All Rights Reserved. Concerns about maintaining wage scales may lead employers to raise the wages of workers earning slightly above the new mandated wage. The Preamble study quotes one manager as saying workers seem happy [and] they come to work on time because they know that at $6.10 [in 1995] per hour, somebody else wants the job if they dont. Furth Washington, D.C.: Preamble Center for Public Policy. In numerous cities, low-wage urban residents have responded very positively to these campaigns, apparently viewing them as an opportunity to take action against negative trends that directly affect their living standards. A study of the Los Angeles ordinance found that absenteeism declined, and the decrease in turnover offset 16% of the total cost of the living wage ordinance. High impact refers to firms where the direct increase in wage costs under the Quality Standards Program is 10% or higher. The plan to help them has backfired. As the director of Bostons Living Wage Division said, We also have not seen increased costs to maintain city contracts. Thus, by redirecting the benefits to those in need by a means that is more tax advantaged than wages, the local government ends up paying less for the same gain to workers. There are similar pressures on firms that provide wage increases to maintain differentials based on employee tenure. Living Wage 1st Session H. R. 122 To amend the Fair Labor Standards Act to provide for the calculation of the minimum wage based on the Federal poverty threshold for a family of 4, as determined by the Bureau of the Census. 2004. They give the example of Multnomah County, Oregon, where consolidating janitorial services at the Department of Corrections, courthouse, and county jail into a single contract saved the county money and may also have improved the firms approval rating and turnover rate. Despite a recession-induced decline in airport activity by early 2001, SFO employment in jobs covered by the QSP rose by more than 15% between 1998 and 2001the period in which the QSP was implemented (Reich 2005, 129). The LAANE study approached this question by comparing those employees hired before the ordinance was implemented and those hired after. Other questions referring to living wage in the B Impact Assessment 5. A good example is the living wage law passed in the city of Baltimore in 1994. [ If Living Wage Employers Guide - NationBuilder Neumark and Adams conduct interviews with municipal government administrators responsible for implementing the business assistance provisions of the living wage ordinance and reach a different conclusion than Brenner et al., finding that many cities are in fact implementing the provisions to some extent (Neumark and Adams 2005c, 19-20). The number of workers benefiting from spillover increases is substantial, accounting for one-fifth of all workers benefiting from the ordinance, and is one-fourth the size of the group getting mandatory raises. A study of home-care workers in San Francisco found that turnover fell by 57% following implementation of a living wage policy. In most of these cases, it is clear that the reason costs were absorbed by employers was the presence or introduction of competitive bidding (Sander and Lokey 1998, 8). Economic Policy Institute The Los Angeles Alliance for a New Economy conducted a survey in 2002 of 320 randomly selected workers who benefited from the Los Angeles living wage ordinance. er anecdotal evidence of decreased turnover following living wage ordinances is reported in Elmores survey of cities. As she explains: In some places, implementation seems to simply fall through the cracks: there is no single person in charge and no one who knows much about the ordinance. Sander and Lokey did indicate, however, that by late 1998 most implementation issues were improving. Perhaps because of the clearer connection to the costs of increased wage floors, this practice appears to make it easier for firms to pass on the costs to the city. Tanner, Jane. As suggested by Brenner, this area should be more thoroughly addressed by future research on living wage laws. Prospective studies produced by living wage opponents (e.g., Tolley 1999) have predicted massive costs that have not been reflected by the actual experience of cities. 19. THIS PIECE ORIGINALLY APPEARED IN THE SPRING 1999 COMMUNITY ACTION DIGEST. Howes, Candace. The living wage ordinance has been good for Boston.. The Los Angeles Living Wage: The First Eighteen Months. Multiple studies of Baltimore, Boston, Los Angeles, and San Francisco have shown that firms enjoy lower turnover among employees as a result of the living wage ordinance. In the study of the San Francisco airport, Reich also reports some basic demographic characteristics of affected workers. Phone: 202-775-8810 epi@epi.org Fairness in the workplace with a living wage | Unilever Reich, Michael, Peter Hall, and Ken Jacobs. The impacts of living wage policies: introduction to the special issue. A frequently expressed concern about living wage ordinances is that the increased cost might decrease employment opportunities for low-skilled workers by causing employers to hire fewer workers or even lay off employees. This may be a profitable strategy in the short-run, but it will ultimately serve to corrode some of our most valuable resources. Cleveland, Ohio: Policy Matters Ohio. 29. Some of those who argue against living wages are simply ideologues who oppose any mandates on the private sector. These increases are less than what many municipal governments had expected when they were preparing cost projections in anticipation of law changes, and much