The living wage movement has become a major political force in almost every major American city. So-called living wage ordinances require contractors doing business with a city to pay their workers a minimum wage well above those required by state or federal law. Detroit's voters on November 3 approved a typical ordinance requiring city contractors, including nonprofits, and businesses receiving city tax breaks to pay at least $7.70 per hour plus health benefits. If no health benefits are provided, the minimum wage rises to $9.63 per hour.

The first living wage ordinance was enacted in Baltimore in 1994 and it has been a model for other cities.

• The most detailed study of the economic impact of living wage ordinances, published by the Preamble Center for Public Policy in October 1996, found that the real cost of city contracts actually fell following enactment of the living wage ordinance.

• The Preamble finding is important because the major argument against living wage ordinances is that they increase costs for city governments.

• It turns out, however, that the data used were wrong, according to a recent review by the Employment Policies Institute (EPI) which found that in many instances the contracting data upon which the Preamble study was based do not match official records.

• In the most significant instance, the Preamble study was so far off that the data appear to have been fabricated.

According to the EPI study, there were numerous other errors in the Preamble report, including misstating the number of bids on contracts, improper comparisons of contracts not covered by the living wage ordinance, and excluded data that would have contradicted its conclusions. In short, an honest study of the most prominent living wage ordinance finds that it did indeed raise the cost of city contracts, as one would expect. The counterintuitive conclusions of the Preamble study to the contrary simply do not stand up to close scrutiny.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, December 2, 1998.

For text http://www.ncpa.org/oped/bartlett.html