Living Wage Campaign

IN THE UNITED STATES, living wage campaigns support the enactment of laws to guarantee that the lowestpaid workers earn enough to support their families. Living wage laws are enacted at the local level and specify minimum per-hour pay rates that are higher than minimum wage rates mandated by national and state laws. By 2005 over 100 local governments in the United States had enacted living wage laws.

The living wage campaign was inspired by a steady erosion of wages for almost all working Americans between the late 1970s and the early 2000s—a process that hit lowest-income workers the hardest. From 1979 to 1999 (the latter year falling during the economic boom of the 1990s), the lowest-paid 10 percent of workers saw their average wages decline by 9.3 percent, while the percentage of workers earning poverty-level wages increased from 23.7 percent to 26.8 percent. During approximately the same period (1977–99), the income of the wealthiest one percent of Americans increased by 115 percent.

In addition to mandating wage levels above the national and state minimums, living wage laws typically apply only to businesses that have government contracts or that get development assistance (such as subsidies or tax credits) from local governments. Supporters of the laws argue that government should not help or do business with firms that pay poverty-level wages. There are two main types of living wage laws. Contractor-only laws apply to businesses that have contracts with the governmental unit that passed the law. Business-assistance laws apply to any company to which the governmental unit has given some form of assistance, such as tax breaks or subsidies. Of the two types, business-assistance laws appear to have greater effects, both positive and negative.

The principal argument for living wage laws is that they enable the lowest-paid workers to earn enough to rise above the poverty level. The principal argument against living wage laws is that they enable some workers to earn more by causing other workers to become unemployed. Economic theory predicts that, in general, when the price of a good increases, consumers or businesses reduce the amount of the good that they purchase. Applied to labor, this means that if wages increase, businesses will reduce the amount of labor that they purchase, thereby causing unemployment.

Opponents of living wage laws advance this argument to contend that such laws do not, in fact, reduce poverty. Empirical studies of living wage laws paint a more complicated picture. The economic-theory argument assumes that purchasers buy the same good at both higher and lower prices. However, higher-paid workers are more reliable and less likely to quit, leading to lower costs from employee turnover. In addition, living wage laws apply only to the lowest-paid workers who are employed either by government contractors or recipients of government business assistance.

As a result, living wage laws appear to have a net positive effect. Depending on the type of living wage law and the local economy where it is enacted, the laws often do (but sometimes do not) cause a small amount of unemployment. However, this negative effect is more than balanced by higher wages that lift a greater number of families out of poverty. As one study by S. Adams and D. Neumark observed, “even coupled with some employment reductions, living wages can lift a detectable number of families above the poverty line.”

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