Living wage laws
- Requiring higher pay than the federal rate: Living wage laws require all employers within a jurisdiction to pay wages at a rate higher than the federal minimum wage ($7.25 for untipped workers; $2.13 for tipped workers). Increasingly, living wage laws are designed to phase out a subminimum wage for tipped workers altogether, often over a period of 3-5 years.
- Making market-specific adjustments: Local living wage laws take into account market-related costs (such as food, child care, housing transportation, and more) to determine basic living costs and self-sufficiency. Many newer living wage laws also build in annual increases to account for changes in the cost of living and inflation.
- Multiple pathways to implementation: Some localities advance living wage laws through ballot measures; others may pass legislation through a city or county council. Legislation may also include related benefits, such as supplemental pay when an employer does not provide health insurance, unpaid and paid days off, and various job protections.
- Enforcing the law: Living wage laws and other worker protection laws can be enforced by a range of jurisdictional agencies. These can include a department of worker protection, an office of labor standards, the mayor’s office of equity, and more. Dedicated staff, often including attorneys, are responsible for raising awareness about the law, reviewing and investigating complaints, and facilitating settlements between workers and employers.
- Issue Areas
- Target Population
Adults and families, Community-wide
- Key Stakeholders
Mayor or County Executive's Office, City Council, Labor and Workers' Organizations, Law Department, Labor Standards Department, Program Evaluation Team
What evidence supports this strategy?
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. 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.
How do living wage laws impact economic mobility?
- Raising incomes: Living wage laws lead to higher immediate earnings for low-wage workers. Higher income and associated earning potential are the foundations of achieving upward economic mobility.
- Accessing new skills and education: Minimum wage laws increase earnings for all minimum wage workers (including tipped workers). Research shows that increased earnings for minimum wage workers can boost upward mobility through increased capacity to pursue new skills training and education.
- Eliminating legal sub-minimum wages: Many minimum wage laws eliminate the gap between the sub-minimum wage for tipped workers and the full minimum wage for non-tipped workers. Research shows that sub-minimum wages create a significant barrier to upward mobility; tipped-wage earners are disproportionately reliant on public benefits and have far higher poverty rates than non-tipped minimum wage workers.
Best practices in implementation
- Create a broad advocacy coalition: Living wages often are the subject of significant opposition from large 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.
- Engage with the business community: Living wage laws can be associated with short-term cost increases for some businesses. To appropriately address any concerns, engage early and regularly with the business community; communicate the myriad benefits of living wage policies, such as decreased employee turnover and increased productivity, and be prepared for an ongoing dialogue and significant pushback.
- 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.
- Move beyond hourly wages: Consider supplemental compensation to a base living wage, such as additional pay when an employer does not provide health insurance, unpaid and paid days off, and various job protections.
- Invest in enforcement capacity: High-impact laws typically results from significant investment in increased enforced capacity (i.e. staff to review and investigate complaints and marketing budget to raise awareness of new laws). Dedicate significant resources to developing and communicating enforcement mechanisms and penalties for noncompliance by covered employers.