Living wage laws

There is some evidence that living wage laws increase wages for covered workers and modestly reduce poverty rates (Urban-Holzer 2008, Clain 2008, Adams 2005). Additional evidence is needed to confirm effects.

Living wage laws appear to help workers just below and just above the poverty line the most (Adams 2005). Moderate living wage requirements applied to local government, and to contractor and grantee employees funded by local government, are the most likely to reduce poverty rates (Bartik 2004). In some cases, living wage ordinances can lead firms to lay off workers or reduce workers’ hours (Urban-Holzer 2008, Clain 2008, Adams 2005). Ordinances with relatively lower costs to firms reduce the likelihood of other unintended consequences such as firm relocation and employee displacement (Pollin 2005). Increased wages may encourage higher-skilled individuals to join the applicant pool (Fairris 2008); to minimize the likelihood of displacing the lowest-skilled workers, some researchers suggest setting wages close to market rates (Bartik 2004). A nationwide study of living wage ordinances finds no city-level effects, positive or negative, on average wages, poverty rate, or unemployment; the lack of city-wide effects may be due to the limited number of workers covered by ordinances, or ordinances setting wage thresholds too low (Sosnaud 2016).

Living wage laws and initiatives can be implemented without significant negative effects on employment or business growth (Sosnaud 2016, Lester 2011, Pollin 2005). A study of Los Angeles’ living wage, for example, found that participating businesses reduce employee turnover, absenteeism, overtime hours, and job training needs compared to other businesses (Fairris 2005). Studies of Boston’s living wage found that covered businesses increase full-time staffing (Brenner 2005) and reduce internal wage inequality (Brenner 2005a). A survey of businesses participating in a Vancouver, Canada, living wage certification program suggests such programs may increase worker recruitment and retention, while decreasing training costs (Ptashnick 2015).

Research suggests that living wage ordinances are associated with reductions in property-related crime (Fernandez 2014). Living wages may improve mental health among workers: in a study of London’s living wage, service sector employees who work for a living wage employer appear to have greater psychological well-being than those who do not (Flint 2014).

There is some evidence that living wage laws have the potential to decrease disparities in socio-economic status by modestly reducing poverty for covered workers earning lower wages, compared with workers earning higher wages (Urban-Holzer 2008, Clain 2008, Adams 2005). Living wage laws are designed to increase families’ income and reduce poverty; wage rates are indexed to the federal poverty threshold (Sosnaud 2016). In practice, living wage ordinances are usually implemented at the city or county level, covering a limited number of urban workers employed by or through the municipality (Sosnaud 2016). Families with a single earner and multiple children may see less poverty reduction, especially with part-time employment (Sosnaud 2016).

A 2002 study on Los Angeles' living wage ordinance for city employees and contractors suggests that female and Black workers were more likely to be affected by the ordinance, since they make up a greater percentage of the public sector workforce. Most workers affected by the ordinance were full-time employees, with a high school education or less; 58% were age 35 or older; 50% were Latino; 29% were Black; and 57% were women (Fairris 2005a). About 50% of affected workers were immigrants to the U.S. Most workers who benefited had been in the workforce an average of 20 years (Fairris 2005). As of January 2022, California’s state minimum wage is $15 per hour, the same as the L.A. County living wage rate (LA-LWO). As of 2022, the MIT Living Wage Calculator estimates a living wage in L.A. County for a household with two working adults and two children to be $31.11 (Living Wage Calculator).

Cities which pass living wage laws are more likely to be urban. Experts suggest businesses are unlikely to relocate from cities to avoid living wage requirements, since it is typically more expensive to relocate than to increase employee wages (Sosnaud 2016). Living wage laws or ordinances are less likely to be in place in cities in the southern U.S. (Sosnaud 2016). States in the southern U.S. contain the most counties where Black or Hispanic people are the majority or represent a larger population share than in the U.S. overall (Brookings-Frey 2019). Black people make up 58% of the population in the southern U.S. (Brookings-Frey 2019).

Advocates for a minimum wage in the late 19^th and early 20^th centuries described it as a living wage, arguing that a minimum wage should cover an individual’s basic needs (Evans 2016, Luce 2005). In response, the U.S. federal minimum wage was established in 1938 via the Fair Labor Standards Act, with related worker protections (US DOL-FLSA). The aim was to set a minimum standard for conditions needed to support workers’ health, efficiency and well-being (Bernstein 2014). However, the minimum wage is not indexed to inflation and policymakers have not increased the federal minimum wage alongside increases in the cost of living (CBPP-McNichol 2004). As such, the value of the minimum wage has eroded over time while the median wage has increased. This contributes to growing inequality between low-wage and middle-wage workers (Autor 2016) and lowered living standards for workers earning minimum wage (CBPP-Minimum wage 2018).

Living wage campaigns in the 1990s and later have drawn attention to workers living in poverty and asserted that the minimum wage does not qualify as a living wage as it fails to meet workers’ and their families’ basic needs without supplemental assistance (Horton 2018). Campaigns, such as in Baltimore, have been supported by coalitions which include workers and activists of color, women, and immigrants (Evans 2016). Such campaigns advocate for adoption of local wages above the federal minimum, basing estimates on the income a family of four would need to pay for childcare, food, health care, transportation, and other necessities (Evans 2016). Campaigns often advocate for related rights and protections for workers, such as paid vacation and protections for those doing union organizing, and often for raising minimum wages statewide (Evans 2016). Experts suggest that successful living wage campaigns include a coalition aligning trade unions and community-based social justice advocates (Evans 2016). Living wage laws in practice cover a smaller percentage of workers than the federal minimum wage. Some cities with living wage ordinances went on to pass a higher city minimum wage, covering more workers (Sosnaud 2016).

