NCPA - National Center for Policy Analysis

'Living Wage' is Controversial Among Economists

July 26, 2002

More than 80 communities have adopted rules requiring government contractors and some other employers to pay wages in excess of the federal minimum. Labor unions are largely responsible for the momentum of the "living wage" movement -- which is controversial among economists. There is fierce disagreement as to whether it helps or hurts workers.

  • Living wage laws are getting bolder -- extending coverage to more employers than simply those who hold government contracts, and mandating wages of as much as $12 an hour.
  • And living wages do cause job losses, according to a report by Michigan State economist David Neumark.
  • Robert Pollin, an economics professor at the University of Massachusetts, also found a living wage causes some lower-wage workers to lose their jobs -- although there may be some limited offsetting benefits for other workers.
  • A living wage that is 50 percent higher than the state's minimum wage will raise the average wage of low-income workers 3.5 percent.

Source: Stephanie Armour, "Living-Wage Movement Takes Root Across Nation," USA Today, July 23, 2002.

 

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