How Living Wage Laws Affect Low-Wage Workers and Low-Income Families

Library of Congress Cataloging-in-Publication Data Neumark, David. How living wage laws affect low-wage workers and low-income families / David Neumark. p. cm. Includes bibliographical references. Research publications reflect the views of the authors and do not necessarily reflect the views of the staff, officers, or Board of Directors of the Public Policy Institute of California. Short sections of text, not to exceed three paragraphs, may be quoted without written permission provided that full attribution is given to the source and the above copyright notice is included. iii Foreword America's cities have traditionally pursued new development by providing a variety of economic incentives or subsidies to developers, investors, and landowners. Proponents of these subsidies argue that jobs and taxes stemming from the new growth more than compensate for the subsidy. However, in recent years, some city officials (influenced by labor and community organizations) have moved beyond the subject of job growth and have expressed concern about the adequacy of wages for those already employed. The challenges facing a working-poor family in urban America are well documented, including housing availability and costs, health care, child care, and transportation. Thus, the concern in many cases has begun to focus on the quality of life among those at the lower end of the income distribution rather than on creating more jobs. National and state minimum wage laws are often viewed as too modest in their compensation, and thus various voices have called for a " living wage " that reflects the reality of living and working in today's urban centers. In this study, Professor David Neumark, a visiting fellow at PPIC in 2001, takes a close look at living wage ordinances across the United States, assessing their effects on wage and employment levels of the urban poor and on urban poverty. Nationwide, some 40 cities and a number of other jurisdictions have passed living wage ordinances. These ordinances mandate that certain businesses, generally those under contract with the city, pay employees a wage high enough to lift their families out of poverty. Indeed, among the cities studied, Neumark finds that living wages have a substantial effect on the wages of workers at the bottom of the scale—and the broader the scope of coverage, the more likely lower-wage workers will be positively affected. However, as we might expect, he finds a tradeoff between wages and employment. Although living wage laws raise the wages of the …