living wage movements: global perspective (advances in social economics)

Living Wage Movements

“In this volume, Professor Figart has drawn together 18 scholars for thefirst comprehensive global analysis of the various living wages movements.These essays bring to life the story of the distributive conditions of labor,through global activism and empirical research. It provides a fascinatingdetailed view of the ethical, political, economic and social foundations ofthe standard of living of the working classes in many nations. I highly rec-ommend it for courses on labor economics, public policy and comparativepolitical economy.”

Professor Phillip O’Hara, Global Political Economy Research Unit,Curtin University, Australia

Living wage activism has spanned time and space, reaching across decadesand national boundaries. Conditions generating living wage movementsearly in the twentieth century have resurfaced in the twenty-first century,only on a global scale: “sweated” labor, macroeconomic instability, andjob insecurity.

The original essays in this volume assess the movement for higher livingstandards in the USA, Canada, Europe, and Australasia. Each of the indi-vidual chapter authors has extensive experience in academia or researchinstitutes, in public policy, or in the labor movement. A variety of inno-vative efforts to achieve living wages are profiled. Minimum wageincreases, labor code activism, low pay campaigns, and fair wage clauses,for example, have begun to reverse a growing two-tiered labor market.Women, workers from racial and ethnic minority groups, and employeesin service and sales occupations have been noteworthy beneficiaries.

Upon reviewing the empirical evidence, the book’s contributors makestrong cases both for and against living wage activism. The effective blendof historical, contemporary, and global perspectives provides opportun-ities for teachers, scholars, and activists to evaluate how we can addresslow pay at the organizational and macroeconomic levels.

Deborah M. Figart is Professor of Economics at Richard StocktonCollege, USA.

Advances in social economicsEdited by John B. DavisMarquette University

This series presents new advances and developments in social economicsthinking on a variety of subjects that concern the link between socialvalues and economics. Need, justice and equity, gender, cooperation, workpoverty, the environment, class, institutions, public policy and methodol-ogy are some of the most important themes. Among the orientations ofthe authors are social economist, institutionalist, humanist, solidarist,cooperatist, radical and Marxist, feminist, post-Keynesian, behavioralist,and environmentalist. The series offers new contributions from today’smost foremost thinkers on the social character of the economy.

Published in conjunction with the Association of Social Economics.

Books published in the series include:

Social EconomicsPremises, findings and policiesEdited by Edward J. O’Boyle

The Environmental Consequences of GrowthSteady-state economics as an alternative to ecological declineDouglas Booth

The Human FirmA socio-economic analysis of its behaviour and potential in a neweconomic ageJohn Tomer

Economics for the Common GoodTwo centuries of economic thought in the humanist traditionMark A. Lutz

Working TimeInternational trends, theory and policy perspectivesEdited by Lonnie Golden and Deborah M. Figart

The Social Economics of Health CareJohn Davis

Reclaiming EvolutionA Marxist institutionalist dialogue on social changeWilliam M. Dugger and Howard J. Sherman

The Theory of the Individual in EconomicsIdentity and valueJohn Davis

Boundaries of Clan and ColorTransnational comparisons of inter-group disparityEdited by William Darity Jnr. and Ashwini Deshpande

Living Wage MovementsGlobal perspectivesEdited by Deborah M. Figart

Living Wage MovementsGlobal perspectives

Edited by Deborah M. Figart

First published 2004 by Routledge11 New Fetter Lane, London EC4P 4EE

Simultaneously published in the USA and Canadaby Routledge29 West 35th Street, New York, NY 10001

Routledge is an imprint of the Taylor & Francis Group

© 2004 Selection and editorial matter, Deborah M. Figart;individual chapters, the contributors

All rights reserved. No part of this book may be reprinted orreproduced or utilized in any form or by any electronic, mechanical,or other means, now known or hereafter invented, includingphotocopying and recording, or in any information storage orretrieval system, without permission in writing from the publishers.

British Library Cataloguing in Publication DataA catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication DataA catalog record for this book has been requested

ISBN 0-415-32002-X

This edition published in the Taylor & Francis e-Library, 2004.

ISBN 0-203-62945-0 Master e-book ISBN

ISBN 0-203-67062-0 (Adobe eReader Format)(Print Edition)

Contents

List of illustrations ixNotes on contributors xiAcknowledgments xvList of abbreviations xvii

1 Introduction to living wages around the globe 1D E B O R A H M . F I G A R T

PART IWhat is a living? 13

2 The right to an individual living wage 15J O H N A . R Y A N

3 Wages and hours: historical and contemporary linkages 27E L L E N M U T A R I A N D D E B O R A H M . F I G A R T

4 Living wage laws and the case for a targeted wage subsidy 43D A V I D A . M A C P H E R S O N

5 The determination of living wages 51D A V I D H . C I S C E L

PART IILiving wage and low pay campaigns: contemporary global activism 67

6 The living wage movement mushrooms in the United States 69D A V I D B . R E Y N O L D S

7 Organizing homeworkers in Toronto’s garment industry 85J O N A T H A N E A T O N A N D A L E X D A G G

8 Living wage and low pay campaigns in Britain 101D A M I A N P . G R I M S H A W

9 The living wage in Australia: history, recent developments,and current challenges 122J O H N B U C H A N A N , I A N W A T S O N , A N D

G A B R I E L L E M E A G H E R

10 The fight for living standards in New Zealand 138P R U E H Y M A N

PART IIIEvidence and lessons from US empirical studies 155

11 The Miami living wage ordinance: primary and secondary effects 157B R U C E N I S S E N

12 Minimum wages and living wages: raising incomes by mandating wage floors 171D A V I D N E U M A R K

13 The economic impact of living wage ordinances 188M A R K D . B R E N N E R

14 Living wages in US communities: an analysis of costs of services and economic development 210A N D R E W J . E L M O R E

Index 225

viii Contents

Illustrations

Figure

9.1 Living wage claims and Australian Industrial RelationsCommission safety net decisions, 1997–2003 129

Tables

5.1 US poverty thresholds for 2002 545.2 Living wage budgets for single-parent families with two

children 595.3 The labor hours required to earn a living wage in Memphis,

Tennessee 638.1 Evidence of low pay among private cleaning contractors 1058.2 Recommended and accepted minimum wage rates,

1999–2003 1088.3 Percentage increase in average hourly earnings, 1998–2002 1098.4 The relative level of the National Minimum Wage,

1999–2002 1109.1 Key features of the ACTU’s living wage claim 1269.2 Labor market coverage of different forms of industrial

regulation and average annual wage increases, 1996 1279.3 Wage growth among low-paid workers, 1989–99 1309.4 Change in weekly total earnings of full-time adult

non-managerial employees, 1996–2000 13110.1 Minimum wage levels in New Zealand 14412.1 Minimum wage workers and low-income families 17712.2 Percentage change in proportions of families in ranges of

income-to-needs distribution, minimum wage increase vs.no increase 178

12.3 Effects of living wage laws 18012.4 Estimates of effects of contractor living wages on wages of

below-median wage workers 18313.1 Economic impact of various living wage ordinances:

prospective evidence 194

13.2 Economic impact of various living wage ordinances:retrospective evidence 199

14.1 City contract cost increases after passage of living wage laws, 2001 212

14.2 Human services contract cost increases after passage ofliving wage laws, 2001 213

14.3 Projected versus actual increases in contract costs 21414.4 Impact of living wage laws on city economic development

projects 217

x Illustrations

Contributors

Mark D. Brenner is Assistant Research Professor at the Political EconomyResearch Institute, University of Massachusetts-Amherst, USA. Hecompleted his PhD in economics at the University of California-Riverside, specializing in development and labor economics. His mostrecent work addresses the institutional factors surrounding rising wageinequality in the United States as well as the economic impact of livingwage proposals in several cities: Los Angeles, Santa Monica, NewOrleans, and Boston.

John Buchanan is Deputy Director (Research) at the Australian Centrefor Industrial Relations Research and Training (ACIRRT), Universityof Sydney, Australia. Previously he was director of policy research inthe Federal (Australian) Department of Industrial Relations. Hismajor research interests are the demise of the classical wage earnermodel of employment, management determinants of labor productiv-ity, and the role of the state in nurturing new forms of multi-employercoordination in the labor market.

David H. Ciscel is Professor of Economics and faculty affiliate at theCenter for Research on Women at the University of Memphis, USA.He has authored two living wage monographs for the MidSouthregion and is active in the local living wage campaign. In addition tohis regular publication in the Journal of Economic Issues and otherheterodox economics journals, he writes on labor issues for regionalnewspapers.

Alex Dagg is the elected Director of the Union of Needletrades, Industrialand Textile Employees (UNITE) Ontario Council, Canada. In 1999,she was elected an International Vice-President of UNITE at theUnion’s quadrennial international convention. Alex has been anactive lobbyist for improved working conditions for homeworkers andsweatshop workers in the garment industry. She was a member of theAdvisory Group on Working Time and the Distribution of Work setup by Minister Lloyd Axworthy in 1994 and was the labor representat-ive to the former Federal Minister of Labor Alphonse Gagliano’s

“Collective Reflection on the Changing Workplace” in 1997. Alex wasalso appointed by the federal government to represent labor at theInternational Labour Organization (ILO) in Geneva at the conven-tions in 1995 and 1996 dealing with the issue of homeworkers, whichresulted in a convention on the issue.

Jonathan Eaton is a PhD candidate at the Centre for Industrial Relationsat the University of Toronto. He obtained his BA (Economics) andLLB from Queen’s University at Kingston, and his LLM from theUniversity of Toronto. From 1994 to 2002, he worked with UNITE,the Union of Needletrades, Industrial and Textile Employees, as aresearch coordinator and as assistant to the Canadian director. Hisresearch interests include nonstandard work, equality in employment,and union renewal.

Andrew J. Elmore received his law degree from the UCLA School ofLaw, specializing in public interest law and policy. He is a Staff Attor-ney and Skadden Fellow with the Legal Aid Society in New YorkCity. He has previously published in the UCLA Law Review, and isinterested in labor and employment law and policy, particularly withregard to the US low-wage and immigrant workforce.

Deborah M. Figart is Professor of Economics at the Richard StocktonCollege of New Jersey, USA. She is co-author (with Ellen Mutari andMarilyn Power) of Living Wages, Equal Wages: Gender and LaborMarket Policies in the United States (Routledge, 2002) and co-author(with Peggy Kahn) of Contesting the Market: Pay Equity and the Poli-tics of Economic Restructuring (Wayne State University Press, 1997).Among her edited volumes are Working Time: International Trends,Theory and Policy Perspectives (Routledge), Emotional Labor and theService Economy (Sage Publications), and Women and the Economy:A Reader (M.E. Sharpe). She has published numerous papers andessays on labor market issues.

Damian P. Grimshaw is Senior Lecturer in Employment Studies andAssociate Member of the European Work and Employment ResearchCentre at the Manchester School of Management, UMIST, UK. Hisresearch involves a number of international and UK projects, with astrong policy focus on European employment, gender equality, lowpay, public sector pay, gender pay inequality, and privatization ofpublic services. His recently published books include The Organisationof Employment: An International Perspective, with Jill Rubery(Palgrave, 2002) and Managing Employment Change: The New Real-ities of Work, with Huw Beynon, Jill Rubery, and Kevin Ward(Oxford University Press, 2002).

Prue Hyman is a Research Associate in Women’s Studies at VictoriaUniversity of Wellington, New Zealand, recently retired from being

xii Contributors

Associate Professor in Economics/Women’s Studies. Her 1994 book,Women and Economics: A New Zealand Feminist Perspective (BridgetWilliams Books), covers theoretical and applied areas of feminist eco-nomics. She spent two years in government at the New Zealand Min-istry of Women’s Affairs and is heavily involved with gender analysisand policy, locally and internationally, including gender impacts ofglobalization.

David A. Macpherson is the Abba P. Lerner Professor of Economics andResearch Affiliate of the Pepper Institute on Aging and Public Policyat the Florida State University, USA. His specialty is applied laboreconomics. His current research interests include pensions, discrimina-tion, industry deregulation, labor unions, and the minimum wage. Heis the author of many articles in leading labor economics and indus-trial relations journals. He received his PhD from the PennsylvaniaState University in 1987.

Gabrielle Meagher is Senior Lecturer in Political Economy at the Univer-sity of Sydney, Australia. Her research program combines feministpolitical economy and labor studies. Her current research examinesthe problem of poor industrial and cultural recognition of paid caringwork. Her recent book is Friend or Flunkey? Paid Domestic Workersin the New Economy (UNSW Press, 2003).

Ellen Mutari is Assistant Professor in the General Studies Division of theRichard Stockton College of New Jersey, USA. She has published onthe theory and methodology of feminist political economy, women’semployment during the Great Depression, working time, gender stat-istics, and race- and gender-based discrimination. Previously, she co-authored Living Wages, Equal Wages: Gender and Labor MarketPolicies in the United States (Routledge, 2002) and is co-editor ofGender and Political Economy: Incorporating Diversity into Theoryand Policy (M.E. Sharpe, 1997).

David Neumark is a Senior Fellow at the Public Policy Institute of Cali-fornia, USA. He was previously an economist at the Federal ReserveBoard, and taught at the University of Pennsylvania and Michigan StateUniversity. In addition to research on minimum wages and living wages,his recent research focuses on discrimination, segregation, affirmativeaction, the economics of aging, and the school-to-work transition.

Bruce Nissen is the Director of Research at the Center for LaborResearch and Studies, Florida International University, USA. His twomost recent books are Which Direction for Organized Labor? Essayson Organizing, Outreach, and Internal Transformations (1999) andUnions in a Globalized Environment: Changing Borders, Organi-zational Boundaries, and Social Roles (2002). He also works with

Contributors xiii

community and labor groups such as South Florida Jobs with Justiceand the Miami Community Coalition for a Living Wage.

David B. Reynolds is a faculty member in the Labor Studies Center,Wayne State University in Detroit, Michigan, USA. He authoredLiving Wage Campaigns: An Activist’s Guide to Building the Move-ment for Economic Justice, now in its fourth printing. Reynoldsheaded two major studies on the impact of Detroit’s living wage law.He sits on the steering committee of the Michigan Living WageNetwork. His latest book, Taking the High Road: Communities Organ-ize for Economic Change, is available from M.E. Sharpe.

John A. Ryan (1869–1945), designated as a Right Reverend by Pope PiusXI in 1933, was a leading figure in advocating moral arguments for justeconomic policies in the early twentieth century. He studied eco-nomics at St. Paul seminary and moral theology at the CatholicUniversity of America, later joining the faculty at Catholic. His firstbook, based on his dissertation in 1905, was A Living Wage, publishedin 1906. Ryan followed this with numerous books, pamphlets, andarticles until his death in 1945. In 1919, he was head of the SocialAction Department of the National Catholic Welfare Conference. Hisarguments became more popular with the election of PresidentFranklin Delano Roosevelt, and Ryan was influential among RomanCatholics in the Roosevelt administration. He lobbied for New Dealsocial programs and minimum wage and maximum hours provisions inthe Fair Labor Standards Act of 1938.

Ian Watson is Senior Researcher at the Australian Centre for IndustrialRelations Research and Training, where he has been working onlarge-scale workplace surveys of earnings, industrial coverage, andother issues. He was one of the authors of Australia at Work: JustManaging (1999) and Fragmented Futures: New Challenges in WorkingLife (2003). In his time at ACIRRT, he has worked on a range of pro-jects including immigrants in the labor market, labor market inequal-ity, the problem of the working poor, and development of a Health ofthe Labour Market index.

xiv Contributors

Acknowledgments

I have spent twenty years studying and writing about labor market issuesin one form or another, especially wages and wage setting. One thing thatI have always liked about doing research on wages is the politics of wagesetting. The dawning of wage labor brought with it the activism surround-ing debates over living standards. What is an acceptable standard ofliving? At what level should societies set a living wage? Should a minimumwage be less than a living wage? I have also relished the interdisciplinarynature of research on wage setting. Wages are part of the process of provi-sioning in market economies. Therefore, relative wage levels result fromcomplex political and economic processes involving the macro and microeconomy, including business, households, and the government, but alsoencompassing customs, habits, and norms. In market economies, however,wages are also a key form of identity. That means that wages have socialand psychological dimensions.

My particular interest in the feminist political economy of wage settingwas further developed by my work with Ellen Mutari and Marilyn Powerin Living Wages, Equal Wages: Gender and Labor Market Policies in theUnited States (Routledge, 2002). As part of our research, we investigatedhistorical and contemporary living wage movements. Upon completingthat book, I thought there was a story still to be told: an internationalstory. Activism around the issue of living wages and living standards is aglobal phenomenon. It has always been so. In the late nineteenth and earlytwentieth centuries, living wage advocates met at international confer-ences to share information, theories, and strategies. They corresponded asindividuals and published as organizations. One country’s legislationserved as a model and building block for the next. The same cross-fertilization is occurring today, this time aided by the rapid pace of today’shigh-tech information networks.

With the help of friends and colleagues in economics associations, Iassembled a team of authors to write about living wage issues on their“home turf.” In particular, I would like to thank Mark Brenner, DavidReynolds, Jill Rubery, and Frances Woolley for facilitating introductionsbetween myself and various contributors. I also thank each of the chapter

authors for their energy, commitment to scholarship, and attention todetails and deadlines. Though several of the chapters have been presentedin draft form at academic conferences, each chapter was written for thisvolume, with the exception of a reprinted chapter from Monsignor JohnA. Ryan’s A Living Wage in 1906. My appreciation also goes to the staffat Routledge (Taylor & Francis), especially economics editor RobertLangham and editorial assistant Terry Clague.

Many of the authors of the chapters in this volume have been involvedin living wage research and activism in their communities. We share thelabel of “scholar-activist.” However, we would have little to write aboutwithout the heroic work of grassroots activists and national/internationalpolicy advocates who devote themselves to improving the living standardsof low-wage workers. My greatest appreciation, therefore, is for the workof living wage advocates past, present, and future.

xvi Acknowledgments

Abbreviations

ABS Australian Bureau of StatisticsACCI Australian Chamber of Commerce and IndustryACIRRT Australian Centre for Industrial Relations Research and

TrainingACORN Association of Community Organizations for Reform NowACTU Australian Council of Trade UnionsAFDC Aid to Families with Dependent ChildrenAFL American Federation of LaborAFL-CIO American Federation of Labor-Congress of Industrial

OrganizationsAFSCME American Federation of State, County and Municipal

EmployeesAIRC Australian Industrial Relations CommissionBCA Business Council of AustraliaBLS Bureau of Labor Statistics, USBNB Basic Needs BudgetBUILD Baltimoreans United in Leadership DevelopmentCBI Confederation of British IndustryCCLW Community Coalition for a Living Wage (Miami-Dade,

Florida)CCNE Connecticut Center for a New EconomyCEC Commission of the European CommunitiesCIO Congress of Industrial OrganizationsCLUE Clergy and Laity United for Economic JusticeCPI-U Consumer Price Index for All Urban ConsumersCPS Current Population SurveyCTU Council of Trade Unions, New ZealandECA Employment Contracts Act (New Zealand)EDF European Disability ForumEITC Earned Income Tax CreditEPI Economic Policy InstituteERA Employment Relations Act (New Zealand)EU European Union

FLSA Fair Labor Standards Act (US)GAW guaranteed annual wageGED General Equivalency DiplomaGLA Greater London AuthorityGMB General, Municipal and Boilermakers’ UnionGMFI Guaranteed Minimum Family Income (New Zealand)HERE Hotel, Entertainment, and Restaurant Employees UnionHRDC Human Resources Development CanadaHUD Department of Housing and Urban Development, USHWA Homeworkers AssociationIAF Industrial Areas FoundationICARE Interchurch Coalition for Action, Reconciliation and

EmpowermentILGWU International Ladies’ Garment Workers’ UnionILO International Labour OfficeLAANE Los Angeles Alliance for a New EconomyLAX Los Angeles International AirportLICO Low Income Cut-OffLMPG Labour Market Policy Group of the Department of Labour

(New Zealand)LPC Low Pay Commission (United Kingdom)MIAESR Melbourne Institute of Applied Economic and Social ResearchMWA Ministry of Women’s Affairs (New Zealand)NAACP National Association for the Advancement of Colored PeopleNAS National Academy of SciencesNHS National Health ServiceNICWJ National Interfaith Committee for Worker JusticeNIRA National Industrial Recovery Act (US)NMW National Minimum Wage (United Kingdom)NOW National Organization for WomenOCSJ Ontario Coalition for Social JusticeOECD Organization for Economic Co-operation and DevelopmentPERI Political Economy Research InstituteSEIU Service Employees International UnionSMART Santa Monicans for Responsible TourismSNA Safety Net AdjustmentsSSC Solidarity Sponsoring CommitteeSSC State Services Commission, New ZealandSUB supplemental unemployment benefitTANF Temporary Assistance to Needy FamiliesTELCO East London Community OrganisationTGWU Transport and General Workers’ UnionTUC Trade Union Congress (UK)TUPE Transfer of Undertakings Protection of Employment

Regulations

xviii Abbreviations

UAW United Automobile WorkersUNITE Union of Needletrades, Industrial and Textile EmployeesUSDA United States Department of AgricultureUSDL United States Department of LaborWOTC Work Opportunity Tax Credit

Abbreviations xix

1 Introduction to living wagesaround the globe

Deborah M. Figart

Wage policies in industrialized countries have exemplified tensionsbetween impersonal markets and very personal needs. Neoclassical eco-nomic theory, for example, views wage setting as impersonal and workersas a means of production. Marginal productivity theory concludes thatcompetitive labor markets generate wages that are directly linked to pro-ductivity, or the actual job that is being performed. This wage is con-sidered fair because of the equality of the exchange (commutative justice).If the worker considers the wage inadequate, he or she is free to search fora better bargain. Any attempts to raise wages above market-determinedlevels would generate inefficiencies such as unemployment.

Yet there is another view of the wage-setting process. In this view,wages are also based upon workers’ needs, or a socially defined level ofsubsistence. Human beings must have access to the goods and servicesnecessary to support and sustain themselves and their dependants. Withinsocial economics and other schools of heterodox economic thought, thereis a rich literature on the subject of adequate living standards, how theyreflect cultural norms, and how they should be defined. These approachesquestion the necessary efficiency of market processes. Classical economistssuch as Adam Smith maintained that supply and demand fluctuations inwages were short-term phenomena, but that subsistence-level wages werefundamental to viable economic growth. Karl Marx’s version of the labortheory of value based wages on the necessary living standards of workers,determined through class struggle (see Figart et al. 2002: Chapter 3).

As living wage movements gained momentum in the late nineteenthcentury, theoretical formulations based on classical political economy viedwith the emerging neoclassical paradigm. Socialists, most notably Sidneyand Beatrice Webb (1897), argued that capitalism was an inefficientsystem, wherein short-sighted employers with disproportionate bargainingpower would treat individual workers as disposable commodities. Laborsupply and labor demand did not enter the market on equal terms. Theresulting low wages were a disincentive to technological innovation andtherefore discouraged the efficient use of resources. Other living wageactivists cited Pope Leo XIII, who issued an 1891 encyclical Rerum

Novarum (“On the Condition of Labor”). The encyclical based theconcept of a “just wage” on the scholastic principle of a “just price.”Employers are ethically obligated to pay a just wage whenever possible(Figart 2001). Both arguments noted that society necessarily supple-mented below-subsistence wages (either through charity or social welfareprograms) in order to maintain adequate living standards. Low-wageemployers were therefore either social “parasites,” according to the firstview, or morally deficient, according to the second view.

Today, low pay is a key feature in labor markets throughout the world.Living Wage Movements: Global Perspectives reviews the efforts to raiseliving standards in industrialized countries through public policy. The firstminimum wages were very limited in coverage. Minima were applied towomen only, to workers in certain sectors such as the “sweated trades,”and/or in specific regions or geographical areas. The first country-wideminimum wage was installed in New Zealand in 1894. Australia followedin 1904 and Great Britain and Ireland in 1909. In 1918, the Canadianprovinces of British Columbia and Manitoba enacted minimum wage leg-islation; they were followed by four others in 1920. The United Statespassed its first federal, gender-neutral minimum wage in 1938. Mostcontinental countries of the European Union have had continuousminimum wage legislation only since World War II.

But minimum wages are not necessarily living wages. Compromiseswere made. Coverage was limited. Debates over the setting of andincreases in national minimum wages show that the terms “minimumwages” and “living wages” are contested. They are shaped by argumentsabout what constitutes appropriate living standards for different groups ofworkers (see, for example, Paulsen 1996; Waltman 2000; Figart et al. 2002).“Minimum wages” have come to be considered a “wage floor” for unorga-nized labor, many of whom are women and/or members of racial andethnic minority groups. It has been up to trade unions to organize andbargain on behalf of workers to achieve the higher standard of living asso-ciated with “family wages.”

In recent decades, this struggle has not been easy. Labor market liberal-ization and deregulation since the 1980s have increased earnings inequal-ity. According to the European Foundation for the Improvement of Livingand Working Conditions:

This increase in earnings inequality raises concerns about the con-sequences for the lives of workers located at the lower end of the wagedistribution, with a growing proportion of workers receiving a wage solow as to harm their ability to maintain decent living standards.

(2002: 1)

The disjunction between regulated minimum wages and family-sustainingliving standards has led to the revitalization of living wage movements

2 Deborah M. Figart

across the globe. New models of public policy initiatives are emerging. Inthe United States, for example, a living wage policy has come to be identi-fied with a particular type of municipal ordinance first developed in Balti-more, Maryland, in the mid-1990s. These ordinances require private sectoremployers who receive public funds (through supplier contracts, taxbreaks, cash grants, subsidies, loans or development bonds, enterprisezone aid, and/or use of publicly-owned land) to pay their workforce a“living wage” defined at a level above the prevailing minimum wage.Advocates justify this market intervention by arguing that public taxdollars should not be used to subsidize employers who pay poverty-levelwages – echoing the parasitic industries argument advanced by the Webbsa century earlier. By 2003, over 100 US cities, counties, school boards, andother public entities have passed such living wage ordinances.1 In othercountries, policy responses include campaigns to raise the minimum wage(wage floors), engaging in low pay campaigns, and securing better wages,benefits, and working conditions for workers in part-time, contingent, tem-porary, or casual employment. All of these efforts have required coalitionsand cooperation among government, labor, and community groups.

While hours of work play a role in determining low pay, low-paidworkers can also be found in year-round full-time jobs. The issue ofpoverty-level wages is especially crucial for women and workers fromracial and ethnic minority groups (Sklar et al. 2001). Across the globe, theshare of low-income workers is disproportionately female, and most likelyemployed in less-skilled sales and service occupations. These workers arecleaning buildings, preparing and serving food, tending to children, theelderly, and the sick, performing routine office tasks, or selling and sewinggarments. Three recent studies underscore the seriousness of the problem.About one in six non-elderly Americans lives in a working poor family(see Kazis and Miller 2001). Depending on the definition, about one inseven employees in the European Union is low paid (European Founda-tion for the Improvement of Living and Working Conditions 2002). Theincidence of low pay is greater for women than men in the USA, the Euro-pean Union, Canada, Australia, and New Zealand (Jepsen 2000: Table 1).Women, therefore, are the direct and indirect beneficiaries of policies andlegislation, such as eradicating low pay, that are gender-neutral on thesurface (see Blau and Kahn 1992; Rubery 1992; Hunter and Rimmer1995).

The thirteen succeeding chapters of Living Wage Movements: GlobalPerspectives cover the origins of living wage movements and debate overpolicy interventions, explain how a living wage has been and is deter-mined, survey and assess campaigns in the USA, Canada, the UnitedKingdom, Australia, and New Zealand, and, through empirical research,analyze the economic and political impact of living wage campaigns andordinances passed in the late twentieth and early twenty-first centuries.Each of the individual chapter authors has extensive experience in

Introduction to living wages 3

academia or research institutes, in policy advocacy organizations, or in thelabor movement. Several “scholar-activists” have been directly involved inliving wage campaigns: Bruce Nissen (Miami, Florida), David Reynolds(Detroit, Michigan), Jonathan Eaton and Alex Dagg (Canada), DavidCiscel (Memphis, Tennessee), and Mark Brenner (Boston, Massachu-setts). Some of these same and other authors in the volume have providedexpert testimony or written research for campaigns, research institutes,or government agencies who have a role in wage setting: Damian P.Grimshaw (Great Britain), David A. Macpherson, David Neumark, andMark Brenner (USA), and John Buchanan (Australia). Feminist econo-mists Prue Hyman, Ellen Mutari, and Deborah M. Figart have been activein equal pay and pay equity campaigns and research in New Zealand andthe US.

Low pay and living wages: global perspectives

One early case for a living wage was made by ethicist, teacher, andscholar-activist Monsignor John A. Ryan (1869–1945). His approach washeavily influenced by Pope Leo XIII’s 1891 encyclical Rerum Novarum.Ryan’s 1905 PhD dissertation from the Catholic University of Americawas published as A Living Wage: Its Ethical and Economic Aspects (1906).In the chapter excerpted in this volume, “The right to an individual livingwage,” John A. Ryan summarizes alternative grounds for establishing aliving wage principle in wage setting that were influential in latenineteenth- and early twentieth-century living wage movements. He cri-tiques three forms of argument common among activists at the time,preferring to ground his defense of living wages on an individualisticnotion of human dignity rather than on appeals to the common good orthe common estimate of a just price. Ryan disagrees not only with theWebbs’ parasitic industries argument but also with several Catholicwriters’ interpretation of Aquinas and other scholastic thinkers from theMiddle Ages. He takes issue with the principle of commutative justice(equality of perceived gains through exchange) as the basis for a just wage,arguing that “Only in contracts between persons whose incomes are sub-stantially equal does the rule of equality or gains seem to accord with oureveryday conceptions of justice.” Further, Ryan rejects a simple equalitybetween the wage and the labor performed because, in a reverse causality,a low wage could be consistent with a low expenditure of energy undersweatshop conditions.

Ryan’s defense of living wages, presented in Chapter 2, is based on aconcept of natural rights, specifically an individual’s right to an appropri-ate distribution of the common bounty of nature. This right is maintainedby fulfilling one’s obligation to participate in productive labor. Within amarket economy, one’s share takes the form of a wage. Ryan, like Marx,notes that workers had no real alternatives to selling their labor power and

4 Deborah M. Figart

thus little bargaining power over wage rates. Ryan viewed a living wage asa means to a “decent livelihood,” the ability to live in “a reasonabledegree of comfort” (1906: 73).2 In his subsequent volume, DistributiveJustice, he specifies the elements of a living wage as access to:

food, clothing, housing sufficient in quantity and quality to maintainthe worker in normal health, in elementary comfort, and in anenvironment suitable to the protection of morality and religion; suffi-cient provision for the future to bring elementary contentment, andsecurity against sickness, accident, and invalidity; and sufficientopportunities of recreation, social intercourse, education, and churchmembership to conserve health and strength and to render possiblethe exercise of higher faculties.

(Ryan 1916: 361)

Employers were obligated because Ryan viewed private ownership as aform of stewardship, a less fundamental right than the employee’s right toa life of dignity.

Ryan’s books, A Living Wage and Distributive Justice, were publishedduring the Progressive Era, a period of US history in which many socialreformers were concerned about the wages and working conditions of thelargely immigrant labor force working in sweatshop industries. Activelyinvolved in advocating for living wages throughout his career, Ryan laterworked with Roosevelt advisors on the New Deal, and testified in the USCongress in favor of legislation to establish a minimum wage in the UnitedStates. These two crucial periods in the history of living wage movementsare also described in Chapter 3, “Wages and hours: historical andcontemporary linkages.” In this chapter, Ellen Mutari and Deborah M.Figart examine the shifting meaning of the concept of living wages indifferent political, economic, and social contexts, providing snapshots ofthree living wage movements in the USA. In response to the problem ofsweated labor during the Progressive Era, social reformers advocatedminimum wages for women. The first federal minimum wage law waspassed during the Great Depression in order to enhance the purchasingpower of nonunionized male breadwinners. Union-negotiated guaranteedwage plans were a response to fears of job insecurity during the post-warperiod. Based on their historical survey, they remind contemporary livingwage activists that discussions of wage levels are inseparable from issues ofworking time in determining living standards.

Living wage policy initiatives, including minimum wages across theglobe and the living wage ordinances that have been passed in the USA,have provoked strong responses from those who are wary of interferencewith market mechanisms. David A. Macpherson is one such skeptic. In hischapter, “Living wage laws and the case for a targeted wage subsidy,”Macpherson elucidates some problems with living wage policies, and,


specifically, the US ordinances that he terms “mandates.” The economiccosts, he argues in Chapter 4, are far worse than the intended benefits.Rather than burdening employers, Macpherson would place the respon-sibility for maintaining living standards on the state. Specifically, Macpher-son advocates expanding wage subsidies that are provided as tax creditseither to employers of low-wage workers or directly to low-incomeworking families. Such subsidies can be targeted so they have less damag-ing effects on employment and prices and they are directed specifically tolow-income families. His contribution, therefore, highlights the tensionbetween those living wage advocates who view such subsidies as enabling“parasitic” employers to maintain substandard employment practices andthose who regard some jobs and some workers as necessarily low-wage.

David H. Ciscel returns to another issue raised by Msr. Ryan: how dowe know what constitutes a living wage? In “The determination of livingwages” (Chapter 5), Ciscel carefully traces the mathematical methods inwhich “adequate” living standards have been calculated in the USA. Henotes that this type of social science is, in itself, a political act. The authorbegins by reviewing how US poverty thresholds were set up in the 1960s,how poverty lines have been critiqued, how they led feminist economiststo create alternative Basic Needs Budgets, how this academic researchcreated a flurry of self-sufficiency studies and construction of familybudgets that played key roles in living wage campaigns. Ciscel then sum-marizes how he applied the methodological approaches used in the variouscalculations of sufficiency to his own living wage study for Memphis, Ten-nessee. He concludes that defining a living wage is not difficult; the moreproblematic issue is how it can be provided and by whom – labor marketsor the state. He also reflects on the implications of the politics of definingliving standards for economic theory.

Cross-national case studies

Part II of the volume consists of five chapters that highlight aspects ofglobal activism around the call for better living standards. It opens withthe story in the United States. In Chapter 6, “The living wage movementmushrooms in the United States,” David B. Reynolds shows the growth ofgrassroots activism around economic justice. Reynolds surveys the groupsthat have elected to participate in living wage coalitions and why, and thenoutlines common elements in US living wage campaigns. Six large, city-wide campaigns (Baltimore, Los Angeles, San Jose, Chicago, Boston, andDetroit) are analyzed in more detail. The author categorizes these six astaking three forms: (1) part of a broader project in pursuit of economicjustice; (2) localized battles that had to overcome strong opposition; or (3)a local ballot initiative that led to serial campaigns around the state.

Jonathan Eaton and Alex Dagg turn our attention to a creative livingwage campaign in Toronto, Canada, that reached beyond traditional

6 Deborah M. Figart

municipal services to marginalized workers in the global economy.Chapter 7 is entitled “Organizing homeworkers in Toronto’s garmentindustry.” Clothing manufacturing is a low-wage, labor-intensive industrycommitted to flexible production. Firms rely on a labor pool of immigrantwomen who work out of their homes so that the employers can match pro-ductive efficiency with labor flexibility. The city of Toronto, with over 550fashion manufacturers, has witnessed an increase in the incidence ofpoverty among low-wage workers. Concern led the International Ladies’Garment Workers’ Union, now called the Union of Needletrades, Indus-trial and Textile Employees (UNITE) as a result of a union merger, to act.

A union investigation of working conditions showed that the averagewage was below the minimum wage in the province of Ontario. Addition-ally, homeworkers toiled for long hours without receiving an overtimepremium or benefits. Children, too, often pitched in to raise productioninside the home. The union decided to publicize the results of this studyand push for legislation to protect homeworkers. Eaton and Dagg’schapter tells the story of a “no sweat” campaign. A broad coalition thatincluded a new group, the Homeworkers Association, launched a varietyof innovative efforts to achieve living wages in the garment industry. Thecampaign had one chief success thus far when the Labor Ministry inOntario announced regulatory changes that gave homeworkers the samerights as other employees regarding hours of work, overtime pay, and paidpublic holidays.

