Living wage laws
- Issue Areas
- Financial security
Strategy overview
Requiring a living wage: Living wage laws aim to require that all or some employers within a jurisdiction pay wages at a rate that would enable a full-time worker to cover their family’s minimum basic needs, including housing, food, transportation, utilities, and others. Living wage laws set rates at those that exceed the federal minimum wage–which has remained constant at $7.25 per hour since 2009–and take into account inflation and the cost of living in a jurisdiction. Jurisdictions typically either pass city- or countywide living wage ordinances that cover all workers or may take a more targeted approach by specifying that they only apply to workers at businesses working under a government-supported or publicly financed contract. Living wage ordinances may also contain provisions for calculating the cost of living, monitoring compliance, and ensuring enforcement.
Enacting via ordinance or ballot measure: Living wage laws may be implemented through a variety of tactics: some localities advance laws through ballot measures, while others pass legislation through a city or county council. Legislation may also include related benefits, such as enhanced occupational safety protections, supplemental pay when an employer does not provide health insurance, paid leave, or days off.
Addressing community-specific costs: Because the cost of living varies widely between communities, the costs for basic needs in that jurisdiction specifically should be taken into account when establishing a living wage rate. These include housing or rent costs, those related to maintaining a healthy diet, paying for health care and child care, and attaining self-sufficiency. In addition, many living wage laws include mandatory annual increases pegged to local needs to account for changes in the cost of living and inflation.
Enforcing the law: Multiple jurisdictional agencies may be empowered to enforce living wage laws and other worker protections. These typically include a department focused on worker protection issues, an office of labor standards, or a mayor’s office of equity. Dedicated staff is responsible for reviewing and investigating complaints, facilitating settlements between workers and employers, and increasing awareness of the need for and impact of living wage ordinances.
A large body of evidence demonstrates that living wage laws can increase earnings and reduce poverty in some circumstances. However, more evidence is needed to confirm the scale and duration of such effects.
Synthesized research of living wage laws shows that they can increase earnings and alleviate poverty. The effects are most pronounced for individuals close to the poverty line.
Synthesized research on minimum wage shows mixed results, with modest positive impacts on health outcomes and income for some residents. However, the results are inconsistent in demonstrating a reduction in poverty rates.
A research synthesis found minimum wage increases improve health for low-wage continuously employed adults including by reducing smoking, low birth weights, and sick days taken.
An analysis of six cities who enacted livable wage laws found that low-wage workers benefited from wage increases in the range of $10 to $13 per hour with negligible job losses.
Before making investments in this strategy, city and county leaders should ensure this strategy addresses local needs.
The Urban Institute and Mathematica have developed indicator frameworks to help local leaders assess conditions related to upward mobility, identify barriers, and guide investments to address these challenges. These indicator frameworks can serve as a starting point for self-assessment, not as a comprehensive evaluation, and should be complemented by other forms of local knowledge.
The Urban Institute's Upward Mobility Framework identifies a set of key local conditions that shape communities’ ability to advance upward mobility and racial equity. Local leaders can use the Upward Mobility Framework to better understand the factors that improve upward mobility and prioritize areas of focus. Data reports for cities and counties can be created here.
Several indicators in the Upward Mobility Framework may be improved with investments in living wage laws. To measure these indicators and determine if investments in these interventions could help, examine the following:
Access to jobs paying a living wage: Employment-to-population ratio for adults ages 25 to 54. These data are available from the Census Bureau’s American Community Survey and the Bureau of Labor and Statistics’ Local Area Unemployment Statistics.
Opportunities for income: Household income at 20th, 50th, and 80th percentiles. These data are available from the Census Bureau’s American Community Survey.
Financial security: Share of households with debt in collections. These data are available from the Urban Institute’s Debt in America website.
Opportunities for wealth-building: Ratio of the share of a community’s housing wealth held by a racial or ethnic group to the share of households of the same group. These data are available from the Census Bureau’s American Community Survey.
Mathematica's Education-to-Workforce (E-W) Indicator Framework helps local leaders identify the data that matter most in helping students and young adults succeed. Local leaders can use the E-W framework to better understand education and workforce conditions in their communities and to identify strategies that can improve outcomes in these areas.
Several indicators in the E-W Framework may be improved with investments in this strategy. To measure these indicators and determine if investments in this strategy could help, examine the following:
Access to jobs paying a living wage: Percentage of jobs in a county or metropolitan statistical area (MSA) for which the ratio of average pay to the location-adjusted cost of living is greater than one.
Employment in a quality job: Percentage of individuals employed in a quality job, as defined by scores on an indexed measure, such as the Good Jobs Scorecard, which assesses pay and benefits, scheduling, potential career paths, safety, and security.
Economic mobility: Percentage of individuals who reach the level of earnings needed to enter the fourth (60th to 80th percentile) income quintile in their state or above 1, 3, 5, 10, and 15 years after completing their highest degree or leaving education (high school or postsecondary).
|
Address wage gaps in specific demographics and occupational segregation: Women and people of color, especially in such professions as home health care, child care, and hospitality, along with those with disabilities, are disproportionately affected by economic and wage inequality, and therefore are among the groups that benefit the most from living wage laws. In addition to race, ethnicity, and gender, when defining the scope of coverage, consider the immigration status of workers concentrated in specific professions to ensure that they are not exempt from living wage provisions.
