Buffalo News, April 18, 2010, Sunday

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Buffalo News (New York)

April 18, 2010, Sunday

Feasibility divides 'living wage' debate; Agency says Canal Side cannot afford to impose rule; proponents say it cannot afford not to

BYLINE: By George Pyle - NEWS BUSINESS REPORTER


"It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed, and lodged." -- Adam Smith, The Wealth of Nations, 17762

Maybe it is fair that those who do the work of society can be expected to be paid enough that they can enjoy its benefits. But is it always feasible?

The father of modern economics, after all, had never been to Buffalo.

People overseeing the development of Canal Side -- the $294 million project to turn the city's forlorn waterfront into a retail and entertainment powerhouse -- say that Buffalo cannot afford a rule that would require Bass Pro Shops and the other businesses that will locate there to pay their workers a "living wage," well above the legal minimum wage and the going rate for such positions.

"We're not prepared to enter into a living wage agreement," said Jordan Levy, chairman of the Erie Canal Harbor Development Corp. "It's hard enough to get development in Buffalo."

Though the agency's own environmental impact statement says that one of the project's goals is to "create locally owned retail businesses with living wage jobs," Levy said the bulk of the project, with retail stores, restaurants and taverns, is not a high-wage kind of development.

But those favoring such a requirement say Buffalo cannot afford much more in the way of development that does not pay at such a rate. And they argue that the higher wage, topping $10 an hour, is economically beneficial for the employers who would pay it and for the taxpayers of the larger community who are sinking so much into the project.

"Buffalo is exactly the kind of city that should have living wage agreements," said Sam Magavern, co-director of the Partnership for the Public Good, a group that advocates for development policies that directly improve the lives of working people. "Jobs that pay poverty wages are not real economic development."

The Buffalo Common Council agrees. It recently passed a resolution calling for the taxpayer subsidies that will cover half the cost of the project, including $35 million to build a showcase store that Bass Pro will then lease for $1 a year, to be accompanied by a Community Benefit Agreement.

In addition to set-asides for locally owned businesses and green-building standards, that agreement would include, a living wage requirement for Canal Side tenants that employ more than 20 workers.

Magavern said that economists do not widely support the idea of using taxpayer subsidies to fund retail develop-ments. Unlike funding that may go to support a major manufacturer, creating jobs and bringing more economic activity to a community, subsidies for retail projects merely shift shoppers from one part of town to another.

"These aren't new jobs," Magavern said. "It's just a different way of slicing and dicing the retail piece of the econ-omy."

And if the jobs created by public subsidies aren't new, he argues, they ought to be better. Without a living wage standard, or some other approach to boost the wages paid in such a subsidized development, Magavern said that tax-payers of all income levels will find themselves paying for the privilege of having wages driven down by out-of-town companies that drain most of their profits away from the cities where their customers live.

Lou Jean Fleron, the partnership's other co-director and emeritus professor at Cornell University's Industrial Labor Relations School, says businesses that look at living wages only as a higher cost aren't seeing the total picture. Experience in other communities, she said, shows that better wages buy better employees.

Meeting a living wage standard, she said, pays businesses back because they save money in reduced turnover, training costs, absenteeism, even employee theft. And, she said, employees who are paid enough to live on put less stress on taxpayer-funded support systems such as Medicaid, welfare and child care subsidies.

Or, quoting Adam Smith again, "Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious than where they are low."

Levy isn't convinced.

"Anybody can say anything they want," he said. "We don't need impediments to development. We need things that encourage development. Something like this (a living wage) will tell the development community that we're not open for business."

Bass Pro spokesman Larry Whiteley said the company would have no comment on the matter.

Modern academics are on both sides of the issue.

Reports cited by the Partnership for the Public Good include those done at the University of California and Univer-sity of Massachusetts, as well as by Policy Matters Ohio, an independent research organization that has studied living wage agreements and laws across the country. Living wage advocates say all show that paying a higher wage boosts the business paying it and the community in which it operates.

"There are well over 100 cities and local governments with a living wage agreement," said Zach Schiller, research director for Policy Matters Ohio. "By and large, we found that there was hardly any negative effect."

On the other side of the argument, University of Kentucky economist Aaron Yelowitz has examined living wage laws in cities from the Rust Belt to the Sun Belt and finds, as Levy contends, that they discourage business development. And, Yelowitz writes, they also hurt the very working people they are supposed to help by reducing the number of jobs created and the hours individual workers are offered.

Further, Yelowitz argues, higher wages paid to workers at the bottom of the income ladder actually wind up de-creasing their total wealth, as higher pay means an increased tax bill and reduced eligibility for taxpayer-supported ser-vices.

In a paper published in 2005 by the Employment Policies Institute, a business group that opposes living wage rules as well as increases in minimum wages, Yelowitz examined the results of a living wage requirement passed in Santa Fe, N.M., one of the few that applied to every worker in a city rather than only those in subsidized developments or for businesses that sell products or services to the local government. He found that it actually harmed workers, especially those with the least to offer in terms of skills and experience.

"Citizens should understand that there is no free lunch with living wages," Yelowitz wrote.

"They cause unemployment."
e-mail: gpyle@buffnews.com


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