The British campaign to secure fair wages for low-paid workers liesbetween the European model of regulation through legislation and collect-ive bargaining coverage and the decentralized collection of living wageordinances in the USA. In Chapter 8, “Living wage and low pay cam-paigns in Britain,” Damian Grimshaw provides a comprehensive analyticalsurvey of efforts to improve the UK national minimum wage and the lob-bying to incorporate a “fair wage” clause into the European Union Direc-tive on public procurement. The chapter, though, begins by describing asuccessful US-type campaign for a living wage in the municipality of EastLondon. Like living wage campaigns in the USA, the coalition in EastLondon brought together trade unions, community and civic organi-zations, religious groups, and schools.

Although Great Britain was among the first countries to legislateminimum wages in the twentieth century, coverage under the legislationwaned after World War II, and the Conservative-led government abol-ished Wage Councils, the machinery that set minimum wages by industry,in 1993. The Labour Party’s new government of 1997 immediately estab-lished the Low Pay Commission, an independent body for study, recom-mendation, and analysis. A National Minimum Wage was introduced inApril 1999. As shown in the empirical analysis by Grimshaw, regularincreases in the minimum wage since 1999 have had a significant impact onmany low-paid workers. Further, the insertion of “fair wage” clauses into


contracts of public services workers has diminished subsidies for privatefirms and has begun to reverse a previously growing two-tiered or seg-mented labor market of “good jobs” and “bad jobs.”

John Buchanan, Ian Watson, and Gabrielle Meagher explore what theAustralian case offers researchers and practitioners in other countriesinterested in living wage campaigns and policies. Unlike the decentralizedactivism around living wage ordinances in the USA, “living wages” havebeen and are an integral part of a centralized, national system of wagedetermination. Quasi-judicial industrial tribunals, under authority grantedby the Australian parliament, play a major role in setting legally bindingwages or “awards.” The tribunals have endorsed arguments for basingawards on living standards, advocated by the Australian Council of TradeUnions (ACTU).

Buchanan and his colleagues elaborate how this has occurred inChapter 9, “The living wage in Australia: history, recent developments,and current challenges.” A legislated “basic wage” or a “family wage” formen dates to the early twentieth century; the wages of women andindigenous people were an exception, however. Reflecting global trendstoward decentralization and laissez-faire in Britain in the 1980s and 1990s,changes in government and institutional arrangements lessened the role ofcentralized awards. In 1996, the Australian Council of Trade Unions revi-talized the ideal of a living wage and launched a new, three-phase livingwage campaign. ACTU sought to raise the minimum wage for workers notcovered by collective bargaining, especially those employed in contingentor part-time work, as well as provide a demonstration effect that wouldincrease wages for higher skilled workers. Buchanan, Watson, andMeagher conclude their chapter by analyzing the success, even if modest,of ACTU’s annual living wage claims. Incomes of workers did rise acrossincome groups, but living standards still continued to polarize. Womenwere the clear beneficiaries, however, as the percentage increase inwomen’s wages outpaced the percentage change in men’s wages, causing aslight narrowing of the gender-based wage gap.

New Zealand has also had a relatively centralized wage-setting process,although collective bargaining between employer organizations andunions, rather than wage boards, is the primary mechanism. In Chapter 10,“The fight for living standards in New Zealand,” Prue Hyman discussesthe erosion of this centralized system since the 1980s. Centralized bargain-ing is supplemented by a legislated minimum wage and a minimum codesetting baseline standards for various forms of leave and statutory holi-days. Under the “New Zealand Experiment,” decentralized marketmechanisms and enterprise-level bargaining supplanted centralized wagedetermination processes. Living wage activism has focused on raising thelegislated wage floor, reintroducing a universal child benefit, and debatingthe appropriate level for a tax credit program called the GuaranteedMinimum Family Income. One of the insights from the New Zealand case

8 Deborah M. Figart

is the interrelatedness of wage policies and social welfare provisions tosecure living standards.

Evaluating policy initiatives

Part III presents an array of the latest empirical research on the impact ofthe living wage campaigns and living wage ordinances. Much of the priorresearch has only been able to assess the impact ex ante, that is, beforeliving wages were fully implemented. This new research offers readersvaried evidence of the effect of living wages on employment and othereconomic indicators, municipalities, firms, and workers themselves, expost. Because it was evident that workers who receive raises benefit fromliving wage policies, the contributions to Part III focus on less intuitivefindings regarding the impact of employment and public sector budgets.Some of the larger campaigns are covered in the chapters, includingMiami, Detroit, Los Angeles, and Boston.

Bruce Nissen examines the experiences with living wage policy inMiami-Dade County, Florida in Chapter 11, “The Miami living wageordinance: primary and secondary effects.” Five areas are summarized:(1) public discussion on the relations between poverty and paid work;(2) local social movement activity; (3) political reactions from interestedparties; (4) the economic impact; and (5) the level and extent of diffusionof the Miami living wage movement throughout the state of Florida. TheMay 1999 ordinance covered the county, the county’s service contractors,the local public hospital and its auxiliaries, and some ground serviceworkers at Miami airport. In 2001, coverage was extended to all servicecontracts at the airport. One important victory is the indexing provisions:the living wage would be indexed for inflation. The initial $8.56 per hour is$9.00 per hour as of 2003.

The cost of the Miami living wage has been less than anticipated, mostlydue to the relatively small numbers of contracts that were covered.Through a survey of firms, Nissen found, surprisingly, the contractorscovered by the ordinance had a mostly positive reaction to the policy.Though their costs had slightly risen, the wage mandate seemed to “levelthe playing field” for competitive bidding. The greatest impacts of theMiami living wage ordinance were felt by the workers themselves and thecommunity coalitions that worked for the public policy. Labor, commun-ity, and faith-based alliances were built and carried over to other economicand social justice campaigns in the state of Florida. And coveredemployees improved their standard of living.

A different reading of the economic effects of legislating higher wages,both minimum wages and living wages, is presented by David Neumark inChapter 12. Neumark is less sanguine about mandating higher wages toeradicate poverty and inequality. In “Minimum wages and living wages:raising incomes by mandating wage floors,” he reviews the economic


theory on mandated wage floors, summarizing the concepts of laborsupply, labor demand, and the sensitivity of employment to wageincreases, or what economists call “employment elasticity.” He thenassesses the newest empirical research on the impact of minimum wageson employment, work hours, wages, and income inequality, includingsome of his own oft-cited scholarship. On balance, he finds that higherwages, accomplished through raising the federal minimum wage or passinglocal living wage ordinances, do not accomplish their hypothesized object-ives of helping low-income workers and their families, and that the long-run costs likely outweigh the benefits.

The use of national data sets to estimate the anticipated empiricaleffects of living wages, the methodology adopted by Neumark, is chal-lenged by Mark Brenner. In Chapter 13, “The economic impact of livingwage ordinances,” Brenner directly challenges the Neumark findings. Healso provides a comprehensive survey of the existing empirical research onthe impact of living wages to date. Brenner separates his analytical reviewinto two groupings: (1) prospective studies (estimated effects while theminimum wage was being debated, but before implementation); and (2)retrospective studies (research reports that draw on the actual experienceof US cities following implementation).

His meta-analysis of studies covers the following municipalities: Balti-more, Maryland; Boston, Massachusetts; Dane County, Wisconsin;Corvallis, Oregon; Detroit, Michigan; Hartford, Connecticut; Los Angeles,California; Miami-Dade, Florida; New Haven, Connecticut; New Orleans,Louisiana; New York, New York; Oakland, California; San Francisco,California; San Jose, California; and Santa Monica, California. The overallevidence suggests that managers in firms affected by living wage ordi-nances are likely to adopt alternative measures rather than reduce thenumber of employees or move their base of operations. Some evidenceindicates that living wage ordinances do increase the cost of some city con-tracts, but this depends on the size of the contract and is therefore not ageneralized finding. Unlike Neumark’s analysis, Brenner concludes thatthe benefits of a living wage exceed the costs, and the potential to affectliving standards of low-paid workers is significant.

The costs of human service contracts under US living wage ordinancesis investigated further by Andrew J. Elmore in Chapter 14, “Living wagesin US communities: an analysis of costs of services and economic develop-ment.” The chapter is among the first to present a comprehensiveoverview of the direct expenses after implementation of living wage ordi-nances. The author conducted structured interviews with governmentadministrators and law-makers from twenty cities, counties, and townshipsacross the USA. Elmore allows officials to speak for themselves about theimpact of living wage ordinances; their voices add considerable legitimacyto the debate. For further evidence, he also analyzed any studies con-ducted by the localities.

10 Deborah M. Figart

The chapter first specifies the increases in local contract costs, in dollarterms and as a percentage of the city budget. As shown in Brenner’schapter, Elmore finds that contract costs did rise due to living wage ordi-nances, but the increases were moderate. Only a few municipalities inElmore’s survey extended living wage coverage to employees in humanservices. These human services contracts had a larger percentage impacton municipal budgets, though these increases, too, were still modest. Con-tractors appeared to absorb the higher labor costs. In debating living wageinitiatives, law-makers have also voiced concern that a high wage man-dated under a living wage ordinance could discourage private firms fromparticipating in economic development programs, especially the creationof jobs in a low-wage sector such as retail. The author therefore next turnsto investigate ten cities with a living wage requirement for economicdevelopment projects, where subsidized jobs must pay a living wage.Elmore interviewed policy-makers and economic development personnel.Again, he finds that it was rare for a project to be cancelled because of theliving wage requirements. Finally, the chapter presents various factors thatmay have limited the negative impact of living wage laws on both contractcosts and local development programs, providing lessons for other munici-palities and the living wage movement as a whole.

The chapters in Living Wage Movements: Global Perspectives illustratethat a variety of approaches have been utilized to ensure adequate livingstandards. In part, this reflects ideological differences about the appropri-ate form of state intervention in markets and the role of wage labor inprovisioning. Society cannot be economically sustained unless socialreproduction, the daily and intergenerational renewal of the labor force,takes place. Living wage advocates support public policies that ensure thisprocess by requiring employers to provide their workers with living wages.Minimum wage laws and living wage ordinances reflect the political stand-point that employers should bear the primary responsibility for under-writing these costs. The success of such regulations, as the research in thisvolume demonstrates, depends on the depth and breadth of coverage, theteeth of enforcement, and the regularity of wage rate increases.

Wages, however, are not the only means of provisioning, even inadvanced industrialized countries. The state can directly provide incometo supplement or replace inadequate income. While some of the book’sauthors view wage subsidies as less intrusive upon market mechanisms,others regard them as fostering low-wage labor markets. Yet, the statemust clearly have a role in economic provisioning. While wage labor is animportant economic and social contribution that deserves adequate recog-nition and remuneration, combining labor market policy with more com-prehensive welfare state provisions – paid parental leave, universal accessto health care – could provide citizens with the best opportunities for real-izing human potential.


Notes1 For a further background on the US living wage movement beyond that offered

here, see Pollin and Luce (1998).2 Pope Leo called for “just wages:” “remuneration must be enough to support the

wage-earner in reasonable and frugal comfort” (1891: 27–8).

References

Blau, F.D. and Kahn, L. (1992) “The Gender Earnings Gap: Learning from Inter-national Comparisons,” American Economic Review 84 (2): 533–8.

European Foundation for the Improvement of Living and Working Conditions(2002, September) “Low-Wage Workers and the ‘Working Poor.’” Available:http://www.eiro.eurofound.ie/print/2002/08/study/TN0208101S.html

Figart, D.M. (2001) “Ethical Foundations of the Contemporary Living WageMovement,” International Journal of Social Economics 28 (10/11/12): 800–14.

Figart, D.M., Mutari, E., and Power, M. (2002) Living Wages, Equal Wages:Gender and Labor Market Policies in the United States, London: Routledge.

Hunter, L. and Rimmer, S. (1995) “An Economic Exploration of the UK and Aus-tralian Experiences,” in J. Humphries and J. Rubery (eds), The Economics ofEqual Opportunities, Manchester: Equal Opportunities Commission, pp. 245–73.

Jepsen, M. (2000) “What Do We Know about the Link between Low Pay, Genderand Part-time Work?” Transfer 6 (4): 673–86.

Kazis, R. and Miller, M.S. (eds) (2001) Low-Wage Workers in the New Economy,Washington, DC: The Urban Institute Press.

Leo XIII. (1891) Rerum Novarum, Encyclical Letter of Pope Leo XIII on the Con-dition of Labor, New York, NY: The Paulist Press.

Nordlund, W.J. (1997) The Quest for a Living Wage: The History of the FederalMinimum Wage Program, Westport, CT: Greenwood Press.

Paulsen, G.E. (1996) A Living Wage for the Forgotten Man: The Quest for FairLabor Standards, 1933–1941, Selinsgrove, PA: Susquehanna University Press.

Pollin, R. and Luce, S. (1998) The Living Wage: Building a Fair Economy, NewYork, NY: The New Press.

Rubery, J. (1992) “Pay, Gender, and the Social Dimension to Europe,” BritishJournal of Industrial Relations 30 (4): 605–21.

Ryan, J.A. (1906) A Living Wage: Its Ethical and Economic Aspects, New York,NY: The Macmillan Company.

Ryan, J.A. (1916) Distributive Justice: The Right and Wrong of Our Present Distri-bution of Wealth, New York, NY: The Macmillan Company.

Sklar, H., Mykyta, L., and Wefald, S. (2001) Raise the Floor: Wages and Policiesthat Work for All of Us, New York, NY: Ms. Foundation for Women.

Waltman, J. (2000) The Politics of the Minimum Wage, Urbana, IL: University ofIllinois Press.

Webb, S. and Webb, B.P. (1897) Industrial Democracy, London: Longmans,Green, & Company.

12 Deborah M. Figart

Part I

What is a living?

2 The right to an individual livingwage1

John A. Ryan

It is the purpose of this chapter to show that the workingman’s right to adecent livelihood is, in the present economic and political organization ofsociety, the right to a living wage. The term “workingman” is taken todescribe the adult male of average physical ability who is dependentexclusively upon the remuneration that he is paid in return for his labor.And “an individual living wage” means that amount of remuneration thatis sufficient to maintain decently the laborer himself, without reference tohis family. At the close of the chapter a word will be said concerning thewage-rights of women and children.

The grounds for living wages: alternative views

The advocates of the living wage doctrine do not all reach their commonconclusion by the same process of reasoning. Some of them base it on thesocial benefit to be derived from maintaining the workers in a condition ofthe highest industrial efficiency; others, on the manifest justice of giving aman sufficient to repair the energy that he expends in his labor; others, onthe “common estimate” of what constitutes a just price for work; and stillothers, on the personal dignity of the laborer, or his right to possess therequisites of a decent human life.

Prominent among those who defend the principle of a minimum wageon social grounds are Sidney and Beatrice Webb (1897), and their line ofargument is typical of that large class of writers who habitually regard therights and welfare of the individual from the viewpoint of society. Theymaintain that the state ought to enforce a national minimum of wageswhich would provide the laborer with “the food, clothing and shelter phys-iologically necessary, according to national habit and custom, to preventbodily deterioration” (1897: 751). By this means the community would riditself of the industrial evil called “parasitism,” that is, the existence oftrades or businesses in which the wages paid are too low to maintain theworkers in industrial efficiency, and to enable them to reproduce and reara sufficient number to take their places. These industries take from thenation’s capital stock of character, intelligence, and energy more than they

give back, and therefore steadily degrade the character and industrial effi-ciency of the whole people. Hence, as a matter of simple protection to thenational life, both present and future, this practice ought to be prohibited,and all workers ought to be given, through appropriate legal measures,sufficient remuneration to maintain their productive power.

Admitting the premises, this conclusion is obviously correct, but it isonly partially satisfactory to anyone who regards the laborer primarily as abeing endowed with a personality and rights of his own. Like every otherperson, he exists primarily for himself, not for society; and he has rightsthat are derived from his own essential and intrinsic worth, and whoseprimary end is his own welfare. Society exists for the individual, not theindividual for society, and when there is question of fundamental rightsand interests, the good of the individual, that is, of all the individuals,should be the supreme consideration. Social welfare when taken as anideal of effort entirely apart from the welfare of the particular individualsof whom society is composed, is either an empty abstraction or, concretely,the welfare of a portion only of its members – the strongest, or most effi-cient, or most intelligent. Individual rights ought, indeed, to be interpretedconsistently with the legitimate interests of society, but this is only anotherway of saying that no person’s rights should be extended so far as toviolate the rights of other persons; for the vital fact about injury to societyis always that some wrong is done to a group of human beings. And,despite the alleged evils of “parasitism,” it is quite conceivable that insome contingencies social utility would be promoted by paying some ofthe least efficient workers a wage insufficient to repair expended energy orto bring out their highest productive effort. The nation, like the individualemployer, might find it profitable to wear out quickly a portion of its pro-ductive power. The difference between the product of some laborers atbare subsistence wages and at a wage adequate to replace their outlay ofenergy and evoke their fullest productivity, might not equal the differencein remuneration. In such cases the attempt to obtain the highest industrialefficiency would be economically unprofitable. No doubt the advocates ofthe view here criticized are too humane to conclude that society is justifiedin seeking its own utility at the cost of inhumanity to any section of itsmembers. They would probably insist that this course would in the longrun be productive of more harm than good, owing to the resulting moraldeterioration. With this contention the defender of natural rights wouldagree, since he holds that true and permanent social utility, economic,moral and spiritual, can be secured only by a general observance of themoral law and the law of rights as deduced from the essential nature ofman; but he would insist that the doctrine which derives the laborer’sclaim to a decent livelihood from considerations of social utility is not onlyunsound in theory but extremely dangerous in practice. Once this viewbecomes general, the condition of the “sweated classes” will be even morehopeless than it is today; for only the few are capable of perceiving, or

16 John A. Ryan

anxious to secure, what will be beneficial to society “in the long run.” Themany will see only the apparent social utility of cheap goods and cheapservices.

The Rev. Charles Antoine, S.J. (1899), declares that there ought to bean objective equivalence between the labor performed and the wagereceived. That is to say, the laborer’s remuneration must be sufficient toreplace the energy that he has put forth in the service of his employer,and this as a matter not of social welfare but of individual rights. Whilethis formula has a certain show of exact, rigorous justice, it can be inter-preted and applied in such a way that the “equivalent” compensation willbe less than a living wage. For the energy expended by the laborer isreplaced, substantially, as long as he continues to work with his accus-tomed efficiency. Any wage that is uniform from day to day will providehim with the material means of realizing this end. The fact is that theamount of energy expended by the laborer, who is wholly dependentupon his wages, is always limited by his wages and can never be in excessof them. The subsistence received by the men and women employed insweatshops does not repair a large amount of energy, but, on the hypoth-esis that they continue at work, it replaces all that they actually expend.The rule that Father Antoine proposes cannot be made the basis of achange for the better, since it is even now in force throughout the worldof industry. In fact, it would work very well side by side with “the iron lawof wages.”

A third view: the “just price”

Other writers derive the right to a living wage from the principle of justprice. Following the Schoolmen [or the Scholastics], they maintain that forevery commodity, whether goods or labor, that men buy and sell, there is aprice that is just and fair. It is the price at which the things exchanged willbe equal. Now the equality that may exist between economic goods can benothing else but an equality of utility. And this equality is to be under-stood, not absolutely, in the sense that both exchangers will derive thesame amount of satisfaction from the goods received, but relatively to theinconvenience that each suffers by depriving himself of the good trans-ferred (see, for example, Aquinas 1894). It was as obvious to the School-men as it is to us, that in every economic exchange both parties make again, or think they do – otherwise the transaction could never take place.The utility that each obtains from the thing received is greater than hewould have enjoyed by continuing in possession of the thing parted with.Now, justice requires that these net gains should be the same for bothsides. Such is the precise and commonly accepted meaning of the scholas-tic formula: “In an onerous contract the two parties should be benefitedequally.” It is held to be a deduction from the personal equality of allhuman beings. Men have equal rights, not only to subsist upon and acquire

The right to an individual living wage 17

the fruits of the earth, but to profit by the exchange of such goods as theyhave legitimately acquired (see, for example, Castelein 1899: 208).

Since the price of goods is merely their value expressed in terms ofmoney, their value must always be so assessed and determined that theprice will be just – that both parties will obtain the same quantity of netadvantage. Understood in this sense, the value of things is primarily anethical attribute. It is measured and formulated with reference, not merelyto economic facts, but to this objective moral standard of equality of gain.If the gains resulting from the exchange of one coat for two pairs of shoesare unequal, the goods have not been rightly valued, and the contract isnot in accordance with ideal justice. In a word, justice is not realized byexchanging commodities at any valuation that the contracting parties seefit to put upon them, nor at any other valuation whatever, except the onethat is just, the just price.

Who is to ascertain and fix this just value of things in actual transac-tions? Not those who make the exchange, for they are liable to form preju-diced estimates, and the stronger bargainer will be tempted to use hispower at the expense of the weaker. In the opinion of the Schoolmen, thevaluation could be most reasonably and justly determined by the commun-ity. They admitted, indeed, that the just price of goods was incapable ofexact determination, and consisted of a “certain estimate” or approxima-tion (“quadam aestimatione”). Hence, they said, it is susceptible of threegrades, lowest, medium and highest, all of which are legitimate as rules ofpractical justice. This method of social appraisal seemed to them to be afairly satisfactory device, inasmuch as it reduced the influence of the indi-vidual bias and individual selfishness (against which the whole doctrine ofjust price was directed) to a minimum. Nor was the community to actarbitrarily in arriving at its common estimate; it was morally bound to takeinto account certain objective factors, chiefly, the cost of production, thescarcity, and the general utility of the goods appraised. Thus formulated,the “social estimate” was always the proximate determinant of just price.

Upon this doctrine the writers whom we are now considering base thelaborer’s right to a living wage. Their argument runs thus: the workingmanhas a right to a just price for his labor; the just valuation of any kind oflabor is that formed by the common estimate, or social judgment, of whatis reasonable; now the social judgment declares that a man’s wages oughtnever to be less than the equivalent of a decent livelihood; consequently,the just price of labor is never less than a living wage.

The defenders of this view are careful to point out that the social esti-mate to which they refer is not the economic social estimate. The latter isdetermined solely by the movement of demand and supply, is producedunconsciously, by the “higgling of the market,” and is always expressed inactual market prices. The ethical estimate is a deliberate pronouncementof the social judgment, made independently of the price-determiningaction of competition. It declares the prices and wages that ought to exist,

18 John A. Ryan

not those that do exist. In this sense the social estimate, we are told, main-tains that when men are paid less than a living wage, they are victims ofinjustice.

Critique of the “just price”

In considering the bearing of the doctrine of just price upon that of a livingwage, we must distinguish between its objective and subjective aspects.Equality of gain for the two exchangers is the objective standard of idealjustice; while the subjective application of the abstract rule to the concretefacts of industry is found in the social estimate, which is assumed to be thebest available expression of the requirements of practical justice. Now, ourcontention is that neither the ideal standard nor the method of applying itaffords a satisfactory logical basis for the living wage principle.

The criterion of equal gains for the two parties to an economicexchange would seem, at first sight, to possess all the requisites of a correctrule of justice. Inasmuch as men are endowed with equal rights to acquirethe resources of the earth, it seems reasonable to conclude that when twoof them enter into a contract for the exchange of goods that they have law-fully acquired – a contract in which neither intends to enact the role of aphilanthropist, but both wish to gain as much as possible – they have aright to equal quantities of gain. As we saw in the last chapter [Chapter 4of A Living Wage], equal rights to the earth do not, indeed, imply rights toequal amounts of it or its products; but this is owing to the existence ofother titles of ownership, such as superior needs, efforts and productivity,which modify the content of the primary and fundamental title. No suchconsiderations stand in the way of men’s rights to equal gains from theexchange of their goods. When we look deeper, however, we find thatthere are other and very good reasons for rejecting this standard of equalgains. In the first place, there is the difficulty of putting it into practice. Nostatement of a just price in terms of money can be formulated which willenable the two contracting parties to make equal gains in the case of anygood that is frequently bought and sold. Different men may purchase thesame article from the same merchant at the same rate, and yet the per-sonal advantage will not be the same for all of them (see, for example,Hobson 1900: Chapter 1). According to the theory that we are discussing,all the buyers ought to profit to the same extent, provided that the mer-chant’s gains on all the transactions are equal. And the chances of inequal-ity are increased when the purchasers deal with different sellers. Thesituation is the same when the commodity dealt in is human labor. It ismorally impossible to appoint a rate of wages from which the employerand every employee will obtain the same amount of net utility.

Not only is this standard impracticable (except by an approximation sobroad as to render it superfluous), but in a large proportion of cases it isunsound theoretically. For example, the man who gives his last dime to a


prosperous baker for a loaf of bread, gains far more by the transactionthan does the baker. The profit made by the latter is very small, say, onecent, and represents the satisfaction of a very trifling want. The other partyto the contract has stilled the keenest pangs of hunger, and possiblywarded off imminent starvation. Any other utility that he might have pro-cured for his dime, is, in comparison with the one that he really obtained,insignificant. Consequently, the utility of the bread to him, whether con-sidered in itself or relatively to any other good that he might have got forhis money, is much greater than the advantage accruing to the baker. Andyet no one would assert that in the ordinary conditions of production tencents is not a sufficiently large price for a loaf of bread. In accordance witha well-known law of value, the utility of a good to an individual is alwaysproportioned to the importance and intensity of the want that it satisfies;hence the more dissimilar the material conditions of the exchangers, themore will the gain of the poorer exceed that of the richer. If the two are togain equally, the poorer man must pay a price that all fair-minded personswould regard as outrageously exorbitant. Only in contracts betweenpersons whose incomes are substantially equal does the rule of equality orgains seem to accord with our everyday conceptions of justice. When, forinstance, a shoemaker gives a tailor a pair of shoes in return for a pair oftrousers, their gains are about equal, since the wants supplied are nearlyequal in importance. The inequality that we are discussing is even morestriking and more frequent in labor contracts. No matter how low thewage, the laborer gains more than the employer. The man who works for75 cents a day satisfies in some fashion his most important and intensewants. Compared with this result the pain-cost of the exertion that he putsforth is quite small. The net advantage that he derives from the contract is,therefore, very large; whereas the employer’s profit is a small amount ofmoney which, in a great many cases, represents a few cigars or someequally secondary utility. According to the equal gain principle, thelaborer is getting more than is just, although his remuneration is far belowthe limit of a living wage. As a general rule, the employer who has anyconsiderable number of men on his payroll does, indeed, obtain from theaggregate of his wage contracts more utility – a greater satisfaction ofwants both intensively and extensively – than any one of his employees,but his gain is less than the total gains of all of them; and in any one con-tract it is smaller than the advantage received by the other party, thelaborer.

As a matter of fact, the Schoolmen never made any consistent attemptto apply the principle of equality of gains to industrial contracts. Whenthey declared that the community, or, more precisely, those members of itwhose reputation for fairness was highest, was the most competent agencyto determine the concrete price that would safeguard equality betweenbuyer and seller, they also declared, as we have seen above, that thedecision of the community, the social estimate, ought to be based upon the

20 John A. Ryan

general utility, the relative supply, and the cost of production of the com-modity. Now these are objective factors, but they are in no sense anexpression or interpretation of the objective standard of equality of gains.A price fixed in accordance with them would not always – would never,perhaps – enable both exchangers to obtain the same amount of profit.Hence the Schoolmen’s working criterion of just price implies a completesetting aside of their ideal standard . . .

So much for the theoretical standard: the practical criterion, the “socialestimate,” is unsatisfactory, either as a justification or as a measure of theliving wage. To begin with, it is too vague. Does it describe the unanimous,or morally unanimous, judgment of the community – what the olderwriters called the “sensus communis”? Or, is it another name for “publicopinion”? Does it mean custom? Possibly it refers to the deliberate judg-ment of a body of men chosen from the various classes, intellectual, indus-trial, and religious, of the community. Let us see whether any of thesesocial estimates will serve today as a working rule of industrial justice.

The first of them undoubtedly sanctions the principle of a living wage.Our knowledge of the average man’s moral beliefs entitles us to assumethat he holds, at least in the abstract, that the laborer ought to have themeans of living comfortably and decently. But concerning the amount ofsubsistence goods comprised in the idea of a decent livelihood, the “sensuscommunis” lacks definiteness. The best that it can give us is a compromisederived from a multitude of individual or class estimates. We have,however, no means of ascertaining the content of this compromise, oraverage estimate, and, even if we had, we cannot be certain that it wouldbe in harmony with reason and justice. In judging of the larger and moregeneral questions of morality, the common convictions of mankind aresufficiently trustworthy; but in details its judgment is easily perverted bythe influence of bad and long established custom.

Second, that somewhat capricious form of the social estimate, calledpublic opinion, is vitiated by defects similar to those just enumerated. Itsverdict concerning the precise requisites of a living wage will necessarilybe too general, and too difficult of ascertainment. It is, moreover, essen-tially variable and therefore untrustworthy. Indeed, if we accept the pressas its mouthpiece we must admit that it has not declared in favor of eventhe principle of a living wage.

In the third place, it is undoubtedly true that a fairly definite standardof industrial justice is found in custom; but it is not a reliable standard.The custom of our time approves of wages that are insufficient to affordthe conditions of a decent livelihood – witness the remuneration of the“sweated” classes . . . Finally, the pronouncement of a carefully selectedand representative committee would, it is probable, be sufficiently definiteand trustworthy. If the social estimate, thus understood, declared thatevery laborer ought to have a living wage, and defined what it meant bythis phrase, its decision would probably satisfy all reasonable minds, and


be the nearest approach to a correct estimate of a living wage that ispractically attainable. Since, however, no such judicial body exists, itsassumed pronouncements cannot be made to serve as the basis of theliving wage doctrine.

The theory which founds a living wage upon the principle of just pricehas been discussed at this length because the concepts and formulasunderlying it dominated the industrial theory and practice of Europe forcenturies, and because they are still quite common in ethical literature.One after another the Schoolmen of the Middle Ages asserted andexpounded the principle that goods and labor had a certain just price. Andthey were right; for when we admit that a commodity can be sold at anexorbitant price we tacitly assume that it has some other price which is notexorbitant, which is just. An action cannot be adjudged wrong except byreference to some standard of right. The precise determination of thatstandard is another matter . . .

The dignity of a living wage

Finally, we come to the doctrine which deduces the laborer’s right to aliving wage from his personal dignity and his right to a decent livelihood(Leo XIII 1891; Pottier 1900). It has been shown in the last chapter that,on account of his sacredness as a person, every member of a communityhas an abstract right to a decent livelihood, and that this right becomesconcrete and actual when the material goods controlled by the commun-ity are sufficient to provide such a livelihood for all, and when the indi-vidual performs a reasonable amount of useful labor. It is assumed thatthe first condition is verified; and it is maintained that the second is ful-filled by the man who labors for hire during a working day of normallength. His general right to as much of the earth’s fruits as will furnish adecent livelihood is clear; the correlative obligation of his fellow membersof the community to appropriate and use the common bounty of natureconsistently with this right, ought to be equally clear. Now, the simple andsufficient reason why this general right of the laborer takes the specialform of a right to a living wage is that in the present industrial organi-zation of society, there is no other way in which the right can be realized.He cannot find a part of his livelihood outside of his wages because thereare no unappropriated goods within his reach. To force him to make theattempt would be to compel him to live on less than a reasonableminimum. And the obligation of paying him this amount of wages restsupon the members of the industrial community in which he lives; for theyhave so appropriated the resources of nature, and so distributed theopportunities and functions of industry that he can effectively realize hisnatural right of access to the goods of the earth only through the mediumof wages. As long, therefore, as the present organization of industryexists, the obligation of not hindering the laborer from enjoying his right

22 John A. Ryan

to a decent livelihood will be commuted into the obligation of paying hima living wage.

The right to a living wage is asserted to be valid against “the membersof the community in which the laborer lives.” Whether the term“members” refers merely to the employers, or to other persons as well, orto the community in its civil capacity, that is, the state, will be fully dis-cussed in later chapters. For the present it is sufficient to point out that theright exists, and that it holds against those who are responsible for con-verting the laborer’s opportunity of getting a living into the opportunity ofreceiving wages. “The industrial community in which the laborer lives”can be defined only approximately. It describes that section of the world’sinhabitants with which the laborer comes into somewhat close economicrelations, chiefly, those who are primarily benefited by his labor, and thosewho have appropriated that portion of the earth’s resources that otherwisewould be practically within his reach . . .

One of the principal reasons why the right to a living wage has beenobscured in the minds of many men, is the complexity of modern eco-nomic life. An example or two will illustrate this contention. Let ussuppose that six men settle upon a no-man’s land, and proceed to divide itamongst them. Although it is capable of affording a comfortable liveli-hood for all six, five of them – an undoubted majority – organize a govern-ment, and divide the land in such a way that the portion allotted to thesixth will barely keep him alive. Each of the other five is thus enabled toenjoy something more than a decent livelihood. Now, it is safe to say thatninety-nine of one hundred men would condemn this proceeding as unjust.They would maintain that the right of the sixth man to the whole amountof land distributed was just as good as the right of any of the others, andthat no reason, title, or justification existed for depriving him of an equalshare, when that much was essential to a decent livelihood. Imagine, now,a company of fifty men taking up their abode on a territory that no manhas previously visited or claimed. Instead of dividing up the land, they tillit in common, and distribute its produce. Not all of them, however, laborupon the soil; there is a shoemaker, a weaver, a tailor, a carpenter, and soon; every man performs the task for which he is best fitted. But the distrib-ution of their common product is so carried out that forty-five can live inabundance, while the remaining five have merely the means of continuingto exist and work. The services of these latter, so the other five assert, arenot worth more than this pittance. Again it is palpable that the commonproduct of a common property has been unjustly apportioned by the arbi-trary action of the majority; for the five, we assume, perform a reasonableamount of useful labor. The case is precisely the same, at least in principle,in the more complex and elaborate industrial conditions of today: themembers of a community who are in control of its land and resources,violate the laborer’s right to live decently out of the common bounty ofnature when they so take advantage of the existing distribution of private


property as to deny him a living wage. In exercising their right of access tothe earth, they make it impossible for the laborer to exercise his as fully asis demanded by decency and justice. And they do it just as effectively, theyare as truly responsible for the laborer’s inability to enjoy his natural right,as the greedy and arbitrary majority in the above mentioned examples.For the laborer, generally speaking, is as little able to change his locationas are the harshly treated members of those two isolated communities. Afew workingmen could, indeed, find a living elsewhere, but the over-whelming majority must stay where they are, or merely exchange placeswith one another – unless the whole machinery of industry is to stop, andmankind to perish off the face of the earth. The controllers of the indus-tries and material resources of a community cannot get along withoutwage-workers; rather than make the attempt, they would gladly pay everyone of them a living wage which is a clear indication that they regard thelaborer as really worth that amount. Hence the complexity of the presentindustrial system obscures, but in no way annuls, either the rights of thelaborer, or the correlative obligations of his fellow citizens.

Another cause of the prevailing indifference toward these rights andobligations is ignorance and neglect of the common, or social, aspect ofproperty. All too general is the notion sanctioned by the definitions ofproperty in the Roman Law and in the Civil Code of France, that a manhas a right to do with his own what he pleases. Such a claim is obviouslyabsurd, since men have not a right to do as they like with their faculties, tosay nothing of the bounty of nature which was created for the benefit ofall. They have a right to do with their own only that which is consistentwith the rights of others. The private proprietor too often forgets that hisright of ownership is valid only as a means to his right of use, and that thelatter is a right common to all mankind, which he is obliged to interpretand exercise within such limits that its realization shall be possible for hisfellow men likewise. He forgets that when he appropriates a portion of theearth’s resources for his own use and benefit he diminishes by that muchthe amount available for private ownership by the rest of men. He forgetsthat his less fortunate neighbors, among whom must be counted the labor-ers, have, on account of their inborn right of access to the world’s materialgoods, some sort of claim to that part thereof which he calls his own. Theexaggeration of the scope of individual ownership, and of the ability of thepropertyless man to take care of himself in the competitive struggle, hasconverted into a maxim of business ethics the contention that employerand employee have no property rights against each other except thoseexpressly named in the labor contract. The fact that a contract may be theoccasion of a right, which it does not explicitly provide for, is entirely over-looked. It is forgotten that the laborer enters the wage-contract as a manendowed with a natural and indestructible right to a decent livelihood,which the contract renders impossible of realization except through themedium of wages. His right to a living wage is merely the former right as

24 John A. Ryan

modified and determined by the contract. In so far as it is valid against hisemployer, it is produced neither by his contract with the latter nor by hisright to a decent livelihood, taken separately, but by the two in conjunc-tion . . .

