|
|
|
|
 |
BusinessWeek: September 4, 2000 |
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |
|
Social Issues: Economics
What's So Bad about a Living Wage? Paying above the minimum seems to do more good than harm
While most mainstream economists would laud Zatarin's good fortune, they typically disapprove of laws that require firms with municipal contracts to pay their workers enough to stay out of poverty. Ever since Baltimore passed the first such ordinance in 1994, economists have derided them as little better than the federal minimum-wage law, which many believe forces employers to ax jobs. Now that view is changing. A small but growing body of academic research suggests that living-wage laws do more good than harm. So far, they have imposed little, if any, cost to the 50 cities that have passed them, the studies find. And they have led to few job losses and have lifted many families out of poverty. "I'm no longer ready to dismiss these policies out of hand," says David Neumark, a Michigan State University economics professor--and prominent minimum-wage opponent--who recently published empirical research showing a positive overall impact of living-wage laws. The fresh thinking is giving new ammunition to the living-wage movement, which has steadily gained momentum since its initial Baltimore success (table). Advocates, mostly grassroots religious and labor groups, are pushing for new laws in more than 70 cities and a dozen states. The success of living-wage ordinances also may spur efforts to lift the federal minimum wage, since the laws show little adverse job impact even from pay levels of up to $10.75 an hour in San Jose, vs. the federal minimum of $5.15. NO LOSS. The new research shows that living-wage laws don't cause many job losses because employers learn to live with them by trimming profit margins and finding efficiency gains from improved morale and lower turnover. Unlike the federal minimum, which covers most workers, living-wage ordinances apply only to employees of companies with city contracts. Studies of Baltimore, Los Angeles, and Detroit found no evidence of job losses. Neumark's research, which compares 12 cities with living-wage laws to a control group of cities without them, finds minimal job losses, which are more than compensated for by significant income gains among the lowest-paid workers. Even higher taxes aren't a necessary outcome. In Baltimore, city contracts have risen less than inflation, at 1% to 2% a year--mostly because contractor profit margins declined, according to a study by the Economic Policy Institute, a Washington think tank. The findings are analogous to a new perspective on minimum wages that emerged in the mid-1990s. Back then, several economists challenged conventional thinking with studies that found little or no job loss from higher minimum-wage levels, at least in a growing economy like the U.S. is enjoying today. However, since 1997, continued opposition from small business and congressional Republicans has blocked increases in the federal minimum, which is now 40% below the federal poverty line. Although the economic debates about living and minimum wages aren't exactly the same, the success of the former may boost efforts to lift the federal minimum. Already, Representative Luis V. Gutierrez (D-Ill.) has introduced a living-wage bill for federal service contracts. "During a period of prosperity, when people are sleeping in cars after working a full day, paying a living wage is a basic matter of fairness," asserts Jen Kern, a director at the Association of Community Organizations for Reform Now (ACORN), a Washington advocacy group. Opponents disagree. Business groups argue that a living wage would be more expensive in a down economy and more disruptive if applied nationally, or even to workers not employed by city contractors. For example, the Santa Monica Chamber of Commerce argues that a proposed $10.69-an-hour living wage, which would apply to all companies in the city's coastal tourist zone, would force local businesses to close. Still, those arguments may carry less clout now that so many other cities have passed living-wage laws--and escaped the dire consequences. Return to top | |
|
|
|
 TABLE Who's Paying a Living Wage? Fifty cities and counties now require contractors to pay more than the
federal minimum wage. Some leading cities:
CITY/ COVERAGE HOURLY
DATE PASSED WAGE LEVEL
BALTIMORE Service contracts $7.70
1994 over $5,000
LOS ANGELES Service contracts 8.97
1997 over $25,000
SAN JOSE Service contracts 10.75
1997 over $20,000
CHICAGO Contracts covering 7.60
1998 clerical, custodial,
and other service
workers
DETROIT Service contracts 10.70
1998 over $50,000
SAN FRANCISCO Airport and home-care $9, $10 in 2001,
2000 workers, and service plus 2.5% yearly
contracts over $25,000 increases
DATA: UNIVERSITY OF MASSACHUSETTS
Return to top |
|
Copyright 1991-2008 by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
