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NATIONAL CENTER FOR POLICY ANALYSIS
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The Employment Effects of Living Wage Laws
Daily Policy Digest

Minimum Wage / "Living Wage" Regulations

Wednesday, March 20, 2002
For some years, liberal groups like ACORN (Association of Community Organizations for Reform Now) have pushed hard to get so-called living wage laws enacted in cities and counties throughout the country. More than 60 jurisdictions having enacted living wage ordinances since the first in Baltimore in 1994.

  • Typically, living wage laws require city contractors to pay their employees a wage significantly higher than the minimum wage as a condition for doing business with the city.
  • Living wage rates are often tied to the poverty-level income for a family of four, which was $17,761 per year in 2000 or just $8,959 for a single person.
  • Thus one effect of a living wage law is to pay single people and two-earner couples considerably more than a living wage, as defined by the poverty level.
The point is that it is silly to assume every worker is the sole wage earner in a four-person family, as living wage advocates do.

Living wage campaigns are mainly fronts for municipal employee unions who want to raise labor costs for potential private competitors.

In fact, a new study by economist David Neumark finds that existing government employees are the primary beneficiaries of living wage laws.

  • This is the main reason why he finds that living wage laws raise local wages.
  • However, Neumark also finds that forcing up wages causes demand for labor to fall; thus while workers covered by the living wage law typically see a 3.5 percent increase in wages, there is a 7 percent increase in unemployment among low-wage workers.
Taxpayers foot the bill for the higher wages. They may pay again when businesses relocate elsewhere, thus reducing the tax base.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, March 20, 2002; see David Neumark, "How Living Wage Laws Affect Low-Wage Workers and Low Income Families," March 2002, Public Policy Institute of California.

For Bartlett text http://www.ncpa.org/edo/bb/2002/bb032002.html

 For more on "Living Wage" Regulations
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