To the objection that some laborers possess other means of living inaddition to their labor power, the answer is that these are rather rareexceptions. Whether they also have a right to a living wage is of compara-tively small importance. Still it would seem that the question ought to beanswered in the affirmative, since they perform as much labor as their lessfortunate fellows. At any rate, there are good social reasons for payingthem as much as is received by the other workers of their group.

A word will not be out of place concerning the wage-rights of womenand children. According to the foregoing reasoning, it is evident that thosewomen who are forced to provide their own sustenance have a right towhat is a living wage for them. Since they have no other way of living butby their labor, the compensation therefore should be sufficient to enablethem to live decently. Again, women doing the same work with the samedegree of efficiency as men in occupations where both sexes are employed,have a right not merely to a woman’s living wage, but to the same remu-neration as their male fellow workers. Distributive justice requires thatequally competent workers be rewarded equally. Moreover, when thewomen receive less pay than the men, the latter are gradually driven out ofthat occupation (see, for example, Smart 1895). Unless we hold that anincrease in the proportion of women workers is desirable, we must admitthat social welfare would be advanced by the payment of uniform wages toboth sexes for equally efficient labor.

Children of either sex who have reached the age at which they can,without detriment to themselves or society, become wage earners, but whocannot perform the work of adults, have a right to a wage sufficient toafford them a decent livelihood. They are entitled to this because theirwages, generally speaking, constitute their sole source of maintenance. Itmust be noted that a living wage for children refers to their essential needsas members of a family, not to the requisites of boarding-house life, as thisis not the condition in which working children are usually placed. Finally,children of either sex who perform the work of adults ought to receive thewages of adults, for the same reasons that justify the payment of men’swages to equally efficient women.2

Notes1 Editor’s note: This chapter originally appeared as Chapter V of A Living Wage:

Its Ethical and Economic Aspects, “The Right to a Personal Living Wage” (thetitle in the table of contents) or “The Right to an Individual Living Wage” (thetitle on the opening page of the chapter), published by The Macmillan Companyin 1906. It has been shortened slightly, section titles were added, and somechanges were made to conform to house style (e.g. in the original, Ryan


consistently capitalized the phrase “Living Wage”). The reader is to interpretellipses [. . .] as text that has been deleted from the original. Those interested in afull-length presentation are encouraged to consult the source publication.

2 In speaking of a living wage, whether for men, women, or children, it is assumedthat they are employed during the whole of the working time of the year. Con-sequently, women who are obliged to devote all their attention to householdduties for a considerable portion of the year, and children who attend school, arenot entitled to a living wage for the entire year. As we shall see, the right to aliving wage must be secured in another way.

References

Antoine, C. (1899) Cours d’Economie Sociale, Paris.Aquinas, T. (1894) Summa Theologica, Rome.Castelein, A. (1899) Institutiones Philosophiae Moralis et Socialis, Brussels.Hobson, J.A. (1900) The Economics of Distribution, New York.Leo XIII. (1891) Rerum Novarum, Encyclical Letter of Pope Leo XII on the Con-

dition of Labor, Rome.Pottier, A. (1900) De Jure et Justitia, Liège.Smart, W. (1895) Studies in Economics, New York.Webb, S. and Webb, B. (1897) Industrial Democracy, London.

26 John A. Ryan

3 Wages and hoursHistorical and contemporarylinkages

Ellen Mutari and Deborah M. Figart

. . . the workingman’s right to a decent livelihood is, in the present eco-nomic and political organization of society, the right to a living wage.

(John A. Ryan, A Living Wage, 1906: 81)

In the opening sentence to the excerpted chapter reproduced in thisvolume, Msr John Ryan asserts that his living wage doctrine is an histori-cally contingent principle. The right to a living wage is equivalent to theright to a “decent livelihood” given “the present economic and politicalorganization of society.” By this, Ryan means that advocacy of livingwages is predicated on the institutionalization of wage labor as theprimary means of provisioning for individual workers and their families.Ryan’s book, A Living Wage, was published early in the twentieth century,at a time when wage labor had only recently become an accepted socialnorm in most industrialized countries. Even so, which of society’smembers could and should participate in paid labor, and to what degree,were still contentious issues.

In the era in which property ownership bestowed economic status andeven citizenship rights, working for wages was viewed as relatively un-desirable. For example, the term “wage slavery,” a dominant metaphor inthe United States, signified the demeaning status associated with wagedwork in the early nineteenth century (Roediger 1991). Over the course ofthe nineteenth century, the expansion of industrialization, and, with it, theseparation of factory work from the household, meant that an increasingproportion of people, especially men, came to rely on working for a wageas their primary means of provisioning. Masculinity, in the process, wasredefined. Breadwinning came to be viewed no longer as subjection to amaster, but rather as a means to economic independence, the benefits ofconsumer society, democratic citizenship, and status as head of one’shousehold (Connell 1993; Glickman 1997).

Under this male breadwinner ideal, young single women from familieswith limited means engaged in wage labor for a few years before gettingmarried. Married women, however, were supposedly excluded from wage

labor unless their families had no other method of meeting subsistenceneeds. Despite this ideal, many women did engage in remunerated work inboth the formal and informal economy. Married women working from thehome were crucial to the garment industry in many countries. Otherwomen continued their work in family businesses such as farming orhandicrafts. Some took in boarders, did laundry at home, and performed avariety of other income-generating activities. And many women did workfor wages, as domestic servants, in factories, and in shops (Honeyman andGoodman 1998; Figart et al. 2002).

The proliferation of wage labor was thus a precondition for, as well as aresult of, the emergence of living wage movements. Living wage move-ments legitimated wage labor by differentiating respectable forms ofemployment from those that were considered oppressive or exploitative.Living wage standards, however, reflected the gendered (and, especially inthe United States, racialized) social order in which these movements flour-ished. Working men joined unions and struggled with employers toachieve a family wage, defined as a wage sufficient to support a dependentwife and children (Glickman 1997; Honeyman and Goodman 1998). Infact, another chapter of Ryan’s A Living Wage (the chapter subsequent tothe one excerpted in this volume) argues for men’s “right to a family livingwage” rather than simply an individual living wage; he defines this as theability to support a spouse and four or five children. For Ryan and manyother living wage advocates, living wages for women were fairly consis-tently construed as less than living wages for men. Wage-setting processesas well as levels were often gendered. Unionized male workers sought toestablish a breadwinner wage primarily via collective bargaining. Effortsto improve working women’s living standards across industrialized coun-tries, in contrast, largely focused on “protective legislation” aimed at rein-forcing motherhood as women’s primary life purpose (Wikander et al.1995; Mutari 2000).1

The discourse of living wage movements resonated across the theo-retical and political spectrums in the early twentieth century. During thisperiod, economists, policy-makers, and business leaders, as well as laborleaders and social reformers, understood economic activity as a process ofprovisioning, that is, of producing and reproducing human material life.While market forces had long been understood to play a role in settingwages, market outcomes could be judged on their ability to provide aliving and regulated when they failed to do so (Figart et al. 2002).

This chapter explores three examples of twentieth-century living wagemovements. These “snapshots,” taken from the United States, indicatethat living wage movements take different forms in various political, eco-nomic, and social contexts. While broadly defined as a remedy for lowwages, in different historical contexts, the meaning of low wages can varydramatically. Therefore, we examine how living wage advocates definedthe problem that living wage policies were meant to address at the time.

28 Ellen Mutari and Deborah Figart

Important insights with implications for contemporary living wage move-ments emerge from this analysis.

One is the inter-relatedness of issues of wages and hours in these differ-ent historical contexts. The nature of the linkage, however, changes. Atthe turn of the twentieth century, when low pay was associated with“sweated” labor, overwork was key. During the Great Depression, lack ofemployment, or underwork, was crucial. The Fair Labor Standards Act(FLSA) of 1938 coupled penalties for excess hours (to share employment)with a legislated wage floor (to increase purchasing power) as a means ofstimulating the economy. Guaranteed annual wage plans, encouraged byboth the FLSA and the (World War II) War Labor Board, represented aneven stronger melding of wages and hours by stabilizing income inresponse to cyclical fluctuations. The issues became de-coupled by theinstitutional arrangements established during the post-war period. Theunraveling of these institutions has generated a new set of concerns forcontemporary living wage activists.

Snapshot 1: The genesis of wages and hours legislation inthe USA

The period from 1880 to 1920 was a pivotal time for living wage move-ments in the USA and other industrialized countries. During what isreferred to as the Progressive Era in the United States, business concen-tration combined with mass immigration and macro-economic fluctuationsplaced many workers in a weak position to negotiate a price for theirlabor. Social activists called attention to this lack of bargaining power. Inresponse, social reformers advocated factory safety and inspection lawsand labor regulations such as maximum hours and minimum wages. InEurope, Australia, and the United States, however, most of the so-calledprotective legislation during this period was gender-specific. That is, thelabor regulations usually applied to women (and children) but not adultmen.

Protective legislation in the United States was passed in individualstates but not federally. From 1912 to 1923, minimum wage legislation forwomen was enacted in fifteen states, the District of Columbia, and PuertoRico (US Department of Labor, Women’s Bureau 1928). Wage minimafor specific occupations within industries were set by industrial boardscomprised of representatives from business, labor, and the community.The decision to focus on women workers was partly a strategic response tothe laissez-faire stance adopted by the US Supreme Court. A New Yorkmaximum hours law that applied to male workers (a ten-hour limit forbakers) was overturned by the court in a 1905 ruling (Lochner v. NewYork 1905), on the ground that labor regulations violated the workers’freedom of contract. In 1908, the court held, however, that women’sfreedom of contract could be superseded in the interest of protecting their

Wages and hours 29

reproductive health and thus the society’s interests (Muller v. Oregon1908). Massachusetts subsequently passed the first US minimum wage lawin 1912; the Supreme Court did not rule in a 1917 case, challenging theconstitutionality of this relatively weak legislation. It seemed, for a brieftime, that protective legislation was acceptable for women but not men.In 1923, however, the Supreme Court voided Washington’s strongerminimum wage legislation (Adkins v. Children’s Hospital). State-levelminimum wage laws remained in effect in many states but became virtu-ally unenforceable (Lehrer 1987; Nordlund 1997; Power 1999).

In order to establish minimum wage laws and other gender-specific pro-tective legislation, social reformers perpetuated the rationale that identi-fied women primarily as mothers rather than as workers. The “livingwage” established by these regulations was not the family-sustaining orbreadwinner wage advocated by unions for male workers. Most discus-sions about appropriate levels presumed that working women required, atbest, a wage sufficient for a temporary spell of independence (as a“woman adrift”). At the lower end, policy-makers argued that a workingwoman needed only enough to contribute to her own support within anextended family, thereby benefiting from the “economies of family life.”

At the same time, such legislation was a tool for combating the harshconditions experienced by low wage women workers, especially the youngdaughters of recent European immigrants who were employed in manu-facturing under “sweatshop” conditions. Their labor force intermittencymade unionization difficult and their bargaining position weak. Therefore,while some social reformers accepted the essentialist viewpoint endorsedby the Supreme Court, others advocated gender-specific legislation purelyfor strategic or pragmatic reasons (see Figart et al. 2002: Chapter 5).

States enacted separate laws regulating minimum wages and maximumhours. Furthermore, the states with maximum hours laws were notnecessarily those with minimum wage laws, or vice versa. For the socialreformers advocating labor legislation, the two issues were integrallyrelated. The “problem,” as they defined it, was sweatshops (see, forexample, Kelley 1998). Sweatshops were small manufacturing operationswhere employees worked long hours for minimal pay in crowded andsometimes unsanitary or dangerous working conditions. Many sweatshopsoperated out of apartments in tenement buildings and other locations thatwere not constructed for industrial use. In other cases, mothers and chil-dren performed piece work in their own homes.

Living wage advocates argued that sweatshops proved that untamedcompetition did not breed efficiency. In fact, those innovators who intro-duced new technologies and the best practices toward their labor forcewould be undercut by ruthless employers who simply pushed their work-force to work harder, faster, and longer. Below-subsistence wages meantthat charity or the meager social welfare programs of the time would becalled upon to ensure social reproduction. At stake was not simply the


daily renewal of the labor force, but the intergenerational renewal as well.Young women who received inadequate nutrition, were poorly housed, ortempted by poverty into accepting favors from men would be less able tofulfill their future role as the virtuous mothers of the next generation ofworkers. For this reason, sweatshop employers were described as “para-sitic,” meaning that they were leeches on the community as a whole(Power 1999).2

Minimum wage laws and maximum hours laws were separate policyinstruments, but they were strategically linked by social reformers’ defini-tion of sweatshops. Overwork and exploitation were seen as mutually rein-forcing. Low pay necessitated long hours of work, especially when piecework was performed in the home. Long hours bred health and safetyhazards. Depleted workers were less efficient, depressing productivity andtherefore wages. Further, the issues became associated legally. TheLochner and Muller decisions regarding maximum hours establishedprecedents that enabled minimum wage regulations, at least in the shortrun until the Adkins decision (Lehrer 1987). The connection betweenwages and hours became more explicit in the next round of wage regula-tions, the gender-neutral laws established during the Great Depression ofthe 1930s.

Snapshot 2: Wages and hours in one law

The advent of the Great Depression of the 1930s redefined how socialreformers viewed the inter-relationship of wages and hours and thusreshaped and reinvigorated the living wage movement in the USA. Macro-economic problems were crucial, as millions of workers could not gain aliving for their families. The unemployment rate skyrocketed from 3.2percent in 1929 to 24.9 percent in 1933. Other “discouraged workers” wereuncounted because they stopped looking for work, statistically droppingout of the labor force. The unemployment rate was still as high as 20percent in 1938 when the Fair Labor Standards Act was passed by the USCongress and did not fall below 14 percent before the end of the decade(Margo 1993). Working men found themselves unable to be breadwinnersand more women became “added workers,” finding jobs gendered asfemale in less cyclically sensitive industries (Humphries 1976; Mutari1996). Further, prevailing economic discourse among living wage advo-cates began to reflect nascent Keynesian concepts, including the import-ance of increased purchasing power to jump-start the faltering economy.

The first attempt to regulate wages and hours as part of PresidentFranklin Delano Roosevelt’s New Deal policies came as part of theNational Industrial Recovery Act (NIRA) of 1933. In coupling wage andhours standards, the National Industrial Recovery Act linked a labor-supported movement for shorter hours with social reformers’ call forminimum wages. This was not the position favored by the American

Wages and hours 31

Federation of Labor (AFL), the largest federation of unions in the US atthe time. Historian Landon Storrs observed that “what organized laborand some businessmen had accepted in the states for women workers theyfound unacceptable as part of a federal program that included men” (2000:95). The labor federation preferred to isolate the maximum hours issue,supporting a thirty-hour week bill introduced by Senator Hugo Black ofAlabama in 1932. The skilled craft unions that comprised the AFL soughtshorter hours as a means of spreading the available work over a largerpool of workers, but they staunchly defended collective bargaining as theappropriate means of setting wages for male workers.

Secretary of Labor Frances Perkins had deep roots among the socialreformers who had strategically crafted protective legislation during theProgressive Era. They considered wages and hours to be inextricablylinked. Without wage regulations, shorter hours could impoverish thelowest paid workers. Perkins had been rebuffed when she proposedamending the Black Bill to create industry boards setting minimum wages.Perkins and her allies succeeded in coupling the two issues in the NIRA,however, because the labor movement was anxious for the favorableunion-organizing provisions to be incorporated into Section 7a of theNIRA; the unions traded off their opposition to wage setting by industrialboards for the right to unionize (see Figart et al. 2002: Chapter 6).

The NIRA did not survive a constitutional challenge and was over-turned by the US Supreme Court in 1935. Even as the constitutional chal-lenge to the NIRA was being decided, flaws within the system it effectedwere becoming obvious. Domination of the National Recovery Adminis-tration (the administrative body overseeing enforcement) by employers,implementation of low standards under the codes, and scanty enforcementhad generated substantial criticism by and frustration for social feministsand labor unions even before the court acted. In particular, sex and racediscrimination were institutionalized in many of the industry codes (seeStorrs 2000). Minimum wages for women were lower than minimum wagesfor men, for example. Perkins herself wrote that she believed at the timethat the NRA “would blow up by internal combustion” (1946: 248).

Two key factors – the separation of legislative and executive powersand federal responsibility for interstate commerce – became central ele-ments to the construction of a federal wage and hours bill that couldsurvive constitutional challenge. Nevertheless, wage regulations withenforcement mechanisms would not have been possible had the SupremeCourt not reversed its position of unrelenting hostility to market inter-vention. The Fair Labor Standards Act of 1938 (FLSA) established only a25-cent minimum wage (rising in steps to 40 cents per hour by October 24,1945), enforced by a new Wage and Hour Division in the Department ofLabor. In the first years of implementation, there were also industry com-mittees that could set higher minimums in specific industries, but not morethan 40 cents per hour. The minimum wage quickly became a wage floor


enforced by a complaint-driven litigation mechanism rather than by activeinvestigation of labor conditions.

Coverage was limited from the start. The language of the Act mostclearly applied to wage workers in manufacturing, mining, wholesaletrade, some transportation, and utilities. Agricultural work was exemptedfrom the wages and hours provisions, although in the final law child laborin the fields was banned. Most retail sales occupations were omitted on thebasis of the interstate commerce provisions. Executive, administrative,supervisory, and professional work were also unprotected, since the regu-lations were intended to apply to waged, not salaried, workers. Takentogether, these restrictions excluded most female-concentrated jobs.Further, the two job categories that contained the vast majority of AfricanAmericans – farm labor and domestic service – were not covered by theFLSA, following the pattern set by most earlier state-level minimum wagelaws.

Once again, minimum wage regulations were structured to definecertain groups as possessing inadequate bargaining power and othergroups as able to negotiate their own wage. The focus had shifted,however, from young women in sweatshops to “unskilled” and unorgan-ized male workers (see Nordlund 1997; Mutari 2000). The law wasworded to reassure unions that government regulation would not inter-vene in industries regulated by collective bargaining. Skilled male workersin unions could use their bargaining power to define acceptable livingstandards and labor markets to ensure a share of productivity gains. Un-organized workers were given a legislated wage floor. In testifying on behalfof the legislation, one prominent labor leader, John L. Lewis, argued that:

The unskilled workers or those in the lowest grade of the scale of occu-pations in an industry are entitled to receive the subsistence or livingwage, and above this guaranteed minimum, semiskilled or skilledemployees are paid differentials established by precedent or throughcollective bargaining, based on skill, experience, and productivity, andhazard.

(US Congress 1937: 275, emphasis added)

Since few female-dominated industries and occupations were covered bythe FLSA, the weaker, virtually unenforceable state laws continued to bethe primary protection for working women.

Multiple meanings of the term living wage persisted into the twentiethcentury. These definitions reflected different visions of what constituted aliving for different groups of workers and how these visions could bestrategically achieved. The legacy of gender-specific minimum wages wasthat labor legislation was stigmatized as appropriate for weak members ofthe labor force – the unskilled and the unorganized. Such protection wasdifficult to reconcile with hegemonic concepts of masculinity and

Wages and hours 33

whiteness. During the Depression, however, state protection was now con-sidered necessary for relatively powerless unskilled and unorganized maleworkers. A new hierarchy was created between those men who neededprotection and those who could represent their own interests throughunions.

Excluded from this dichotomy were African American males. Concen-trated in the excluded industries of agriculture and domestic service, theydid not fall under the FLSA umbrella. Nor were they represented byunions, both because of the industries in which they were concentratedand due to the legacy of the labor movement’s racism. Neither mechanismfor achieving a breadwinner wage was available. Multiple wage earners,rather than a male breadwinner, was the logical implication for AfricanAmerican families.

As movements for gender and racial-ethnic equality progressed overthe course of the century, new groups became included under the federalstatute. FLSA coverage was extended to many new groups of workersthrough a series of amendments in the 1960s and 1970s. More workers inretail came under the FLSA umbrella in 1961. In 1967, laundries, publicschools, nursing homes, the construction industry, and some farm workersbecame covered. Changes in 1974 were aimed at domestic workers withfairly regular employment (see Nordlund 1997; Figart et al. 2002: Chapter6). Women workers and workers of color, originally excluded from cover-age because of the occupations and industries in which they worked, cameto constitute the majority of minimum wage workers.

During roughly the same period that coverage expanded, however, thereal value of the minimum wage diminished. At the peak of its purchasingpower in 1968, a worker earning the federal minimum wage in a year-round, full-time job (2,080 hours annually) could support a family of fourat the federally-defined poverty threshold. As increases in the minimumwage became less frequent, the minimum wage ceased to be a family-supporting wage (Figart 2001). At its current value of $5.15 per hour, afull-time, year-round worker would not earn enough to keep a family oftwo above the 2002 threshold for a parent and with one child ($12,400).

The linkage of wages and hours in the FLSA legislation was born of animportant insight: an hourly wage alone does not determine a worker’sstandard of living. The number of hours worked per week, month, andyear also matters. Indeed, at the end of his 1938 State of the Unionaddress, Roosevelt hinted at the importance of this issue when he advoc-ated:

thinking in terms of regularizing the work of the individual workermore greatly throughout the year – in other words, in thinking more interms of the workers’ total pay for a period of a whole year ratherthan in terms of his remuneration by the hour or by the day.

(1967: 2840)


For this reason, the provisions of the FLSA included language designed tosupport the institutionalization of guaranteed annual wage plans. Thisrelatively short-lived concept fused the issues of wages and hours, provid-ing a more holistic approach to securing living standards.

Snapshot 3: A different approach to wages and hours

The link between wages and hours became more explicit with the move-ment for guaranteed annual wages. This movement peaked in the USAduring the mid-twentieth century.3 The emergence of mass productionindustries, along with policies to foster mass consumption of the productsof these industries, created large firms with bureaucratic management anddiminished skill and autonomy for workers. While individual workers lostbargaining power through this deskilling process, employers did seek tomaintain long-term relationships with employees who were familiar withproprietary production processes. Internal labor markets began toaugment external labor markets in setting wages and other conditions ofemployment.

The internal labor market strategy was particularly popular in the massproduction industries. These industries – from steel and automobiles totires – were organized by the new labor federation, the Congress of Indus-trial Organizations (CIO). The CIO differed from the AFL in that it sawthe future of unionization as protecting the interests of unskilled and semi-skilled workers rather than just the interests of skilled craftsmen. In anattempt to cushion mass production industry workers from the seasonaland cyclical demand for their labor (that is, the shifting hours or weeksthat corporations employed them throughout the year), many CIO leaderstook up the cause of a guaranteed annual wage (GAW) (see, for example,Shishkin 1953; Seastone 1955; Becker 1968). A guaranteed annual wage(GAW) provides a regular income stream to workers, effectively provid-ing the income security held by most white-collar professionals. Salariedwhite-collar workers traditionally had such protection, earning a stablesalary despite shifting work loads.

Union President Walter Reuther summarized the rationale behindwage guarantees in an address before the 1953 United Auto Workers(UAW) convention:

Half a dozen General Motors executives get from three to four, even$500,000 a year. They live by the year, they get paid by the year. Butthe workers live by the year and get paid by the hour. That is wherethe problem arises.

(quoted in Seastone 1955: 915)

As one observer summarized the position of the textile worker unions:“We have no time to think about the guaranteed annual wage at present;

Wages and hours 35

when we have won the battle for a rise of minimum hourly rates . . . wemay be able to go into the question of guaranteed annual wage” (Kaplan1947: 32). GAW policies were thus primarily supported by unions in male-dominated industries. In fighting for a GAW, unionized men were pursu-ing a marker of middle-class masculinity.

The pace of adopting GAW plans quickened in the 1930s, as workersand even some employers sought stability in a period of economic uncer-tainty. According to the US Bureau of Labor Statistics (1948), the numberof plans nearly doubled from 1931 through 1935. A Keynesian or macro-economic version of the living wage argument was advanced as a majorreason for fostering GAW plans: “To many, the appeal of annual-wageguarantees is that in critical periods these plans will provide the purchas-ing power to stabilize consumption and employment” (Feldman 1947:835). Although the Social Security Act of 1935 established an unemploy-ment insurance program to stabilize income, living wage advocates main-tained that the benefits provided were not enough money to feed a family.In order to ensure that the provisions of the Fair Labor Standards Act didnot conflict with GAW plans, Section 7(b)(2) of the FLSA exempted firmsfrom payment of the overtime wage premium (up to twelve hours a dayand fifty-six hours a week) if they possessed bona fide guaranteed annualwage or employment agreements.

The deep economic dislocations of the 1930s were followed by highcapacity utilization during World War II. It was only as anticipation of thewar’s end heightened concern over the cyclical sensitivity of employmentthat the GAW issue reemerged (Kaplan 1947). In 1944, the United Steel-workers of America demanded guaranteed annual wages in a case heardby the National War Labor Board. The Board deferred its decision;however, it recommended the president appoint an advisory committee tostudy the subject. The resulting study, termed the Latimer Report, wasissued in January of 1947 (see Latimer 1947). The report found 196current plans in operation in the United States, covering less than 1percent of workers employed in non-agricultural or non-governmentalestablishments. The majority of the companies with plans were small firms,producing primarily consumer goods with predictable seasonal, ratherthan business cycle, fluctuations in output. Based on the limited scope ofGAW plans, the report recommended private supplements to unemploy-ment benefits as a more feasible means of implementing wage guaranteesin cyclically sensitive industries.

During the boom years after World War II, the drive for the GAW loststeam. The United Steel Workers, the United Auto Workers, and theMarine Workers’ Union continued some initiatives through this period,with little initial success. Rather than a guarantee of the full wage from theemployer, the unions shifted their demand to a supplemental unemploy-ment benefit or SUB, modeled on the recommendation of the LatimerReport. Latimer himself authored an unsuccessful brief in support of


income guarantees for the Steelworkers’ union. In the mid-1950s, theUAW successfully negotiated a plan in which the employer (Ford MotorCompany) would supplement the low federal unemployment insuranceprogram. The SUB became an industry norm, one that other oligopolisticindustries mirrored, effectively edging out the demand for guaranteedannual wages. The result was an interesting synthesis of social welfare pro-visioning (unemployment benefits) and negotiated benefit (SUB).

Strategically, since GAW plans and the SUB were collectively negotiatedrather than a social welfare program, they reinforced the hierarchy betweenthose who gained their living wage through union membership and thosewho relied upon a state-provided hourly minimum wage. This distinctionreflects the labor market structure of the 1950s and 1960s. The social con-tract between labor unions and large corporations meant that labor marketswere segmented with trade unions controlling powerful internal labormarkets that guaranteed job access, benefits, career ladders, and a regularflow of earnings. The rest of the workforce lived with a minimal governmentsafety net in what came to be called the secondary labor market: low wages,few to no benefits, dead-end jobs, and unstable employment.

Advocacy of income stabilization to maintain consumption reflected theanxieties of the early post-war economy, when memories of the Depres-sion were still strong and it was feared that the production boom of thewar years would be a transient phenomenon. As long-term growth con-tinued and SUB plans and Keynesian welfare state policies cushionedbusiness cycles for skilled workers in the primary sector, the issue thatGAW was designed to address lost prominence. The GAW as a livingwage movement also waned and never filtered down to those workers insecondary labor markets.

Despite the limited successes of the GAW movement, the conceptholds lessons for contemporary living wage activists. As one proponentstated: “Wage rates represented a fiction unless a steady job ensuredregular take-home pay” (Kaplan 1947: 5). The GAW was a strategicattempt to ensure living standards by focusing on income rather than wagerates. The problem, during the post-war period, was defined as job securityin the wake of business cycle fluctuations. For contemporary workers,however, declines in real wages coupled with increased job insecurity andflexible hours plans have given the issue of regularizing income streamsrenewed relevance.

Implications for contemporary living wage movements

The concept of living wages is an organic concept, evolving with changingcircumstances. As we have seen, it has been posed as a remedy for avariety of ills related to low wages, including overwork in sweatshops,underwork during a cyclical downturn, and as a way of ensuring macro-economic stability during a period of uncertainty. The consistent hallmark

Wages and hours 37

of living wage arguments, nevertheless, is their challenge to the dominanteconomic paradigm that determines fair wages on the basis of commuta-tive justice only. For neoclassical economists and those endorsing theirworld-view, market mechanisms – the laws of supply and demand – are themost efficient and objective means of ensuring the equivalence ofexchange. Fairness, in this framework, is separable from measures of well-being. The understanding of economic activity as provisioning has gradu-ally faded into the background.

Current living wage initiatives can be seen as attempts to reassert theprovisioning view of economic activity and to give community interestsand well-being primacy over market forces. In the United States, coali-tions of community groups, faith-based activists, and labor unions haveworked to pass legislation called municipal “living wage ordinances,” man-dating that private businesses receiving public funds should pay their ownworkers a living wage. The dollar threshold typically sought is the hourlyrate equivalent for one full-time earner to keep a family of three or fourabove the federal poverty line; the legislated compromise is usually lower,attempting to balance the family-sustaining threshold with the politicalrealities of negotiating with city government.

Once again, the political economic context has shaped how living wageactivists have formulated their issue. The end of the twentieth century wasa period marked by dramatic changes in the political economy, in thesocial consensus on the proper role of the state, and in attitudes towardfamily structure. The US economy underwent a period of restructuring, asnew technologies and industries combined with globalization to challengethe institutions that had fostered stability during the post-war period.Sweatshops, both in the USA and abroad, sprouted like weeds. A pro-longed period of economic instability beginning early in the 1970s was fol-lowed by an apparent boom in the mid-to-late 1990s that still left manybehind. As the twenty-first century begins, sluggish growth has promptedfears of depression and deflation.

Many of the institutional arrangements of post-war capitalism – Keyne-sian income stabilization policies and welfare state provisions, amongothers – have been unraveled through a series of neoliberal economicpolices. The demise of active state policy coincided with a return tolaissez-faire principles regarding market forces. Flexible work hours arepart of this larger trend in the global political economy. The concept of a40-hour norm is being replaced by the idea that work schedules shouldaccommodate demand fluctuations and managerial strategies. This has ledto an expansion of part-time jobs, extensive hours of overtime, and jobswith irregular hours. The US Congress, for example, is considering policiesthat would restructure the overtime provisions of the Fair Labor Stand-ards Act to ease overtime penalties. Policies to increase work time flexibil-ity have already been widely adopted in Europe (Mutari and Figart 2001).All three of the conditions generating twentieth-century living wage


movements thus coexist: “sweated” labor, macroeconomic instability, andjob insecurity. Finally, the male breadwinner family describes an ever-decreasing subset of households, degendering the concept of living wagesin comparison with the breadwinner wage emphasis of mid-twentieth-century movements.

Living wage activists have revived arguments that employers whoseemployees are among the working poor are parasitic, linking this argu-ment to the rise in what has been called corporate welfare. If privatesector employers receive tax subsidies and other benefits from state andlocal government, then those same employers have a social obligation topay employees a family-sustaining wage. Organizers point to skyrocketingpay and perks for executives and administrators while low- and middle-income earnings stagnate or decline. An implicit or explicit ethical argu-ment in many of the local living wage campaigns is that corporate Americahas a responsibility to treat their employees decently, in addition to pilingup quarterly dividends for owners/shareholders. In this guise, living wageordinances are a response to increased income inequality.

The growing concentration of low-wage jobs in cities as a result of pub-licly subsidized downtown revival projects is another catalyst for livingwage activism. Many jobs in new city convention centers, sports stadiums,hotels, restaurants, and airports are minimum wage or near-minimumwage jobs. The ordinances are also a response to reductions in the relativesize of the public sector, specifically the push to privatize government ser-vices. Privatization has consisted of the outright sale of public sector assetsand especially the contracting out of services once provided by publicemployees. Spawned by Reaganomics in the USA and Thatcherism inGreat Britain, conservative politicians, economists, and businesspeoplepromoted privatization as a means of enlarging the domain of marketforces. By the mid-1980s, there were tangible advances in the outsourcingof physical and commercial services in state and local government. Somelocalities have stripped themselves of public assets such as water, waste-water treatment, and electrical utility operations. Others have hired outservices such as trash collection, recycling, and cleaning government build-ings and parks to the private sector. Private firms are administering healthservices, absorbing public hospitals, managing educational institutionsincluding public and charter schools, directing and staffing correctionalfacilities, and overseeing public assistance (welfare) case loads.

Privatization was pitched as a cost-saving mechanism because it oftenreplaced union workers with nonunion workers. With public sector down-sizing, unionization rates in the public sector began to fall during the1980s. This was a dual blow to the labor movement. Private sector uniondensity had already begun to decline in the 1960s and 1970s, precipitatedby the relative decline in manufacturing and the more aggressive challengeby management to union organizing campaigns. At first, union organi-zation in state and local government was able to hold off labor’s decline, as

Wages and hours 39

state governments passed legislation authorizing collective bargaining instate and municipal government. Momentarily, public sector union organ-izing outpaced private sector membership growth but privatization beganto take a toll on the newly unionized public sector labor force, especiallywomen and people of color.

The trends toward neo-liberalism provided the soil for germination of anew living wage movement. Unlike their historical counterparts, the issueof adequate living standards has been largely disengaged from debates overworking time. Contemporary living wage ordinances, as well as minimumwage laws, focus primarily on the hourly rate paid to workers who are paidby the hour. However, as we have seen, an hourly wage alone does notdetermine a worker’s standard of living. The number of hours worked perweek, month, and year also matters. Because of the proliferation of jobswith non-standard hours, it is more important than ever that contemporaryliving wage movements focus on the linkage between wages and hours.While workers need an adequate living standard, they also need fewerweekly hours of paid work so that family responsibilities can be met. Therole of wages, the primary means of provisioning during the twentiethcentury, may need to be rethought. Therefore, living wage policies need tore-link discussions of wages and hours in ways that – given the shift ingender norms away from the traditional breadwinner family – promotegender equity and provide time and resources for social reproduction.

Notes1 Australia is the exception. The 1896 law that established a system of minimum

wages set by industrial wage boards was initially introduced as gender-specificlegislation but amended before passage (Howe 1995: 322–3).

2 This parasitic industries argument is summarized and critiqued by Ryan inChapter 2 in this volume.

3 Organized attempts to regularize income for wage workers date back to theearly 1890s. The wallpaper industry is credited with an early version during thisperiod, guaranteeing employment rather than wages.

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Connell, R.W. (1993) “The Big Picture: Masculinities in Recent World History,”Theory and Society 22: 597–623.

Feldman, H. (1947) “The Annual Wage – Where Are We?” American EconomicReview 37 (5): 823–47.

Figart, D.M. (2001) “Raising the Minimum Wage and Living Wage Campaigns,” inM.C. King (ed.), Squaring Up: Policies to Raise Women’s Incomes in the UnitedStates, Ann Arbor, MI: University of Michigan Press, pp. 111–35.

Figart, D.M., Mutari, E., and Power, M. (2002) Living Wages, Equal Wages:Gender and Labor Market Policies in the United States, London: Routledge.


Glickman, L.B. (1997) A Living Wage: American Workers and the Making of Con-sumer Society, Ithaca, NY: Cornell University Press.

Honeyman, K. and Goodman, J. (1998) “Women’s Work, Gender Conflict, andLabour Markets in Europe, 1500–1900,” in R. Shoemaker and M. Vincent (eds),Gender and History in Western Europe, London: Arnold, pp. 608–28.

Howe, R. (1995) “A Paradise for Working Men but Not for Working Women:Women’s Wagework and Protective Legislation in Australia, 1890–1914,” in U.Wikander, A. Kessler-Harris, and J. Lewis (eds), Protecting Women: Labor Leg-islation in Europe, the United States, and Australia, 1880–1920, Urbana, IL: Uni-versity of Illinois Press, pp. 318–36.

Humphries, J. (1976) “Women: Scapegoats and Safety Valves in the Great Depres-sion,” Review of Radical Political Economics 8 (1): 98–121.

Kaplan, A.D.H. (1947) The Guarantee of Annual Wages, Washington, DC: Brook-ings Institution.

Kelley, F. ([1898]1998) “The Sweating System in the United States,” in KathrynKish Sklar, Anja Schüler, and Susan Strasser (eds), Social Justice Feminists in theUnited States and German: A Dialogue in Documents, 1885–1933, Ithaca, NY:Cornell University Press, pp. 105–14.