smaller than what was predicted by opponents of living wage laws. 30. Industrial Relations. If contract prices do increase, the municipal government will be faced with cutting services, raising taxes to pay for the higher costs, finding ways to become more productive, or some combination of the three. Amherst, Mass. Living Wage critique. Two studies of San Francisco living wage policies found employment increased among airport workers and home health care workers. The Quarterly Journal of Economics. See related work on Income and wages | Wages, Incomes, and Wealth, See more work by Jeff Chapman and Jeff Thompson. Living wages and retention of homecare workers in San Francisco. Berkeley, Calif.: Institute of Industrial Relations. Their average income, adjusted for inflation, is 11% lower than it was in 1979, and, at $14,900 in 1997, was about $1,300 below that years poverty line for a two-parent family with two children. Their econometric analysis shows that, on average, metropolitan areas with business assistance provisions tended to have more negative employment outcomes and more positive wage outcomes than other cities during the time studies. What can we do to combat these trends? An estimated 1,850 workers who were already earning at or above the living wage level received indirect, or spillover raises. 2005, 95). (Luce 2005, 46). 12. The 12-month lagged effects are generally the most robust findings. In general, the evidence from enacted ordinances, as well as the more carefully prepared prospective studies, shows that the overall cost of contracts does not rise significantly. There has been no adverse financial impact on the city. In their 18-month review of the ordinance, Sander and Lokey considered the discipline process to be toothless, and one of several implementation problems limiting the effect of the ordinance (Sander and Lokey 1998, 4). In their survey of affected workers, Niedt found that most reported an improved attitude toward their job, including a greater sense of worth of the job and an intention to stay on the job longer (Niedt 1999, 2). 3. These responses could offset at least some of the increased labor costs experienced by employers. In their study of the Los Angeles living wage ordinance, Sander and Lokey found that enforcement, compliance, and discipline were all problems. Time to Repair the Wage Floor: Raising the Minimum Wage to $6.65 Will Prevent Further Erosion of Its Value. Based on extensive interviews with city administrators, living wage advocates, and review of newspaper reporting on living wage laws, Luce considers more than half of all living wage ordinances to have been only narrowly implemented25 (Luce 2005, 45). These estimates are influenced by the degree of reduction induced by living wage ordinances and the cost of employee turnover at the affected firms. WebEnsuring a living wage is an accelerator for achieving the SDGs. Brenners study documents that while approximately 1,000 workers received wage gains, there was no evidence of reduced employment or hours.15 These possibilities have received less attention in the research literature than other possible employer responses to living wage ordinances. 1225 Eye St. NW, Suite 600 Also concerning Baltimore, the Preamble study no Fairris, David, David Runstein, Carolina Briones, and Jessica Goodheart. The next section provides some evidence on these matters from existing living wage ordinances. Living wage movement: do laws requiring higher wages cause unemplo We estimate that such a targeted wage subsidy could deliver the same benefits as a living wage mandate to workers in genuine financial need at 35 to 60 percent of the budgetary cost of the wage mandate. In 1996, one year after the implementation of the first modern living wage ordinance in Baltimore, the Preamble Center for Public Policy published a study reviewing the fiscal costs of the ordinance. 2000. Whats more, despite their claims to the contrary, employers and contractors will not flee the minute a new regulation is reduced. WebThe budgets estimate community-specific costs for 10 family types (one or two adults with zero to four children) in all counties and metro areas in the United States. WebBACKGROUND Poverty in Ottawa is an unfortunate fact of life - according to the 2006 Census, 121,200 individuals in Ottawa (15.2% of the population) live below Statistics Canada's Low Income Cut-Offs (LICO) for a city the size of Ottawa (i.e. Economic Analysis of a Living Wage Ordinance. They also found that contracts already paying above the living wage experienced a decrease in the number of bids. As such, the City has established a Elmore, Andrew J. Living wages can help begin to reverse this destructive policy development. You could probably get every factory and sports team in the world to move to your town if you cut them every tax and environmental break available. But opponents of the policy also include employers who genuinely fear that the mandated wage increase will hurt their ability to compete in the marketplace; similarly, city officials worry that if there is a wage ordinance in their city, businesses considering relocation will simply look elsewhere, at the cost of local employment opportunities. Armonk, NY: M.E. Early discussions of spillover effects in the living wage debate were primarily speculative, based primarily on educated guesswork and application of rules-of-thumb gleaned from the limited work on this issue in the minimum wage literature. Columns (2) and (3) report the results for the restricted sample (79 cities), and then with city-specific trends. demonstrate that this decline in airport