earn $17,050 a year, or $8.20 an hour, to rise above the federal poverty line. Thus, a living wage might be set at $8.20 per hour. It should be noted that this would constitute a substantial improvement for many employees at UT. Indeed, the average hourly wage for non-exempt UT employees in Employment Grade Levels 1-5 is less than $8.20 per hour. The starting hourly wage for Grades 1-7 is less than $8.20 per hour.

For two reasons, however, cities, counties, employers and economic policy experts are increasingly rejecting this approach (simply dividing the Federal Poverty Guidelines figures for a family of four by 2080, the number of hours worked by a full-time, full-year worker). The first is that the Federal Poverty Guidelines fail to take into account significant regional and local differences in cost of living. The second is that there is near unanimous agreement among economic policy experts that the federal poverty guidelines are set far too low. The primary reason for this is that they are set using a formula derived from data in the mid 1950's. At that time, the average family spent roughly one-third (1/3) of its after-tax income on food. In 1964, the federal poverty guidelines were determined by figuring what it would take to feed various sized families and then multiplying that amount by three. While there have since been adjustments to how the federal poverty guidelines are determined, the basic approach has not changed. The trouble is that in 1997, the average family spent roughly only one-sixth (1/6) of its after tax income on food. And while the percentage share of food costs for the average family budget has declined since the mid-1950's, the percentage share of housing, transportation and childcare costs have risen substantially, costs essentially ignored by the federal poverty guidelines. The upshot is that the federal poverty guidelines, which essentially still come to a tripling of the average food expenditures for particular sized families, do not accurately measure what it takes to meet the basic needs of families. Just ask yourself: Could you provide basic necessities for yourself and two or three dependents in Knoxville on $17,050 a year? Nevertheless, notwithstanding the defects of appealing to Federal Poverty Guidelines, some cities and counties have done just that in determining the amount of their local living wage.

Increasingly, however, communities and employers are using alternative methods to determine the amount of their local living wage. A second method used sets the living wage so that a full-time, full-year employee earns 130% of the Federal Poverty Guideline for a family of four. The reason for this is that families earning less than 130% of the Federal Poverty Guidelines are eligible for food stamps. Since the aim of a Living Wage Ordinance or Policy is to insure that full-time, full-year workers earn enough to support themselves and their families with dignity and without "means-tested" public assistance, it makes sense to insure that workers earn wages sufficient to put them above the threshold for food stamps. On this approach, a full-time, full-year worker would need to earn $22,172 per year or $10.66 per hour to enjoy a living wage. While an improvement over the simple appeal to Federal Poverty Guidelines discussed above, this approach suffers from the same two defects. It takes no account of regional and local differences in cost of living. And it makes fundamental use of the flawed Federal Poverty Guideline figures.

The best method for determining the amount of a living wage is to study the costs of basic necessities in a particular community. On this method, there are two key variables: a) what counts as a basic necessity, and b) its cost. The latter is an empirical question settled by local pricing data. The former, however, is not simply an empirical question. Whether childcare is a basic necessity, for example, is not a question empirical data alone can answer. It is a question that calls for collective, public and inclusive normative deliberation.

Because this is the most conservative yet still defensible estimate, based on local information and conditions, of what it would take to provide basic necessities and a life with dignity for a family of four in Knoxville. From 1997-1999, the Knoxville Living Wage Campaign coordinated 49 brainstorming sessions involving more than 750 Knoxvillians. At each session, participants were asked to reach agreement on what was the least amount a family of four needed to have a decent standard of living. The average figure was an after-tax income of $27,612 or more than $15 per hour.(1) It is important to note that this figure assumes that all healthcare costs are paid out of pocket. To take account of employer-subsidized healthcare, this figure would need to be reduced by several thousand dollars. It would then be approximately $1,000 more than the 130% of federal poverty guidelines figure (the figure determining eligibility for means-tested programs such as food stamps) discussed above.