Since 1997, 26 states have passed preemption laws which prevent localities from implementing a minimum wage or living wage higher than the state minimum (or federal minimum, in some states), regardless of local costs of living (EPI 2018). These include states in the southern U.S. with the lowest wages (Godoy 2019), the highest percentages of Black Americans (Brookings-Frey 2019), and the most rural counties with high and persistent rates of poverty (USDA ERS-Farrigan 2021).

• How do wages in your area compare to local living wage estimates? What would individuals from different family structures need to earn to cover their basic needs?
• Who would benefit the most from living wage laws in your community? How can a policy be implemented or amended to maximize reach and benefits?
• What efforts exist in your area or state to increase wages in job sectors with historically low wages, such as hospitality? How can you partner or align with those efforts?
• What strategies can you consider to ensure that living wage laws keep up with inflation and increases to cost of living?
• How do preemption laws impact your ability to implement living wage laws?

Local conditions determine optimal wage levels and implementation strategies. The City of Hartford, Connecticut uses a calculation similar to the Living Wage Calculator to set a living wage rate which exceeds federal poverty guidelines (Hartford-Living wage) and the state minimum wage (CT-Wage). Los Angeles’ living wage ordinance requires employers to offer a wage that includes health insurance at no cost to employees; if employees opt out of health insurance coverage, employers must pay them a higher living wage (LA BCA-Living wage 2018).

In Santa Fe, New Mexico, the mandatory living wage ordinance applies to all employers who receive a business license or registration from the city, and employers must post notice of compliance in a prominent place, in English and Spanish (Santa Fe-Living wage, Santa Fe-LWO). Washington, D.C. has a living wage law for government contracts (DC-LW 2020) as well as a living wage certification program (DC Council-LWC).

Living wage initiatives may become or include campaigns for increased local minimum wages. In North Carolina, the coalition Just Economics has certified over 400 employers as providing a living wage and belongs to the statewide coalition advocating to raise the state minimum wage (JE-Living wage). San Francisco’s Living Wage Coalition worked to increase wages for municipal workers at the San Francisco Airport and now supports the city's minimum wage law (Sosnaud 2016, SF LWC).

As of 2020, 25 states have preemption laws in place which prohibit mandatory living wage ordinances and local minimum wage laws (EPI 2018); Colorado repealed its preemption law in 2019 (NELP-Lathrop 2019). Communities and developers may design a Community Benefits Agreement (CBA) that includes living wage requirements for development projects, even if a city does not have a local living wage ordinance (Gross 2005).

Family Budget Calculator - Economic Policy Institute. Family Budget Calculator.

Living Wage Calculator - Living Wage Calculator. Introduction to the living wage calculator.

Self-Sufficiency Standard - Center for Women’s Welfare (CWW). Self-Sufficiency Standard.

* Journal subscription may be required for access.

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Brenner 2005a - Brenner MD, Luce S. Living wage laws in practice: The Boston, New Haven and Hartford experiences. Political Economy Research Institute, University of Massachussets, Amhearst; 2005.

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CT-Wage - State of Connecticut. Governor Lamont signs minimum wage increase. May 28, 2019.

DC Council-LWC - Council of the District of Columbia. Living wage certification program.

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Fairris 2008* - Fairris D, Fernandez Bujanda L. The dissipation of minimum wage gains for workers through labor-labor substitution: Evidence from the Los Angeles living wage ordinance. Southern Economic Journal. 2008;75(2):473-96.

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Flint 2014* - Flint E, Cummins S, Wills J. Investigating the effect of the London living wage on the psychological wellbeing of low-wage service sector employees: A feasibility study. Journal of Public Health. 2014;36(2):187-193.

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Gross 2005 - Gross J, LeRoy G, Janis-Aparicio M. Community benefits agreements: Making development projects accountable. Good Jobs First and the California Partnership for Working Families. 2005.

Horton 2018* - Horton A, Wills J. Chapter 13: Impacts of the living wage on in-work poverty. In: Lohmann H, Marx I, eds. Handbook on In-Work Poverty. Cheltenham, UK: Edward Elgar Publishing; 2018:228-244.

JE-Living wage - Just Economics. Living wage employer certification program.

LA BCA-Living wage 2018 - City of Los Angeles, Bureau of Contract Administration. Rules and regulations implementing the living wage ordinance. 2018.

LA-LWO - City of Los Angeles Department of Public Works, Bureau of Contract Administration (BCA). Living wage ordinance (LWO).

Lester 2011* - Lester TW. The impact of living wage laws on urban economic development patterns and the local business climate: Evidence from California cities. Economic Development Quarterly. 2011;25(3):237-54.

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Pollin 2005* - Pollin R. Evaluating living wage laws in the United States: Good intentions and economic reality in conflict? Economic Development Quarterly. 2005;19(1):3-24.

Ptashnick 2015* - Ptashnick M, Zuberi D. Certifying voluntary living wage employers. International Journal of Sociology and Social Policy. 2015;35(9-10):618-634.

Santa Fe-Living wage - City of Santa Fe. Living wage information.

Santa Fe-LWO - Santa Fe County. Living wage ordinance (LWO).

SF LWC - San Francisco Living Wage Coalition.

Sosnaud 2016* - Sosnaud B. Living wage ordinances and wages, poverty, and unemployment in U.S. cities. Social Service Review. 2016;90(1):3-34.

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