traffic, which was also experienced by airports around the world, was due to a general decline in economic activity, and then to the events of September 11, 2001. For example, when Boston enacted its living wage in 1999, the minimum wage was $5.25 per hour and the new living wage started at $8.23 per hour. One security guard contractor remarked, Most companies with any business sense would concentrate on a higher wage niche, because there is more stability involved, and it gives you better control of the business, and allows you to preserve your reputation. Similar sentiments were expressed in New Haven, where that citys comptroller noted that the living wage puts all vendors on equal footing [and] it has leveled off undercutting. Under the ordinance, competition for contracts is determined by more than which firms can drive wages down the lowest, and is influenced by other factors, such as service quality. 2, pp. The competitiveness of the market and the price elasticity of demand for the products in question influence the ability of producers (in this case, service contractors) to pass cost increases on to their consumers (in this case municipal governments). 2002. 2005. As Brenner notes in his study of the Boston ordinance, nonprofits may go to greater lengths to avoid layoffs in the face of labor cost increases from a mandated wage increase (Brenner and Luce 2005). But, while you might create some jobs, youre just as likely to ruin your community. They reasonably fear that if MoneyBags Enterprises is trying to decide where to build their next factory, stadium, etc., a living wage ordinance is not exactly a draw. 14. 2005. Such local initiatives cost less than contractor-based living wage ordinances and reach more families genuinely in need. This comparison does not even consider the additional wage subsidy benefits of avoiding the loss of jobs and loss of work opportunities. For example, affected firms added 22.1 FTE positions, while unaffected firms added 22.4.14 Also, the number of contract employees covered by the Boston ordinance increased more at firms that were forced to raise wages to comply than those that did not have to raise wages. Research Report No. Living wage policies, particularly the predominant contractor-only variety, are typically not place-based policies. A wide array of federal, state and local government programs to assist low-income families already exist. See related work on Wages, Incomes, and Wealth | Income and wages. The economic impact of greatest interest for most prospective studies, and policy makers as well, is jobs. The first evaluation, released in October of 1996 is by Mark Weisbrot and Michelle Sforza-Roderick: Baltimores Living Wage Law: An Analysis of the Fiscal and Economic Costs of Baltimore City Ordinance 442. 28. The majority of firms have not changed their hiring standards and reported seeing no changes in the composition of their workforce. Similarly, in Brenners survey of Boston firms, it was reported that the average per-employee cost of turnover was $9,297 and the median cost was $2,500. WebFamilies and individuals working in low-wage jobs make insufficient income to meet 12. Adams, Scott and David Neumark. As far as these studies could discern, the cost increase to the city after the living wage ordinance went into effect was less than the rate of inflation; Again, given data limitations, these studies found no evidence of job loss in response to the wage increases; There was a small decrease-concentrated among smaller firmsin the number of bids per contract after the ordinance went into effect; this small decline, however, did not appear to lower competitiveness or raise contract costs; Interviews and case studies with affected employers suggests some absorption of labor cost increases through efficiency gains, particularly lower turnover; While there is evidence that the ordinance raised wages for those at the bottom of the wage scale, the affected group appears to be small (less than 2,000); Given their low levels of hours worked, the income/poverty-reducing effect was also small; other benefits include some spillover increases to workers above the new wage floor. In their 1996 study, researchers from Preamble interviewed 31 contractors affected by the wage increase. Living Wage: Policy Solutions - Employment Policies While it is not possible to fully address all of the criticisms in this review, below is a brief summary. Under this law, firms under contract with the city had to pay those workers who were performing the duties under the contract an hourly wage of $6.10 in 1996, rising incrementally to $7.70 in 1999. In fact, the EmPI study does not present a new interpretation of what actually happened to the overall cost of contracts, possibly because their analysis did not yield significantly different results than Preambles.2. The Brenner, Wicks-Lim, and Polling figures are based on an assumption of 7,600 affected workers that was developed before the release of either the Fairris or LAANE studies. If few workers are covered and/or policies are not actually implemented or enforced, there is little reason to think that workers will gain. Since living wage beneficiaries cannot be identified directly in the CPS, they used a classification scheme that ends up including unreasonably large portions of the workforceover 85% of the lowest-paid one-fourth of workers in cities with living wage ordinances are classified as covered (Neumark 2002, 60). The term living wage refers to the minimum salary received by workers to cover their basic needs as well as those of their families. How Living Wage Laws Affect Low-Wage Workers and Low-Income Families. 