Latimer, M.W. (1947) Guaranteed Wages, Report to the President by the AdvisoryBoard, Office of War Mobilization and Reconversion, US Office of TemporaryControls, Washington, DC: US Government Printing Office.

Lehrer, S. (1987) Origins of Protective Labor Legislation for Women, 1905–1925,Albany, NY: SUNY Press.

Margo, R.A. (1993) “Employment and Unemployment in the 1930s,” Journal ofEconomic Perspectives 7 (2): 41–59.

Mutari, E. (1996) “Women’s Employment Patterns During the U.S. Inter-WarPeriod: A Comparison of Two States,” Feminist Economics 2 (2): 107–27.

Mutari, E. (2000) “Protective Legislation,” in Janice Peterson and Margaret Lewis(eds), The Elgar Companion to Feminist Economics, Cheltenham: EdwardElgar, pp. 639–44.

Mutari, E. (2002) “The Fair Labor Standards Act of 1938 and Competing Visionsof the Living Wage,” Review of Radical Political Economics 32 (3): 408–16.

Mutari, E. and Figart, D.M. (2001) “Europe at a Crossroads: Harmonization, Lib-eralization, and the Gender of Work Time,” Social Politics 8 (1): 36–64.

Nordlund, W.J. (1997) The Quest for a Living Wage: The History of the FederalMinimum Wage Program, Westport, CT: Greenwood Press.

Perkins, F. (1946) The Roosevelt I Knew, New York, NY: Viking Press.Power, M. (1999) “Parasitic Industries Analysis and Arguments for a Living Wage

for Women in the Early Twentieth Century United States,” Feminist Economics5 (1): 61–78.

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4 Living wage laws and the case fora targeted wage subsidy

David A. Macpherson

Beginning with Baltimore, Maryland, in 1994, a growing number of citiesand counties in the United States have enacted so-called “living wage”ordinances. At this writing, over 100 local governments have enactedliving wage ordinances, and campaigns are active in dozens of jurisdic-tions. These ordinances generally require covered employers to pay aminimum wage much higher than the state or federal wage requirement.The laws may also require one wage standard for employers who providehealth insurance and a higher wage standard for employers who do notprovide such insurance.

The coverage of the ordinances tends to vary. Initially, the laws werenarrowly drawn to cover only employees of local governments and theirservice contractor. For example, contractor ordinances were enacted inBaltimore, Maryland (1994), Milwaukee, Wisconsin (1995), Portland,Oregon (1996), and Miami-Dade County, Florida (1999). However, as thenumber of jurisdictions adopting such laws grew, the living wage propo-nents drafted the legislation to cover a greater number of private employ-ers. Today, a typical living wage proposal covers not only contractors, butalso private employers receiving financial assistance, such as tax abate-ments or subsidies, from the local government. Examples of localitiesadopting ordinances covering private sector employers who receivegovernment financial assistance include Los Angeles, California (1997), St.Paul, Minnesota (1997), Hartford, Connecticut (1999), San Francisco,California (2000), and Suffolk County, New York (2001).

A few jurisdictions have gone even further and considered or adopted alocal minimum wage binding on employers who do business within adefined geographic area. An example is Santa Fe, New Mexico, which haspassed a law which requires private employers with 25 or more workers topay at least $8.50 per hour starting on January 1, 2004. This figure will beraised to $10.50 on January 1, 2008. Another example is Santa Monica,California, which has passed a law requiring all employers in the “CoastalZone” having over $3 million in annual sales to pay at least $10.50 an hourif stipulated health benefits are provided, and at least $12.25 an hour ifbenefits are not provided. In some jurisdictions, such as the City of New

Orleans, Louisiana, the living wage movement has also advocated localminimum wages tied to the national minimum wage with very broademployer coverage.1

Although living wage mandates bear some similarity to the “prevailingwage” requirements in the federal Davis-Bacon Act (of 1931) and similarstate statutes, they are fundamentally different. The Davis-Bacon Actrequires that federal contractors pay wages prevailing in the locality wherethey do business. This means union scale or market wages. The philosophybehind the Davis-Bacon wage standards is that the federal governmentshould not depress wages through its contracting activity. Unlike theDavis-Bacon Act, living wage laws set a wage standard based on a family’sneeds. In this respect, the laws seek to make operational the socialist prin-ciple for wage determination: “to each according to his needs.”

Proponents of living wage ordinances contend they are necessary toalleviate poverty among workers who are unable to support their familiesdespite working full-time. The advocates commonly assert that publicmoney should not be used to support “poverty wages” (as in the web siteof the Association of Community Organizations for Reform Now orACORN, a prominent national organization that organizes living wagecampaigns (see http://www.livingwagecampaign.org)). Increasingly, theyalso argue that the national minimum wage is insufficient to lift familiesout of poverty and that localities should pass higher, and in their view,more adequate minimum wages. Proponents also contend that at thehigher wages, employers experience increases in productivity and morale,and reductions in labor turnover that completely or largely offset anyadverse economic effects (for a summary of these arguments, see Pollinand Luce 1998: Chapter 4). However, as I will argue below, in makingtheir case for local living wage laws, the activists either ignore or discountpotentially harmful economic effects such as reductions in employment,business relocation, higher prices, and the displacement of low-skilledworkers by more qualified workers.

Who is supporting the movement and how do they define aliving?

A combination of activists and academics have lined up behind living wagecampaigns. The ACORN, the New Party, and trade unions all have beenactive in supporting and funding living wage efforts. Other nationalorganizations participating in the campaigns have included the EconomicPolicy Institute (EPI), the Political Economy Research Institute (PERI),the Center for Community Change, and the National Campaign for Jobsand Income Support. ACORN has established a Living Wage ResourceCenter to assist activists in organizing living wage campaigns all across thecountry. It has also published an activist’s guide to organizing such cam-paigns (see Reynolds 2000). PERI, at the University of Massachusetts at

44 David A. Macpherson

Amherst, under the leadership of radical political economist RobertPollin, frequently provides technical assistance to local campaigns in theform of reports to and testimony before local governmental bodies. In1998, Pollin and sociologist Stephanie Luce published a book, The LivingWage: Building a Fair Economy (Pollin and Luce 1998), advocating livingwage laws and laying out a framework for promoting the laws to local gov-ernments. A number of other academics, usually sociologists or liberal-to-progressive economists, have joined the movement. These include DavidReynolds of Wayne State University, Bruce Nissen of Florida Inter-national University, both of whom have authored chapters in this volume,and Michael Reich of the University of California at Berkeley. The Wash-ington, DC-based Economic Policy Institute, a “think tank” funded by theUS labor movement and more liberal foundations, produces statisticalanalysis in support of living wage campaigns and generally advocates forhigher minimum wages and living wage ordinances. ACORN, the Centerfor Community Change, and the National Campaign for Jobs and IncomeSupport are all national organizations heavily involved in communityorganizing.2 They use living wage campaigns to build broad community-based coalitions in support of government regulation of the economy atthe local, state and national level.

The starting place for advocates attempting to define living standardshas frequently been the Census Bureau’s poverty thresholds for a familyof either three or four persons. The Census publishes these thresholdsannually. For the year 2002, for instance, the Census poverty threshold fora two-adult, two-child family was $18,244. ACORN, a key leader in theliving wage movement, has recommended a minimum hourly wage basedon the annual poverty threshold divided by the total annual hours workedby a full-time, full-year employee (i.e., 2000–2040 hours). This would placethe “living wage” in 2002 between $8.94 and $9.12 per hour. Typically, thiswould be the wage requirement for an employer who paid for a certainstandard of health insurance coverage. For employers not meeting thishealth insurance standard, the wage mandate would be incrementallyhigher, usually by a maximum of $1.00 to $2.00. Thus, employers not pro-viding paid health insurance could face a wage mandate of $10.00 or more.In fact, this closely tracks the actual experience with such ordinances. Forexample, the median hourly wage rates in living wage ordinances adoptedin 2002 were $9.00 with benefits and $10.87 without (see EmploymentPolicies Institute 2003).

However, just as the coverage of the living wage proposals haveexpanded with the movement’s successes, so too has the wage standard insuch proposals escalated. Increasingly, movement spokespersons arecalling for national and state minimum wages to be replaced by a universal“living wage” mandate (Pollin and Luce 1998: Chapter 6). These expandedproposals usually cite budget studies showing how much it allegedly costsa family to live on a basic needs budget in a given geographic area. For

The case for a targeted wage subsidy 45

example, the Economic Policy Institute (2001) has published a major com-pilation of budget studies for major metropolitan areas. According to thereport, Hardships in America, in 1999, a “basic needs” budget for a familywith two adults and two children was $38,780 in Los Angeles, California,$34,796 in Miami, Florida, $39,464 in Chicago, Illinois, and $49,218 inWashington, DC. For that same year, the published US Census Bureaunational poverty threshold for a family with two adults and two childrenwas $16,895. The push for living wage mandates based on budget studiessuch as the Economic Policy Institute’s could lead to living wage demandsas high as $18.00 to $25.00 an hour.

Some problems with living wage mandates

There is ample evidence that living wage laws adversely affect localeconomies and harm those workers with limited skills and experience.They also cost far more than alternative subsidies that target only low-income families, which means that the living wage ordinances lead tohigher taxes or cuts in government services compared to targeted subsi-dies. Finally, to the extent that living wage laws affect private sectoremployers, they cause price hikes that are paid by many low-income famil-ies who receive no benefits from the laws.

Because living wage laws are relatively new, most of the evidence ofemployment losses from wage mandates comes from studies of theminimum wage. This research confirms that for every 10 percent increasein employee’s pay from a wage mandate, at least 2 percent of the affectedemployees will lose their jobs as a result of that mandate. Thus, with livingwage ordinances that seek to raise worker’s pay by huge multiples of theminimum wage, the employment losses could be quite large.

In fact, decades of time series studies of the employment effects ofminimum wage hikes on teenagers have produced a consensus amongeconomists that a 10 percent increase in the minimum wage produces a1–3 percent short-term reduction in teenage employment (see, forexample, Brown 1999: 2115). When the decade of the 1980s is considered,the estimates have been around 1 percent or less (ibid.: 2154). However,because the vast majority of teenagers in the economists’ time seriesstudies are not working at the minimum wage, this job loss estimate is con-sidered low for minimum wage workers. The impact for a worker at theminimum is likely to be about five times as great as the teenage estimates.For example, if the teenage estimate is a 1 percent job loss for a 10 percentincrease in pay, the effect for workers at the minimum wage is at least a 5percent reduction in employment (ibid.: 2155).

More recent research confirms that a 10 percent wage hike leads to atleast a 2 percent decrease in employment for the workers affected by thehike (for contrary evidence, see Card and Krueger 1995). David Neumark,for example, also an author in this volume, finds that for workers at the


minimum wage, a 10 percent increase in the minimum wage reducesemployment by about 2 percent and reduces hours of work by roughly 6percent. Some studies using micro-data on individuals, or panel data usingyear, US state, and the unit of observation, have documented much highernegative employment effects (for example, Burkhauser et al. 2000).Longer-term effects are likely to be even larger because there is more timefor employers to make adjustments in personnel.

In addition to creating job losses, it is generally thought that higherminimum wage levels shift the distribution of employment toward thosewith higher skills, who can better compete at the higher wage, at theexpense of the least-skilled, who cannot. Evidence showing job displace-ment of low-skilled workers is provided by Lang and Kahn (1998) andTurner and Demiralp (2000). Even the living wage activists acknowledgethat such effects are likely. As Bruce Nissen wrote in his report on the pos-sible effects of the Miami-Dade County Living Wage Ordinance: “Onecan somewhat confidently predict that the wage increases and the newlyoffered health care benefits will result in a higher caliber of worker andmeasurable increases in efficiency” (1998: 16, emphasis added). Employersare likely to raise their hiring standards, leaving those job applicants withmarginal skills no opportunity to work at “living wages,” and possibly noopportunity to work at all. Also, as Nissen notes, while some employersmay experience efficiency gains, from the employer perspective, this doeslittle more than partially offset the increases in labor costs. Furthermore, ifsuch efficiency gains do occur, employers will need fewer workers andtherefore less hiring or layoffs are likely to occur.

To the extent that living wage ordinances succeed in raising wages ofemployees subject to the law, those benefiting are primarily not from low-income families. One study, for example, reports that living wage ordi-nances reach relatively few poor or low-income families. Only 15 percentor less of those families benefiting from living wage ordinances are in poorfamilies and 35 percent or less are in families in the bottom fifth of thewage distribution (see Turner and Barnow 2002). Living wage laws also dolittle to raise the disposable income of poor families, who face payrolltaxes and the phase out of government benefits as their income rises.Advocate Robert Pollin has claimed that the proposed New Orleansminimum wage (set $1.00 above the federal minimum) would raise theaverage before-tax income of affected families by 12 percent (Pollin et al.1999: 70–2).3 However, he has conceded that after taxes and benefit lossesare considered, family income would rise by only 2.9 to 4.4 percent. Bycontrast, a refundable credit such as the Earned Income Tax Credit raisesdisposable income by the full amount of the credit.

Living wage ordinances that affect private sector employers also raiseprices to consumers as those employers pass on the costs to their cus-tomers. Again, most of what we know about this process comes fromstudies of minimum wage laws. A recent study (MaCurdy and McIntyre


2001) shows who would gain and who would pay if employers were to passall of the costs of a minimum wage hike to consumers in higher prices. Theauthors conclude that while only one out of four poor households wouldsee any benefit from the law, the remaining three out of four poor house-holds would end up paying higher prices. MaCurdy and McIntyre comparea minimum wage hike to a public program that benefits mostly non-poorfamilies yet is financed through a regressive sales tax on consumption thatfalls disproportionately on poor families.

A better method: targeted wage subsidies

A targeted wage subsidy provides funds to workers at the low end of theincome distribution. Wage subsidies are typically provided as a tax creditto employers or families. For example, the Work Opportunity Tax Credit(WOTC) provides a tax credit to employers who hire certain types of low-skilled workers. The Earned Income Tax Credit (EITC) provides a wagesupplement via an income tax credit to low-income working families andindividuals. The tax credit rises with the amount earned until a ceiling isreached and then it is phased out for higher income workers. A larger taxcredit is provided for bigger families. If the tax credit exceeds the taxesowed, then the family or individual receives a lump sum payment from thegovernment.

There are three main advantages of targeted subsidies. First, wagemandates cause low-skilled workers to be laid off, while wage subsidiesdo not. A higher minimum wage raises the cost of low-skilled workers toemployers. As a result, employers will tend to substitute more skilledlabor and capital for now relatively more expensive low-skilled labor. Inaddition, to the degree that firms raise prices due to the wage increases,they will lose customers and further reduce the number of workersemployed.

But wage subsidies either raise or have no effect on the employment oflow-skilled workers, since they either lower or do not raise the cost toemployers of hiring such workers. Employer-based subsidies like theWOTC increase the demand for low-skilled workers by lowering the costof hiring such workers. Employee-based subsidies, such as the EITC,provide funds to families without raising the employer’s labor costs.

Second, wage subsidies are more clearly targeted at low-income famil-ies. Many of those who gain from minimum wage increases are secondaryworkers in higher income families. On the other hand, wage subsidies, byincreasing the incentive to work, affect more poor families. They are alsomore cost-efficient because funds only go to those in need.

Third, wage subsidies are more efficient than wage mandates in increas-ing the disposable income of workers in poor families. Many poor familiesreceive aid from the government such as food stamps and the EITC, whichis reduced as their income levels rise. As a result, much of the earnings


gain from minimum wage increases is lost through taxes or benefitreductions. Wage subsidies such as the EITC are either not taxed or taxedat a lower effective rate than wage income. Furthermore, benefit reduc-tions are currently smaller for wage subsidies than wage increases.

A potential problem with a living wage subsidy is that some states haveno state income tax and thus no mechanism to issue to a state income taxcredit. However, the state or local governments could piggyback on thefederal EITC program and issue checks for the wage subsidy. Thisapproach is already implemented in ten states. These governments use thefederal eligibility rules and express their credit as a percentage of thefederal tax credit (between 5 and 50 percent).

Conclusion

Living wage laws, particularly when extended to private sector employers,have several problems. They harm local economies and workers bycausing layoffs. In addition to creating job losses, it is generally thoughtthat higher minimum wage levels shift the distribution of employmenttoward those with higher skills, who can better compete at the higherwage, at the expense of the least-skilled, who cannot. Many of the wagegains would go to low-wage workers in higher income families rather thanto those most in need. Finally, living wage laws extended to private sectoremployers cause price hikes that are paid by many low-income familieswho receive no benefits from the laws.

I have outlined why targeted tax credits, or wage subsidies, are a betterpolicy to assist poor families. In contrast to wage mandates, wage subsidieseither raise or have no effect on the employment of low-skilled workers.Also, wage subsidies are clearly targeted at low-income families and thusare more cost-efficient than wage mandates. Finally, wage subsidies aremore efficient than wage mandates at raising the disposable income ofworkers in poor families since they reduce other government aid such asfood stamps by a much smaller amount.

Notes1 The New Orleans local minimum wage ballot initiative pegged the city minimum

at $1.00 above the national minimum wage, currently $5.15 an hour. It waspassed in February 2002 and was overturned by the State Supreme Court in Sep-tember 2002. Local minimum wages have been defeated in ballot initiatives inHouston, Texas ($6.50, defeated January 1997), Denver, Colorado ($6.50, $7.15in 1999, defeated November 1996) and Tucson, Arizona ($7.00, defeatedNovember 1997). Also, a local minimum wage of $7.00 was defeated in Albu-querque, New Mexico, in a legal challenge to the petitions.

2 Both the Center for Community Change and the National Campaign for Jobsand Income Support are based in Washington, DC.

3 See also Shaviro (1999) who shows that low-income families lose much of anywage gains through payroll taxes and government benefit reductions.


References

Brown, C. (1999) “Minimum Wages, Employment and the Distribution ofIncome,” in O. Ashenfelter and D. Card (eds), Handbook of Labor Economics,Amsterdam: Elsevier, Vol. 3B, pp. 2101–63.

Burkhauser, R., Couch, K., and Wittenberg, D. (2000) “Who Minimum WageIncreases Bite: An Analysis Using Data from the SIPP and CPS,” Southern Eco-nomic Journal 67 (1): 16–40.

Card, D. and Krueger, A. (1995) Myth and Measurement: The New Economics ofthe Minimum Wage, Princeton, NJ: Princeton University Press.

Economic Policy Institute (2001) Hardships in America: The Real Story of WorkingFamilies, Washington, DC: Economic Policy Institute.

Employment Policies Institute (2003) “Coverage of living wage ordinances.”Available: http://www.LivingWage.org

Lang, K. and Kahn, S. (1998) “The Effect of Minimum Wage Laws on the Distrib-ution of Employment: Theory and Evidence,” Journal of Public Economics 69(3): 67–82.

MaCurdy, T. and McIntyre, F. (2001) Winners and Losers of Federal and StateMinimum Wages, Washington, DC: Employment Policies Institute.

Neumark, D., Schweitzer, M., and Wascher, W. (2000) The Effects of MinimumWages Throughout the Wage Distribution, NBER Working Paper 7519, Cam-bridge, MA: National Bureau of Economic Research.

Nissen, B. (1998) “The Impact of a Living Wage Ordinance on Miami-DadeCounty,” unpublished.

Pollin, R. and Luce, S. (1998) The Living Wage: Building a Fair Economy, NewYork, NY: The New Press.

Pollin, R., Luce, S., and Brenner, M. (1999) Economic Analysis of the New OrleansMinimum Wage Proposal, Research Report Number 1, Amherst, MA: PoliticalEconomy Research Institute, University of Massachusetts.

Reynolds, D. and ACORN Living Wage Resource Center (2000) Living WageCampaigns: An Activist’s Guide to Building the Movement for Social Justice,Boston, MA: ACORN.

Reynolds, D., Pearson, R., and Vortkampf, J. (1999) “The Impact of the DetroitLiving Wage Ordinance,” unpublished.

Shaviro, D. (1999) Effective Marginal Tax Rates on Low-Income Households,Washington, DC: Employment Policies Institute.

Turner, M. and Barnow, B. (2002) “Living Wages and Earned Income Tax Credits:A Comparative Analysis,” unpublished.

Turner, M. and Demiralp, B. (2000) “Higher Minimum Wages Harm Minority andInner-City Teens,” unpublished.


5 The determination of livingwages

David H. Ciscel

The mathematical computation of a living wage is a political act. That actprovides an illustration of the failures of the labor market to support largenumbers of men and women. With a simple chart (e.g., comparing a “livingwage” to some measure of earnings), the living wage shows why so manyworking adults are unable to purchase basic necessities. And it providesclear documentation of the strong gender bias to labor market payoffs.

The determination of income-adequate family budgets has a longhistory. Living wage and family wage campaigns also have a long andsometimes checkered history (Ciscel 2000). The US Bureau of Labor Stat-istics (BLS) created its first family budget almost a century ago (Johnson etal. 2001). That early BLS computation found that a cotton mill workerrequired an annual income of $713 to provide a “fair” standard of livingfor a family of five. If researchers have been addressing this issue for solong, why is the computation of a living wage still so controversial and soimportant? There are several reasons. But each reason can be traced backto the paucity of income provided by employment for many workers: thefailure of markets to work equitably in a rich nation.

First, there is the inadequacy of the current poverty standards publishedby the federal government. Built forty years ago on a faulty methodo-logical foundation, poverty thresholds continue to provide the policy stan-dard that we use to judge whether or not society has provided an incomefor a family to live independently and with a basic standard of living.Almost every living wage study indicates that poverty thresholds are notjust wrong by a little bit. For a family to be self-sufficient requires a yearlyincome twice what the published poverty threshold numbers indicate.

Second, the key legal floor to wage labor in the United States is thefederal minimum wage set by amendments to the Fair Labor StandardsAct of 1938. Once considered everyman’s “labor contract,” the minimumwage – at $5.15 per hour – provides a potential yearly income that is only athird of an adequate living wage. In addition, the minimum wage is underconstant ideological attack by orthodox economists as an egregious ineffi-ciency in labor market operation. Conventional wisdom in most economicstexts uses the minimum wage to illustrate the horrible consequences of

government intervention in the marketplace. Little or nothing is ever men-tioned of the worker’s ability or inability to survive on such wages. Andrarely is research mentioned that illustrates the positive labor marketimpact of minimum wages.

Third, the outcomes in most labor markets are deeply gendered. Therates of pay earned by women continue to be significantly different andlower than those earned by men. Living wages are important to women,because women supporting families find it difficult to earn a large enoughincome to provide for financial self-sufficiency. The welfare reform move-ment of the 1990s changed public policy toward women with children.Under the poorly funded Aid to Families with Dependent Children(AFDC), society, at least theoretically, provided women with an incomeand other subsidies to stay at home to raise children. With welfare reformin the 1990s, Temporary Assistance to Needy Families (TANF) requiredpoor women to go into the paid labor market. The theory behind TANF isthat a working woman will, over time, earn an income necessary to moveher family off of government subsidies and toward self-sufficiency; but theearnings from welfare-to-work jobs usually are not adequate in duration,wage levels, or stability to accomplish these goals. Consequently, earning aliving wage has become a critically important issue for millions of womenwith families who were transferred quickly into the labor market over thepast several years.

Finally, the computation of a living wage is an important educationaltool. Most people reading this chapter live a life of relative ease. Moneycomes in through work or family and it is spent. How often do wecalculate what it takes to just get by? How much money in rent, in foodexpenditures, in health insurance or childcare does it really take to be self-sufficient? And what does self-sufficiency really mean to someone with anadequate income? If the government or an endowment pays over half thecosts of your college education, are you really self-sufficient in school? Aliving wage points out that we are really all tied together. Many of thethings that we purchase – safety, homes, and insurance – are partially sub-sidized by others either through mutual associations or through govern-ment subsidy.

This chapter will blend the two issues. It will review how a living wage iscomputed and why it is important. To compute a living wage, we will needto review poverty thresholds in the US and the computation of basic needsand self-sufficiency. In this chapter, I will also explain the politics of thesimple mathematics. What is the living wage challenging? Why is such hos-tility vented towards it?

Poverty thresholds in the United States

US poverty guidelines were set up in the 1960s in response to thatdecade’s policy concern with poverty in America. President Lyndon B.

52 David H. Ciscel

Johnson’s War on Poverty set as its goal the elimination of poverty in theUnited States. The official poverty thresholds were developed by MollieOrshansky of the Social Security Administration in 1963–64 based on theUnited States Department of Agriculture (USDA) economy (thrifty) foodplan, the cheapest of the four food plans developed by the USDA(Orshansky 1965). At the time, it was found that low income families spentroughly a third of their income on food. The poverty line was thereforecalculated by multiplying the lowest USDA basic food plan times three.1

The poverty thresholds are updated annually for inflation using theConsumer Price Index (CPI-U). Other than several minor adjustmentsto the measure and considerable debate concerning the adequacy ofthe poverty threshold measure, it remains the official standard today(Fisher 1992).

A leading proposal in favor of a new poverty threshold comes from theNational Academy of Sciences (NAS 1995). Two of its recommendationsindicate its bias toward patriarchal subsistence rather than a concern forself-sufficiency for a modern family. First, Recommendation 1.2 states inpart: ‘The poverty thresholds should represent a budget for food, clothing,shelter (including utilities), and small additional amount to allow for otherneeds (e.g., household supplies, personal care, non-work-related trans-portation)’ (NAS 1995: 4). No allotment is made for child care expenses.Second, Recommendation 2.1 explains: ‘A poverty threshold . . . should bederived from Consumer Expenditure Survey data for a reference family offour persons (two adults and two children)’ (ibid.: 6). While the NASreport continues by recommending adjustments for different regions anddifferent family types, it begins by ignoring one of the primary sources ofpoverty today: working women supporting small children. For example,while 11.7 percent of population in the United States lived below thepoverty threshold in 2001, 22.4 percent of female-headed households livedin poverty (US Census 2000).

Table 5.1 illustrates the US poverty thresholds for 2002. While numbersare also available for larger families, this table shows two things. First, therange for poverty is from $12,400 for a single parent with one child to$18,244 for a two-parent family with two children. Using a 50-week full-time work year (assuming no paid vacation), the single parent would haveto earn $6.20 to $7.25 per hour to reach the poverty threshold. A two-parent family, where the second laborer works 50 weeks per year, 30 hoursper week, requires a wage of $4.14 to $5.21 per hour. With the minimumwage of $5.15 per hour and the typical welfare-to-work wages runningbetween $6.00 and $7.00, per hour, the poverty threshold paints a mod-estly easy path for a woman to move to above poverty living standards.Indeed, it looks as if the main task for an entry level worker is to find full-time, year-round employment, though that has been difficult to accomplishfor many low-wage workers in the past decade.

The poverty thresholds, along with the minimum wage, have helped

The determination of living wages 53

propel living wage research. Indeed, rather than a measure of inadequacy,they are used as the name “threshold” implies. If a family earned less thanthe threshold, it is assumed to be in poverty; if it earns more, then it isassumed to be out of poverty. Living wage studies clearly show that thepoverty thresholds do not delineate the barrier between poverty and afflu-ence.

Calculating a basic needs budget

One of the first academic forays into the living wage debate was authoredby Trudi Renwick and Barbara Bergmann (1993). Renwick and Bergmanncreated an alternative to the poverty thresholds called the Basic NeedsBudget (BNB). Hoping to correct the deficiencies in the official definitionof poverty, they developed an adequacy standard for family consumption,calculated family taxes and added in appropriate non-cash and transferbenefits that families are entitled to receive.

Renwick and Bergmann used national Bureau of Labor Statistics data onfamily budgets to construct separate standards for food, housing, healthcare, transportation, and personal care/miscellaneous for 1989. In addition,they added in child care costs for children less than 5 years of age. The BNBexcluded expenses for recreation, education, and various entertainment andmiscellaneous expenditures. After constructing the cost of goods and ser-vices, the authors developed a pre-tax income required to support thoseincome levels. This pre-tax income also adjusted for non-cash benefits (foodstamps, rent subsidies, etc.) that a family were entitled to were added inbefore calculating the BNB. The results, which assumed the family receivesall 1989 entitlements before calculating the BNB, are listed below:

• Parent at Home, Two Preschool Children: $6,288 per year (64 percentof $9,885 federal poverty line) – $9,752 in 2001 dollars.

• Parent at Work, Two Preschool Children: $18,098 per year (183percent) – $25,848 in 2001 dollars.

54 David H. Ciscel

Table 5.1 US poverty thresholds for 2002 (US$)

One child Two children

Single-parent family 12,400 14,494Hourly wagea 6.20 7.25Two-parent family 14,480 18,244Hourly wageb 4.14 5.21

Source: US Census Bureau: http://www.census.gov/hhes/poverty/

Notesa assumes one worker employed full-time, 50 weeks, 40 hours per week.b assumes two workers, one employed full-time, 50 weeks, 40 hours per week and another

employed part-time, 50 weeks, 30 per week.

• Parent at Work, Two Older Children: $14,657 per year (146 percent) –$20,934 in 2001 dollars.

Renwick and Bergmann find that 1989 poverty rates for single-parentfamilies grew from 39 percent of the total (official poverty threshold) to 47percent of the total (the BNB definition). The authors urge adoption oftheir system for computing family budgets, arguing that it would be easy toexpand to other types of family structure, easy to adjust for changes in thefamily market baskets, and a real move toward measuring income ade-quacy in the definition of poverty. Interestingly, the BLS “referencefamily” – an urban married couple with two children under 18 – required$31,562 in 1989, basically twice the BNB (Johnson et al. 2001).

There are several features of the BNB that are useful to living wageanalysis. First, there is the important gender agenda. Poverty is oftenabout the problems of women. This study focuses on that issue. While thenumber of explicit references to women in the article is fairly small, theBNB is designed to show the impact of poverty on female-headed house-holds. Second, the study features an “at home” single mother withpreschool children. That mother receives all the current 1989 social bene-fits, including AFDC payments, but still requires an additional $6,288 tomeet the BNB. Third, the BNB, for the single mother with preschool chil-dren, explicitly included the cost of child care.

BNB income levels, stated in terms of 2001 dollars, are not dramaticallydifferent from the self-sufficiency or living wage studies of the late 1990s.Renwick and Bergmann’s BNB study reflects an interesting component ofliving wage research: a study can start from a different perspective orpolicy agenda and the outcome is remarkably similar. Computing what ittakes to have a modestly decent standard of living in the USA is not diffi-cult. The hard part is persuading the body politic to implement it.

Indeed, the biggest problem with the BNB is political. It is basically anattempt to persuade the bureaucracy of the federal government to re-define the meaning of poverty. After shifting to a BNB-like poverty defini-tion, new governmental statistics would clearly illustrate that the levels ofpoverty in the United States are much higher than they were previouslythought to be. But even under the old definition of poverty, it has beenclear that too many women and children live in poverty.

While the BNB is an important contribution to understanding poverty,it does not make the next step that living wage and self-sufficiency studieshave made. Living wage or self-sufficiency studies are generally written asdocuments to “persuade” the public that the incomes of low-wage workersare just too low and that labor markets should be reshaped to deliver moreincome to that segment of the population.


Self-sufficiency studies

There have been large number of living wage studies across the USA.Almost all of these have used a market basket approach. The studies firstsort the items that should or should not be in a budget that provides abasic standard of living. Then they aggregate to estimate the consumptioncosts of self-sufficiency in a geographic area or for a particular type offamily. Three representative studies will be reviewed here: (1) The Self-Sufficiency Standard for North Carolina (Outtz et al. 1997); (2) What is aLiving Wage for Memphis? (Ciscel 1999; Ciscel 2002); and (3) The Cost ofLiving in Minnesota (Steuernagel and Ristua 1998; Cederberg et al. 2001).

These three studies are not unique in the living wage literature, butthey do have several common features that make them interesting. First,each is a combination of academic research and community activism.Indeed, the academic connection is usually played up in the introductionto help give the studies credibility. The studies often refer to other exami-nations of self-sufficiency, showing the common elements that tie thisresearch agenda together across the nation. Second, the studies providedetails on the family basket of goods and services, assuming the familypurchases necessities in the marketplace. Self-sufficiency is defined interms of the ability of a family to purchase a basic standard of living inthe United States. This definition excludes raising one’s own food,walking to work, or building one’s house. Third, the studies are family-and locale-specific. Each attempts to estimate the costs of living for differ-ent family configurations and cost of living differences that exist amongcities and between rural and urban living environments. A strong elementto every study is the cost of supporting the female-headed family withsmall children. Both the replacement of AFDC with TANF and the riseof childhood poverty have strongly influenced the focus of self-sufficiencystudies.

What is self-sufficiency? The North Carolina study opens by defining it:

The Standard defines what income would be high enough to meetbasic needs (including paying taxes) in the regular marketplacewithout public subsidies – such as public housing, food stamps, Medic-aid or child care – or private or informal subsidies – such as free baby-sitting by a relative/friend, food provided by churches or local foodbanks, or housing shared with relatives or friends.

(1997: 1)

The North Carolina study assumes all adults in the family work full-time,that is, no credit is given to either parent for the hours of free householdlabor required to operate and maintain a family. The Minnesota studyaddresses the issue of how much is enough income by pointing out what isnot included in a self-sufficiency budget:

56 David H. Ciscel

The cost analysis is based upon monthly budget requirements neces-sary to achieve a “no frills” standard of living. No money is includedfor debt payments or skills training. There is no entertainment budget,no restaurant meals, no vacation, and nothing set aside for emergen-cies, retirement or children’s college education.

(1998: 1)

Each study warns the reader that there is little income allowed for extras.For example, Ciscel’s What is a Living Wage for Memphis? indicates that“The Living Wage income leaves out a lot. While it provides for basic self-sufficiency, it does little more than that” (1999: 11).

These studies provide considerable detail on the market basket ofgoods that make up the self-sufficiency budget. Every budget providesdetails for food, housing, health care, child care, transportation, andpersonal/miscellaneous expenses of living. In addition, most of the studiesexplain income tax/social security tax deductions, and tax rebates throughthe Earned Income Tax Credit (EITC) program. Some attempt additionalcalculations for child care allowances.

For the food budget, two issues stand out: (1) choice of a specificUSDA budget; and (2) out-of-home food costs. Uniformly, everyonerejects the USDA thrifty food plan that was the basis for the originalpoverty guidelines. In its place, self-sufficiency budgets substitute theUSDA “low-cost food plan,” a more nutritionally sound budget and onethat costs about 25 percent more than the thrifty plan. Interestingly, in theera of drive-through and fast food, none of the self-sufficiency budgetsallow for food prepared away from home. Assuming that families, whereall adults work, will prepare all breakfasts, lunches, and dinners, packagethem, and eat them at work or school certainly stretches credibility intoday’s world. But it also points out how conservative these budget esti-mates are.

How housing costs are budgeted is likewise fairly standardized. Thestudies use the US Department of Housing and Urban Development’s(HUD) “fair market rents.” Both the Minnesota and North Carolina studyassume that a single parent and child require a two-bedroom apartmentwhile the Memphis study assumes a one-bedroom apartment. The Min-nesota study assumes that two parents and two children require three bed-rooms, while the other studies assume two bedrooms. The studies use the40th percentile or the median for rents, assuming that the low-end rentsprobably result in fairly dilapidated housing conditions. Adjustments forutilities and telephone vary from study to study, but none allow for long-distance telephone service or a cell phone.

In the categories of medical care and child care, there are similarmethodologies for determining the appropriate basket of services. TheMemphis study used the premiums required from the state-managedhealth care plan, TennCare. The other studies used a standard family


premium usually representing a third to a half of the actual cost of a healthcare policy. Though somewhat unrealistic for many workers going into thelow end of the labor market or into contingent employment, these studiesassume a group policy. Finally, these studies tend to minimize the costs ofdeductibles and leave no money for uninsurable portions (teeth, mental,and eye care costs) of the health care family budget. Child care is based onsurveys of child care cost in each US state. With the conversion of AFDCto TANF, most states maintain a child care expense survey to help estab-lish subsidies, so good data are available for this portion of the analysis.Like so much of the self-sufficiency budget analysis, these estimates ofmedical costs and child care tend to be at the low end, providing expensesfar below what middle-class parents would expect to pay for health careand child care.

