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The Living Wage, Economic Efficiency, and Socio-Economic Wellbeing in a Competitive Market Economy


  • Morris Altman


Conventional economic wisdom views a Living Wage as costly in term of economic efficiency and competitiveness. I argue, based on x-efficiency theory, that higher wages need not cause any economic harm and can, on the contrary, generate higher levels of material wellbeing. Higher wages can be expected to induce x-efficiency and technological change cost offsets. In this context, an effective living wage, one that is above some subsistence minimum, can have a net efficiency effect on the economy. Therefore, a living wage greater than the wage rate generated by the free market cannot be predicted to generate economic harm. With the institutional parameters in place to realize a living wage, the economic pie can be expected to grow to accommodate the living wage.

Suggested Citation

  • Morris Altman, 2012. "The Living Wage, Economic Efficiency, and Socio-Economic Wellbeing in a Competitive Market Economy," Forum for Social Economics, Taylor & Francis Journals, vol. 41(2-3), pages 166-186, July.
  • Handle: RePEc:taf:fosoec:v:41:y:2012:i:2-3:p:166-186
    DOI: 10.1007/s12143-011-9095-8

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