A living wage is a locally mandated wage that is higher than state or federal minimum wage levels. Living wages may be set at the level needed for a family of four to meet the federal poverty guidelines1, $26,200 for a family of four in 20202. Alternative methods for calculating living wages adjust wages based on city, state, or metro area; family composition; and include additional expenses, such as childcare, taxes, and savings1. Some laws mandate or encourage firms to provide health coverage and other benefits to workers3. Living wage laws may apply to workers at businesses that have contracts with or that receive financial assistance, a business license, or registration from the city or county; in some cases, all municipal employees are covered3, 4. Living wage initiatives may overlap with efforts to increase local minimum wage1, 3. Some local governments cannot enact such measures due to state preemption legislation5. Companies may also adopt living wage policies as part of corporate responsibility initiatives or participate in voluntary living wage certification programs, with criteria specified by living wage advocates6.
Expected Beneficial Outcomes (Rated)
Evidence of Effectiveness
Living wage laws appear to help workers just below and just above the poverty line the most9. 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 rates10. In some cases, living wage ordinances can lead firms to lay off workers or reduce workers’ hours7, 8, 9. Ordinances with relatively lower costs to firms reduce the likelihood of other unintended consequences such as firm relocation and employee displacement11. Increased wages may encourage higher-skilled individuals to join the applicant pool12; to minimize the likelihood of displacing the lowest-skilled workers, some researchers suggest setting wages close to market rates10. A nationwide study of living wage ordinances finds no city-level effects, positive or negative, on average wages, poverty rate, or unemployment; the lack of city-wide effects may be due to the limited number of workers covered by ordinances, or ordinances setting wage thresholds too low3.
Living wage laws and initiatives can be implemented without significant negative effects on employment or business growth3, 11, 13. A study of Los Angeles’ living wage, for example, found that participating businesses reduce employee turnover, absenteeism, overtime hours, and job training needs compared to other businesses14. Studies of Boston’s living wage found that covered businesses increase full-time staffing15 and reduce internal wage inequality16. A survey of businesses participating in a Vancouver, Canada, living wage certification program suggests such programs may increase worker recruitment and retention, while decreasing training costs6.
Research suggests that living wage ordinances are associated with reductions in property-related crime4. 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 well-being than those who do not17.
Impact on Disparities
Local conditions determine optimal wage levels and implementation strategies. The City of Hartford, Connecticut uses a calculation similar to the 18 to set a living wage rate which exceeds federal poverty guidelines19 and the state minimum wage20. Los Angeles’ living wage ordinance requires employers to offer a wage that includes health insurance at no cost to employees; if employees opt out of health insurance coverage, employers must pay them a higher living wage21.
In Santa Fe, New Mexico, the mandatory living wage ordinance applies to all employers who receive a business license or registration from the city, and employers must post notice of compliance in a prominent place, in English and Spanish22, 23. Washington, DC has a living wage law for government contracts24 as well as a living wage certification program25. In North Carolina, the coalition Just Economics has certified over 400 employers as living wage through its certification program26.
Living wage initiatives may become or include campaigns for increased local minimum wages. San Francisco’s Living Wage Coalition worked to increase wages for municipal workers at the San Francisco Airport and now supports the city’s minimum wage law3, 27.
As of 2020, 25 states have pre-emption laws in place which prohibit mandatory living wage ordinances and local minimum wage laws5; Colorado repealed its pre-emption law in 201928. Communities and developers may design a Community Benefits Agreement (CBA) that includes living wage requirements for development projects, even if a city does not have a local living wage ordinance29.
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1 Luce 2017 - Luce S. Living wages: A US perspective. Employee Relations. 2017;39(6):863-874.
2 US DHHS-Poverty - Office of the Assistant Secretary for Planning and Evaluation (ASPE). 2020 HHS poverty guidelines: One version of the [US] federal poverty measure. US Department of Health and Human Services (US DHHS).
3 Sosnaud 2016* - Sosnaud B. Living wage ordinances and wages, poverty, and unemployment in US cities. Social Service Review. 2016;90(1):3-34.
4 Fernandez 2014* - Fernandez J, Holman T, Pepper J V. The impact of living wage ordinances on urban crime. 2014;53(3):478-500.
5 EPI 2018 - Economic Policy Institute (EPI). Worker rights preemption in the US.
6 Ptashnick 2015* - Ptashnick M, Zuberi D. Certifying voluntary living wage employers. International Journal of Sociology and Social Policy. 2015;35(9-10):618-634.
7 Urban-Holzer 2008 - Holzer HJ. Living wage laws: How much do (can) they matter? Washington, DC: Urban Institute; 2008.
8 Clain 2008* - Clain SH. How living wage legislation affects US poverty rates. Journal of Labor Research. 2008;29(3):205-18.
9 Adams 2005 - Adams S, Neumark D. Living wage effects: New and improved evidence. Economic Development Quarterly. 2005;19(1):80-102.
10 Bartik 2004 - Bartik TJ. Thinking about local living wage requirements. Urban Affairs Review. 2004;40(2):269-99.
11 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.
12 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.
13 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.
14 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.
15 Brenner 2005* - Brenner MD. The economic impact of the Boston living wage ordinance. Industrial Relations. 2005;44(1):59-83.
16 Brenner 2005a - Brenner MD, Luce S. Living wage laws in practice: The Boston, New Haven and Hartford experiences. Political Economy Research Institute, University of Massachussets, Amhearst; 2005.
17 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.
18 Living Wage Calculator - Living Wage Calculator. Introduction to the living wage calculator.
19 Hartford-Living wage - City of Hartford. Living wage notice. Fiscal year 2020.
20 CT-Wage - State of Connecticut. Governor Lamont signs minimum wage increase. May 28, 2019.
21 LA BCA-Living wage 2018 - City of Los Angeles, Bureau of Contract Administration. Rules and regulations implementing the living wage ordinance. 2018.
22 Santa Fe-Living wage - City of Santa Fe. Living wage information.
23 Santa Fe-LWO - Santa Fe County. Living wage ordinance (LWO).
24 DC-LW 2020 - Washington DC, Department of Employment Services. Living wage fact sheet 2020.
25 DC Council-LWC - Council of the District of Columbia. Living wage certification program.
26 JE-Living wage - Just Economics. Living wage employer certification program.
27 SF LWC - San Francisco Living Wage Coalition.
28 NELP-Lathrop 2019 - Lathrop, Y. Raises from coast to coast in 2020: Minimum wage will increase in record-high 47 states, cities, and counties this January. New York, NY: National Employment Law Project (NELP); 2019.
29 Gross 2005 - Gross J, LeRoy G, Janis-Aparicio M. Community benefits agreements: Making development projects accountable. Good Jobs First and the California Partnership for Working Families. 2005.
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