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Research on the Impact of Living
Wage Laws
More than 140 local governments
have passed living wage laws since the
first ordinance was
passed in Baltimore in 1994. This has given economists
and other
academics time to study and document the positive impact of
living wage laws, as well as refute the claims of opposition groups who
predicted negative consequences in cities who adopted the living wage.
A November 2003 study by Andrew
Elmore of the Brennan Center for
Justice at New York University
School of Law found that living wage laws
are a good tool for
economic development, and that the costs associated
with them
have been much lower than most analysts have predicted. The
study
finds that for most cities, contract costs increased by less than .1%
of the overall local budget in the years after the living wage was adopted.
The Brennan Center study is the first to interview administrators at a number of
local governments who have responsibility for implementing living wage
laws. Some local officials interviewed reported that adding a living wage
requirement to their business subsidy program increased support for these
programs because taxpayers were assured that funds would only be spent
to attract high wage jobs.
David Neumark of Michigan State
University was once a prominent critic
of living wage laws. In
2000, however, he released a study that compared
twelve cities
with living wage laws to those without them. After finding
significant income gains among low wage workers as a result of the laws,
and after being unable to find any evidence that living wage laws caused
the loss of jobs, Neumark declared to Business Week that "I'm no longer
ready to dismiss
these policies out of hand." (Article by Steven Brull,
September 4, 2000).
Two thorough studies of the impact
of the Baltimore living wage law found
that much of the
increased cost of the living wage was absorbed by businesses,
particularly through lower turnover and training costs and other efficiency
gains.
For an Economic Policy Institute analysis of how both
economic theory and evidence
demonstrate that the living wage can lead to
the
more efficient provision of services, click here.
To sum up, research from a variety
of sources indicates that living wage laws
make positive
differences in the lives of low wage workers, can help improve
efficiency among municipal contractors, have a low cost to local governments,
and improve economic development policies made at the local level.
For even more examples of research
on the impact of living wage laws, visit ACORN's
Living Wage Resource Center
and the
Economic Policy Institute's living wage issue guide.
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