‘Living Wage’ Laws Reducing Poverty Levels, Study Shows

“Living wage” laws, adopted in dozens of cities and counties in recent years, reduce overall poverty levels despite causing some job loss, according to a cautiously worded study from a conservative economist.

David Neumark, a Michigan State University economist known for his opposition to minimum-wage hikes, said the findings--to be released today by the nonpartisan Public Policy Institute of California--surprised him.

“Going into this, I would have been pretty negative,” Neumark said. “But I come away saying these things work reasonably well, and there’s no reason to condemn them on empirical grounds.”

The electoral fight between advocates and business opponents has intensified in recent years over living wage laws. The laws raise hourly wages beyond the minimums for select workers, generally those with some connection to government. About 80 such laws have been enacted since the first was adopted in Baltimore in 1994, and dozens more are pending. The city and county of Los Angeles have adopted living wage laws, as have at least 10 other California cities and counties.

Neumark is still no fan of an increase in the minimum wage, which he maintains won’t reduce poverty and could even exacerbate it. Living wage laws have the opposite effect, he said, because they are more targeted. Beneficiaries are more likely to be adults heading poor households rather than those in middle-class homes, such as suburban teenagers in part-time jobs. “It’s a distributional question,” he said.

The Public Policy Institute said the 145-page study is the first comprehensive look at the outcomes of living wage legislation. Neumark collected income data from 40 cities that have living wage laws and compared trends with other cities where no such laws exist.

He cautioned that his study should not be taken as a prescription for the living wage approach. “There are two themes that come out of this,” he said. “One is if you simply ask the question, ‘Do these things tend to help the poor?’ It looks like they do, at least the broader ones. The more subtle question is, ‘Is this the best way [to reduce poverty]?’ That’s not so clear-cut.”

The findings were questioned by the Employment Policies Institute in Washington, which is an organization of restaurants and other employers of low-wage workers and a prominent voice against living wage laws.

Chief economist Richard Toikka said it may be too early to reach conclusions about costs and benefits. And because the laws vary greatly, it is difficult to generalize about them. More significantly, Toikka said, there are more efficient ways to reduce poverty, such as with earned income tax credits.

On the other hand, living wage proponents said the study backs up what they’ve maintained all along.

“These laws are running straight at some of the most dire economic realities that poor people face,” said Jen Kern, director of the Living Wage Resource Center at ACORN, a national coalition of anti-poverty community groups that has been a leading voice for the living wage movement. “It’s fundamental: If you work, you shouldn’t be poor. People in America believe that.”

The living wage campaigns have been championed by groups ranging from labor unions to affordable-housing advocates.

The laws vary widely as well. Nearly all set wage floors for employees of government contractors, such as janitors, food service workers and security guards. Many also cover employers that receive any government subsidies or benefits, or who lease space from the government, such as airport concessionaires.

Emboldened by success, proponents have been raising the living wage floor--from an average of $9 an hour in the late 1990s to about $12 now--and broadening the definition of covered employees.

And private employers are increasingly being targeted. One example is Santa Monica’s recently adopted coastal zone living wage of $10.50 an hour, which covers private employers near the beach and is being challenged by a hotel-sponsored ballot initiative.

Just last month, voters in New Orleans approved a landmark living wage that covers all workers in the city. It immediately was met with a business-sponsored legal challenge, and even proponents concede that it may not survive.

Employer groups have fought each new wrinkle with lawsuits, rival ballot initiatives and lobbying in state capitals. In response, seven states have adopted preemptive laws prohibiting local living wages, and more are considering them.

Opposition to the Santa Monica ordinance has been particularly fierce. As the City Council was considering it, major hotels and restaurant chains funded a rival ordinance that offered a “traditional” living wage law but prohibited the city from raising wages paid by private employers.

That failed and the council adopted the law, but the same coalition is now backing an initiative to kill it. If that fails, they have pledged to fight it in court.

The Los Angeles Alliance for a New Economy, which proposed the ordinance, estimates that opponents have spent more than $1 million so far, and may end up more than doubling that.

“It’s been intimidating and overwhelming, the amount of opposition and money in particular,” said Madeline Janis-Aparicio, alliance director. “But it’s not unanticipated. In some ways, it’s validating that we’re asking for real change.”

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