A living wage: good for workers and their cities

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January 2004

A living wage: good for workers and their cities
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A living wage: good for workers and their cities
When local union and community activists launch campaigns for municipal living wage ordinances, critics often predicts taxpayer costs will rise and business—and their jobs—will flee. A new study suggests these fears are unfounded.

Living Wage Laws & Communities: Smarter Economic Development, Lower Than Expected Cost, a report from the Brennan Center for Justice at New York University School of Law, finds that for most cities, contract costs rose less than 0.1 percent after living wage ordinances passed. But not only were living wage laws affordable to most communities, according to the report, such laws often reinforced smarter economic development strategies focused on creating higher-quality jobs.

"While our opponents continue to make the same unfounded anti-living wage arguments year after year, this report goes right to the source and proves what we’ve known all along: Living wage laws are a good investment for cities, boosting incomes for low-wage workers without busting city budgets or hurting business," says Maude Hurd, national president of ACORN, a network of community groups active in living wage campaigns across the country.

Since 1994, more than 100 cities and counties have passed living wage laws, which generally require employers receiving municipal contracts or business subsidies to pay workers wages above the poverty level adjusted to local economic conditions.

The report found that:

• For most cities, contract costs increased by less than 0.1percent of the overall local budget in the years after a living wage law was adopted.

• Generally, in each city a few contracts involving large numbers of low-wage workers—for example, contracts for janitorial or security guard services—increased substantially in price. For these few contracts, the contracting businesses submitted higher bids, or negotiated for higher prices, to perform the city work once the living wage requirement took effect. But the officials interviewed found that most contracts increased little, if any, in cost. In many cases, contracting employers were reported to have absorbed much or all of the additional labor costs without demanding increased funds from the cities.

• Living wage requirements encouraged some local governments to institute competitive bidding for contracts that had not been put out for bid in many years, reportedly yielding savings for the cities.

• In localities that extended living wage requirements to human services such as home healthcare or child care services, cost increases were slightly larger—ranging from 0.3 percent to 2.79 percent of local human services budgets—although still quite moderate overall. These increased costs reflect both the high concentrations of low wages among city-contracted caregivers, and the fact that cities have sometimes agreed to automatically pay for some or all of the increased wage costs for such contracts because of the vital nature of human services and the budgetary constraints faced by the non-profit agencies that often provide these services.

For city business subsidy programs, local officials reported that they could still attract desired business development, and that living wage laws often reinforced smarter economic development focused on creating higher quality jobs.

• Local officials reported that only in a very few instances did living wage requirements that applied to business subsidy programs limit their ability to attract desirable employers to their communities.

• Many business subsidy programs already emphasized attracting higher-wage jobs, so living wage laws effectively formalized and reinforced existing practices.

• Some local officials reported that a living wage requirement increased public support for their business subsidy programs by assuring taxpayers that public funds would be spent to attract only high wage jobs.

• Relatively few local officials reported using their business subsidy programs to attract jobs in low-wage sectors such as retail, since such jobs are less beneficial to local residents and the economy than higher paying jobs. The few that did use subsidies to attract retail jobs reported that they were still generally able to attract such employers, although some cities renegotiated subsidy packages or chose to exempt some businesses from the living wage requirement.

For more information:
Working for a living wage (SOTE November 2003)
Clean up on aisle five (U.S. Catholic January 2004)

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