The costs of transportation are generally linked to the expenses of oper-ating an old car. Since sprawl is a characteristic of most small and largeurban areas, most studies note how impractical the use of public trans-portation is. The Minnesota study provides considerable detail, breakingdown driving time between work- and non-work-related driving for differ-ent types of families. While the costs attempt to include all the normalcosts of driving including minor repair, insurance and registration, none ofthe three studies examined here provide funds for initial purchase of a newor used car when this one wears out.

Finally, every study includes a category for personal care, clothing, andmiscellaneous. Sources on estimates of this category vary. Though cleanli-ness and personal appearance are key features of most modern advert-ising, the studies tend to relegate this important category of our standardof living to a second-class level. The studies implicitly fear that theseexpenses seem frivolous though they are clearly extremely important tothe vast majority of US consumers.

The North Carolina study is important for its comprehensiveness. Notonly does it create self-sufficiency budgets for seven family configurations,it also computes the budget for every Metropolitan Statistical Area (MSA)and county in North Carolina. Consequently, it is very useful to compareurban and rural differences and it delineates the differences on familybudgets imposed by infants, preschoolers, and older children. However,both the Memphis study and the Minnesota study (which also providesurban/rural differences) are more focused on presentation of data for per-suasion. Consequently, they provide fewer tables that are more accessibleto the reader. Indeed, the updates for the Minnesota study (2001) and theMemphis study (2002) are even more reader-friendly and also includemore peripheral information on poverty and low wage employment poten-tial in their regions.

Table 5.2 provides a comparison of the three studies for one familytype: a single parent with two children. Note that though childcare, tax,housing, and transportation assumptions are quite different, the results are

58 David H. Ciscel

quite similar. Regional differences are, of course, important, but they donot obscure the basic message. For a single parent family to be self-suffi-cient, the family would require an income of $30,000 to $35,000 per year. Ifthat income is going to be earned in one full-time job, an hourly wage of$15.00–16.00 per hour is required. As has been noted elsewhere in thischapter, the modest estimates of the self-sufficiency studies indicate thatthe minimum wage provides little more than a third of a living wagebudget and the poverty thresholds provide only about half of a decentstandard of living.

The Economic Policy Institute’s budget and hardshipanalyses

Two publications by the Economic Policy Institute (EPI) have contributedto the calculation of living wages in the United States. These studies take anational viewpoint, but they are invaluable for the comparative data avail-able. How Much Is Enough? (Bernstein et al. 2000) is a summary of nine-teen family budget studies from across the nation. Very useful is thediscussion of how to compute a family budget. The publication asks thequestion: should it be based on absolute, relative, or subjective measuresof family needs? Most self-sufficiency studies use an absolute standard.That is, they use an expert to determine the size of budget required inhousing or food in a specific area. The family budget is thus based on ascientific foundation. EPI’s criticisms of the absolute approach reflect theirown commitment to a scholarly-based analysis of family income needs.They accurately note: “The main advantage of the relative measures is


Table 5.2 Living wage budgets for single-parent families with two children

Minnesota 2001 Memphis 2002 North Carolina1997

Food $362.00 $371.42 $303.24Housing $599.00 $790.00 $599.00Transportation $378.00 $153.25 $109.60Child care $637.00 $468.75 $703.17Medical Care $261.00 $300.00 $161.10Clothing/Misc $230.00 $201.33 $187.61Taxes $369.00 $322.25 $511.99

Monthly $2,836.00 $2,607.00 $2,575.71Annual $34,032.00 $31,284.00 $30,908.52Hourly Wage $16.36 $15.64 $14.63

Sources: Ciscel (2002); Outtz et al. (1997); Cederberg et al. (2001).

NoteThe North Carolina study is for the Raleigh/Durham/Chapel Hill MSA. Each study computesworking hours slightly differently.

that they allow a sufficiency budget to incorporate two dynamic economicdevelopments: the growth of average income and the commensurateincrease in general living standards, plus the change in relative prices”(2000: 17).

Relative living wage standards are based on some percentage of themedian income level (or 150 percent of the poverty threshold). Con-sequently, the relative measure is based on available government incomemeasures, is easy to compute, and adjusts as community income levelsadjust. But, of course, relative family budgets do not actually specifyfamily needs to maintain a standard of living. Finally, subjective measuresinvolve interviews of families requesting information about what theyneed to live decently. Subjective measures, though they clearly are moredemocratic and involve those individuals involved in and affected by theanalysis, are difficult to design, to administer, and to make reliable.

How Much is Enough? provides an important service to living wageresearchers. The text works its way through every component of a livingwage budget, reviews the various methods used by the nineteen studiesunder review, and suggests a “best choice” approach to each budgetcomponent. Most of the recommendations are excellent, though the EPImethods for computing health care costs are complex. In addition, EPI isslightly more generous in personal expenditures than the typical livingwage study. EPI reviews the items – credit card debt, savings, insurance,and consumer durables – that are missing from almost all living wagestudies. In the biggest missing element of family budgets, food consumedaway from home, the EPI study does not help correct the errors of otherstudies. The EPI study claims “Although 45% of low-income familiesconsume at least one meal outside the home a day, the USDA does notinclude these costs in its food plans. There is no adequate way to adjustthe food plans to reflect these costs” (Bernstein et al. 2000: 40). Finally, asimple breakdown is provided of the nineteen studies (in 1996 prices). Fora single-parent, two-child family, the studies, on average, recommend a$2,331.95 per month ($27,983.40 per year) living wage. That wage isbroken down by:

• 15.0 percent for food;• 22.5 percent for housing;• 8.7 percent for health;• 9.4 percent for transportation;• 13.5 percent for taxes and the EITC;• 21.6 percent for child care;• 10.8 percent for other necessities.

Compared to data from Vanderheide (1999) based on 1996–97 consumerexpenditures, this living wage budget probably dramatically underfundsthe budget component of housing and transportation.

60 David H. Ciscel

In 2001, EPI issued a more detailed analysis of living wages, Hardshipsin America (Boushey et al. 2001). This report provides a basic familybudget, in 1999 dollars, for six different family types for most cities in theUnited States. The output is impressive, though the individual town or cityis lost in the massive tables at the end of the text. The strength is its reviewof the issue of hardship.

All living wage studies imply that “life is hard” if a family doesn’t earn aliving wage. This text helps document what hardship means and whathardships a family living on less that living wage would have to endure.Being short of food, missed meals, eviction, loss of utilities, lack of healthinsurance and care, children caring for themselves while parents work allreflect serious to critical hardships typically suffered in larger amounts bythe poor than those families with higher incomes. While determining thefrequency of hardships is difficult, the EPI report notes:

Hardships, both critical and serious, are more common among familiesliving below the 200% of poverty than those above . . . Some hardshipsare more common than others, but families living below 200% ofpoverty are two or three times as likely as families living above 200%of poverty to experience each of the specific critical and serious hard-ships.

(ibid.: 29)

And the key to hardship seems to be health insurance: those families withhealth insurance tend to do better facing all other hardships than familieswithout health insurance. If a living wage hovers around 200 percent of thepoverty threshold, then it is clear that a living wage, with a health insur-ance package, is a key to a successful family in financial terms.

Basic needs and living wage ordinances

The living wage movement has drawn upon the scholarly analysesreviewed here to achieve a political end. The idea has been to change thefocus from poverty thresholds and mere sufficiency to definitions of ade-quacy, or living wages. One of the things that makes a living wage budgetattractive as a political instrument is that it can easily be compared to anyindividual monthly budget. For instance, if a self-sufficiency budget recom-mends $700 per month for rent and utilities and the typical rent and utili-ties for a locality is $2,000 per month, it makes it easy to see the gapbetween subsisting and living.

The ACORN web site lists 103 successful city and county living wagecampaigns as of March 31, 2003. In addition, there are another 121 activeliving wage campaigns (ACORN 2003). The group’s primary focus hasbeen to urge local municipalities to pass living wage ordinances, local lawsthat call for private employers who receive local government subsidies or


tax breaks to pay their workers (often outsourced contract workers) aliving wage. In addition to ACORN, living wage ordinances have alsobeen the focus of several faith-based organizations such as Clergy andLaity United for Economic Justice (CLUE) and National Interfaith Com-mittee for Worker Justice (NICWJ) (Figart 2001).

The ordinances are usually segmented into two tiers: a lower livingwage with health benefits and higher living wage without health benefits;the difference tends to be about $1.50 per hour. Living wage ordinanceshave ranged from $7.00 per hour to over $12.00 per hour with health bene-fits. This ordinance-level living wage reflects the political art of the pos-sible, not the research-based self-sufficiency budgets. But each living wageordinance campaign is usually informed by a research agenda, and authorsof economic and self-sufficiency studies are typically called upon to testifyin favor of proposed ordinances. Examples include Michael Reich andPeter Hall’s study prepared for the living wage campaign at the San Fran-cisco, California airport (Reich and Hall 1999) and Bruce Nissen’s study ofthe impact of the living wage in Miami, Florida (Nissen 1999).

Moving from calculating a living wage budget to enacting a living wageordinance is a key goal for many living wage activists. The living wagebudget is usually the initial component of a campaign, making local citi-zens aware of the costs of living independently in today’s economy. Thesecond stage is passing the ordinance. A major hurdle to overcome innearly all US living wage campaigns has been the predictions of orthodoxeconomic analysis. That is, any interference with free market operationthrough administrative wage increases will have the unintended side effectof harming those who are supposed to be helped through employmentlosses. Like minimum wage increases, local living wage laws are stronglyopposed by the restaurant and hospitality industries. Pollin et al. (2002)challenge that orthodox prediction in their study of the New Orleanseconomy, a city very dependent on the tourist trade. They note the poten-tial for a combination of productivity increases, price adjustments, andintra-firm cost redistribution that would probably minimize employmentlosses. They conclude, as other research has corroborated: “This then alsosuggests that the incentive for covered firms to lay off low-wage employeesor relocate outside the New Orleans city limits should be correspondinglyweak” (2002: 863).

The determination of a living wage

The computation of a living wage turns out not be as difficult as it initiallyseems. The issue of subjectivity is probably the least important criticism ofthe living wage estimates. There are so many studies that assist in the cal-culation of a living wage that estimates tend to form fairly tightly around amean. While the living wage movement has emphasized determining livingwages by region, the actual differences, for a similar family type, usually

62 David H. Ciscel

are plus or minus $1,000 per year. That is, the differences have a typicalrange of a $1.00 per hour in pay.

The more serious issue is where these incomes should come from. Table5.3 from my living wage study (Ciscel 2002) provides an insight into theseproblems. If a family is going to earn $26,000 to $34,000 per year to be self-sufficient in Memphis, Tennessee, it has basically four sources of income.First, the idea of self-sufficiency can be legislatively overturned. If societydecides to pay for all or some of health care, housing, transportation orchild care, then the explicit dollars needed by a family are reduced. Manylow-income working families make it through the year with public orcharitable subsidies, but most of these subsidies are means tested; that is,the family must already be suffering some sort of hardship in order toquality. Rather than helping to guarantee a living wage income, mostsocial welfare problems (except Social Security) tend to be safety netprograms that catch those that are already falling into misery.

Second, the number of workers in a family can reduce the wages thatany individual family member has to earn to lift the entire family up to aliving wage. Criticisms of the living wage often indicate that intact old-fashioned families have an easier time of earning a living wage. Of course,living wages would also be even easier to earn if small children wereallowed to work regular jobs. These types of criticisms of the living wage


Table 5.3 The labor hours required to earn a living wage in Memphis, Tennessee

The living wage for self-sufficiency

One adult with Two adults with1 child 2 children 1 child 2 children$26,040 $31,321 $30,143 $34,304

Hourly wagesa Total weekly working hours required

$5.15 101 122 117 133$6.00 87 104 100 114$7.00 74 89 86 98$8.00 65 78 75 86$9.00 58 70 67 76

$10.00 52 63 60 69$11.00 47 57 55 62$12.00 43 52 50 57$13.00 40 48 46 53$14.00 37 45 43 49$15.00 35 42 40 46$16.00 33 39 38 43

Source: Ciscel (2002).

Notea Overtime pay at time and a half is not calculated in this table. Since many workers expand

their time to earn additional income through second and third jobs, this report uses straighttime for all hours worked.

harken back to a mythical patriarchal family where a wise male organizesfamily work, and allocates expenditures to each member in an impartialmanner. Not only did such a family never really exist, but it ignores thecurrent construction of families – large numbers of single parent families –and the need for a more gender-friendly income production and the cre-ation of a system where the next generation of workers (today’s children)are able to reach their potentials.

Third, the living wage depends on the mix of hours that are worked atdifferent wages. Working in a minimum wage job requires an individual towork long hours; perhaps moving from a daytime to an evening job tobring in enough income to achieve self-sufficiency. A single mother with achild could theoretically earn a living wage at the current minimum wage ifshe worked 101 hours per week (out of a total of 168 hours). Even $10.00per hour requires a woman to work 52 hours of paid labor before shebegins her housework or care for her child. In short, the higher the wage,the shorter is the path to self-sufficiency. But even two parents with twochildren do not have an easy time of gaining self-sufficiency. At theminimum wage, each parent would have to work 68 hours per week. Witha $10.00 per hour job, 70 hours total is still required. That is, one parentwould work a 40-hour week while other worked a 30-hour week beforehousehold chores and child care were begun.

Wages as a living and as a price

What do we do if the labor market refuses to yield these pittances toworkers? Clearly, many workers earn far less than a living wage. Earningsfor workers in the post-Vietnam War era seem to be bifurcated, deliveringvery high incomes to those with property and advanced educational cre-dentials, and stagnant or falling incomes to workers with low levels offormal education and those workers in the growing service and tradesectors of the economy. And, as a general rule, this functional wage seg-mentation occurs along the boundaries of race and gender.

Figart et al. (2002) argue that working must be understood as a tripar-tite function of the labor market: wages as a price, as a living, and as asocial practice. Wages as a price reflect the world-view of orthodox eco-nomics. Like the prices of eggs, toothpaste, or DVD players, the price oflabor power fluctuates. Supply and demand are its only determinants. Ifwages are low, they only reflect poor on-the-job productivity or lack ofindividual human capital. But as Figart et al. note:

Markets are human-constructed, culturally embedded institutionswhose outcomes are neither infallible nor beyond challenge. Wages asa living refers to the concept of setting wages according to sociallydefined appropriate living standards in order to maintain the repro-duction of the labor force and macroeconomic growth . . . Wages as a

64 David H. Ciscel

social practice . . . are a means of reinforcing or redefining how womenand men of different social classes, races, and ethnicities should live.

(2002: 208–11)

The living wage movement is an example of an attempt to educate citizenshow wages and jobs are actually allocated while recommending reform intoday’s labor markets operations. Clearly, wages reflect unequal bargain-ing power and asymmetric information of workers relative to employers, ahistorical memory of the market that stigmatizes jobs entered by womenand people of color, and an institutional structure defining labor marketsthat reinforces wage inequality.

Determining a living wage is part of the process of explaining thatwages need to cover the cost of supporting a family and its children. Socialreproduction of the labor force is an important social goal. And that socialreproduction is not merely building human capital in the next generationof workers. It is allowing a family, whatever its type, to play an active rolein the political and community life of society. The simple calculation ofdetermining how much food, housing and transportation a family needs isa profoundly political act, one that may change society’s focus fromlooking only at wages as a price to understanding that wages are also aliving.

Note1 The official poverty threshold does not include various non-cash benefits

(housing and food assistance, for instance) that low-income families may be eli-gible for.

References

ACORN (2003) http://www.acorn.org/Bernstein, J., Brocht, C., and Spade-Aguilar, M. (2000) How Much is Enough?

Basic Family Budget for Working Families, Washington, DC: Economic PolicyInstitute.

Boushey, H., Brocht, C., Gunderson, B., and Bernstein, J. (2001) Hardships inAmerica: The Real Story of Working Families, Washington, DC: EconomicPolicy Institute.

Cederberg, H., Ristua, K., and Steuernagal, B. (2001) The Cost of Living in Min-nesota: The Job Gap Economic Literacy Project, St. Paul, MN: JOBS NOWCoalition.

Ciscel, D.H. (1999) What is a Living Wage for Memphis? Memphis, TN: The Uni-versity of Memphis Center for Research on Women (CROW).

Ciscel, D.H. (2000) “The Living Wage Movement: Building a Political Link fromMarket Wages to Social Institutions,” Journal of Economic Issues 34 (2):527–35.

Ciscel, D.H. (2002) What is a Living Wage for Memphis? 2002 Edition, Memphis,TN: The University of Memphis Center for Research on Women (CROW).


Figart, D.M. (2001) “Ethical Foundations of the Contemporary Living WageMovement,” International Journal of Social Economics 28 (10/11/12): 800–14.

Figart, D.M., Mutari, E., and Power, M. (2002) Living Wages, Equal Wages,Gender and Labor Market Policies in the United States, New York, NY: Rout-ledge.

Fisher, G.M. (1992) “The Development and History of the Poverty Thresholds,”Social Security Bulletin 28 (Winter): 3–14.

Johnson, D., Rogers, J., and Tan, L. (2001) “A Century of Family Budgets in theUnited States,” Monthly Labor Review 124 (5): 28–45.

National Academy of Sciences (1995) Measuring Poverty: A New Approach, avail-able: http://www.census.gov/hhes/poverty/otherpov.html

Nissen, B. (1999) The Economic Impact of a Living Wage Ordinance on Miami-Dade County, Miami: Florida International University, Center for Labor Rela-tions.

Orshansky, M. (1965) “Counting the Poor: Another Look at the Poverty Profile,”Social Security Bulletin 28: 3–29.

Outtz, J.M., Brooks, J., and Pearce, D. (1997) The Self-Sufficiency Standard forNorth Carolina: Selected Family Types, Raleigh, NC: NC Equity SustainableFamily Initiative and The Women and Poverty Project of Wider Opportunitiesfor Women, Inc.

Pollin, R., Brenner, M., and Luce, S. (2002) “Intended versus Unintended Con-sequences: Evaluating the New Orleans Living Wage Ordinance,” Journal ofEconomic Issues 36 (4): 843–75.

Reich, M. and Hall, P. (1999) Living Wages at the Airport and Port of San Fran-cisco Bay Area, Berkeley, CA: Living Wage Research Group, Center for Payand Inequality, Institute for Industrial Relations, University of California,Berkeley.

Renwick, T.J. and Bergmann, B.R. (1993) “A Budget Based Definition of Poverty:With an Application to Single Parent Families,” The Journal of HumanResources 28 (1): 1–24.

Steuernagel, B. and Ristua, K. (1998) The Cost of Living in Minnesota: The JobGap Economic Literacy Project, St. Paul, MN: JOBS NOW Coalition.

US Census Bureau (2000) Available: http://www.census.gov/hhes/poverty/poverty01/tables01.html

Vanderheide, W. (1999) “At Issue: Tracking Changes in Consumer’s SpendingHabits,” Monthly Labor Review 122 (9): 38–9.

66 David H. Ciscel

Part II

Living wage and low paycampaignsContemporary global activism

6 The living wage movementmushrooms in the United States

David B. Reynolds

In the past decade, living wage campaigns have emerged as one of themost significant signs in the United States of a grassroots reawakeningaround economic justice. Begun in 1994 with Baltimore’s pioneering ordi-nance, the living wage movement has spread to every part of the country.By May 2003, 102 local governments had passed living wage laws – withcampaigns active in over seventy-five additional communities.1 Mostnotably, the ranks of active campaigns include the conservative Americansouth – with local organizing in Alabama, Louisiana, Kentucky, NorthCarolina, South Carolina, Tennessee, Texas, Florida, and Virginia. Tounderstand the character and potential of this movement, we explore sixcampaigns in detail. First, however, we need to briefly examine somebasics.

Basics of living wage campaigns

While living wage laws differ in specifics, all require firms that receivepublic funds to pay wages above some minimalist poverty level for thecommunity – typically in the range of $8–12 an hour. As the living wagemovement has matured, it has become more sophisticated and aggressive.Nearly all campaigns now link to health benefits by requiring a higherwage if no family health insurance is provided. More and more ordinancesalso mandate such public standards as paid vacation time, worker reten-tion when contracts change hands, and measures to protect workers whowish to organize a union.

Campaigns have also sought new ways to broaden their reach. Abouthalf of the living wage laws cover companies that receive tax abatementsand other forms of financial assistance, in addition to contractors. Eitherdirectly in the laws or by related administrative action, campaigns havealso convinced many municipalities to bring their own pay scales up to aliving wage. By covering non-profits and including place-based coverage atthe city airport, San Francisco’s living wage directly aided an estimated22,000 workers.

Why groups participate in living wage coalitions

Living wage campaigns represent a genuine bottom-up grassroots impulse.ACORN, with its national Living Wage Resource Center, has had themost systematic involvement in living wage organizing. Other nationalorganizations – such as Jobs with Justice, the AFL-CIO (American Feder-ation of Labor-Congress of Industrial Organizations), and the NationalInterfaith Committee for Worker Justice – have also aided local organ-izing. However, the main initiative driving local living wage coalitions hascome from the grassroots level.

The living wage cause attracts labor and community groups because itpoints to basic economic issues while at the same time offering a verywinnable legislative reform. A broad section of the public can sympathizeat several levels – both as workers who have seen their income levels stag-nate and as taxpayers who demand that public funds go to support publicstandards. Ironically, the living wage has proven an effective coalition-building tool because it also draws significant, though usually not insur-mountable, opposition. While in a small number of cases opposition hasproven triumphant, more often it simply compels further activism andbroader coalition building by participating groups.

In terms of organized labor, most major unions in an area will, at aminimum, formally endorse a campaign. At least some labor leaders willbe among the core activists. The labor movement has a long tradition offighting for and raising the minimum wage as a way of protecting work-place bargaining power. More immediate self-interest can strengthen aunion’s role, as in the frequent involvement of the Service EmployeesInternational Union (SEIU) and Hotel, Entertainment, and RestaurantEmployees Union (HERE) – two unions whose membership is among theworkers covered by living wage laws. However, this is not always thecase. While the American Federation of State, County and MunicipalEmployees (AFSCME) was one of the two leaders of Baltimore’s pioneer-ing law, in other campaigns locals have barely participated despite theirdirect interest in dampening privatization. In Michigan, the United Auto-mobile Workers (UAW)’s living wage efforts appear to have come out ofa tradition of socially-oriented political action rather than some immediateconnection to the union’s core industry (this despite low wage supplierfirms that receive local tax abatements). While some campaigns, such as inLos Angeles and Santa Cruz, have demonstrated the possibilities for usingthe living wage to secure concrete organizing gains, the link between theliving wage and union organizing remains underdeveloped and does notserve as an important feature in most campaigns. Local AFL-CIO laborcouncils have proven a quite frequent, although by no means universal,player in living wage organizing. Living wage efforts provide an avenue fordoing something that is both new and coalition-building, while at the sametime tapping into a labor council’s traditional role of political action. In

70 David B. Reynolds

general, the living wage fits well into the AFL-CIO leadership’s topagenda of restructuring the labor movement to place a far greateremphasis on union organizing. Building ties to community groups andbuilding coalitions around local economic development are key com-ponents to this organizing agenda.

As Deborah Figart explores in her insightful article on the ethicalfoundations of the living wage movement (Figart 2001), faith communitieshave a long historical tradition of supporting worker justice. For a varietyof reasons, during the second half of the twentieth century theselabor–faith connections declined. Today, however, faith-based activism ison the rise in the United States. In part, religious leaders have seen yearsof running soup kitchens, shelters, and other work with the poor fail tostop the increase in poverty experienced in the last two decades. Thus,people of faith have begun looking for additional ways to address the eco-nomic injustice in the society. Formed in 1996, the National InterfaithCommittee for Worker Justice now supports over sixty affiliates aroundthe country (Bobo 2003). In addition to living wage campaigns, thesegroups support worker organizing and bargaining struggles, organize chal-lenges to sweatshops, create worker-friendly partnerships with govern-ment agencies charged with protecting worker rights, and advocate forincreases in state and federal minimum wage laws. Most notably, theendorsers of living wage campaigns have reached well beyond the “usualsuspects” of traditionally liberal activist churches to include mainlinedenominations.

At a general level, the living wage movement reflects the erosion of theold post-war interest-group liberalism. Shaped by the political and eco-nomic conditions of the post-war boom, many progressive groupsdeveloped often successful interest-group strategies of narrowly pushing afocused set of concerns relatively independent of other activist currents.The corporate restructuring of the past twenty years, however, has sharplyreduced support for liberal reforms in elite circles and rendered narrowinterest groups less effective than in the past. At the same time, pastliberal reforms and public institutions are now under attack while broadsections of the US public have seen their standard of living erode. Thus,for a diversity of grassroots organizations today the need to connect to abroad array of partners has become a practical necessity for both long-term survival and future progress.

The basic campaign

Most living wage campaigns involve some minimal common elements.They have to build some form of coalition between key local labor, reli-gious, and community groups. The coalition must cultivate some championwithin local elected government. Generally, but not exclusively, livingwage campaigns develop in communities with elected Democratic

The US living wage movement mushrooms 71

majorities. Not all elected Democrats, however, automatically supportliving wage ordinances.

Employers covered by the legislation are not always, or even typically,the main opposition. Rather, the local chambers of commerce lead theopposition supported by business people ideologically opposed to publicparticipation in economic decisions. Nationally, the Employment PoliciesInstitute, a think-tank funded by the restaurant and retail industry, pro-vides a clearing for anti-living wage materials. To date, the opposition hasoffered no concrete evidence to back their claims that living wage lawsproduce job losses, tax increases, or a poisoned business investmentclimate. Indeed, two dozen academic studies and internal city reviews havefound that the paying of a living wage costs relatively little money, haslong-term cost savings and quality benefits for employers, and has pro-duced few jobs losses (Reynolds and Kern 2003: Chapter 7).

Although over one hundred communities have living wage laws, coali-tions have to push for each new ordinance in a context of elected officialsfearful of going into the “unknown.” For this reason, campaigns mustdemonstrate that the living wage is a popular cause. At a minimum,activists need to fill local council chambers with vocal living wage supports.Once the ordinance has been passed, the battle is not always over asopponents may try to weaken the law either through amendments orvarious ways of undermining enforcement. Indeed, enforcement is theweakest link in the living wage movement.

While most campaigns display the above elements, many go beyond thisbare bones experience. Below we detail six campaigns that in differentways illustrate the potential of living wage organizing to foster a long-termeconomic justice movement in the United States.

Living wage campaigns as part of a broader project

Many of the most far-reaching living wage efforts developed as one tool ina much larger movement-building strategy. The first living wage campaignin Baltimore revealed this character, while Los Angeles and San Joserepresent some of the most comprehensive regional movement-buildingpractices in the United States today.

Baltimore, Maryland

From the beginning, the two main forces behind the Baltimore living wage– BUILD (Baltimoreans United in Leadership Development, a coalitionof fifty congregations) and AFSCME – placed organizing low-wageworkers in the long term at the center of their effort. Having advocated forhousing, education, and other subsidies since the late 1980s, by the early1990s BUILD realized that such efforts were undermined by the city’sdowntown-focused redevelopment strategy. Such “urban renewal” was


generating large numbers of low-wage jobs. As they sought direct ways toraise the wage floor, BUILD found an ally in AFSCME. The union viewedthe living wage as a way to stem privatization and develop allies forexpanding collective bargaining rights for public employees (Fine 2000–01).

Through solicitations at neighborhood stores, person-to-person con-tacts, and other means, the campaign included workers covered by theproposed living wage law in the campaign. While a seemingly naturalconnection, such outreach is often difficult to do, especially if the campaignwants to place covered workers in the limelight. Through the outreach,however, Baltimore’s coalition developed a list of 3,000 workers whowanted an organization for people like themselves. Today, the SolidaritySponsoring Committee (SSC) has grown to three staff and roughly 500dues-paying members. While most of these workers are covered by theliving wage law, the SSC includes workers from other private employers.

The Committee had to mobilize its members to enforce and extend theliving wage law. For example, workers and their supporters twice packedthe Board of Estimates chamber to denounce the Eastman TransportationCompany’s violations of the living wage. Indeed, thanks to the efforts ofthe SSC, AFSCME, and BUILD, the city threatened to cut $14.4 millionin contracts to two dozen school bus contractors who refused to raisewages by the 50 cents increase in the living wage level.

The Solidarity Sponsoring Committee and the living wage coalitionorganized to win a right of first refusal law that provides workers the rightto keep their job even if their employer loses the contract. They havesecured protections for the right to organize brought back governmentjobs previously contracted out and blocked state plans to force welfarerecipients attending community college to discontinue their education forpoverty-wage work. The activists also helped win a state law banning com-panies from gaining public subsidies by replacing existing workers withwelfare recipients.

Building an organization of low-income workers has not proven an easytask, which is why so few campaigns pursue systematic contacts withcovered workers. Low-wage workers often juggle many responsibilitiesand can change jobs frequently. To help stabilize SSC membership, orga-nizers pulled together a basic benefit package. For $10 a month, workersreceived $10,000 worth of life insurance plus dental, vision, prescription,and health discounts. While not comprehensive medical care, the packagedoes focus on crucial preventative measures.

Los Angeles, California

The LA living wage effort grew out of a battle to defend the jobs of 1,000unionized workers at the city’s main, international airport, LAX. Threehundred jobs were lost when the city brought in non-union contractors,such as McDonald’s. The remaining 700 jobs promised to suffer the same


fate. A core group from the hotel workers and service employees unionsjoined with several community groups to map out a response. Their strat-egy involved passing three pieces of legislation connecting public funds tocommunity standards. The first required companies receiving city con-tracts to retain the existing workforce. Activists won this legislation in thefall of 1995. The second was the living wage law. The third establishedlegal protections for workers’ right to organize.

The eighteen-month battle to win LA’s living wage ordinance produced abroad alliance of labor and community groups. Indeed, the campaign’s coali-tion grew to over one hundred endorsing organizations. While the campaignhad clear champions on the city council, Los Angeles’ mayor opposed theliving wage, compelling the campaign to build a veto-proof supermajority. Tokeep the pressure on, activists organized a phone-in campaign to the citycouncil. Organizations faxed letters of support. Over 1,000 “New Years”cards flooded in from city residents. For two weeks delegations visited thecouncil twice a day, three days a week. Some actions were quite dramatic.For Thanksgiving, the campaign asked groups and individuals to mail coun-selors over a thousand decorated paper plates symbolizing the struggle tofeed a family on poverty wages. For the winter holidays, one hundred clergyand other supporters accompanied a volunteer actor playing the part of theghost of Jacob Marley who went to city hall draped with chains to decry theMayor’s Scrooge-like opposition to the living wage. Volunteers went carolingat city hall and nearby restaurants with lyrics modified for the living wage.The living wage coalition also sought support from employers. Two top exec-utives from Bell Industries and Pioneer Foods wrote an opinion piece pub-lished in the Los Angeles Times defending the living wage from thestandpoint of their company’s success pursuing policies of higher wages.Thirty-three Hollywood film and television producers also sent a letter to theLA city council urging passage of the living wage ordinance.

Organizers deliberately recruited and involved workers affected by theordinance. At the airport, for example, workers took reporters and cityhall staff on a tour highlighting the conditions under which they had towork. Low-wage workers also provided powerful human-interest stories.Bobbi Murray, the campaign’s media director, wrote that:

workers came to City Hall and testified about injuries that wentuntreated because there was no time off permitted for a doctor visit,and no insurance or way to pay for it anyway; families crowded intotiny one-bedroom apartments in dangerous areas of town just to makerent, and visits to food pantries to manage the groceries every month.

(Murray 1999)

The participation of affected workers not only helped gain some positivemedia coverage, but also developed an activist nucleus among low-wageworkers that could feed into union activity.


In March 1997, the Los Angeles City Council unanimously passed theliving wage. A month later they overrode Mayor Richard Riordan’s veto.The living wage campaign proved one step in the growth of a model social-movement-oriented organization: the Los Angeles Alliance for a NewEconomy (LAANE). Formed on an early initiative by the Hotel andRestaurant Employees Union (HERE), LAANE has grown to staff oftwenty-five. LAANE links policy development to union growth andorganizing. By policy research, coalition building, and advocacy work,LAANE helps to place labor at the center of a broad local movement foreconomic justice.

For example, since the living wage victory, LAANE has actively moni-tored the city’s contracting and economic development process. LAANEpublished several critiques of the city’s economic development strategy –one strong on corporate subsidies and weak on community standards. AtLAX, the living wage coalition intervened in the processes of granting offood concessions, upholding employers willing to respect workers’ right toorganize. They have also obtained amendments to the original living wagelaw to make clear that the airlines themselves are covered and to providestrong protections and employer sanctions in any workplace in whichworkers are harassed for discussing their rights under the living wage.

LAANE helped establish and houses a faith-based worker supportnetwork: Clergy and Laity United for Economic Justice (CLUE). CLUEdirectly participated in the Los Angeles and subsequent living wage cam-paigns. Along with the Southern California Ecumenical Council, CLUEhas called on churches to lead by their own examples by paying all theirstaff a living wage. CLUE has also directly aided area unions. For example,when the Westside Hotels balked at a first contract with the HERE togradually raise housekeepers’ wages from $8.15 to $11.05 an hour, CLUEdispatched small teams in full ministerial garb to deliver brief sermons onworkplace fairness while ordering coffee at several hotel dining rooms. OnApril 8, 1998, an interfaith procession of sixty ministers, priests, and rabbismarched through Beverly Hills to deposit bitter herbs outside the RodeoSummit Hotel, which still had not signed the HERE agreement, and offermilk and honey to the two which had. Two months later the Summitsigned.2 CLUE has organized similar religious support for a campaignagainst a union-busting hotel in Santa Monica, an organizing drive at St.Francis Hospital, and protests over the University of Southern California’sdecisions to contract out work to low-wage employers.

LAANE also developed Santa Monicans for Responsible Tourism(SMART) as a grassroots member organization that has pushed for thenation’s boldest living wage ordinance. The zone-based law would haverequired all employers within the city’s lucrative coastal zone to pay aliving wage. The ritzy-tourist industry had benefited enormously from thepublic investment provided within the zone only to generate an explodinglow-wage workforce. To head off the measure, an alliance of wealthy hotel


and restaurant owners placed a bogus “living wage” law on the ballot thatwould have covered few workers and prohibited the city from passing anyfurther living wage statutes. LAANE and SMART helped defeat thissham proposal and won city council passage of their authentic living wagelaw. Unfortunately, the opposition forced the new law onto the ballot. InNovember 2002, their scare campaign convinced a majority of voters torescind the law. SMART’s organizing, however, continues.

Today, LAANE’s efforts to intervene in economic development workhave grown to include direct negotiations with developers. By 2002,LAANE’s Accountable Development Project had helped coalitions secureprivate and legally binding agreements with three major entertainment,housing and retail, and industrial development projects. All three bene-fited from millions of dollars of public funds. The agreements include suchprovisions as requiring that 70–75 percent of the jobs provided by the com-panies that locate in the development provide: living wages, affordablehousing and childcare centers, a youth center, local hiring, a neighborhoodimprovement fund, and card check recognition, and employer neutralityduring union organizing. In one case, the developer actually approachedLAANE since community support can help make a proposed develop-ment project’s journey through the public approval process much easier.LAANE aims to make community impact assessments and negotiatedbenefit agreements the normal procedure for the city’s own economicdevelopment efforts.

San Jose, California

As with Los Angeles, living wage efforts in San Jose grew as one part of amuch broader movement-building strategy. Following the 1994 election ofnew leadership, a revitalized South Bay Labor Council began to aggres-sively seek alliances between labor and the community. In 1995, it estab-lished Working Partnerships USA as a non-profit policy and researchinstitute to foster labor-community ties. The group won national newscoverage when it published several reports detailing the dark side ofSilicon Valley’s economy. With the median purchase price of a home over$300,000 and rent averaging $1,100 a month for a one-bedroom apartment,for example, over half of the Valley’s jobs did not pay enough to support afamily of four independent of public assistance.

Such economic data were used in an innovative Labor/CommunityLeadership Institute aimed at developing a cadre of leaders orientedaround a movement for economic justice. Working Partnerships activelyrecruits from among a diverse array of area grassroots leaders to attendthe eight-session training program. Class participants discuss the regionaleconomy, the role of unions, privatization, the role of government,and ideas for how the regional economy can be changed. The programaims not simply to develop a common understanding of the local political


economy among grassroots leaders, but to forge concrete personal tiesbetween the leaders of future labor-community coalitions. Indeed, duringthe course, participants work together on an actual economic-justice-ori-ented project in the community.

