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Pay Laws Making a Difference Across U.S.—Viewpoints | EPI

Opinion pieces and speeches by EPI staff and associates.


Pay Laws Making a Difference Across U.S.

by Chauna Brocht

Activists in Lexington are advancing a proposal to pay all city contract workers a “living wage,” the wage required for a worker to keep a family out of poverty. It’s a good idea, and a proven one, too.

Since the first living wage ordinance was passed in Baltimore, Maryland, in 1994, over 50 living wage laws have been enacted around the country, from Miami Beach, Florida, to Rochester, New York, to Missoula, Montana. Another 70 campaigns are now underway.

Here in Lexington, the living wage is equal to $9.61 an hour, enough for a full-time worker to support a family of four just above the poverty line. Any companies that have contracts with the city would have to pay their workers this wage.

Low-wage workers in Kentucky could use the boost. Adjusted for inflation, the wages of these workers were actually 3.1 percent lower in 1999 than they were two decades earlier. In the same two decades, income inequality expanded, so that by the end of the 1990s, the incomes of the wealthiest one-fifth of all families was 11 times higher than the incomes of the bottom one-fifth.

Add to this Kentucky’s higher-than-national poverty rate of nearly 15 percent, and it becomes clear that better policies to help low-wage workers are long overdue.

Living wage laws are a small part of a community’s anti-poverty strategy, because they typically cover a small portion (less than one percent) of the local workforce. But the laws make a considerable difference in the lives of the workers they affect, by making them feel more committed to their jobs, giving them more money to meet basic needs, and enabling them to quit second jobs and spend more time with their families.

Opponents of the living wage argue that it helps mostly teenagers, displaces low-wage workers from their jobs, hurts businesses, and bankrupts municipalities. Not one of these arguments withstands scrutiny.

These critics argue that living wage laws aren’t well targeted because most beneficiaries are young workers who don’t provide the sole support for their families. In 1999, however, almost nine out of every 10 workers earning between $5.15 and $8.20 were age 20 or older. The average minimum wage worker brings home more than half of his or her family’s weekly earnings.

This does not mean, as opponents argue, that employers will replace lower-skilled workers with higher-skilled workers as a response to wage increases. Instead, employers will be more committed to the workers they have. Research in Baltimore found no evidence of displacement effects.

Employers wind up with more productive workers, and with less turnover, meaning fewer costs associated with recruitment and training.

Many people who believe that low-wage workers deserve a raise nevertheless worry that the drain on city budgets from living wage ordinances would be excessive. This, too, has been proven false. In Baltimore, the cost of city contracts increased by just 1.2 percent after the living wage was adopted – less than the rate of inflation. And the administrative costs were equally insignificant; they amounted to just 17 cents a year for each taxpayer.

Finally, living wage detractors argue that the policy will create a “hostile business climate.” But wages are only one factor in a business’ decision to move to a new location. There is no evidence that any existing living wage ordinance has discouraged firms from locating in a city.

There are always some employers who take the high road and some who take the low road with regard to workplace policies and services to customers.

Without a living wage ordinance, high-road employers, who would rather have a stable workforce and produce a high-quality product, have to compete for contracts with low-road employers, who provide a poorer-quality product at a lower cost.

Living wage ordinances encourage businesses to take the high road, leading to better services for the public and a more loyal, highly trained workforce.

Government should be in the business of eradicating poverty, not facilitating it. Tax revenues shouldn’t be used to subsidize wages that are insufficient to help a worker avoid poverty.

A new living wage ordinance would help guarantee that tax dollars from Lexington residents make life livable for the men and women who provide vital city services.

Chauna Brocht is a policy analyst at the Economic Policy Institute in Washington, D.C.