Living wage laws

A living wage is a locally mandated wage that is higher than state or federal minimum wage levels. Living wages are often set at the level needed for a family of four to meet the federal poverty level ($24,300 for a family of four in 2015 (US DHHS-Poverty)). Living wage ordinances typically apply only to companies under contract with or receiving assistance from cities with such an ordinance. Some ordinances mandate or encourage firms to provide health coverage and other benefits to workers.

Expected Beneficial Outcomes (Rated)

  • Increased earnings

  • Reduced poverty

Evidence of Effectiveness

There is some evidence that living wage ordinances increase wages for covered workers and modestly reduce poverty rates (Urban-Holzer 2008, Clain 2008*, Adams 2005). Additional evidence is needed to confirm effects.

Living wage laws appear to help workers just below and just above the poverty line the most (Adams 2005). In some cases, living wage ordinances can lead firms to layoff workers or reduce workers’ hours (Urban-Holzer 2008, Clain 2008*, Adams 2005), often displacing the lowest-skilled workers (Fairris 2008*). To minimize the likelihood of displacing the lowest-skilled workers, some researchers suggest setting wages close to market rates (Bartik 2004).

Moderate living wage requirements applied to local government, and to contractor and grantee employees funded by local government, are the most likely to reduce poverty rates (Bartik 2004). Ordinances with relatively lower costs to firms reduce the likelihood of unintended consequences such as firm relocation and employee displacement (Pollin 2005*).

Living wage laws can be implemented without significant negative effects on employment or business growth (Lester 2011*, Pollin 2005*). A study of Los Angeles’ living wage, for example, found that participating businesses realized reductions in employee turnover, absenteeism, overtime hours, and job training needs compared to other businesses (Fairris 2005*). Research suggests that including living wage advocates in monitoring and enforcement can enhance implementation (Luce 2005*).

Living wages may improve mental health among workers: in a study of London’s living wage, service sector employees who work for a living wage employer appear to have greater psychological wellbeing than those who do not (Flint 2013*).

Impact on Disparities

Likely to decrease disparities

Implementation Examples

Local conditions determine optimal wage levels and implementation strategies. As of 2013, over 140 communities across the country have adopted living wage ordinances (COWS-Living wage).

Implementation Resources

Living Wage Calculator - Living Wage Calculator. Introduction to the living wage calculator.

Citations - Evidence

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Urban-Holzer 2008 - Holzer HJ. Living wage laws: How much do (can) they matter? Washington, DC: Urban Institute; 2008.

Clain 2008* - Clain SH. How living wage legislation affects US poverty rates. Journal of Labor Research. 2008;29(3):205-18.

Adams 2005 - Adams S, Neumark D. Living wage effects: New and improved evidence. Economic Development Quarterly. 2005;19(1):80-102.

Fairris 2008* - Fairris D, Fernandez Bujanda L. The dissipation of minimum wage gains for workers through labor-labor substitution: Evidence from the Los Angeles living wage ordinance. Southern Economic Journal. 2008;75(2):473-96.

Bartik 2004 - Bartik TJ. Thinking about local living wage requirements. Urban Affairs Review. 2004;40(2):269-99.

Pollin 2005* - Pollin R. Evaluating living wage laws in the United States: Good intentions and economic reality in conflict? Economic Development Quarterly. 2005;19(1):3-24.

Lester 2011* - Lester TW. The impact of living wage laws on urban economic development patterns and the local business climate: Evidence from California cities. Economic Development Quarterly. 2011;25(3):237-54.

Fairris 2005* - Fairris D. The impact of living wages on employers: A control group analysis of the Los Angeles ordinance. Industrial Relations. 2005;44(1):84-105.

Luce 2005* - Luce S. The role of community involvement in implementing living wage ordinances. Industrial Relations. 2005;44(1):32-58.

Flint 2013* - Flint E, Cummins S, Wills J. Investigating the effect of the London living wage on the psychological wellbeing of low-wage service sector employees: A feasibility study. J Public Health (Oxf). 2013: Epub.

Citations - Implementation Examples

* Journal subscription may be required for access.

COWS-Living wage - Local living wage ordinances: Experience, evidence, and best practice. Madison: Center of Wisconsin Strategy (COWS); 2013.

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