Working USA also served as the conduit for developing a new Inter-faith Council on Religion, Race, Economics, and Social Justice whichbrings together over sixty congregations and community groups. Thenetwork has helped successfully advocate for an additional $25 million inRedevelopment Agency funds for low-income housing and greater accessto public benefits for immigrants. In each case, the group’s activism helpedshift public dialogue from a power struggle between labor and business todemands that corporate and government practices reflect high moralground (Brownstein 2000).

It is within this broader movement-building context that the San Joseliving wage campaign developed. The first round took place in 1995, whenthe labor council put together a coalition to attach living-wage-type stand-ards to a local tax incentive program. The 1998 San Jose living wage cam-paign provided a robust channel for the central labor council and WorkingPartnerships to further expand its social movement institutions. The firstLabor/Community Leadership Institute classes used the living wage astheir group project. The Interfaith Council on Religion, Race, Economics,and Social Justice mobilized around the living wage effort – further build-ing its membership. The central labor council and its allies mounted one ofthe strongest get-out-the-vote operations in the city’s district 3, when theliving wage become a central issue between the union-backed incumbentand the anti-living wage opponent. The incumbent won by 200 votes. Twoweeks after the election, the living wage ordinance passed by a strong8-to-3 vote with the then highest required wage in the country. The ordi-nance also included worker retention provisions for new contracts, bidnotifications that are sent to the central labor council, and a requirementthat covered employers assure good labor relations. The latter measureseeks to hamper employers from hiring anti-union consultants or mount-ing aggressive anti-union campaigns.

The economic justice issues highlighted by the living wage campaigncontinue to foster progressive activism. The labor council and WorkingPartnerships, for example, have launched an expanding series of cam-paigns on the issue of temporary work. They have worked for training andskill certification programs, portable health and other benefits, a modelnon-profit temporary employment agency for clerical workers, and a Codeof Conduct through which temporary employment agencies agree to payliving wages, provide access to affordable health benefits and training, anduse fair administrative procedures. Woven into all of this activity areefforts to organize among temporary workers and to foster new forms oflabor organizations appropriate to a contingent workforce.

The model shown in Los Angeles and San Jose – of a new labor-related


non-profit founded to combine research, policy formulation, and coalitionbuilding – has been replicated in California and elsewhere. Just north ofSan Jose, the East Bay Alliance for a Sustainable Economy uses organ-izing around new and existing living wage laws to build a long-range labor-community economic justice coalition. The new Center for PolicyInitiatives is developing a living wage campaign as a part of its broaderstrategy to lay the basis for a progressive movement in conservative SanDiego. The recently formed Connecticut Center for a New Economy(CCNE) modeled itself after LAANE; CCNE currently maintains anongoing, multi-pronged labor-community campaign in New Haven totransform relations between Yale, the city’s largest employer, and its low-wage workforce and poverty-stricken surrounding community (Simmons2003).

Movement battles enhanced by strong opposition

While the above examples situated a living wage campaign in largerinstitution-building context, Chicago and Boston illustrate how the veryintensity of the battle for the living wage can expand a campaign’s scopeand impact.

Chicago, Illinois

From the outset living wage organizers, including SEIU Local 880 and theChicago ACORN chapter, knew that they would have a tough time inChicago. Home of one of the great urban political machines, local politicalpower resided with the mayor’s office. When Mayor Richard Daleyannounced his opposition to the living wage, the clear majority of cospon-sors on the Board of Aldermen disappeared overnight. Some involved inthe campaign worked not because they believed a win was likely, but inorder to develop a wedge issue that would shake up local politics and builda broad coalition.

The living wage coalition grew to over sixty endorsing organizationswith a combined membership of 250,000. On May 1, 1996, over 500 livingwage demonstrators joined a May Day march through downtown Chicago.Both the city’s Cardinal Bernardin and AFL-CIO President John Sweeneypersonally contacted Mayor Daley to urge his support for the living wage.When SEIU held its national convention in Chicago in 1996 delegatesstaged a major street parade. The campaign had to sue to gain access toNavy Pier so that living wage supporters could picket the Mayor as he wel-comed delegates to the 1996 Democratic Convention. Several busloads ofdelegates went on living wage “tours of shame” in which they visited low-wage employers enjoying ample public funds. The ability of the campaignto mobilize hundreds of living wage supporters made such an impressionupon the mayor that the fire marshal illegally barred people from attend-


ing the city council meeting at which aldermen dutifully voted down theproposed ordinance.

The strength of the campaign’s grassroots organizing, however, eventu-ally secured a living wage law. After the vote, the activists began organ-izing ward-by-ward accountability sessions with the nineteen aldermenwho had abandoned their earlier support. And coalition members directlyenter electoral politics. When activist Willie Delgado first ran for StateLegislature in 1996, he received few union endorsements to challenge hisAFL-CIO-backed primary opponent. Following the living wage campaign,he ran and won in 1998 with the solid labor support. On April 13 of thesame year, Ted Thomas, Illinois ACORN president and Chicago NewParty chair, beat the machine-endorsed candidate to become alderman inthe city’s 15th ward. Even though he never before held public office,Thomas, a retired postal worker, won endorsements from The ChicagoTribune, The Chicago Sun Times, and the Chicago Defender on his recordas a community activist and a leader of the Chicago Jobs and Living WageCampaign.

In the midst of the next election year, Mayor Daley sought a com-promise when he and council prepared to vote themselves hefty salaryincreases. Daley had argued that the city could not financially afford topass the proposed law. Daley and his council allies must have concludedthat they could not risk a backlash from a living wage movement morethan capable of making the contradiction a public issue. While the newunanimously passed living wage law was narrower than the originally pro-posed ordinance, it did represent a major breakthrough in a long cam-paign. Soon after, Cook County passed a similar ordinance. The alliancesbetween founders such as SEIU 880 and ACORN have continued intonew campaigns, for instance, an effort to win state funding increases tohome care, nursing home, and other care providers to explicitly provide aliving wage.

Boston, Massachusetts

The same combination of broad activist thinking and strong but vulnerableopposition applied in Boston. The Boston ACORN chapter initiated theliving wage campaign not simply to pass an ordinance, but to further theirneighborhood organizing and to build relationships with other progressivegroups. While unions joined the living wage coalition, their attention ini-tially focused more on the 1996 elections. It was the opposition that helpedintensify labor’s mobilization and strengthen the bonds between ACORNand the AFL-CIO. In February 1997, living wage organizers turned out acrowd of several hundred for a rally at which the city’s labor leaders wereto formally endorse the campaign. Activists had worked hard to gain thecommitment of a majority of city councilors, most of whom had run withlabor endorsements, to attend the rally. Yet, with Mayor Tom Menino


announcing his doubts about the living wage a week and a half before theevent, only one councilor actually made an appearance. Following thispolitical slap in the face, both the Greater Boston Central Labor Counciland the Massachusetts AFL-CIO threw their energy into the campaign.While leaders from every labor union in the city testified at hearings, thecoalition developed an escalating series of actions, including lawn signs,human billboards, rallies, petitions, and lobbying delegations.

The living wage passed by a final vote of 11-to-1. Some in the businesscommunity, however, used the gap between the law’s passage in 1997 andits implementation one year later to undermine it. Business leadersmounted an intense anti-living wage media effort while lawyers from thestate Chamber of Commerce searched for a legal challenge. In the end, thecampaign had to trade the subsidy-based coverage (the element most atrisk of a legal challenge due to restrictive court rulings on the state’s homerule amendment) for maintaining the contract living wage and a localhiring hall requirement for both contracts and subsidies.

This opposition served to further cement the bonds between ACORNand the Massachusetts AFL-CIO. Both sit on the living wage AdvisoryCommittee established by the ordinance. Since the living wage battle, thetwo have worked together on two state legislative efforts: a campaignthat raised the state’s minimum wage and a measure to increase thestate’s Earned Income Credit. In 2001, living wage supporters won amend-ments to the Boston ordinance increasing the wage amount to from $9.00to $10.54 an hour, dropping the employer threshold from $100,000 to$25,000, and lowering the non-profit exemption from one hundred totwenty-five employees or less. The campaign has also won living wageordinances in neighboring Cambridge and Somerville and helped providecrucial community support to the 2001 Harvard University living wagesit-in.

Serial campaigns in Michigan

Living wage campaigns can also take on a broader significance when theygrow beyond the boundaries of a single community. Michigan’s livingwage campaigns illustrate this dynamic. Individually, the efforts to passeach separate law have not been particularly noteworthy. However, theliving wage battle has grown to take on regional and now statewidedynamics.

While the Detroit campaign made history by becoming the first in thenation to pass a living wage law via a ballot initiative, it was undertaken bya local labor movement driven by modest aims. The decision to place theordinance on the ballot came from the political hope of raising voterturnout by giving city residents something concrete and compelling to votefor. The campaign staff was able to launch a modest outreach to clergy,with at least three dozen holding living wage events. The local ACORN


chapter also contributed door-to-door activism. However, the campaign’smain efforts focused on using living wage materials to enhance labor’straditional get-out-the-vote campaign. With the Chamber of Commercerealizing the difficulty of telling a 70 percent African-American city thatraising wages was a bad idea, the get-out-the-vote effort paid off with a 80percent vote for the living wage initiative.

Since it was linked to the get-out-the-vote mobilization, the Detroitcampaign never developed an autonomous living wage coalition. Nor didit have a plan for economic justice activism after the election. However,the stunning victory helped spark continued living wage activism. Themetropolitan Chamber of Commerce mounted a counter-attack againstthe law aimed at enacting crippling amendments. A packed audience ofliving wage supporters at a key city council hearing helped defeat this.With city enforcement quite uneven, modest outreach to covered workersby groups such as the Detroit AFL-CIO and Jobs with Justice produced aseries of employer violation complaints. In 2003, the National LawyersGuild’s Detroit-based Sugar Law Center initiated one of the first pro-living wage lawsuits on behalf of an employee not paid her legally man-dated wage.

The massive public support displayed by the ballot win promoted theMetropolitan Detroit AFL-CIO and other living wage supporters to initiatea series of suburban campaigns. By 2003, modest campaigns had passedlaws in the cities of Warren, Ferndale, Eastpointe, Southfield, Southgate,and Taylor. South of Detroit, Monroe County passed a law only to see itrepealed by a council that had flipped from a Democratic to Republicanmajority for the first time in its history. The significance of these ongoingcampaigns lies in the collective whole. Labor and its allies have generatedthe ability to push local public policy reform at a regional level.

Following the Detroit ballot win, activists in nearby Washtenaw Countypulled together a campaign which has passed six ordinances and thenation’s only road commission living wage policy. Activists succeeded inbuilding an endorsement list of thirty-nine organizations, fifty-nine clergy,and fifteen non-profits covered by the law. Despite some pilot efforts, thecampaign was not able to sustain door-to-door style grassroots volunteerefforts or hold major rallies or demonstrations. Its mobilization capacityremained at the level of turning out supporters for council hearings.

Despite these limitations, this four-year-long effort is notable at severallevels. It marked the first time in many years that the two major labororganizations in the county have worked together in a sustained way. Thelist of endorsing clergy included mainline church leaders. The campaignalso linked up with University of Michigan students organizing againstsweatshops. Furthermore, the very ability of the local labor–communitycoalition to pass legislation around a pro-active effort marked a newexperience for many local activists used to largely educational activism nottied to concrete policy victories.


Indeed, the potential for these modest serial living wage campaigns tobecome something larger has prompted the Michigan Chamber of Com-merce to place opposition to the living wage as one of its top legislativepriorities. In late 2000 and early 2001, the Chamber made the living wage acause célèbre throughout Michigan by attempting unsuccessfully to passstate legislation outlawing local ordinances. The battle drew in the stateAFL-CIO, the Michigan Democratic Party, and eventually the buildingtrades (when draft legislation also targeted local prevailing wage). Withthe opposition coming close to a state victory, both the metropolitanDetroit and state AFL-CIO, as well as several unions, found themselvespulled into a major grassroots organizing battle in the small suburb ofEastpointe. In 2001, living wage opponents forced the city’s newly passedordinance onto the ballot. Thanks to a door-to-door effort, voters upheldthe living wage. Unfortunately, a ballot campaign in city of Kalamazoo, inthe more conservative western Michigan, went down to defeat in the faceof a well-funded opposition that enjoyed the support of many local electedDemocratic officials. A state budget proposal in the summer of 2002 tocut state aid to cities with living wage laws prompted the Detroit suburbsof Allen Park and Hazel Park to rescind their laws despite the threatbeing taken quickly off the agenda. In early 2003, the state House passed aliving wage ban despite the likely veto by the newly elected DemocraticGovernor.

The Chamber’s opposition reveals concern that should living wagecoalitions score wins outside of southeast Michigan, such activism couldprove a building block for shifting the political balance of power in a nar-rowly Republican-dominated state. In May 2003, living wage supporters insoutheast Michigan worked with the Michigan AFL-CIO to sponsor thefirst gathering of living wage activists in the state. The meeting allowedexperienced organizers to share their knowledge with new or stalled cam-paigns in the politically key parts of the western and northern LowerPeninsula. Most important, the gathering laid the basis for a coordinatedstatewide movement by establishing a steering committee comprising onelabor and one community activist from each community.

Conclusion: steps along the social movement road

As the above case studies demonstrate, two basic forces help to broadenthe reach and deepen the scope of local living wage campaigns. First, con-scious intention by leadership plays a central role. In many of our cases,deep coalition building, grassroots organizing, the involvement of low-wage workers, and the spillover into continued activity after the law’spassage did not simply flow automatically from the campaigns. Rather, atthe outset, key organizers initiated their campaign with the larger purposeof using it to maximize these elements. The living wage is thus an import-ant tool for those wishing to build a larger project for establishing regional


power. This long-range movement-building perspective can take a formalexpression, such as in LAANE or Working Partnerships, or more inform-ally – such as the perspective of key organizers in Boston, Chicago, andMichigan.

Second, as they say in union organizing circles, “management is the bestorganizer.” Because the regional and state chambers of commerce lead thefight against every living wage law, they compel living wage activists tobroaden their coalitions and reach into their grassroots. Campaigns thatdo not build coalitions, but rely on ties to local elected officials and lobby-ing by a limited number of sponsoring groups, typically run into troubleand either end up failing or mounting broader efforts. Whether elaborategrassroots battles or more modest efforts, living wage campaigns can helpby moving local progressive activism further down a social movementroad. If nothing else, they demonstrate to many in the community thatwhen local groups get together they can make a difference; setting andenacting a local policy agenda are possible.

With a network of well over one hundred labor–community coalitionsacross the country, the living wage phenomenon highlights the existence ofa clear local progressive capacity for legislative change. In many casesliving wage organizing has led to further activism on local economicdevelopment, corporate accountability requirements, union building, andother economic justice issues. The challenges ahead include deepeningcoalition members’ level of involvement, developing long-term progressivemodels of regional economic development, and moving living wageactivism to the state and federal level. The first two have been pursued bysome of our examples. At the state level, by 2003 wage campaigns hadpassed minimum wage increases in Vermont, Massachusetts, California,Oregon, and Washington State. Labor–community coalitions have alsowon model corporate subsidy accountability legislation in Minnesota andMaine. And the nation’s deepening healthcare crisis had begun to producenew state-level labor–community alliances. These signs make clear thatwhether full-blown, long-term movement projects or more modest labor-community lobbying campaigns, living wage activism clearly represents anew and energetic grassroots impulse that promises to provide buildingblocks for what some day may prove to be the great social movementreawakening of the early twenty-first century.

Notes1 For a regularly updated list of enacted laws and active campaigns, go to

ACORN’s website (www.acorn.org) and follow the links to the National LivingWage Resource Center.

2 HERE has used the living wage coalition’s support to win a neutrality agree-ment and subsequent union recognition at the new site of the Academy Awardsin Hollywood, the first such union breakthrough in this area. SEIU also wonunion jobs for janitors using the living wage law and coalition support.


References

Bobo, K. (2003) “Religion-Labor Partnerships: Alive and Growing in the NewMillennium,” Working USA 6 (4): 71–83.

Brownstein, B. (2000) “Working Partnerships: A New Political Strategy for Creat-ing Living-Wage Jobs,” Working USA 4 (1): 35–48.

Figart, D. (2001) “Ethical Foundations of the Contemporary Living Wage Move-ment,” International Journal of Social Economics 28 (10/11/12): 800–14.

Fine, J. (2000–01) “Community Unionism in Baltimore and Stamford,” WorkingUSA 4 (3): 49–85.

Murray, B. (1999) Internal campaign paper, Los Angeles, CA.Reynolds, D. (2002) Taking the High Road: Communities Organize for Economic

Change, New York, NY: M.E. Sharpe.Reynolds, D. and Kern, J. (2003) Living Wage Campaigns: An Activist’s Guide to

Building the Movement for Economic Justice, Washington, DC: ACORN, fourthprinting.

Reynolds, D. and Kern, J. (2001/2002) “Labor and the Living-Wage Movement,”Working USA 5 (3): 17–45.

Simmons, L. (2003) “Wrestling with Dragons: The Connecticut Center for a NewEconomy and Yale,” paper presented at the UALE conference of labor edu-cators in Miami, Florida, April 12.

Websites of Groups discussed

ACORN: www.acorn.org (follow the links to ACORN’s National Living WageResource Center).

Los Angeles Alliance for a New Economy: www.laane.orgPolitical Economy Research Institute: www.umass.edu/peri/lwlinks.htmlWorking Partnerships USA: www.atwork.org


7 Organizing homeworkers inToronto’s garment industry

Jonathan Eaton and Alex Dagg

Ming-Zhen sews a woman’s jacket in one hour and earns $4.15 [all figures$Can]. She receives no compensation for training time when new stylesarrive. She must teach herself the new design. The jacket is sold at Eaton’sdepartment store for $275 to $375. Poi-Yee makes $5 for sewing a dress inone hour, but she has had to buy the sewing machine and cover all operat-ing costs such as hydro and heat. The dress is sold for $150 to $200 at ahigh-end retail boutique. A contractor often delivers work on Friday toYen, who must complete it by Monday morning. She must care for her chil-dren while she sews at least ten hours a day all weekend . . . In contrast tothe inside factory workers with regular wages, benefits and overtime payfor overtime hours, homeworkers received none of these.

(Paleczny 2000: 4)

Many Canadians were shocked to learn in the early 1990s that garmentworkers in our largest city were laboring under conditions more oftenassociated with third-world sweatshops. Over the following decade, aninnovative labor organization was launched, aimed at organizing andimproving conditions for this particularly exploited group of workers. Theproject has met with both success and failure. Awareness of the issue hasincreased tremendously. Using creative tactics and support from diversesources, some of the barriers of isolation and intimidation facing garmenthomeworkers have been broken down. But government inaction hasmeant that the essential features of exploitation in this sector remainunchanged. As the Homeworkers Association enters its second decade,the challenges of winning a living wage and decent working conditions forits members loom larger than ever.

The Toronto clothing industry in global perspective

Clothing manufacturing is not a “sunset” sector in Canada. In the wake ofthe Canada–US Free Trade Agreement signed in 1988 and the recessionof the early 1990s, the industry suffered massive job losses, losing over 800plants and 35 percent of its Canadian workforce in a four-year period. In

1993, however, the industry began to recover. Employment grew mod-estly, and shipments and exports grew strongly, throughout the remainderof the decade. In 2002 clothing was Canada’s tenth largest manufacturingsector with more than 93,000 employees working in 1,500 establishments.1

The city of Toronto, with over 550 fashion manufacturers, saw employ-ment increase between 1994 and 1999 by 60 percent, or about 10,000 jobs.A report from the city’s economic development office concluded that:“Manufacturing, private label and contract production are booming”(Gunning et al. 2000: 22).

Clothing manufacturing is a low-wage, labor-intensive industry. Produc-tion workers make up over 85 percent of the workforce (UNITE 1997)and labor costs consume up to 40 percent of the cost of manufacturing agarment (Taplin 1994). The limp character of fabric makes automation ofmost assembly processes extremely difficult (Dunlop and Weil 1996). As aresult, the key competitive strategy within the clothing industry has beensimply to keep labor costs down. Employers rely on immigrant women asa pool of cheap labor.2 With over 30 million garment workers in 160 coun-tries around the world producing clothing products for export, clothingmanufacturing is the most globalized of all industries. Clothing manufac-turing has spread in successive waves to countries with lower productioncosts, becoming a worldwide industry whose geographical distribution isconstantly changing (ILO 1995). Wages for most Canadian clothingworkers are comparable to those in other industrialized nations, but farhigher than wages of workers in the developing world (UNITE 1997). As aresult, the downward pressure on labor costs is intense.

At the same time, the “Quick Response” strategies (getting the rightproduct in the right quantity to the right place, with very short turn-around times) adopted by North American retailers has created anopening for domestically based manufacturers who can meet this demand(Berg et al. 1996). The basic objective of Quick Response is to reducewarehouse time, cut in-process inventory, and improve communicationflow from retailers to manufacturers and suppliers by collapsing the dis-tance between production and sale. Instead of making big orders at thestart of the season, retailers are moving to a system of continuous restock-ing. Proximity to the market has thus become an important competitiveadvantage, but only if manufacturers can deliver the right products onshort notice.

To meet this competitive challenge, government and industry reportshave pointed to the need for Canadian clothing manufacturers to producehigh quality, high-value added products for specific markets using flexibleproduction strategies (Industry, Science and Technology Canada 1991).The majority of clothing manufacturers, however, continue to be weddedto a low-wage strategy. By 1992, for example, just 9 percent of US apparelmanufacturers were using “modular” or team production (Dunlop andWeil 1996). Canadian manufacturers have lagged behind even this modest

86 Jonathan Eaton and Alex Dagg

benchmark. Instead of a trend toward innovation, production of clothing,particularly women’s clothing, has fragmented into networks of contrac-tors, subcontractors, and homeworkers.

The Canadian clothing industry is often described in terms of a pyramid(Paleczny 2000). At the top sits the increasingly concentrated retail indus-try, dominated by a handful of big players. The next level consists of a toptier of designers and manufacturers. More and more, however, manufac-turing has moved from large factories to a network of small contractorswho fill the middle of the pyramid. At the bottom are homeworkers. Asyou move down the pyramid, profit margins, bargaining power andincomes all decline steeply.

Clothing industry homeworkers provide a flexible, cheap supply oflabor on the doorstep of the Canadian and US markets. While the typicallead time ordering garments from Hong Kong is three months, home-workers in Toronto can deliver a finished product literally overnight.Homeworking allows clothing companies to quickly produce their goodswithout the expense of salaried staff, a factory floor or machinery. Home-workers absorb the overhead. They provide the workspace, the equip-ment, the electricity – even the thread. If there are no orders, they are notpaid. Homeworkers provide the perfect “just-in-time” labor force.

Homework and urban poverty

Poverty among low-wage workers is a growing problem in Toronto, hometo one in six Canadians and half of all recent immigrants.3 Canada doesnot have an official poverty line. However, Statistics Canada, a federalgovernment agency, does calculate the “Low Income Cut-Off,” or“LICO.” In 2002, the before-tax LICO for an individual living in Torontowas $19,261, and for a family of four was $36,247. Garment industryhomeworkers, earning less than the minimum wage set by the provincialgovernment, are likely to fall far below this threshold. Over two millionCanadians – about one in six workers – are stuck in jobs that do not payenough to support a family (Maxwell 2002).

The incidence of poverty increased in Toronto over the 1990s, growingduring periods of both recession and economic growth. Canada was hit bya deep recession in the early 1990s, followed by a slow recovery, then areturn to strong job growth after 1997. Both the recession and the recov-ery were more pronounced in Toronto than the rest of the country, withunemployment in the Toronto Census Metropolitan Area surging fromjust 4.0 percent in 1989 to 11.4 percent in 1993. The unemployment ratethen fell to 5.5 percent in 2000 (Jackson et al. 2001). But job growth in thelatter part of the decade did not cut into poverty, in part because many ofthe jobs created were part-time, temporary, and contract positions that failto pay a living wage. A study by Jackson et al. (2001) concluded that by theend of the 1990s, both the extent and depth of poverty in Toronto had

Organizing homeworkers in Toronto 87

increased. As these authors note: “Compared to the late 1980s, jobs inToronto have become more unstable and more precarious, particularly forthose at either end of the age spectrum” (2001: 6).

The number of working-poor households (those where one or moreincome earners were employed for at least forty-nine weeks) has increasedsubstantially. This problem is particularly evident among Toronto’s immi-grant workers who comprise 44 percent (Statistics Canada 2003) of thecity’s population. The poverty rate (pre-tax LICO) among immigrants inToronto in 1996 was 32.9 percent; among recent immigrants (those whoarrived between 1991 and 1996) the rate was 52.8 percent (Lee 2000). AsJackson (2002: 13) concludes: “Many racialized [minority] immigrants findthemselves trapped in low-wage, insecure, no-future ‘survival jobs’ whichlead nowhere.” The adage that “a rising tide lifts all boats,” has notapplied to immigrant workers in Toronto, who continue to face a signific-ant gap in employment and income opportunities even in good years(Smith and Jackson 2002). Garment industry homeworkers represent theextreme end of the spectrum of precarious, low-wage jobs that make up anincreasing share of Toronto’s job market.

A union for homeworkers

Concern over the rise of homeworking and the loss of factory jobsprompted the Ontario District of the International Ladies’ GarmentWorkers’ Union (ILGWU)4 to begin investigating the working conditionsof Chinese-speaking homeworkers in Toronto in January 1991. Member-ship in the union, which began organizing in Toronto in 1911, had fallenfrom 6,000 members in 1985 to less than 2,000 in 1992 (Orwen 1992; Smith1995). At that time, the union had no formal relationship with any home-workers or any real awareness of how many homeworkers there were inToronto or where they were located (Dagg 1996). A Chinese-speakingresearcher was able to make contact with homeworkers by setting up aChinese hotline telephone service, advertising in the Chinese newspapersand by word of mouth from Chinese union members. Through in-depthinterviews with thirty homeworkers, the union’s researchers documentedthe dismal working situation of these workers.

Twenty-one of the thirty homeworkers surveyed were being paid lessthan the minimum wage. Their average wage was just $4.64, well belowthe legal minimum wage in the province of Ontario at the time, which was$6.00. The earnings of one of the homeworkers, a deaf woman from ruralChina, added up to just one dollar per hour. Only one of the thirty home-workers was receiving the vacation pay to which all were entitled. None ofthe employers were making contributions to the unemployment insurancescommission or Canada pension plan, and only one employer had thepermit to employ homeworkers then required by the Employment Stand-ards Act of 1974 (Cameron and Mak 1991; Dagg 1996).


Homeworkers were working long hours – as much as 70 hours perweek in peak periods – without receiving an overtime premium. Halfreported that other family members, particularly children, assisted them,providing additional unpaid labor to the contractor. Ninety percent ofthose interviewed reported serious health problems related to their work,such as allergies to fabric dust, stress resulting from time pressures, andergonomic problems caused by sitting for long periods of time in acramped space. The workers had no control over the scheduling of theirwork or the rate of pay. Twelve reported that they had had problemsgetting paid at all after the work was completed. Workers had to invest inpurchasing their own industrial-quality sewing machines – in the range of$3,500. The vast majority reported that they would prefer to work in afactory, rather than at home, if they could get those jobs and if affordablechildcare was available (Cameron and Mak 1991). Only one of the thirtyparticipants could converse in English. For these workers, doing sewing intheir basements was not so much a liberating choice as a survival strategy(Beck 1995).

The union made a decision in the summer of 1991 to try to publicize theresults of this study. The time appeared to be right to push for legislativereform in the province of Ontario to protect homeworkers; in September1990, the labor-friendly New Democratic Party (NDP) had won a surpriseelection victory. The union worked with a small group of women from alliedorganizations such as the Workers Information and Action Centre ofToronto, the National Action Committee on the Status of Women (Canada’slargest women’s organization), and Mujer a Mujer (an organization workingwith women in Mexico, the United States and Canada). On November 2, aformal workshop was held that marked the birth of the Coalition for FairWages and Working Conditions for Homeworkers. A press conference laterthat month, revealing the nineteenth-century conditions found amongToronto garment workers, gained significant media attention to the issue, asdid a legislative lobby in December (Landsberg 1991).

A key recommendation of the coalition was that the definition ofemployer in the Employment Standards Act be changed to encompass theemerging pattern of subcontracting in the garment industry. Under theexisting legislation, only the immediate employer could be held respons-ible for violating minimum employment standards. The coalition’s goalwas to make the principal contractor (owner of the label) accountable forworking conditions of all employees working on that contractor’s productsat any point in the subcontracting chain (Yalnizyan 1993).5 A system ofregistration of homeworkers and contractors was advocated that wouldaddress the problem of clandestine labor. The coalition also pushed thegovernment to appoint a commission to study broader-based bargainingstructures that would allow homeworkers to organize and bargain collec-tively. The Minister of Labor was sympathetic and indicated that he wouldbegin a review of the matter (Dagg 1996).


At the same time, it was recognized that a campaign focused on legisla-tion would not be successful without the necessary organization of home-workers themselves to push for reform. A route to achieve this objectivewas provided by the Associate ILGWU Member Program (AIM), whichhad been established in the United States as a means of keeping rank-and-file activists in the union after a plant closed down or an organizing cam-paign failed. Associate members in the USA had access to reduced-feemembership plan or the AFL-CIO Union Privilege Plan, a benefit plan setup for union members with a lower-cost program for a variety of services(this program does not exist in the same form in Canada). The mission ofthe program was to eventually organize AIM members as “full” memberswhen the time was right or the legal recognition gap could be met by theunion. The ILGWU’s international office granted Toronto a formalcharter to set up a new local under this program, Local 12, and the Home-workers Association (HWA) was born. Resources to support the associ-ation were generated through a fundraising drive and a fundingapplication to the Ontario Women’s Directorate. With the help of thisfunding a full-time coordinator, fluent in both Cantonese and Vietnamese,was hired in March 1992.

In the United States, the union had traditionally taken the position thathomeworking should be prohibited. However, the union’s internationalleadership recognized the different situation in Canada and supported theOntario District’s innovative campaign to organize homeworkers (Dagg1996: 240).Whereas homeworking was banned in the US women’s garmentindustry in 1942, it is a legal practice in Canada (Bernstein et al. 2001).Under Ontario law in 1992, homeworkers were entitled to many of thebenefits of regular employees, including the minimum wage. Contractorswere required to obtain a permit from the Ministry of Labor to employhomeworkers. But most worked in isolation, unaware of these legalrequirements or afraid to speak out for fear of losing what work they had.

Throughout 1992, the coalition continued to build public awareness ofthe exploitation of homeworkers. In October, the coalition released thenames of designers and clothing companies using homeworkers underillegal working conditions, and began a postcard campaign demanding thatthese companies do something about these conditions. The province’sLabor Minister responded to the increasing public pressure by announcingin October 1992 that legislative reforms would be enacted to benefithomeworkers (Papp 1992; Galt 1992). Over the course of the followingyear the three targeted retailers, who together accounted for 40 percent ofthe Canadian garment market, received nearly ten thousand cards fromacross the country. In the wake of this apparent success, the coalition builtfurther visibility by organizing demonstrations in front of Toronto’s largestdowntown shopping centre (Swainson 1992). The main strategy was togenerate as much media attention as possible to build public support forchanges to the legislation, and to pressure retailers and manufacturers to


clean up their image. In a particularly memorable action in March 1993,over 1,000 women participating in the International Women’s Day marchflooded the shopping center and plastered “clean clothes” stickers on thewindows of one of the targeted retailers (Wright 1993).

While the coalition targeted retailers at the top of the industry pyramid,the HWA sought to organize the homeworkers who formed the pyramid’sbase. The objectives of the HWA are:

• to inform and assist homeworkers to enforce their rights as workers;• to offer legal, social services and social activities to help overcome the

extreme isolation of their work;• to be a vehicle where homeworkers may come together to develop

their own capacity to respond to the issues, share strategies and findcollective solutions;

• to provide a chance for skills and experience sharing between home-workers and factory workers (HWA 2002).

This work is extremely challenging, because by its nature homeworkoccurs in many locations hidden from view, and homeworkers themselvesare isolated. The union had to commit to a patient and long-termapproach. Many of these workers have had no experience with unions, andoften come from countries where independent union organizing is sup-pressed. As an associate local of the union, the HWA provided an excel-lent way to gradually introduce workers to the concept of unionism.Members are part of a functioning local that can determine its own by-laws and elect its own executive, which meets monthly. Members pay anannual fee of $24. The HWA signed up thirty-five members in its first sixmonths of organizing, and ninety-three by the end of the first year.

Since the Ontario Labor Relations Board does not permit a bargainingunit of only one worker, there is no formal certificate for the local and theunion has no legal right to bargain collectively on behalf of these women(Yalnizyan 1993; Bernstein et al. 2001). The union’s goal is to achievelabor law reform such that the HWA will ultimately be in a position toorganize members into full-fledged union members with a formal collect-ive bargaining relationship with clothing industry contractors. In themeantime, the HWA provides one-on-one advocacy and support to itsmembers and other garment workers who lack the benefit of collectivebargaining. The association’s coordinator stays in close contact withworkers who are pursuing employment standards claims and keeps themadvised of their rights and responsibilities under the law (such as the strictdeadlines for filing complaints). In 2002 the HWA assisted workers toregain over $2,000 in unpaid wages.

The association provides a range of services, including legal advocacy,education, lobbying and other political work. HWA staff offer counselingand referral to other community organizations for a variety of legal


problems. Through networking among organizations serving the Chinesecommunity, homeworkers are also referred back to the HWA. Perhaps themost important benefit provided by the HWA is to help break down thesocial isolation that homeworkers experience. The most popular eventsorganized by the HWA have been social events such as family trips toNiagara Falls and other popular sites. While HWA skills programs typ-ically involve groups of ten to twelve workers, social events frequentlydraw up to a hundred members and their families. As Yalnizyan (1993:294) notes: “These women are isolated in their homes, often with youngchildren, with little money and less knowledge about places to explore intheir adopted country. Day outings provide an opportunity for these newimmigrants to experience an outing with those they most trust, theirfamily.” One homeworker, when asked by a reporter if she joined theHWA to press for higher wages responded: “Oh no, I joined for the socialevents.” (Sweet 1992). By overcoming their isolation and allowing home-workers to meet other homeworkers and develop both formal and infor-mal links, gain confidence and learn new skills, the HWA has become animportant voice for immigrant women in Toronto.

Education programs provided by the HWA include legal clinics,English as a second language, basic computer skills, women’s leadership,human rights, health (including Tai Chi),6 sewing skills, pattern-making,and sewing machine maintenance and repair. In a twist on traditional lan-guage training, the children of homeworkers have the opportunity to learnCantonese while their parents are participating in English classes. Allmembers receive a regular Chinese newsletter. In partnership with othercommunity-based organizations, the HWA has conducted communityforums on labor rights and workplace survival skills.7 The HWA also pro-vides an optional drug and sickness benefit plan. More recently, theHWA’s “Wear Fair Employment Project” worked to develop workers’political literacy skills through a program of worker outreach and educa-tion. An attempt to market a jacket designed and manufactured by home-workers under fair conditions failed, in the face of a negative responsefrom clothing firms invited to participate.

In 1993, the union surveyed an additional forty-five homeworkers whohad not been involved in the first study. The results found a similarexperience of exploitation, with six in ten reporting wages below theminimum wage. Half reported that in the busiest time of year, in summerjust before the fall fashion season, they worked between 61 and 75 hours aweek to meet their quotas. And about 30 percent reported doing work forwhich they were never paid. The report disclosed the names of thirty-fourclothing labels that were sewn by workers who receive less than theminimum wage. The release of this study in February 1994, again gener-ated considerable media interest, but failed to move the provincial govern-ment to action. Coalition members unfurled a banner stretching 12 feetdocumenting dates of worker initiatives and government promises. “What


more does it take?” asked coalition spokesperson Barbara Paleczny(Canadian Press 1994; Van Alphen 1994; Rusk 1994; Paleczny 2000).