5. Though living wage ordinances come in a variety of flavors, they all amount to the same thing: they force employers who receive contracts or tax benefits from the locality to pay their workers a wage rate a few bucks over the minimum. Program on Race, Ethnicity, and the Economy, Economic Analysis and Research Network (EARN), Program on Race, Ethnicity, and the Economy PREE, Economic Analysis and Research Network EARN. Tolley, George, Peter Bernstein, and Michael Lesage. Interactive tools and videos bringing clarity to the national dialogue on economic inequality. This essay will explore the debate around this relatively new movement. London Living Wage Sample Clauses These higher (though still modest) price increases could result from a range of factors, not least of which includes large concentrations of low-wage workers and a willingness of municipalities to pick up at least some of the increased wage bill of community-based nonprofit organizations. With the increasing availability of quality studies and data on the actual (as opposed to projected) effects of living wages, future prospective studies should be less speculative and instead be based on the findings of the highest quality empirical studies. What are Living Wage Ordinances? While some predictions of job losses resulting from living wage ordinances have been based on perfectly defensible, if not empirically supported reasoning, others are simply re-treads from different debates that are not actually relevant to living wage ordinances. The Minimum Wage, In Schafer and Faux (eds. Most of the study, produced by Michael Reich and colleagues at UC Berkeley, concerns the employment and other economic impacts of the QSP (which will be discussed in the next section), and addresses the issue of cost increases faced by airport consumers. 40, No. A typical family of four (two working adults, two children) needs to work nearly Baiman, Ron, Joseph Persky, and Nicholas Brunick. Although one quarter of firms reported greater employee work effort and one quarter similarly reported improved morale, there was no evidence that higher wages produced lower turnover or less absenteeism (Brenner 2005, 73-77). Thus far, the most reliable research on living wages suggests that the impact is modest. The Preamble study used data on city contracts and interviews with contractors and found that, in the first year under Baltimores living wage law, the real cost of city contracts actually decreased. WebLiving wage. Differences in the questionnaires for the two types of firms complicate the analysis, but Fairris reported significantly lower levels of turnover at affected firms. Working Paper No. To learn more about the movement or to get involved with a campaign, call them at 202-547-2500. If you believe these theoretical propositions, then you are likely to be troubled about mandated wage increases. So Who Could Object to That? However, EmPI inaccurately portrays the Preamble findings as a claim that the living wage ordinance actually caused contract costs to increase, despite the fact that Preamble states clearly in their study, We cannot, of course, conclude that the living wage ordinance actually contributed to lowering the cost of the average contract.. All of these mechanisms suggest ways that increased labor costs for firms are offset. 13. Following the implementation of the QSP, more than three-quarters of affected workers were 25 or older, and 86% were non-white13 (Reich 2005, 134). The modern living wage movement was born in Baltimore in 1994, when the city passed an ordinance requiring firms to pay employees a rate above the minimum wage while working on city contracts. Living Wage : Political Economy Research Institute. 2005. WebExamples of Living Wage Policy in a sentence. !function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs"); EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. Berkeley, Calif.: Bay Area Living Wage Research Group, Center on Pay and Inequality, Institute of Industrial Relations, University of California, Berkeley. Santa Monica Living Wage Study: Response to Peer Reviews and Business Critics. 2005). Why give to EPI Predictably, these few contracts were labor intensive operations that employed a large number of workers concentrated at low wages, notably janitorial and security guard services.4. It is different from the minimum wage, which is an amount set by law to ensure workers have enough income to ensure they are living above the poverty level. There are other cities in which the staff is incompetent, ineffective, or personally opposed to the ordinances. And if they can continue to make a profit by doing business with the city, they will stay. Even cities budgeting for a new living wage policy have systematically overestimated the ultimate cost of the policy. Staff There is actually an extensive literature in labor economics which examines the validity of these theories, and, at least as far as the labor market goes, finds them lacking. Reich addresses some of the difficulties associated with measuring turnover costs by combining survey information of affected firms with industry and academic research regarding turnover costs among low-wage workers. What if workers arent always paid what theyre worth, and what if employers-the buyers of labor services-respond differently to price increases than do shoppers buying bananas? Other workers in the firm are not subject to the living wage ordinance, even if they work at the same site. A study of living wage ordinances in three New England cities found that contract costs only rose in one city.