Living Wage Laws in U.S. Cities

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 17.11.2004, 12:15 - 13:30


Presentation by 

David Neumark (University of California, Irvine)


The presentation is based on the following two papers:

Living Wages: Protection For or Protection From Low-Wage Workers?
Living wage laws are touted as anti-poverty measures. Yet they apply to only a small fraction of workers, most commonly covering only employers with city contracts. The apparent contradiction between broad anti-poverty goals and narrow coverage suggests that goals other than poverty reduction may partly underlie living wage campaigns. This paper considers the hypothesis that living wage laws act to maintain or increase rents among unionized municipal workers. By raising the wages that city contractors would have to pay, living wage laws may reduce the incentives for cities to contract out work that would otherwise be done by unionized municipal employees, hence increasing the bargaining power of municipal unions and leading to higher wages. The evidence indicates that the wages of unionized municipal workers are increased as a result of living wages covering contractors, and is consistent with living wage laws in part reflecting rent-seeking behavior by these workers.
[Download complete paper]

The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns
(joint with Scott Adams)
Living wage campaigns have succeeded in about 100 jurisdictions in the United States. But living wage campaigns have also been unsuccessful in numerous cities. Some campaigns were derailed due to a state legislative or judicial decision preventing living wages. Other campaigns failed to get legislation passed at the city level due to a negative city council vote or a mayoral veto. The analysis in this paper exploits the information provided by failed and derailed living wage campaigns in estimating effects of living wage laws. These unsuccessful living wage campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a living wage law, and also permit the separate estimation of the effects of living wage laws and living wage campaigns. The findings indicate that living wage laws raise wages of low-wage workers but also reduce employment among the least-skilled, especially broader living wage laws that cover business assistance recipients, and living wage laws accompanied by similar laws in nearby cities.
[Download complete paper]

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