In December 1993, the HWA achieved a partial victory when the LaborMinistry announced regulatory changes to the Employment Standards Actgiving homeworkers the same rights as other employees regarding hoursof work, overtime pay, and paid public holidays. In addition, the new regu-lations required that homeworkers be paid a 10 percent premium abovethe regular minimum wage to cover operating costs. Employers were nowobligated to provide a written summary of the terms of employment.However, legislative reforms that would have addressed the major con-cerns of the homeworkers’ coalition were never introduced by the NewDemocratic Party government before it was defeated in 1995. In 1993, thegovernment had been relentlessly pummeled by the business communityand the media for introducing a package of union-friendly amendments tothe Labor Relations Act (originally passed in 1950). Apparently, thisexperience convinced the NDP to back off from pursuing a broader laborlaw reform agenda (Eaton 1994).

With the election of the Progressive Conservative government in 1995,the prospects of significant legislative reform to benefit homeworkers dis-appeared. The Coalition for Fair Wages and Working Conditions forHomeworkers dissolved. In 1996, a new coalition group was formed: the“Labor Behind the Label Coalition.” This group came together to cam-paign for greater responsibility by retailers to ensure that minimum laborstandards were met. Its public campaign was oriented to combat sweat-shop conditions in the home and in factories in Canada and in other coun-tries. Educational material was designed and distributed, primarily by theMaquila Solidarity Network (Paleczny 2000). A major retailer found to beexploiting homeworkers was targeted by the coalition (McHutchion 1996).However, retailers continued to be able to evade legal responsibility byhiding behind contracting and subcontracting arrangements.

In 1996, the Ontario Ministry of Labor acknowledged that the garmentindustry in this province employed between 4,000 and 6,000 homeworkers,and that the number was growing rapidly (White 1996). By 1999, the esti-mated number of homeworkers working in Toronto had reached 8,000. Asurvey of thirty homeworkers by Ng (1999) once again found a high levelof exploitation, with no improvements in wages or working conditionsfrom previous studies. The virtual non-enforcement of labor standards inthis sector is striking. The study revealed that employers continue toviolate provincial laws regarding minimum wage, overtime pay and vaca-tion pay. Many of the homeworkers interviewed said that they do not evenfind out how much they are being paid until after they have finished thework. In fact, the research found that in many cases employers cut the payper piece of clothing as the women increased production, making itimpossible for them to boost their hourly earnings. An interesting findingwas that very few homeworkers were now being given the labels to sew on


the clothing. As a result, it has become more difficult to trace the linksbetween retailers and manufacturers and their subcontractors. Mediainterest in the release of this report was high (Lindgren 1999; Ross 1999;Weinberg 1999). However, with the election of a (by Canadian standards)radically right-wing government in Ontario in 1995 (re-elected in 1999),the prospects for progressive legislative changes to improve legal protec-tions for homeworkers had shifted from slim to none.

Minimum wage and “No Sweat” campaigns

Employment laws for most Canadian workers are within the jurisdiction ofthe provinces.8 Canada thus has different minimum wage rates across itsten provinces and three territories. At the beginning of 2003, this ratevaried from $5.90 an hour in Alberta to $8.00 an hour in British Columbia(HRDC 2003). The value of the minimum wage in real terms hasdecreased in most provinces by 20 to 30 percent over the last two decades(Maxwell 2002). The minimum wage in Ontario in 2003 of $6.85 (a levelthat has been frozen since 1995), would provide an annual full-timeincome of roughly $14,200. And even this figure assumes that the workerwas paid for 52 weeks a year. In fact, finding full-year employment is amajor problem for low-waged workers; about one in four must work mul-tiple jobs in order to get more hours of pay (Maxwell 2002). Ontario’sminimum wage in 2002 fell $4,826 below the before-tax low income linefor a single person in Toronto (Battle 2003).

The struggle to achieve a “living wage” in Canada has been largelyfocused on the need to increase the minimum wage (Curry-Stevens 2001;Schenk 2001). For example, “Justice for Workers,” a coalition of commun-ity groups in Toronto, began a campaign in 2002 with the immediate goalof raising the Ontario minimum wage to $10 per hour (Justice for Workers2002). Leading up to an anticipated provincial election in Ontario in thespring of 2003, this minimum wage campaign was embraced by theprovince-wide Ontario Coalition for Social Justice, which represents over200 member organizations including the Ontario Federation of Labor(OCSJ 2003). Similar demands are at the heart of a labor rights campaignlaunched by the Immigrant Workers’ Centre, a coalition of labor andcommunity groups in Montreal. Activists in British Columbia (Goldbergand Green 1999) and Manitoba (Scarth 2000) have also focused on raisingthe minimum wage as a key tool in fighting poverty.

We have not, yet, seen a broader movement to win living wage ordi-nances in municipalities or other institutions in Canada (Maxwell 2002). Inpart, this may be because a number of municipalities in Ontario and acrossCanada already have “fair wage” policies in place that apply to municipalcontractors.9 In Toronto, the fair wage policy was implemented as long agoas 1893 in order to ensure that contractors for the city paid their workersthe prevailing wages and benefits in their field of work (City of Toronto


1998–2002). Fair wage schedules vary among municipalities, but they areusually within about 10 percent of the going union rate for that classifica-tion (Schenk 2001: 13). Fair wage policies have been extended to includeprovisions ensuring acceptable hours and work and working conditions(such as compliance with health and safety legislation). In practice, thescope of these policies is limited to the construction trades, and evenwithin this sector lack of resources committed to enforcement has been apersistent problem (ibid.: 14).

While Toronto’s century-old fair wage policy is of historic and practicalsignificance for the construction trades, UNITE recognized that a newapproach was needed to boost wages for workers in the city’s fragmented,and increasingly underground, garment industry. The growing activismand increased public awareness on the issue of garment-industry sweat-shops that built throughout the 1990s provided the conditions to get thisissue on the city administration’s agenda. On October 1, 2002, Torontocity council unanimously endorsed a resolution calling on the city to“enact a purchasing policy requiring the purchase of garments, uniforms,or other apparel items from ‘No Sweat’ manufacturers” (Maquila Solid-arity Network 2002). The campaign in Toronto was spearheaded by acoalition that included UNITE, the Maquila Solidarity Network, OxfamCanada, and the Toronto and York Labor Council. When the issue waspresented to the administration committee of Toronto city council in May2002, a cross-section of community organizations came to support themotion, including the Anglican Diocese of Toronto, the Canadian Councilfor Reform Judaism, the Canadian Union of Public Employees (represent-ing municipal workers), the International Association of Fire Fighters, theCatholic teachers’ association, and a group of local high school students.Members of the HWA were also on hand to show their support.

The city of Toronto spends some $3 million a year on apparel formunicipal employees, including transit workers, police, fire fighters, sanita-tion workers, etc. The goal of the “No Sweat” campaign is to ensure thatthese products are made under decent working conditions, rather than insweatshops. UNITE and the HWA called on the city to adopt a policy thatrequires public disclosure of factory locations and independent monitor-ing, so that citizens can know where and under what conditions cityuniforms are made. The city’s director of purchasing was mandated bythe resolution to work with UNITE and other interested parties todevelop a “No Sweat” policy. By the end of 2002, eight Canadian citiesand towns and nine universities had adopted procurement policies forapparel aimed at supporting fair labor policies.10 The anti-sweatshopmovement in Canada has gained inspiration from the parallel campaign inthe United States, where major cities such as New York, Cleveland, andSan Francisco have adopted purchasing policies banning sweatshop con-tracts for apparel (UNITE 2003). At the national level, all of the leadingCanadian organizations working to address sweatshops are joined in one


organization formed to push No Sweat policies: the Ethical TradingAction Group.

These initiatives could have a real impact in sustaining decent garmentindustry jobs. For UNITE and the HWA, these policies are not an end inthemselves but a means to leverage power. By requiring disclosure andreporting by apparel contractors, demanding investigations and creatingspace for workers to organize, the No Sweat policies create a way for com-panies to be forced into some form of accountability. By targeting bulkpurchasers such as cities and universities, activists can gain power in nego-tiating standards as well. While these campaigns have gained enormousenergy from activists outside of the labor movement, particularly students,the essential role of UNITE and the HWA has been to provide a link tothe workers in the industry.

Conclusion

The goal in launching the Homeworkers Association was to create anorganization that would ultimately become a full-fledged union with aformal collective bargaining relationship. However, the legal barriers inOntario that prevented homeworkers from organizing into unions andbargaining collectively have never been removed. As a result, in part, ofthese legal barriers the HWA has not been able to evolve into a self-sustaining organization. The dues structure must remain low, reflecting themeager earnings of its members. At the same time, the work of organizinghomeworkers is labor-intensive. It is crucial to have a staff member whodevelops programs and is available to provide assistance to the members.In contrast to most union locals, the HWA does not have a cadre ofelected stewards who can shoulder part of the representation work. Theexistence of the HWA has required a commitment of financial supportfrom UNITE. But the resources of the union itself have been severelystrained in the face of on-going plant closures and restructuring in theindustry. Fortunately, the HWA has been able to obtain funding fromseveral levels of government and from independent foundations. Thisfunding base is precarious. HWA staff must continually work on fundingproposals and ideas to generate more resources.

The shortage of funds has also prevented the HWA from expandingbeyond its base in the Chinese community. At the beginning of 2003, theHWA had 210 members. All its programs were geared for Chinese-speaking workers. Efforts have been made to reach out to the Latino,South Asian, and Filipino communities, but the extent of follow-up hasbeen limited due to lack of resources. At the best of times, the instabilityof the industry and the precarious nature of employment mean that thereis constant turnover within the association’s membership.

Given these challenges, the perseverance demonstrated by themembers and staff of the HWA has been remarkable. Together they have


built a dynamic institution organizing the most vulnerable, exploited anddifficult-to-organize group of workers in our labor force. The HWA pro-vides an impressive array of programs with extremely limited resources.The resilience of the organization can be seen by the fact that membershave renewed year after year, and new members have continued to join,although the association has no legislative standing to represent workersand, in fact, faces both hostile employers and an unsympathetic govern-ment. The significant, long-term commitment made by the union and thedetermination of the homeworkers themselves have allowed the HWA toendure.

The continued relevance of the organization and the potential for cre-ative linkages were demonstrated in 2002 when the HWA joined with adiverse coalition including students, municipal unions, and religiousgroups to win the commitment to a “No Sweat” policy from Toronto’s citycouncil. This campaign also illustrates that the ideas animating the livingwage movement – particularly the power of local coalition building – areextending beyond traditional municipal services to new efforts to raiseliving standards for marginalized workers in the global economy.

Notes1 See www.strategis.gc.ca/sc_indps/sectors/engdoc/appa_hpg.html. This figure for

employment does not include homeworkers in the industry.2 According to Human Resources Development Canada, women account for 94

percent of sewing machine operators, 89 percent of sewers/cutters and 75percent of other production jobs. The low level of education of a large part ofthe workforce is also unique. According to HRDC data, 57 percent of theemployees in the apparel manufacturing sector do not have a high schooldiploma, compared with 29 percent in the overall active workforce. In 2000, theaverage hourly wage in the industry was $10.39. See Industry Canada (2002).

3 Toronto is Canada’s largest city, and also the capital of Ontario, the country’slargest province.

4 In 1995, the International Ladies Garment Workers Union merged with theAmalgamated Clothing and Textile Workers Union to form UNITE, theUnion of Needletrades, Industrial and Textile Employees.

5 In a class action filed on behalf of a group of Toronto homeworkers in June2000, the union attempted to establish a legal precedent holding a group ofretailers liable for the unpaid wages of homeworkers who manufactured cloth-ing sold by those retailers. This case was dismissed by the Ontario Court,however.

6 The Tai Chi class covers health exercises that help to prevent and improvechronic pains and discomfort.

7 The partner organizations are: Centre for Information and Community Ser-vices, Toronto Chinese Canadian National Council, Injured Workers’ Consul-tants, Metro Toronto Chinese and Southeast Asian Legal Clinic, St. StephenCommunity House, University Settlement Recreation Centre, and WoodgreenCommunity Centre.

8 About 10 percent of the workforce, primarily in banking, telecommunications,and interprovincial transportation fall within the federal government’s jurisdic-tion.


9 Schenk (2001) notes that the cities that have adopted fair wage policies includeToronto, Hamilton, London, Windsor, Kingston, Edmonton, and Vancouver.

10 Aside from Toronto, most of the municipalities that have adopted “No Sweat”policies so far are small towns in Eastern Canada: Port Hawkesbury (NS),Pictou (NS), Canso (NS), Inverness (NS), Mulgrave (NS), and RichmondCounty (NS). Thunder Bay (ON) adopted a motion to conduct a feasibilitystudy regarding no-sweat purchasing. This had not been completed at time ofwriting.

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8 Living wage and low paycampaigns in Britain

Damian P. Grimshaw

The British campaign to protect low-paid workers lies between two altern-ative models. A first model, characteristic of many member states of theEuropean Union, is defined by a long established and strongly embeddedsystem of low wage regulation, constituted through either minimum wagelegislation or a high level of collective bargaining coverage, or a combina-tion of both. France is a good example of such a model. A universalminimum wage was established in 1950. The rate is maintained at a relat-ively high level through an automatic uprating (indexing) mechanism andthe bargaining power of workers is supported through a high level ofcollective bargaining coverage. By contrast, the UK only introducedminimum wage legislation in 1999. The rate was (and continues to be) toolow and, against a background of a steady decline in the influence of tradeunions over wage setting, low wage workers have few props to supportdemands for higher pay.

The successes of the decentralized collection of living wage movementsin the USA constitute a second model. Here, local campaigns – spear-headed by community groups, unions, and religious groups – haveemerged as a major force pressing for wage protection in a context of afailed societal system of institutional regulation: low minimum wage rates,weakened unions, and privatization of public services. These campaignshave successfully raised wages either by targeting private sector businessescontracting with public bodies or by organizing a state-wide effort toincrease the rate above the federal threshold. In Britain, low pay campaigngroups have been watching these successes with a great deal of interest. Todate, however, with the exception of a remarkable living wage campaign inEast London, we are yet to witness a similar proliferation.

The reason that living wage campaigns have not diffused more widelymay be that, compared to the USA, British workers are still affordedslightly stronger protection. The UK minimum wage is higher, unions arestronger, and the benefit regime is less stringent. But conditions for thelow paid are not so far behind those in the USA. The UK has the highestshare of low paid workers in the European Union. The government hasfailed to address the mounting problem of child poverty. The minimum

wage is perceived by many employers as “the going rate” rather than anabsolute minimum. And many workers have lost opportunities for wageadvancement (through internal labor markets) as new contracts for busi-ness are won on a low cost basis, with wages factored in at minimum rates.

In fact, there is a great deal of campaigning to improve low pay inBritain, but this has more in common with a European model than a USmodel. The living wage campaign in East London is similar to some of theUS living wage movements; however, it is also integrally linked with, and acatalyst to, a broader coalition of low pay campaigns. These campaignsincreasingly focus on the legal arena at the level of both the EuropeanUnion (EU) and the UK. Examples include campaigns to improve the rel-ative level of the National Minimum Wage (NMW) and extensive lobby-ing for changes in the EU Directive on public procurement to incorporatea “fair wage” clause. Further, groups campaigning for equal pay for menand women increasingly recognize that the concentration of women in lowpaid jobs, most of which are part-time, is a major contributor to the genderpay gap. Thus, calls from feminist advocates and activists for gender payaudits and new guidelines for contracting organizations to avoid a “two-tier workforce” add further fuel to the fight against low pay.

This chapter examines these issues and assesses the implications forBritain’s low-paid workers. It begins by describing the campaign for a livingwage in East London and documents some of its successes and failures. Thesecond section sets out the three dimensions to low pay campaigns inBritain: (1) to improve the National Minimum Wage; (2) to eliminate thetwo-tier workforce; and (3) to prevent over-reliance on in-work benefits(government subsidies to the working poor that enable employers to sup-press wages). I argue that living wage and low pay campaigns have achievednotable successes in recent years and provide new insights for our under-standing of the forces shaping wage structures among low-paid workers.

The living wage campaign in East London

In April 2001, the East London Community Organisation (TELCO)launched a Living Wage campaign, with support from the public servicestrade union, Unison, the largest trade union in Britain.1 The campaign hassimilarities with the US model. It brings together thirty-seven organi-zations drawn from churches, mosques, a Buddhist center, communitycenters, union branches, and schools, and has subsequently received thesupport of some private sector employers and London civic leaders(TELCO 2003). People from these different groups had for some yearsshared a common concern about low pay and poor working conditions inEast London. Founded in 1996 as part of London Citizens, TELCO hadcampaigned on a range of local issues such as street crime, pollution, andworking conditions among construction workers in the developing CanaryWharf area of town.

102 Damian P. Grimshaw

Together with Unison, the aim is to champion the cause of a livingwage among public sector bodies and some large corporate employers inthe area of East London. Their first target was the Greater LondonAuthority (GLA). A significant portion of the GLA’s budget goes toprivate sector companies who bid for services contracts, largely involvinglow-paying “business support services” such as cleaning, catering, andsecurity. However, TELCO does not target the service contractors sinceit recognizes that any agreed improvements would be vulnerable to othercompanies bidding for the contract at lower wage costs. Instead, it main-tains that it is the client organizations that bear responsibility for theterms and conditions of contracted workers. The campaign thereforefocuses on persuading public sector hospitals, schools, universities, andlocal authorities to introduce a “fair wage clause” (see below) into theirmarket tenders for contracting. Since many of these service companiesalso have contracts with the large corporate firms in East London, asecond target of the campaign has been to demand a “living wage” fromthe private banks and financial services companies in Canary Wharf,home to well-known names such as Credit Suisse First Boston, Barclays,and HSBC. Future plans include targeting local firms that are members ofthe UK Retail group.

The campaign is notable in the way that its activist goals have beenstrengthened by a careful commissioning of independent, social scienceresearch. This includes research by the Family Budget Unit (then at King’sCollege London) on the minimum income standard for London familiesand research by Jane Wills, a geographer at the University of London, onlevels of pay for workers in contracted-out public services in East London.Other activities include a conference organized at the London School ofEconomics, which brought together academics, activists, and representa-tives from the business support services industry.

The first piece of research was important, both to underpin the claimfor a living wage and to fill a hole in publicly available information(reflecting the lack of government action) on how much workers need fora decent living standard. The Family Budget Unit had already produced anational report in 1999 (funded by the Christian charitable trust, the Zac-chaeus 2000 Trust); the report estimated the minimum band of hourlyearnings needed for families to reach what it refers to as “low cost butacceptable” levels – defined as “how much it costs families of differentcompositions, in predetermined circumstances, to maintain indefinitely, aliving standard which, though simple, provides a healthy diet, materialsecurity, social participation and a sense of control” (Parker 1999, cited inUnison 2002: 8). It recommended hourly earnings of between £5.40 and£6.96, far higher than the then minimum wage adult rate of £3.60. But thefindings were not altogether surprising given the conclusions of a previousindependent inquiry chaired by Sir Donald Acheson into inequalities inhealth that, “people living on low incomes, including those whose income

British living wage and low pay campaigns 103

consists entirely of state benefits, have insufficient money to buy items andservices necessary for good health” (Acheson 1998: 35).

The research commissioned by Unison for the TELCO campaignrequested the Family Budget Unit to estimate a living wage for the area ofEast London (Parker 2001). For a two-parent family, with one parentworking full-time (38.5 hours) and one part-time (17 hours), with two chil-dren (a boy aged 10 and a girl aged 4), a “low cost but acceptable” netweekly income was estimated at £322. A single parent working part-timewith two children would need £272 each week (ibid.: Table 4). TELCOsubsequently adopted the gross hourly rate of £6.30 as its wage standard(updated to £6.50 in 2003).

A second valuable piece of commissioned research investigated theextent to which workers providing contracted-out public services in EastLondon were paid between the minimum wage (by then, the adult ratewas £3.70) and the recommended living wage standard of £6.30 (Wills2001). The research collected evidence from ninety-seven low-paidworkers in East London and covered issues of basic pay, working con-ditions, family circumstances, and attitudes to work. For example, amongthirty-four workers providing cleaning, catering, and security services atdifferent hospitals in the area, pay rates ranged from £4.05 to £6.69, withthe vast majority earning less than £5 an hour. Of twenty-one cleanersworking on contracts for transport companies, none received above £5 anhour, with the lowest rate falling to £3.75. Also, among eleven cleanersworking on contracts at Canary Wharf, only window cleaners earnedabove the living wage; the majority earned between £4 and £4.75 an hour.These workers put in extra hours to make up the shortfall in weeklyincome needed to support their families, either by working overtime (upto 30 additional hours a week, typically at a basic rate of pay) or by takingon a second job. Wills concludes her report as follows:

Workers who perform essential work, keeping the city clean, fed,healthy and mobile, are paid well below the London living wage of£6.30 an hour. Moreover, many get no additional benefits from theiremployer. These workers often have no pension, no sick pay andonly minimal holiday entitlement. Poverty pay and poor conditions ofwork are exacerbating social and economic deprivation in London’sEast End.

(2001: 23–4)

The campaign has had some notable successes and failures. To date, themost significant achievement is the agreement in March 2003 by the NorthEast London Strategic Health Authority that all contractors providing ser-vices to the local hospitals (around fifteen in total) should pay their staffequivalent terms and conditions to collectively bargained rates forNational Health Service (NHS) staff, allowing contractors to phase in


changes by April 2006. This agreement (the first in the NHS in England)was the culmination of a two-year campaign targeted at four hospitals andthe private contractors, ISS and Compass, with TELCO members workingvery closely with local Unison branches. Ultimately, it appears that threatof strike action brought the needed breakthrough, although at the time ofwriting around 300 cleaning and catering staff were still on strike over thepay claim at one hospital.

As part of this campaign, TELCO and Unison submitted detailed docu-ments to the Strategic Health Authority and to individual NHS Trusts tosupport the case for higher pay. These documents argue the case for aliving wage, at the 2003 value of £6.50, but ultimately make the weakerrecommendation that NHS Trusts ought to ensure contractors pay staffequivalent rates to NHS staff; here we see the limitations of the local cam-paign since there are good reasons why unions would not wish to threatenthe national collective bargaining system which sets wages for NHS ancil-lary workers. As such, the campaign was ultimately won by achieving whatis known as a “fair wage” agreement (see below). As Table 8.1 demon-strates, a fair wage still represents a major increase in pay and thus asignificant success for TELCO. The example shows that the basic rate of£4.42 earned by privately employed cleaners rises to £5.43–£5.58, theminimum band of pay set by nationally bargained terms and conditions forNHS workers, and there are significant increases in bonuses, overtime, andunsocial hours premia. The fair wage agreement also improves workers’non-wage conditions such as sick pay, annual leave entitlement, and com-passionate leave.

Other smaller successes in East London include individual agreementsmade by several schools to change their contracting arrangements withcompanies to include a living wage clause. Also, TELCO is hoping to


Table 8.1 Evidence of low pay among private cleaning contractors

Nationally bargained Private cleaning firmterms and conditions for NHS cleaners and domestics

Basic hourly pay £5.43–£5.58 (includes £4.42London weighting)

Bonus 21.3% 10p per hour

Overtime premia �1.5 (Mon–Sat) £1 per hour (Sat, Sun)�2 (Sun, Bank holidays) �2 (Bank holidays)

Unsocial hours premia Extra increments for Nonenight and rotating shift patterns

Source: Unison (2003: Table 1).

mimic the US model of inserting living wage clauses into local authorityplanning tenders, so that workers in cleaning, maintenance, and construc-tion jobs have the right to earn a living wage.

However, a major disappointment has been the failure of the Mayor ofLondon and leader of the Greater London Authority, Ken Livingstone, toengage constructively with the TELCO campaign. Despite statementsreported in the media that “living wage clauses” would be inserted intocontracts held between City Hall and cleaning and catering companies,there is no clear evidence that anything has yet happened. And, given thatthese contracts only cover relatively small numbers of staff, TELCO con-tinues to put pressure on Livingstone to extend this pledge to covercontractors working in the city’s transport, police, and fire services(Walker 2003). The campaign is likely to generate greater resonanceduring 2004, election year for the London mayor. Additionally, TELCOcontinues to campaign for a “London Commission on Wages” that wouldbe responsible for researching and fixing an annual living wage forLondon.

Campaigning with Unison to transform contracting arrangements withpublic sector organizations was TELCO’s main area of focus until 2003.Since then, it has also been actively strengthening what was a ratherunsuccessful campaign to bring some of the main private sector corporateclients into line with a living wage.2 A renewed banking campaign involvescollaboration with some of the main institutional investor groups (includ-ing a number of public sector pension fund bodies), the national cleaningtrade association (Cleaning and Support Services Association) and civilservants (Department of Trade and Industry) to design a three-tier bench-mark of performance – low, medium, and high – that ranks the terms andconditions of employment in each contract for services provision. The aimis that contracts held by the main corporate firms will be graded and therespective positions of firms, as laggards or progressives, publicized. Aproposed retail campaign will target members of the Ethical Trading Initi-ative, which is explicitly opposed to unethical trading with companies (orsubsidiaries) in less developed countries. Here, TELCO makes thestraightforward argument that practicing ethical standards abroad ought tobe mirrored by ethical standards at home. This is perhaps especially perti-nent given that low-paid workers in East London are increasingly drawnfrom a Third World pool of migrant labor. While at an early stage, the aimis to persuade the large retail organizations to insert labor standardsclauses into their contracting agreements.

Low pay campaigns

Campaigns for changes in the regulatory, legal, and institutional rules gov-erning low pay were prominent during the 1990s and early 2000s. Whileclosely related to, and benefiting from, the ground-breaking activities of


TELCO, low pay campaigns are distinctive in their national focus andtheir involvement of rather more traditional social and politicalactors–trade unions, the Equal Opportunities Commission, the Low PayUnits, and certain Members of Parliament. The various campaigns includethe following past and present objectives:

• establishing a minimum wage;• improving the minimum wage (increase to a decent level, establish an

automatic uprating mechanism, and abolish the youth rate);• ending the two-tier workforce among public services workers by

inserting “fair wage” clauses into contracts;• ending over-reliance on in-work benefits.

Improving the National Minimum Wage

A major achievement of the campaigns against low pay was the decision bythe newly elected Labour government to introduce a National MinimumWage (NMW) in 1999. Prior to the NMW, Britain had a somewhat patchyhistory of low pay protection. The first legislation of this kind was the intro-duction of Trade Boards in 1909 to set minimum wages, enforceable undercriminal law, but restricted to the so-called “sweated trades.” Initially, foursectors were covered – tailoring, paper-box making, machine-made lace,and chain-making (Dobb 1944). Coverage was gradually expanded andBoards renamed as Wages Councils. By 1962, there were sixty Councilscovering 3.5 million workers. A subsequent period of rationalization meantthat by 1990, twenty-six Councils only covered 2.5 million workers (Machinand Manning 1994). Until 1986, each Council would set a series of hourlyrates for different types of workers in the sector. The Wages Act of 1986curtailed their role by removing workers under 21 years of age from theircoverage, limiting wage setting to one basic minimum and one premiumrate, requiring them to consider the impact on jobs when setting minima,and simplifying the procedure for abolishing the Councils (Kessler andBayliss 1998). In 1993, the Wages Councils were abolished with the excep-tion of the Council that covered agriculture. Research on Wages Councilshas found that their activities had no adverse employment effects (Craig etal. 1982), that the gradual decline in the relative level of Council minimacontributed to the rise in wage inequality in the affected industries (Machinand Manning 1994), and that abolition led to a substantial fall in pay ratesfor job vacancies (Cox 1994).

The waning power of the Wages Councils and their eventual abolitionshifted the balance of long-running political debates in Britain concerningthe merits of a national minimum wage. Perhaps surprisingly, it was only in1986 that the Trades Union Congress (the only central organization that actsas spokesperson for the British trade union movement) adopted for the firsttime a resolution in favor of a minimum wage. Prior to this, the “traditional”


union view was that legislation on wage setting would necessarily hinderfree collective bargaining (Bain 1999), a reflection of the union movement’shistorical antipathy to any involvement of the state in the realm of industrialrelations. Employer opposition to a minimum wage also weakened duringthe mid-1990s,3 reflecting both a pragmatic desire to influence the level atwhich it was set and a shift in the conventional economic view (associatedwith the empirical research of Card and Krueger (1995) in the USA andMachin and Manning (1994) in the UK, among others).

The Labour Party included a pledge to introduce a minimum wage in its1992 election manifesto and, when successfully elected in 1997, immedi-ately established the independent Low Pay Commission to recommendthe level at which it ought to be introduced and its application to youngworkers. The members of the Commission include representatives ofemployers and trade unions, as well as academics.4 It funds empiricalresearch, listens to oral evidence from a range of organizations, receivesseveral hundred written submissions, and undertakes a program of visitsacross the country. To date, the Commission has published four reports. Inthe First, Third, and Fourth Reports, it recommended adult and develop-ment rates for two consecutive years (see Low Pay Commission 1998,2001, 2003). The remit of the Second report was to assess the initial impactof the NMW (see Low Pay Commission 2000). Beginning with the FourthReport, biennial recommendations are made in February for implementa-tion in October (to allow government to plan for the budget in April).Table 8.2 sets out the recommended rates and the rates subsequently


Table 8.2 Recommended and accepted minimum wage rates, 1999–2003

Adult rate Development rate andcoveragea

Recommended Accepted �Recommended Accepted (to (£) (£) (to cover 18–20 cover 18–21

year-olds) (£) year-olds) (£)

April 1999 3.60 3.60 3.20 3.00June 2000 3.70 3.60 3.30 3.20October 2000 – 3.70 – –October 2001 4.10 4.10 3.50 3.50October 2002 4.20 4.20 3.60 3.60October 2003 4.50 4.50 3.80 3.80October 2004 4.85b 4.85 4.10b 4.10

Source: Low Pay Commission (1998, 2001, 2003).

Notesa The NMW excludes 16–17 year-olds and those on apprenticeships. The development rate

applies to all adult workers for a maximum of six months where they are beginning a newjob with accredited training.

b Recommended rate subject to confirmation by the Commission in early 2004.

accepted by the government. After initial government concerns to proceedrather more cautiously, since October 2001 the Commission has acceptedthe rates in full, with the major exception of excluding 21 year-olds fromthe adult rate.

The NMW has had a significant impact on many low-paid workers.Table 8.3 shows that low-paid workers have, in most years, enjoyed higherearnings growth than the median earner. However, while the relative gainswere significant among low-paid part-time workers immediately after theintroduction of the NMW in 1999, they were actually lower than earningsgrowth among part-time workers at the median and highest decile during2000–01, reflecting the negligible 10 pence increase in 2000. Overall, whilethe NMW has halted the relative decline of low-paid workers’ earnings, itdoes not yet appear to have contributed towards a significant compressionof the wage structure.

Low pay campaigning groups have welcomed the new NMW legisla-tion, but argue that it is lacking in three important respects. The Low PayUnit and many trade unions campaigned for a level at half male medianearnings. However, as Table 8.4 shows, the NMW has so far fluctuatedaround just 40 percent of male full-time median earnings (a generousestimate given that overtime earnings are excluded from the denominatormale median earnings). While this is high compared to countries such asthe USA, Canada, Japan, Spain, and Portugal, it is low compared to mostEuropean countries where the ratio stands at close to 50 percent orhigher.5 The then-Chair of the Low Pay Commission defended the initiallevel against those who campaigned for what he called a “mechanisticformula” of half male median earnings (Bain 1999). Crucially, he arguedthat the recommended level of £3.60 provided cover to a sufficient propor-tion of workers, estimated at around two million workers or 9 percent ofthe workforce. However, this argument no longer holds due to acknow-ledged problems with statistics on low pay workers; the best recent estim-ate is that 1.2 million workers were affected (LPC 2003). Bain also argued


Table 8.3 Percentage increase in average hourly earnings, 1998–2002

1998–99 1999–2000 2000–01 2001–02

Full-timeLowest decile 5.4 3.3 5.2 4.3Median 4.8 2.8 5.5 3.9Upper decile 5.5 2.9 7.0 4.8

Part-timeLowest decile 9.1 2.8 3.8 6.9Median 4.8 1.4 5.3 4.5Upper decile 5.7 2.2 4.2 5.2

Source: Low Pay Commission (2001: Table 3.2) and Low Pay Commission (2003: Table 2.3).

that a more suitable benchmark for comparison is median earnings for allworkers, since the combined average of male and female earnings is abetter reflection of the total composition of employment (1999: appendix).Such a comparison obviously brings the relative level of the minimumwage closer to half median earnings. The problem, however, is that analy-ses of women’s pay demonstrate that women’s work is undervalued com-pared to comparable work performed by men (for a review, see Grimshawet al. 2002a); as such, the decision to include women’s average pay in abenchmark reference incorporates, and leaves unquestioned, problems ofgender discrimination in the labor market. The same argument applies tothe need to exclude part-time workers’ earnings from a benchmark wage.

The second problem identified by campaigning groups is the lack of amechanism for automatic increases. In June 2001, the government grantedthe Low Pay Commission a permanent role in monitoring the minimumwage, but still reserves the right not to follow its recommendations. OtherEuropean countries have a form of indexation that automatically links theminimum rate to changes in inflation or wage growth. For example, Franceindexes its rate to the consumer price index, subject to a minimumincrease of half the rise in average earnings, and the Netherlands links itsrate to average earnings growth, contingent upon the ratio of welfarerecipients to employment (OECD 1998). The absence of an indexingmechanism in the UK (and the USA) offers government the opportunityto exploit the situation for political gain – referred to in the USA as“Washington’s dirty little secret” (Sachdev and Wilkinson 1998). In theUK, the highest rise to date was in the election year, 2001.


Table 8.4 The relative level of the National Minimum Wage, 1999–2002

1999 2000 2000 2001 2001 2002 2002 (Jan– (June– (Jan– (Oct– (Jan– (Oct–May) Dec) Sep) Dec) Sep) Dec)

Half male £4.39 £4.52 £4.52 £4.76 £4.76 £4.96 £4.96median earnings

Adult NMW £3.60 £3.60 £3.70 £3.70 £4.10 £4.10 £4.20

NMW as a % of:Median 41.0% 39.9% 41.0% 38.9% 43.1% 41.4% 42.4%male earningsMedian 48.4% 46.9% 48.2% 45.2% 50.1% 48.1% 49.2%female earnings

Source: New Earnings Survey (various years, National Statistics, London).

NoteAll earnings data are for full-time employees and exclude overtime pay and hours worked.

Campaigning groups have also argued for abolishing the lower ratefor young workers, with a full adult rate payable from age 18. Someorganizations, such as Unison and the British Youth Council, argue forentitlement at the age of 16. Their argument, that a differential rate is dis-criminatory and conflicts with social norms, finds support in the pay data,the research evidence, and oral evidence submitted to the Low Pay Com-mission as part of their biennial enquiry. The national pay data show thatin spring 2002, 9.2 percent of jobs of 18–21 year-olds were paid at or justabove the adult rate (£4.10–4.19) compared with only 2.7 percent paid ator just above the youth rate (£3.50–3.59) (LPC 2003: 113). A survey of 101medium and large-sized firms found 81 percent paid adult rates from age18 or younger (IDS 2002). Also, qualitative research in thirty-six smallfirms in the north-west of England only found four firms paying the youthrate in 1999, and this was reduced to three by 2001; the main reasonemployers avoid use of the youth rate is to provide equality of employ-ment status (Grimshaw and Carroll 2002: 23). Nevertheless, the Low PayCommission continues to recommend a differential rate, although arguesfor a long-term aspiration that this should be linked to accredited training.More problematically, the government continues to extend the definitionof youth to workers aged 21, against repeated LPC recommendations tothe contrary.

Ending the two-tier workforce

The slow but steady policy of successive governments, from Prime Minis-ters Margaret Thatcher to Tony Blair, to privatize public services hastargeted some of the most vulnerable groups of British workers by out-sourcing their jobs to private contractors. There are three periods to date.Between 1980 and 1993, cumulative legislation on “compulsory com-petitive tendering” required public service employers in health and in localand central government to invite tenders from the private sector for theprovision of a range of services, including cleaning, catering, laundry, andsecurity. All the services are labor-intensive and, once the Fair WageResolution was abolished in 1983,6 private firms competed for contracts bywhittling down labor costs. Research subsequently showed that the out-sourcing regime worsened pay significantly, led to work intensification as aresult of cuts in hours and jobs, and reduced the use of supervisoryworkers (Mailly 1986; Bargaining Report 1990; Escott and Whitfield 1995).