The results of the Knoxville Living Wage Campaign survey are consistent with several studies using government figures and other "neutral" cost of living sources. For example, in 1998 Mike Knapp conducted an academic study of the cost of living in Knoxville and concluded that a family of four needed an after-tax income of $33,196 per year to enjoy a "decent" standard of living (again, assuming healthcare costs are paid out of pocket). And, also in 1998, the National Priorities Project concluded in its study of the cost of living for a family of four in Tennessee overall (and not just Knoxville) that a minimally decent standard of living required $23,460 (this figure is lower because it does not include childcare costs and is based on the cost of living in Tennessee and not Knoxville). These figures are also consistent with the results of studies in other comparable cities.(2)

The UT Council for a Living Wage has proposed a living wage of $9.50 per hour plus benefits, or $19,760 per year plus benefits. Assuming roughly $4,000 in healthcare costs covered by benefits, this comes to roughly $24,000 per year if healthcare costs were paid out of pocket. This is a conservative figure. It is less than the figure reached by both the Knoxville Living Wage Campaign's 1997-9 study and Mike Knapps's 1998 study of the cost of living for a family of four in Knoxville. It is roughly the same as the figure reached by the National Priorities Project's 1998 study of the cost of living for a family of four in Tennessee generally, a study that recognizes that Knoxville is among the most expensive places in Tennessee to live. While it is higher than that set by the living wage law enacted by Milwaukee, WI, it is substantially lower than that enacted by Kankakee County, IL.

No. In 1999, ReliaStar Financial Corporation determined that the cost of living in Knoxville is 97% of the national average for the cost of living in the top 125 cities in the United States. In 2000, ReliaStar found Knoxville's cost of living to be 94% of the same national average. In both cases, the cost of living in Knoxville was the same as the cost of living in Nashville and higher than the cost of living in Memphis. The idea that it is substantially cheaper to live in Knoxville than elsewhere is based on misleading comparisons with unusually expensive cities in which to live.

Yes. Living wage laws or policies are necessary to insure that government employers and those contracting with them pay wages sufficient for employees to live and raise their families with dignity and without public assistance. This is actually to the advantage of the taxpayer. Employees that do not earn a living wage ultimately demand and receive public assistance more costly than the cost of providing them a living wage in the first instance. The case for a living wage is especially strong with respect to businesses profiting from contracts with government agencies or from economic development subsidies. Allowing such businesses to externalize some of their labor costs to society generally by paying less than a living wage is tantamount to allowing them to "double-dip" in the public till. This is one example of what is meant by the phrase "corporate welfare." In the end, living wage ordinances and policies simply insure that the power of the government, our collective power as citizens, is not deployed or used by others in ways that create poverty. While reasonable persons can disagree over the proper roles of the state in a liberal democracy, no one can reasonably argue that creating the poor is among those roles.

Living wage ordinances and policies are also necessary to put upward pressure on wages for the bottom ten or twenty percent of wage-earners generally within the entire community. A UT living wage policy will undoubtedly bring about higher wages for all those earning the lowest wages in Knoxville. This is especially important for both moral and economic development reasons.

Consider, first, one of the moral reasons for adopting a living wage policy. The University of Tennessee is under an obligation to demonstrate moral leadership within Knoxville, Tennessee, the United States and the world. State institutions of higher learning in the U.S. are not-for-profit organizations chartered to do more than create successive generations of competitive employees for the now-international labor market and provide research support for private for-profit corporations. They are chartered to educate citizens into the full range of capacities, values and dispositions necessary to effective citizenship in a liberal democracy. Consequently, they must teach students, both through words and action, how to identify and remedy injustice. The current debate over a living wage policy at UT constitutes for the institution as a whole a "a teachable moment." The UT administration ought to seize this moment by engaging the debate seriously and sincerely and moving forward with a living wage policy.

Now, consider the economic development reasons for adopting a living wage policy at UT. UT is under an obligation to advance the cause of healthy economic development, both within the Knoxville metropolitan area as well as Tennessee and the mid-South region more generally. Indeed, President Gilley has formally committed UT to this goal. A living wage policy would substantially advance the cause of healthy economic development in Knoxville and the surrounding area. Those who earn incomes in the range of a living wage spend most of their money locally. Because of the well-known multiplier effect, and because so much state and local revenue is generated through a sales tax, a living wage policy at UT will contribute substantially to improving the local economy and standard of living.

