Bevin must consider high cost of low wages

Carolyn Dupont
Carolyn Dupont

The Kentucky General Assembly recently passed several “emergency” measures that will surely lower wages for Kentucky workers.

One of these, known as a “right to work” law, prohibits the requiring of union membership as a condition of employment. The other repealed the prevailing wage provision that helps keep construction wages strong.

Gov. Matt Bevin praised them as measures that “will be transformative in the way Kentucky competes economically.” But his assertions display more a devotion to a damaging ideology, rather than a commitment to fact or broad economic understanding about the ways low wages hurt all Kentuckians. Bevin and his cohorts maintain that low wages attract businesses, which want to maximize profits by paying as little for labor as possible.

Let’s look at his evidence.

Bevin cites the creation of 20,000 more jobs last year in right-to-work Tennessee than in Kentucky. Frankly, that’s a breathtaking misrepresentation. Tennessee has a population 50 percent greater than Kentucky’s. Kentucky has come closer to recovering jobs lost in the recession of 2007 than any of its right-to-work neighbors, according the Kentucky Center for Economic Policy.

In a recent ranking of all 50 states’ economies, six of the bottom 10 were right-to-work states.

Consider how low wages hurt the economy. A healthy economy needs consumers. But the working poor can barely afford to meet the basic financial obligations of life: housing, food and utilities.

They have nothing left to contribute to the cycle of production and consumption that characterizes a thriving economy. The shuttered downtown buildings in many Kentucky communities bear witness to the impact of local incomes already insufficient to support small businesses.

Bevin cites a savings to taxpayers, through repealing the prevailing wage on public projects, of as much as $136.8 million. Perhaps, but that savings comes with other costs he ignores. It amounts to a little more than $1 million, on average, in each of Kentucky’s 120 counties. That is $1 million in lost wages to hard-working Kentuckians.

The loss will hurt not just those families, but larger communities as well. How many of our counties, already desperately in need of economic stimulus, can afford to lose another $1 million in purchases of restaurant meals, clothes or family outings? And this raw economic cost doesn’t include the price in human denigration.

But the high cost of low wages multiplies much further. What taxpayers save in workers’ wages, they may spend on assistance programs. The working poor often require assistance in the form of food stamps and other aid; the medical bills they incur but cannot pay drive up the price of health care for everyone else.

Furthermore, when corporations and manufacturers pay low wages, they effectively ask the rest of us to shoulder their obligations to their workers. Taxpayer dollars should fund roads, schools and local law enforcement — not subsidize that profits of corporate America.

Also, low wages hurt public education. Studies demonstrate conclusively that children raised in poverty start with huge disadvantages in school. ACT and SAT scores correlate more consistently with parental income than any other factor. America’s high poverty rates lie at the core of its poor educational showing against other developed countries.

Bevin could take a lesson in job creation from the work of former Kentucky governor Martha Layne Collins.

Collins lured a Toyota assembly plant to Scott County in 1985. One of the state’s biggest economic boons of the last 30 years, Toyota has created thousands of good-paying jobs, generated increased revenue for the state, enticed 100 more Japanese-owned companies here, and returned 35 percent on the initial investment.

Collins’ enormous accomplishment required substantial hard work by her administration. It did not rely on a magic-bullet economic theory that hurts ordinary workers. Unfortunately, too many of us accept the ideology that low wages and poverty are a necessary — even American — fact of life.

It’s an ideology with little evidence to support it. But it does serve the powerful while hurting everyone else. Don’t be fooled.

Carolyn Dupont is associate professor of history at Eastern Kentucky University and author of “Mississippi Praying: Southern White Evangelicals and the Civil Rights Movement, 1945-1975,” (NYU Press, 2013).

At issue: Commentary by Gov. Matt Bevin, “New laws will help transform Kentucky