Tayer: Closing the economic security gap

With the 2020 presidential election cycle in full swing — if it ever ended after 2016 — we’re hearing a lot of promises to fix problems with simple solutions. We can end college debt by paying it all off (even for well-healed doctors and lawyers). We can provide medical coverage for everyone (although the costs and details are a tad fuzzy). And we can stop illegal immigration with a wall (no!).

I’m not passing judgment on the issues our presidential candidates are raising. However, while campaign platitudes promising simple solutions to complex challenges attract votes, it’s important to make sure we’re fixing the right problem with the right, well-designed, solution. So it is with an issue that attracted a great deal of attention during Boulder’s 2019 city council elections: the “living wage.”

First, some context. A few years ago, Colorado voted to raise its minimum wage. The Boulder Chamber was alone among chambers of commerce to support this initiative. We saw it as a matter of equity and economic justice. We also heeded the warnings of Federal Reserve Chair Janet Yellen who cited rising wage inequality and the inability to cover basic costs of living as threats to our nation’s economic stability.

At the same time, we recognize the impact a rising minimum wage — compounded by other increasing costs — can have on small businesses with typically thin margins. We’re also sensitive to the unique implications for certain industry sectors. Restaurants, for example, are forced to pay increased minimum wages for their servers (who are primarily compensated through tips), leaving fewer resources to adequately compensate the kitchen staff. Minimum wage increases for individual communities or regions also threaten economic competitiveness. Shoppers and diners can choose Longmont, Lafayette or Cherry Creek over Boulder, if the price is right.

These are good reasons, from a business viability and economic vitality perspective, for a greater degree of caution regarding new attempts to raise the minimum wage. Even more important, are we fixing the real problem?

Rather than addressing long-held income inequality concerns, some economists suggest it’s more urgent to tackle wealth distribution disparities. We can extend this metric even further into what I’ll call the “Economic Security Gap.” This metric encompasses income level concerns, but also includes broader measures of affordability that can prevent wealth accumulation.

In a recent Atlantic magazine article, Annie Lowery acknowledged that our economy appears more robust and found that wages have increased somewhat for lower-income workers. But she also identified a “Great Affordability Crisis”: High costs for expenses, such as housing, health care and childcare, put families at financial risk, unable to create personal wealth. Moreover, the highest price housing tends to be in areas of greatest employment opportunity, limiting access to those who are forced to live beyond the urban core.

The consequences of reduced affordability can be devastating. As Robert Friedman explains in his book, A Few Thousand Dollars: Sparking Prosperity for Everyone: “Assets—that is, wealth—are a central determinant of economic and social behavior, attitude and success, the bedrock. Economic futures are built on savings.” Friedman emphasizes that families can only accumulate assets when income exceeds basic expenses.

Wealth accumulation was also addressed in a recent presentation by Dr. Christopher Thornberg of Beacon Economics. Thornberg noted that incomes are rising along with improving employee benefits. His concern is the growing concentration of wealth in very few hands. Based on historic studies, this is the recipe for social unrest and political instability.

So, where does this leave us? It’s clear that we need to do more than simply raise minimum wages to promote economic security. We need to address affordability issues that prevent wealth accumulation. In Boulder, that means tackling the challenges associated with high housing costs, along with burdensome commute options, that are leaving our workforce further behind and expanding the Economic Security Gap.

The Boulder Chamber is taking on these challenges. Though our Boulder Together program, business leadership and collaboration with our community partners are creating more housing options and providing more affordable, and more convenient, commute options for our workforce. There certainly are other areas to address on the cost and income side of the equation. But, put simply, whether it’s the 2019 or 2020 election, there are no simple problems or simple solutions. Before we reflexively impose a new living wage, let’s make sure we’re fixing the right problem with the right solution. 

John Tayer is president and CEO of the Boulder Chamber of Commerce. He can be reached at 303-442-1044, ext 110 or john.tayer@boulderchamber.com.