An economy is unjust unless it is at a minimum mutually advantageous to all classes of participants over time. An economy not mutually advantageous to all classes of participants over time is one that must in one way or another coerce participation from those classes not advantaged through participation. There is no doubt that the economy of Knoxville, of Tennessee, and of the United States has been unjust for roughly twenty years now. From 1979 to 1998 the real income of the bottom 10% of all wage earners in the U.S. actually fell by nearly 11%. Moreover, the overall percentage of workers earning poverty level wages actually rose from 24% in 1979 to 29% in 1998. While there has been some softening of this trend from 1998 to 2000, the fact is that the bottom 10% of all wage earners continues to actually be harmed by participation in the economy. In contrast and over the same period from 1979-1998, the after-tax family income of the top 20% rose by 43%. The top 1% saw after-tax family income rise 115%. Our economy has not been and still is not "a rising tide that lifts the boats" of all classes over time. Between 1990 and 1998, the wages of top corporate executives rose by 443%, while the wages of hourly workers rose only 22.5%, not enough even to offset the 28% inflation for the period. Regardless of local conditions at UT or in Knoxville, living wage ordinances and policies are generally necessary across the U.S. if we are to reverse this trend and secure an economy mutually advantageous to all classes of participants.

Whether justice demands an economy that keeps income and wealth inequalities within some limit is a matter about which well-informed persons may reasonably disagree. But most everyone agrees that the greater the inequalities of income and wealth in a society, the greater the tendencies to instability and the greater the difficulties in sustaining anything like a genuinely democratic political process. As is well-known, income and wealth inequalities in Knoxville, Tennessee, the U.S., and the world generally are and have been for some time on the rise, as have income inequalities within the UT community. Living wage ordinances and policies are necessary to slow this tendency, if not reverse it.

The costs of living wage ordinances and policies are generally absorbed by the employer and offset by reduced training and recruitment costs. Costs not so offset, of course, are either passed on to consumers or offset by reduced profits. The costs of a UT living wage policy would be partially offset by reduced training and recruitment costs. However, some of the cost would either have to be passed on to students in the form of higher fees or absorbed elsewhere in the UT budget. Of course, it is worth remembering that over time a UT living wage policy would have a positive impact on sales tax revenue in Knoxville and east Tennessee more generally. Given UT's dependence on revenue generated from the state sales tax, a UT living wage policy would likely generate over time some of the revenue it requires. It is also worth remembering that the choice UT faces is not between absorbing the cost of a living wage policy or not. It is between absorbing the cost of a living wage policy or absorbing the cost of no living wage policy. The latter cost is undeniably far larger than is generally acknowledged.

No. Since the early 1990's more than 50 municipalities and counties have adopted living wage ordinances. From Boston and Baltimore, Chicago and Cleveland, Duluth and DesMoines, Denver and Detroit, Milwaukee and Minneapolis, and New Haven and New York to Pasadena and Portland, San Antonio and San Diego, and Toledo and Tucson, Living Wage Ordinances are on the books and widely supported. Living Wage Campaigns are underway today in more than thirty additional cities across the country, from Birmingham and Little Rock to Richmond and Racine. There is now a national movement for a federal living wage policy for employees of and contractors with the federal government.

Yes. Johns Hopkins recently adopted a living wage policy covering all workers in the Johns Hopkins Health System, setting the minimum wage at $7.75 per hour. And Johns Hopkins is working toward a living wage policy covering all University employees. Living wage policies are also either now being adopted or likely to be adopted in the very near future at Harvard University, the University of Virginia, Brown University, Stanford University, Earlham College, Fairfield (CT) University, American University, Princeton, Agnes Scott College (GA), Wesleyan and Swarthmore.

Economic Policy Institute: www.epinet.org
Acorn Living Wage Campaign: www.livingwagecampaign.org
Journalists Covering Inequality: www.inequality.org
Center on Budget and Policy Priorities: www.cbpp.org
United for a Fair Economy: www.ufenet.org

1. This figure was arrived at by adding the following: a) Shelter and Utilities: $7,680 ($640/mo.); b) Food: $4,920 ($410/mo.); Transportation: $4,104 ($342/mo.); Clothing and Household Goods: $2,052 ($171/mo.); Healthcare: $4,020 ($335/mo.); and Childcare: $4,944 ($412/mo.).
   
   
2. For example, a 1996 study concluded that in Kansas City the cost of living for a family of four was $26,028 to enjoy a decent standard of living. A 1999 study of Memphis set the figure at $31,220. A 1995 study of Minneapolis set the figure at $34,865.