Consider worker well-being: In addition to setting higher wages, living wage laws can also address other factors that disproportionately impact the well-being of certain groups, such as those that are of low- and moderate-income, those with disabilities, workers of color, or those of uncertain immigration status. This may include the impacts of climate change on working conditions, especially in warehouses, manufacturing facilities, the agricultural sector, and more. In this regard, federal and state health and safety laws tend to be under-enforced at a time when workers are experiencing extreme heat and other environment-related issues, often without adequate compensation or worker safety rules.
Community leaders and organizations: Crafting effective living wage laws depends on accurate economic data regarding local living conditions and the lived experiences of residents in each jurisdiction. Engage with community organizations and representatives, faith leaders, consumer groups, and local entrepreneurs to better understand residents’ needs, market factors, and the concerns of specific employee sectors.
Labor coalitions: A broad coalition of labor organizations and interest groups directly impacted by wage levels is critical to achieving consensus and winning approval of wage-related legislation. These include workers—in particular, low-income individuals—and trade unions, which play an important role in wage policy discussions and lobbying government officials.
Business leaders: Many business leaders support living wages, while a significant number believe that such ordinances are associated with higher labor costs, price increases that are passed on to consumers, and lower profit margins for companies. To address such key concerns, engage with business groups early and regularly to communicate the benefits of living wages, including improved morale, increased productivity, and reduced turnover. Equally important, engage with business leaders to build support for living wages as a way to not only help workers and communities but also reduce social inequality.`
Elected officials: Elected officials at both the state and local levels are critical to understanding the legislative landscape, crafting executive orders and ordinances, and preventing preemption laws. They must be engaged in efforts to determine the scope and reach of living wage laws, working with community groups and other organizations on specific provisions in government contracting and other areas.
Economists and researchers: Enlist economists, researchers, and academic experts to provide in-depth studies and data analyses to explain the effects of living wages on the economy and its impact on the lives and well-being of workers. In partnership with community and consumer advocacy groups, academics can rally support with state and federal officials to enact living wage laws to help lift people out of poverty and provide greater stability for their families.
Create a broad advocacy coalition: Living wages often are the subject of significant opposition from a wide range of employers of minimum wage workers in the area. To build public momentum for implementation, partner closely with grassroots organizers, labor rights groups, and others. Doing so will also help implementers gather input on local needs, inform specific rules related to the legislation (such as the best ways to encourage workers to file complaints), and raise worker awareness.
Leverage the power of local government spending: Local government procurement processes can encourage the proliferation of living wages; for instance, apply living wage policies to businesses receiving government contracts and/or those receiving economic development subsidies. This tactic is frequently successful even in jurisdictions where state preemption or the political context prevents the implementation of a broader ordinance.
Invest in enforcement capacity: High-impact laws typically result from significant investment in increased enforced capacity (i.e., staff to review and investigate complaints and marketing budget to raise awareness of new laws). If possible, build a funding mechanism into living wage legislation. In addition, significant resources are needed to develop and communicate enforcement mechanisms and penalties for noncompliance by covered employers.
Violations and compliance: Monitor the number and scope of complaints and the industry sectors in which they occur to identify problem sectors, which can be made available on a public-facing dashboard. At the same time, review the number and scale of penalties to assess the success of ordinances, their impact on workers, and whether companies are sufficiently complying. Jurisdictions with successful living wage ordinances and enforcement should see a decrease in violations over time.
Cost burden, poverty, and economic hardship across industries: Determine the percentage of workers in each jurisdiction experiencing difficulties meeting their needs based on low or substandard wages, the ethnicities and population segments they belong to, and the industries they are most likely to be employed in. Data on race, ethnicity, age, and gender will inform ordinances and help you target specific groups and employers who may either fall under or be excluded from the laws. Monitoring this data over time can reveal gaps or issues with living wage law enforcement.
Benefits to communities: Living wages enable workers to put food on the table and lead more secure lives while also functioning as an economic stimulus. Data on the benefits of living wages to residents (e.g., increases in consumer spending) and for businesses (e.g., higher sales and hiring additional staff) measures both the indirect impact of higher wages and their knock-on effects, which can bring tangible economic benefits to communities and local economies.
Resources
Contributors
Tsedeye Gebreselassie
Tsedeye Gebreselassie is director of work quality at the National Employment Law Project and works on researching, developing, and promoting policies that raise job standards and expand workplace protections for immigrant workers and workers in low-wage jobs
Eva Putzova
Eva Putzova is an immigrant from Slovakia, where she earned her master’s degree at the University of Economics. In 2014, Eva was elected to the Flagstaff City Council and later led a citizen initiative, raising the local minimum wage as well as the tipped wage to $15.50 per hour. As a congressional candidate in Arizona’s first district, she garnered the support of 41.4 percent of voters and was nationally among the most successful progressive challengers who didn’t make it through the Democratic Party primaries.
Kavya Vaghul
Kavya Vaghul is a Co-Founder and Chief Product Officer at Living Wage Institute, where she works towards transforming how employers value people. Prior to this, Kavya co-founded Translational Research Service and held positions at JUST Capital, Massachusetts Institute of Technology, Washington Center for Equitable Growth, City of Redmond, United States Senate, Johns Hopkins University, and EKAM Foundation. Kavya holds a Master of City Planning from the Massachusetts Institute of Technology and a Bachelor of Arts in Public Health Studies from the Johns Hopkins University.