What's So Bad About A Living Wage?

September 4th, 2000

Paying Above the Minimum Seems To Do More Good Than Harm

-Steven V. Brull, Business Week

Juana Zatarin lives in a one-bedroom apartment that rumbles whenever a jumbo jet lands at Los Angeles International Airport. But life is looking up for the 44-year-old mother of three, who works as a baggage screener at the airport. Thanks to Los Angeles’ so-called living-wage law, which requires city contractors to pay employees a minimum of $ 8.97 an hour, Zatarin’s salary has jumped nearly 50% in the past year. She will earn some $ 18,000 this year, putting her above the $ 17,028-a-year federal poverty line for a family of four for the first time in years. This summer, Zatarin took her family on vacation for the first time since 1994. ”I’m more relaxed now that I can make our payments,” she says.

While most mainstream economists would laud Zatarin’s good fortune, they typically disapprove of laws that require firms with municipal contracts to pay their workers enough to stay out of poverty. Ever since Baltimore passed the first such ordinance in 1994, economists have derided them as little better than the federal minimum-wage law, which many believe forces employers to ax jobs. Now that view is changing. A small but growing body of academic research suggests that living-wage laws do more good than harm. So far, they have imposed little, if any, cost to the 50 cities that have passed them, the studies find. And they have led to few job losses and have lifted many families out of poverty. ”I’m no longer ready to dismiss these policies out of hand,” says David Neumark, a Michigan State University economics professor — and prominent minimum-wage opponent — who recently published empirical research showing a positive overall impact of living-wage laws.

The fresh thinking is giving new ammunition to the living-wage movement, which has steadily gained momentum since its initial Baltimore success (table). Advocates, mostly grassroots religious and labor groups, are pushing for new laws in more than 70 cities and a dozen states. The success of living-wage ordinances also may spur efforts to lift the federal minimum wage, since the laws show little adverse job impact even from pay levels of up to $ 10.75 an hour in San Jose, vs. the federal minimum of $ 5.15. NO LOSS. The new research shows that living-wage laws don’t cause many job losses because employers learn to live with them by trimming profit margins and finding efficiency gains from improved morale and lower turnover. Unlike the federal minimum, which covers most workers, living-wage ordinances apply only to employees of companies with city contracts. Studies of Baltimore, Los Angeles, and Detroit found no evidence of job losses.

Neumark’s research, which compares 12 cities with living-wage laws to a control group of cities without them, finds minimal job losses, which are more than compensated for by significant income gains among the lowest-paid workers. Even higher taxes aren’t a necessary outcome. In Baltimore, city contracts have risen less than inflation, at 1% to 2% a year — mostly because contractor profit margins declined, according to a study by the Economic Policy Institute, a Washington think tank.

The findings are analogous to a new perspective on minimum wages that emerged in the mid-1990s. Back then, several economists challenged conventional thinking with studies that found little or no job loss from higher minimum-wage levels, at least in a growing economy like the U.S. is enjoying today. However, since 1997, continued opposition from small business and congressional Republicans has blocked increases in the federal minimum, which is now 40% below the federal poverty line.

Although the economic debates about living and minimum wages aren’t exactly the same, the success of the former may boost efforts to lift the federal minimum. Already, Representative Luis V. Gutierrez (D-Ill.) has introduced a living-wage bill for federal service contracts. ”During a period of prosperity, when people are sleeping in cars after working a full day, paying a living wage is a basic matter of fairness,” asserts Jen Kern, a director at the Association of Community Organizations for Reform Now (ACORN), a Washington advocacy group.

Opponents disagree. Business groups argue that a living wage would be more expensive in a down economy and more disruptive if applied nationally, or even to workers not employed by city contractors. For example, the Santa Monica Chamber of Commerce argues that a proposed $ 10.69-an-hour living wage, which would apply to all companies in the city’s coastal tourist zone, would force local businesses to close. Still, those arguments may carry less clout now that so many other cities have passed living-wage laws — and escaped the dire consequences.

FAIR USE NOTICE: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

This entry was posted in Articles by Year: 2005 & Older, Living Wages. Bookmark the permalink.

2021 CWP Newsletter Summary

December 15th, 2021

There is a big debate among economists about a curious phenomenon unfolding right now called “The Great Resignation”. We have an immense labor shortage because people are not returning to work as the experts expected (common after a recession). There … Continue reading

2021 Center Update: Ring the Bell of Hope… Again, and Again

December 15th, 2021

This fall, in one of my first trips to visit my coworkers from the Ayni Institute in Boston, I stopped by New York City to visit one of my closest friends, Eric Stoner. And I was sitting on his couch, … Continue reading

2021 House Journal

December 15th, 2021

The Center for the Working Poor was founded in 2006, but we didn’t move into our large Victorian house until 2007. Therefore, we have been in the house for 14 years now; and throughout this time, only Paul Engler has … Continue reading

The Story of Community Counseling

December 15th, 2021

Over the last year, we have started beta groups for a new model of mutual aid counseling, called Community Counseling that has engaged dozens in weekly small group counseling practice and training. In November, I went to Boston to lead … Continue reading

2020 Center Update: Surrender and Become Attentive

December 17th, 2020

“To everything there is a season, A time for every purpose under heaven: A time to be born, And a time to die …” — Ecclesiastes 3:1 “Surrender to what is dying, and become attentive to what is emerging.”  — … Continue reading

Monasticism, Indigenous Cultures, Burning Man, and/or Kingdom of God?: My trip to Taize.

December 27th, 2019

After being invited to Barcelona, Spain this fall for a chaotic tour of book talks, TV appearances, and radio interviews, I needed a place to recover from all the activity. And one of the greatest realizations of my life has … Continue reading

Are We Cells in a Mystical Body? Center Update 2018

December 24th, 2018

As many of you know, I am a social justice geek. I compulsively read and think about social movements, and have been doing this for a long time, and am now considered a specialist in the field commonly referred to … Continue reading


January 18th, 2018

The election of Trump was like somebody threw a political bomb into the middle of a crowded room. For undocumented people, it meant fear of losing DACA and being deported. For labor unions and the working poor, it meant losing … Continue reading