Labor Standards and Local Economic Development— Do Living Wage Provisions Harm Economic Growth?

In times of economic crisis, state and local governments increasingly turn to economic development incentive programs to jumpstart job growth. However, recent efforts to attach minimum labor standards to incentives are seen as a threat to traditional practice. Critics of such “business assistance living wage” laws assert that they may reduce employment or redevelopment activity. This paper measures the actual impact of living wage laws using a time-series analysis of employment and business establishment trends in large US cities that have enacted such laws and finds no evidence that ordinances that mandate stronger labor standards affect aggregate economic development outcomes. Acknowledgements: The author is grateful to Ken Jacobs, David Madland, Karla Walter, Arindrajit Dube, Michael Reich, Daniel Hartley, Nichola Lowe, and Eric Lester for critical comments and substantive suggestions. Julia Dupree Watson and Jason Kajer performed essential research assistance as graduate students at UC Berkeley and UNC respectively.