Living wage laws
Strategy overview
- 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.
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.
Before making investments in this strategy, city and county leaders should ensure this strategy addresses local needs.
The Urban Institute has developed an indicator framework 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.
- 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.