During the second period, while the contracting regime continued, thelegislative framework changed in 1993 when the government amended theTransfer of Undertakings Protection of Employment (TUPE) Regulations(1981) to bring them in line with the European Commission’s AcquiredRights Directive of 1977.7 TUPE protects employees by providing for con-tinuity of employment post-transfer, and maintains their level of pay,hours of work, sickness benefit, and holiday entitlement. Since 1993,


transferred workers have therefore enjoyed a greater level of protection.However, problems remain. Since all open-ended employment contractsspecify the manager–worker relationship very imprecisely, there is consid-erable opportunity for new private sector employers to apply an ostensiblysimilar set of terms and conditions far more stringently. For example,informal rules governing leave and sickness may be abandoned andworkers may be required to work harder and subjected to more intensivemonitoring (Cooke et al. 2003). Also, the regulations do not apply toworkers who are directly recruited by the private sector contractor and,given relatively high rates of staff turnover among many of these low-paying occupations, new recruits can very quickly constitute a majority ofthe contractor’s workforce.

Evidence of two tiers of employment conditions is growing. Forexample, a survey of 190 local government service contracts in 2000 found62 percent paid new starters a lower basic rate of pay than transferredstaff, and between 44 and 73 percent provided worse unsocial hourspremia, sick pay, leave, pensions, and job security (Unison 2002; see also,Toynbee 2003b; Wills 2001).

While the Labour government did nothing to change matters during itsfirst term of office, when re-elected in 2001, it made the dual-prongedcommitment of quickening and broadening the privatization of public ser-vices (by making greater use of private contractors) and ending the two-tier workforce (subject to proof that it existed). This third period ofprivatization has been characterized by a campaigning focus on ending thetwo-tier workforce, with shifting government statements, public sectorstrikes, the formation of constructive links to living wage and equal paycampaigns, and policy developments at the EU level. Significantly, repre-sentatives of contractors also recognized the need for action. In 2001, theDirector General of the Business Services Association (representingtwenty of the largest contractors, employing more than 500,000 staff)admitted that, “the contracting industry in the 1980s and some of the 1990shad a bad reputation, some of it deserved, for only being interested incutting costs. We often bid at unrealistically low prices just to win the con-tract” (cited in Wintour 2001). The government introduced a new procure-ment rule in local authorities (the March 2001 Best Value Order) thatallowed them to consider “non-commercial” aspects of a contractor’s bidfor services. But the new rules stopped short of excluding contractors whodid not have regard for favorable employment conditions. Instead, despitehaving made a commitment to address the problem of the two-tier work-force, the government focused its attention on convincing the public that achange of ownership of public services was needed to improve services(Grimshaw et al. 2002b).

For trade unions, the government was reneging on a promise. The TUCmade a new Fair Wages Resolution a key objective. By the spring of 2002,trade union leaders lined up to voice their frustration with government:


It is now six months since promises on protecting workers’ rights weremade and it is time they were honoured. Pressure from within ourunion is mounting for the deal on ending the two-tier workforce to bedelivered.

(Dave Prentis, general secretary of Unison)

This is one issue where Tony Blair will have no option to back down.Public sector workers . . . are not prepared to see this process thrownout with the rubbish. The time has come for Tony Blair to stop bowingdown to big business and to start standing up for the people whoelected him.

(John Edmonds, leader of the GMB)

Downing Street has always reacted to any talk of making its contrac-tors comply with good employment conditions by getting out thegarlic and crucifix.

(Jack Dromey, TGWU)8

Campaigns against the two-tier workforce developed rapidly alongsidetraditional action to defend pay. Unions were forced to defend pay amongpublic sector workers in response to the 2002 round of pay offers, whichpromised just 3 percent to the 1.2 million local government workers.Unison made the argument that a quarter of a million of local governmentworkers were earning less than £5 per hour (Parker 2002a) and, along withthe GMB (General, Municipal and Boilermakers’ Union) and the TGWU(Transport and General Workers’ Union), successfully balloted membersfor a wave of national strikes during the summer involving an estimated750,000 workers (Parker 2002b). After just one day of planned strikes, theunions won. In August, employers agreed to a two-year pay deal, whichincreased pay by 8 percent, except for workers on the two lowest gradeswho won a rise of 11 percent, from £4.80 to £5.32 per hour (by April 2003).This success was exploited by unions and they pressed private contractorsto match the pay deal for the lowest-paid workers so as to prevent localauthority workers being undercut by bids from private contractors (apotential problem also noted in the Low Pay Commission’s FourthReport, 2003: 70). Their concerns were justified. In the following months,union branches reported evidence of local authorities threatening to priva-tize services to avoid paying the higher minimum rates, since contractorswere only bound to pay the minimum wage of £4.10. The journalist andwriter, Polly Toynbee (2002), did much to bring the issue of inequality andlow pay among these hidden public services workers to public attention:

Out in the wild woods beyond the pale of the directly employed localgovernment workers are some 700,000 others not covered by anyagreements, who are employed by outside contractors. In the whole of


the public sector . . . there may be as many as two million of theseuncounted workers . . . These workers are almost all non-unionizedand unprotected, many casual and agency workers. Victory for thedirectly employed workers left out this great silent army. That puts thelocal government workers at risk too, constantly threatened with pri-vatization if their pay rises much above that paid by contractors.

Then, despite intense lobbying by the Confederation of British Industry(CBI), in February 2003 the government announced the introduction of anew statutory code, that was implemented in April 2003. In wording thatbrings the UK position closer to the International Labour Office (ILO)Labour Clauses (Public Contracts) Convention No. 94 (1949), it requiresprivate contractors to provide new recruits with terms and conditions ofemployment which are “no less favourable” than those of workers trans-ferred from local government.9

While campaigns in the UK appear to have been slowly winning the re-establishment of a weak form of Fair Wages resolution, they may receive asignificant boost from debates at the level of the European Union. Sincethe late 1990s, controversy surrounding legal regulation of public procure-ments in the European Commission has increased, with the possibility thata new EU Directive might enable all contracts to include a “social clause”on labor standards. Prior legislation had been developed primarily toensure a competitive internal market for contracts across member statesand the traditional view of the European Commission has been that con-tracts ought to be awarded according to economic criteria: that is, thelowest price or “the most economically advantageous” offer (Commissionof the European Communities 1998). Against this position, the EuropeanPublic Services Union, and other organizations, have campaigned forincluding labor standards, as well as other social and environmental cri-teria, in such contracts (in line with the ILO Convention No. 94). In May2000, the Commission proposed two new Directives in order to modernize,simplify, and improve the flexibility of procurement; but non-commercialconsiderations were still generally ruled out, in part due to the need forcriteria to be “directly linked to the subject of the public contract inquestion.”

Again, campaigning organizations challenged this view. The Coalitionfor Green and Social Procurement, which brings together the EuropeanFederation of Public Service Unions, Oxfam, the European Fair TradeAssociation, Greenpeace Europe, and others, called for the Commissionto amend its legislation to incorporate “objective social considerations” –reflecting both narrow and broad public interest concerns – as valid cri-teria for choosing between two contractors of otherwise equal merit. Then,in May 2002, the Commission adopted a new position (yet to be negoti-ated with the European Parliament and Commission at the time ofwriting), which makes some positive concessions, though its ambiguity


provides “a recipe for future conflict” in the courts, leaving the EuropeanCourt “to tidy up the mess on a case-by-case basis” (Bercusson 2002). Atits best, the proposed directive may enable member states and contractingauthorities: to include labor standards as contract performance conditions;to require information on labor standards as part of the tender; to excludecontractors for violating labor legislation; and to use labor standards assecondary award criteria (Bercusson 2002; European Disability Forum2002). But trade unions argue that it fails to incorporate a clause for fairlabor standards and continue to press for change (TUC 2002).

Eliminating subsidies to “low road” firms

Direct activist campaigns against Britain’s system of in-work benefits havebeen absent (it is more difficult to campaign against Treasury officials), buta number of prominent journalists and academics have made an argumentthat links directly to demands for a living wage and for equal treatmentbetween women and men. Given the long tradition of welfare payments tosupplement earnings in Britain, and the many lessons regarding their negat-ive effects, both on society and the economy, it is all the more surprisingthat governments continue to address in-work poverty in this way.

The failure of the Speenhamland Law, applied in the midst of the indus-trial revolution during 1795 to 1834, provides an important lesson (Polanyi1957). Speenhamland established in-work benefits based on the notion ofa “right to live.” Subsidies in aid of wages were commonly granted inaccordance with a scale linked to the price of bread, with additions for theworker’s family. While universally popular at first, among parents, workersand employers, in the long run it led to the pauperization of the work-force. Employers could obtain workers at any wage, since the subsidybrought their income up to scale. Workers had no incentive to work hard,or to bargain for higher pay, since income was the same whatever the levelof pay (given that most employers paid less than the scale). And workerspaid above the subsidy scale found their pay driven down in competitionwith subsidized workers. Polanyi concludes his assessment of this period asfollows:

To later generations nothing could have been more patent that themutual incompatibility of institutions like the wage system and the“right to live,” or, in other words, than the impossibility of a function-ing capitalistic order as long as wages were subsidized from publicfunds . . . Aid in wages must be inherently vicious, since it miraculouslyinjured even those who received it.

(1957: 81–2)

But in the twenty-first century, low-paid British workers still rely heavilyon government aid and its coverage has been expanded under the Labour


government. The Working Tax Credit is the central plank of the govern-ment’s anti-poverty strategy. When the National Minimum Wage wasintroduced at the low level of £3.60, Ministers and the Chair of the LowPay Commission argued that it had to be viewed in conjunction with thebenefit system (tax credits, housing benefit, and others). Estimates sug-gested that for those in rented accommodations, a single parent with onechild working 35 hours a week would earn the equivalent of £6 per hourand a one-earner couple with two children would earn £7.10 (Elliot et al.1998). However, as with Speenhamland, this justification of low pay is seri-ously flawed.

First, in principle, it rejects the duty of employers to pay for the socialcosts of maintaining their workforce, thereby intensifying pressurestowards the commodification of work (see Beynon et al. 2002: 243–8) andkeeps afloat “parasitic” employing organizations (Figart et al. 2002: 79).Second, as presently designed, the tax credits discriminate against womensince they only provide subsidies to “breadwinners” in low-paid jobs(Rubery and Rake 2000). This leaves others in multi-earner households(mainly women, but also young people) to earn wages without subsidiesand, in the absence of a sufficiently high minimum wage, makes themvulnerable to competition from workers who do receive subsidies. Third,the policy potentially reduces the bargaining power of labor (see Sachdevand Wilkinson 1998; Prasch 2002) and creates an in-work poverty trap byremoving the incentive for workers to increase their earnings since addi-tional pay is clawed back in reduced benefits and increased tax. Asemployers reduce low wages to the minimum level, there is a risk that anew line of segmentation is drawn between a “minimum wage labormarket” and the main market (Sutherland 1999). This not only trapsworkers in a form of institutionalized undervaluation of work, but also, asPolanyi warned, increases the cost of state subsidy.

The government seems aware of the need to level up the minimumwage to reduce the cost of tax credits and, in periods of fiscal stringency,this may even provide an incentive for the government to argue for higherrates. Simulations of the impact of the National Minimum Wage on receiptof benefits already indicated that the introductory level was too low tobring a significant reduction – a fall of just 2.5 percent in numbers claimingin-work benefits and 6 percent in expenditure (Gosling 1999). Evidence ofa polarization in the labor market is mixed. In some low-paying sectors,such as cleaning, there is a clear U-shaped distribution of hourly earningswith a large concentration earning the minimum rate, few earning justabove this rate, and then a significant share earning £5 an hour. However,in other sectors, such as social care, while there is a spike at the minimum,this is smaller and there is a more even distribution over the pay scale(LPC 2003).


Conclusion: understanding the dynamics of the low wageeconomy

While living wage campaigns in Britain are not nearly as significant astheir counterparts in the USA, they have played a crucial role in the fightagainst low pay both as a catalyst to wider trade union action and inlinking up with other actions on improving the level of the NationalMinimum Wage, introducing a Fair Wage clause into public procurementcontracts and making the case against in-work subsidies as a main anti-poverty device.

The living wage and low pay campaigns are of obvious importance inhighlighting the issue of poorly paid work and have enjoyed some successin pressuring and convincing employing organizations to improve levels ofpay, either directly or through inserting clauses into contracts with suppli-ers. Less obvious is the role these campaigns have played in illuminatingthe central mechanisms of wage setting in low-paid labor markets –mechanisms that bear little resemblance to those identified in neoclassicaleconomists’ accounts of wage determination.

The first mechanism is the systematic undervaluation of work byemployers. Here, low pay campaigns repeat the claims of generations ofMarxist-inspired scholars (especially in the fields of industrial relationsand labor process theory) who show that workers must exercise theirpotential collective bargaining power to bring pay close to the value oftheir labor. It follows that, for the low paid, work is especially at risk ofbeing undervalued due to low unionization, low accreditation of educationand skills, and few alternative job opportunities.

While this mechanism highlights the need to campaign on the inher-ently conflictual capital–labor relation, the contradictions that drive (andundermine) capitalist societies also generate two other conflicts: capitalistagainst capitalist in the battle for market position and sales; and capitalagainst state in the effort to both nurture efficient use of capital and toprotect the welfare of citizens. What the low pay campaigns have so suc-cessfully demonstrated is that all three conflicts impact directly upon wagesetting. Employing organizations compete against each other to win con-tracts for services provision and, in the absence of regulations that allowfor consideration of labor standards, bids are won on the basis of lowestcost. This second mechanism forces employers to drive wages down to theminimum, regardless of other pressures they face such as those arisingfrom external labor market conditions, recruitment difficulties, a need toprovide staff with incentives, or, even, a straightforward ambition to paybetter wages. Without further changes in the EU’s model of public pro-curement, increasing internationalization of competition for contracts willonly intensify this downward pressure on wages.

A third mechanism regulating the British wage structure is driven bythe interaction between the minimum wage and the social security system,


reflecting, in part, the dual pressures on the state both to foster privatecapital accumulation and to legitimize the vagaries of capitalism throughpolicies of income distribution and social protection (O’Connor 1973).With a low minimum wage, in-work benefits in the form of tax credits trapan increasing number of low-paid workers in poverty; employers areencouraged to hire subsidized workers in favor of the non-subsidized, andworkers lack an incentive (and the ability) to press for wage increases. Themore the policy of tax credits is used as the main policy to combat poverty,the more this contributes to a widening gap between low-income andmiddle-income earners.

Notes1 The discussion of TELCO’s living wage campaign owes a great deal to the

information provided by one of the two campaign co-ordinators, CatherineHowarth, to whom I am very grateful. Discussions with Catherine helped to illu-minate the strategy of TELCO and she also made corrections on an earlier draftof this chapter.

2 The campaign against HSBC involved, among other features, nuns going to theOxford Street branch of HSBC to cash shopping trolleys full of coins (collectionmoney from an East London church) and other activists blockading cashmachines, leaving other customers queuing into the street. At the time, aspokesman for HSBC was quoted as saying, “We don’t believe it’s right toinstruct contractors to pay a certain rate. We would be telling them how to runtheir own business” (cited in Stewart 2001).

3 By 1997, the Confederation of British Industry had softened its position to state:

A “floor” to the labour market to prevent competition based on undercut-ting by employers paying low wages . . . could indeed have some benefits forbusiness as well as employees, by limiting the scope for competition on thebasis of very low pay, low skill strategies.

(CBI evidence to the Low Pay Commission, cited in Sachdev andWilkinson 1998)

4 For the First, Second and Third Reports, the Commission chair was an academicand the members included three employer representatives, three trade unionrepresentatives and two academics. For the Fourth Report, the Commissionchair was switched to a former leader of the central employers’ confederation(the Confederation of British Industry).

5 Data for 2000 from the OECD Labour Market Statistics Database (cited inRubery et al. 2002: Table 4.4) include the following estimates: France (61percent); Ireland (56 percent); Greece (51 percent); Belgium (49 percent); theNetherlands (47 percent); the UK (42 percent); and Spain (32 percent).

6 Until 1983, the Fair Wage Resolution required private firms to match publicsector rates of pay agreed through national wage setting; it was the only govern-ment mechanism for extending collective bargaining agreements to other firmsand sectors.

7 Until then the government considered TUPE regulations to apply only toemployee transfers between private sector firms, but this was eventually success-fully challenged by the European Court of Justice and several court cases inBritain.


8 Trade union quotes cited in Wintour and Maguire (2002) and Toynbee (2002).9 Although the UK was the first ILO member country to ratify this convention, it

was denounced by Thatcher and the UK is still holding out despite it being rati-fied by eight other EU member states (Bercusson 2002).

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9 The living wage in AustraliaHistory, recent developments,and current challenges

John Buchanan, Ian Watson, andGabrielle Meagher

Around the world, workers’ organizations are attempting to reinstate theconcept of needs in wage determination processes by campaigning forliving wages. This chapter examines recent Australian experiences ofdeveloping and implementing a “living wage,” and explores what the Aus-tralian case offers researchers and practitioners in other countries inter-ested in living wage campaigns and policies.

In the United States, the concept of the living wage has underpinnedlocal activist campaigns to increase hourly earnings rates for the lowest-paidworkers, typically via “living wage ordinances,” in which municipal govern-ments mandate that businesses supplying the municipality must pay theworkers involved a living wage. In 1999, researchers estimated that thenumber of workers covered by living wage ordinances in the United Statesran to approximately 44,000 persons. The recent passage of ordinances withwide coverage, notably in San Francisco, has swelled this count by tens ofthousands (Brenner 2002), in a national labor force with total nonfarmpayroll employment of 130.8 million (USDL 2002). Thus, even on a gener-ous “guesstimate,” workers covered by living wage ordinances in the UnitedStates are unlikely to be more than 1 percent of the nonfarm labor force.

The situation in Australia is different, where the idea of a living wage isan integral element in a national system of wage determination. Mass cam-paigns on the social movement model have been limited. However, theimpact of the idea on wage movements has been profound. National andstate industrial tribunals have accepted many of the arguments led by theunions, principally the Australian Council of Trade Unions (ACTU), insetting rates for pay for all those who do not receive wage rises throughenterprise level bargaining. Accordingly, approximately 20 percent of thelabor force are eligible for annual living wage increments.

Living wages in the evolution of Australian industrialrelations

The current Australian concept and practice of a living wage are shapedby very distinctive national circumstances. At the center are Australia’s

unique wage setting institutions – the quasi-judicial tribunals establishedaround the turn of the twentieth century to manage and resolve industrialdisputes. Under authority granted to them by parliaments, industrial tri-bunals at both federal and state levels have had compulsory powers tosettle disputes, to enforce decisions, and to limit direct actions such asstrikes or lock-outs by parties to disputes. Arbitration tribunals also regis-ter and regulate trade unions. Legislation has prescribed – and morerecently proscribed – those aspects of employment relationships aboutwhich tribunals can rule. Within the legislative framework, precedent andtest cases establish the principles upon which commissioners make theirlegally binding decisions, called “awards.” From their establishment until1990, tribunals at both the federal and state levels came increasingly towork in concert to set wages and conditions for a majority of workers in ahighly centralized wage-fixing system. Along with tariff protection of localindustry, and strict immigration controls, the arbitration system was partof the “elaborate institutional framework intended to facilitate nationaleconomic development while protecting key economic protagonists”(Boreham 2002: 179).

The idea of a living wage was a founding concept in the Australianindustrial arbitration system. The most famous expression of the livingwage idea in Australian industrial relations history was the HarvesterJudgment of 1907, which determined the wage rate for adult, unskilled,male laborers. In this judgment, pioneering social liberal and President ofthe Commonwealth Court of Conciliation and Arbitration1 Justice HenryBournes Higgins established this “basic wage” as that which wouldsupport a man, his wife and three children in “frugal comfort.”

Under this model, in addition to the basic wage, many workers alsoreceive a margin for skill. Margins have been determined according toindustry and occupation, not for all workers like the basic wage. Until thelate 1980s, wages generally moved as follows. Labor market pressure,often arising from skills shortages in key sectors of the economy, resultedin an increase in pay for those workers whose skills were in short supply.Increases either took the form of multi-employer agreements or over-award payments. These developments in the field became the basis forvarying awards. Within the award system, primary awards (in the male-dominated metal, construction, and transport industries) were usuallyadjusted first. Once these primary awards were varied, the secondaryawards linked indirectly to them were then adjusted. This system meantthat wage increases arising from labor market pressure in one part of theeconomy were transmitted to most workers, ensuring some fairness in rel-ative pay structures.

Although workers’ needs were a central and perfectly legitimate cat-egory in the structured conflict over wage determination in Australia formost of the twentieth century, by no means did centralized wage fixingensure living wages for all workers. The wages of women and indigenous

The living wage in Australia 123

people are the most obvious exceptions here. The Harvester Judgmentestablished a family wage, and subsequent decisions set women’s rates ofpay at levels significantly lower than men’s, a situation not fully rectified inlaw until the equal pay decisions of the late 1960s and early 1970s (Hunter1988; Ryan and Conlon 1989). Meanwhile a gender wage gap still persiststoday. Indigenous people were simply excluded from the industrial rela-tions system altogether until the 1960s, and as a group, indigenouspeople’s economic disadvantage remains stark (Hunter 1999).

Moreover, white male workers have not always fared well under cen-tralized wage fixing. Prevailing political ideologies, the balance of eco-nomic power between labor and capital, and the economic climate haveaffected wages and conditions, as the principles of need, capacity to pay,comparative wage justice, the national interest, and productivity haverespectively been emphasized or de-emphasized in tribunal decisions(Macintyre and Mitchell 1989; Dabscheck 1994; Boreham 2002). Morerecently, as we discuss below, policy change has radically transformed theoperations and outcomes of the industrial relations system, and ignited thelatest revival of living wage campaigning. Yet despite the waxing andwaning fortunes of the idea of a living wage, it has remained part of theliving lexicon of Australian industrial relations language and practice. Thatis to say, when, in 1996 a union initiative explicitly (re)mobilized the ideaof a living wage, its proponents drew on a tradition; they did not have toestablish the validity of the term ab initio.

In the late 1980s and early 1990s, however, changes to institutionalarrangements in the Australian industrial relations system reduced therole and importance of awards, and increased bargaining at the enterpriselevel. Unions began exerting pressure for decentralization, to bettermanage wage relativities at the peak of a boom. A federal Labor govern-ment, acting with the support of the ACTU leadership, implemented thechanges, but employers’ interests dominated in policy design. The federalIndustrial Relations Reform Act of 1993 and other reforms ensured thataward rates of pay were quarantined from movements in collective agree-ments and over-award movements. As a result, labor market pressurecould increase wages for workers covered by collective agreements andover-awards, but this would not necessarily affect award rates. The newneo-liberal Coalition government’s Workplace Relations Act of 1996further weakened the role of awards. This Act reduced to twenty thenumber of matters on which the Australian Industrial Relations Commis-sion (AIRC, the Commission) can rule in making awards, leaving theremainder for enterprise level agreement, or management prerogative,where no agreement is reached. Consequently, labor market pressure cannow reduce as well as increase working conditions for some workers, andthe capacity of award system to protect all (or most) workers has declined.

During the two decades before these far-reaching reforms of the indus-trial relations system began, immigration policy became less restrictive, at

124 John Buchanan et al.

least in its racial-ethnic dimensions (Jupp 2002), and tariffs began to bereduced. Financial deregulation and the propagation of competitionpolicy, with particular impact on public utilities, followed during the 1980sand 1990s (Bell 1997, 2002). Alongside these changes to Australia’s majoreconomic institutions – and facilitated by them – has been profoundchange in the organization of work. Rates of casual employment and part-time employment are high and increasing. In November 2001, 23 percentof employees worked casually (Australian Bureau of Statistics (ABS)2002a) and in October 2001, 28 percent worked part-time (ABS 2001).The rate of unemployment also remains unacceptably high, at more than 6percent in 2003. At the same time, what might be called “over-full-time”employment is a growing problem. Nearly half the employed labor forceworks longer than 35 hours per week, with 22 percent working longer than41 hours per week. Of those working longer than 41 hours per week, 67percent (or 14 percent of all employees) work overtime either unpaid, orcompensated in other ways (ABS 2000a, ABS 2000b). As we show below,the ACTU revitalized the ideal of the living wage in response to thesedevelopments.

The living wage in Australia: 1996–2003

The living wage claim: vision and rationale

The Australian Council of Trade Unions launched their living wage cam-paign in 1996, in the form of a claim in the Australian Industrial RelationsCommission to vary awards. With this claim, the ACTU sought to providea rallying point for a counter-offensive against the newly elected neo-liberal federal government, which has been committed to breaking unionpower and deregulating the labor market. The ACTU also sought toincrease rates of pay for the lowest-paid workers to compensate for falls intheir real earnings during the first half of the 1990s. Since 1996, this cam-paign has resulted in annual wage increases for some of the lowest-paidworkers in Australia, and has re-established need as a criterion of wagefixing when it had been almost completely eclipsed by productivity-basedcriteria.

When formulating the original living wage claim in 1996, the ACTUenvisaged three stages, each with a number of elements. This is significantbecause a successful claim would have redressed problems arising fromchanges to both the distributional impacts of decentralization of wagefixing (increased inequality), and the organization of work (increasingworking hours for full-time workers, casualization). The key features ofthe original claim are summarized in Table 9.1.

In the ACTU’s original three claims, each stage allowed for an increasein the minimum wage for the lowest-paid workers, and an increase forthose workers without access to increases from enterprise bargaining. The


ACTU intended these measures to counter the widening disparity of earn-ings resulting from decentralization of wage fixing. One key problem isthat enterprise agreements do not cover as many workers as was anticip-ated. In 1989, before the system was formally decentralized, only 23percent of the workforce was covered by some kind of workplace or enter-prise agreement. By 1995, this had risen to around 35 percent (Buchananand Watson 1997: 23). Estimates for 2000 place enterprise agreementcoverage at 35–40 percent – around 50 percent more people than a decadeearlier. However, a large proportion of the workforce remains “agreementfree,” and so dependent on the award system. Table 9.2 demonstrates whythis mattered at the time of the original living wage claim in 1996. Thedata show that different forms of industrial regulation are associated withdifferent levels of wage increase. Significantly, workers dependent onawards receive the lowest annual average wage increases. Moreover,award-dependent workers are disproportionately female, and concen-trated in retail trade, health and community services, and the food serviceand hotel industries (ABS 2002b: 17). The living wage claim aims toachieve some kind of “catch-up” for these workers who have clearlyslipped behind the field.

In addition to wage increases for the lowest paid workers, each stage ofthe living wage claim also included provision for maintaining relativities infederal awards, such that increases in minimum rates within an awardwould “flow on” up the classification structure to workers in higher skilljobs. With this element of the claim, the ACTU sought to advance theprinciple of comparative wage justice. Further, stages two and three of theclaim include additional, more ambitious elements designed to remedyproblems in the distribution of working hours and in working conditions.


Table 9.1 Key features of the ACTU’s living wage claim

Stage 1 • a minimum $10.00 per hour or $380.00 a week for all workers workingunder federal awards

• maintenance of relativities between wages for work of different skilllevels

• a minimum of $20 increase for those without enterprise agreements


• maintenance of relativities• a minimum $20 increase for those without enterprise agreements→ protections for those working few or occasional hours per week


• maintenance of relativities• a minimum of $20 increase for those without enterprise agreements→ consider reducing standard hours of work

Source: ACTU (1996).

The proposed stage two was to focus on casualization, aiming to increaseprotections for the growing number of workers employed casually and/orpart-time, and whom the award system had never protected effectively.The proposed stage three includes an even more ambitious element; thatof opening up for consideration standard hours of work. This marks thefirst time the union movement has taken up this issue in nearly twodecades.

Implementing and updating the living wage

The ACTU has not achieved all that it wanted in the original living wageclaim of 1996. In particular, the non-wage aspects of the second and thirdstages of the claim; those aiming to enhance protection for casual workersand to stem the growth of “over-full-time” employment – have had to bepursued as separate campaigns and test cases, with varying success.Extended hours for full-time workers, for example, have been the subjectof comprehensive test case on “reasonable hours.”2 At the same time, con-ditions for casual workers are improving with a combination of test cases,e.g. the metal workers casuals test case, see AIRC (2000), legislation (e.g.to protect the leave rights of casual workers in Queensland), and case-by-case decisions (e.g. the slow accretion of rights for casual workers in thecase law of unfair dismissal).

However, the wage component of the living wage claim has been incor-porated into the annual decisions of the Australian Industrial RelationsCommission on “Safety Net Adjustments” (SNAs) to awards. Under-standing how this process works will make clear why the concept of“movement” inaptly characterizes living wage campaigns in Australia,which are institutionalized in the fullest sense of the term. In addition toits traditional role in industrial dispute resolution, under the AustralianWorkplace Relations Act 1996, the Commission is responsible forestablishing and maintaining a “safety net.” The precise details of the


Table 9.2 Labor market coverage of different forms of industrial regulation andaverage annual wage increases, 1996

Form of labor market Employees (%) Estimate average annual regulation wage increase (%)

Awards only 35 1.3Awards and registered

enterprise agreements 30 4–6Registered enterprise 5 4–6Individual contracts 30 0–8

Sources: Authors’ estimates were obtained by culling information from official statistics,departmental reports, and the Agreements Database and Monitoring service of the Aus-tralian Centre for Industrial Relations Research and Training.

Commission’s powers – and obligations – are spelled out in S88B(2) of theAct that reads:

In performing its functions under this Part [VI Dispute Preventionand Settlement], the Commission must ensure that a safety net of fairminimum wages and conditions of employment is established andmaintained, having regard to the following:

a the need to provide fair minimum standards for employees in thecontext of living standard generally prevailing in the Australiancommunity;

b economic factors, including levels of productivity and inflation,the desirability of attaining a high level of employment;

c when adjusting the safety net, the needs of the low paid.

Under these provisions, each year the ACTU lodges a claim to adjust thesafety net as part of its living wage strategy. The Commission thenconvenes a Safety Net Adjustment case to hear the claims of all with aninterest in the matter. The ACTU, employer groups (mainly peakrepresentative bodies), community groups (including the churches), stateand federal governments all intervene. Each party is required to produce awritten submission. These often contain comprehensive information onthe state of the low-paid workforce as well as material on the state of theeconomy and community life more generally. Significantly, SNA cases donot simply deal with the lowest paid. Because the Act also authorizes theCommission to rule on relativities, these cases set rates of pay for all thosewith limited enterprise bargaining power, not just the low paid. Con-sequently, many middle- and upper-range white-collar jobs are alsoaffected by SNA decisions. Once the federal Commission reaches adecision, the state tribunals usually make decisions identical to those madeat federal level for workers on state awards.

In making its decisions, the AIRC arbitrates between competing argu-ments put by employers and unions, and by conservative Coalition andAustralian Labor Party governments. The rival principles in contests overthe ACTU living wage claim have been as follows. Unions argue that wageincreases under the Safety Net Adjustment should keep pace withcommunity standards and ensure that benefits of growth are equitablyshared. Employers argue that wages have no social function, that wageincreases simply cause unemployment and inflation and reduce the incen-tive to bargain, and that equity is better achieved through income supportprograms. In weighing these competing claims, the AIRC has sought tomaintain the highest possible community standards compatible with eco-nomic growth and stability.


Results: safety net adjustment decisions

Two simple measures serve to demonstrate how successful the ACTU’sliving wage claims have been. First, the Commission’s reasons for itsdecisions in SNA cases reflect broad acceptance of the ACTU’s argu-ments, and rejection of the arguments of employer groups (althoughthe Commission does not use the language of the “living wage”).3 Second,the Commission has awarded wage increases every year in excess of theamounts advocated by both the federal government and employers. Figure9.1 compares the amounts of the ACTU’s annual living wage claims, theFederal government’s counterclaims, and the AIRC’s decisions.

Clearly, the ACTU’s living wage claims have enjoyed modest butgenuine success in the Safety Net Adjustment cases annually since 1997.How have living wage claims affected incomes of low-paid workers? It isdifficult to distinguish the impact of change in workforce composition fromthe impact of regulation on income. However, evidence suggests that Aus-tralia’s system of wage determination has defended hourly rates of payfrom falling as fast as they would have in the absence of intervention, andreduced the proportion of employees working at very low rates of pay.Table 9.3 shows that the proportion of employees earning less than 10Australian dollars per hour (in constant 1999 dollars), which declined overthe decade from 1989 to 1999, with the most precipitous decline experi-enced by female workers. A similar pattern in the proportion of employeesearning less than 12 dollars per hour is also evident. Significantly, the


$35

$30

$25

$20

$15

$10

$5

$01997 1998 1999 2000 2001 2002 2003

ACTU Claim

AIRC Decision

Federal Government Claim

Figure 9.1 Living wage claims and Australian Industrial Relations Commissionsafety net decisions, 1997–2003.

Source: HSBC, using data from the ACTU, AIRC and Government submissions.

gender gap has closed somewhat as the rate of improvement in men’s realearnings has lagged behind the rate of improvement in women’s earnings.Moreover, that more than one-fifth of the adult labor force4 earned lessthan 12 dollars an hour in 1999 is itself a symptom of broader processes atwork in the economy (Botwinick 1993), and of the importance of continu-ing and enhancing living wage campaigns.

Table 9.4 puts growth in the wages of the low paid in the context of thedistribution of earnings of all employees. The picture painted heretempers optimism about the achievements of living wage campaigns so far.Although real incomes have been rising across the distribution since livingwage campaigns began in the mid-1990s, incomes of workers in the lowesttwo deciles of earnings, on average, have increased at lower rates thanthose in higher deciles. (Again, women fared better than men, with thegender gap closing because the earnings of low-paid males grew so little.)Consequently, household living standards have continued to polarize.Research on poverty lines amplifies this point. In December 2002, thepoverty line for a two-parent family with two children, in which the house-hold head held a job, was a household disposable income of $553.55 (afterincome tax, and including housing costs) (MIAESR 2002). In May 2002,the AIRC’s Safety Net Adjustment decision in response to the ACTU’sliving wage claim set the federal minimum wage at $431.40 (before incometax).

Finally, although rates of pay have been defended in living wage cam-paigns, other aspects of job quality and living standards have not. Full-time, permanent employment (for men) was the standard for which theAustralian system of industrial relations developed, and the historical evo-lution – and contemporary form – of many awards reflect this history. Yet


Table 9.3 Wage growth among low-paid workers, 1989–99

1989 1990 1994 1997 1999

Percentage of employeesa earning under $10b per hourMales 11.3 8.5 8.5 8.5 8.7Females 16.4 13.4 10.6 10.0 9.2Persons 13.5 10.6 9.4 9.2 8.9

Percentage of employeesa earning under $12b per hourMales 24.0 19.7 21.5 20.7 20.0Females 33.1 30.1 28.4 27.1 23.1Persons 28.0 24.2 24.6 23.6 21.4

Sources: Unpublished information from the ABS’s regular August supplement to the LabourForce Survey (for 1989 and 1999) and unpublished information from the ABS Income Distri-bution Survey (for 1990, 1994, and 1997).

Notesa Adult, non-managerial employees.b Constant 1999 dollars.

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in 2000, full-time permanent workers were only 53 percent of the work-force, compared to 76 percent twenty years earlier (Wooden 2002: 57).This dramatic growth in non-standard forms of employment – includingcasual and part-time work, and also labor hire, fixed contract employment,and much self-employment – is one of the most significant developmentsin the Australian labor market in recent decades. Workers employedunder non-standard arrangements often have limited access to awards, orare employed under awards that limit the entitlements of non-standardworkers. Members of this growing proportion of the labor force frequentlylack access to non-wage benefits like paid holiday and sick leave set downin awards, as well as access to legislated remedies that protect workersfrom unfair dismissal. As we noted above, despite aiming to do so, livingwage claims have not been able to incorporate protections for theseworkers, although the (costly and painstaking) test case process hasyielded some promising results.

Challenges for the future

Living wage claims in Australia have worked to defend hourly rates ofpay from collapsing in an era of chronic unemployment and under-employment. Australia’s centralized wage fixing institutions remain acrucial – and apparently viable – vehicle for pursuing industrial justice,particularly for women, and despite attacks by neo-liberal governments inrecent years. However, non-wage aspects of employment have becomeimpoverished, and inequality has increased sharply. We conclude by can-vassing three of the several challenges future living wage campaigns face.

Clarifying the foundation category: individuals or households?

The Harvester Judgment established the household as the reference pointfor setting the basic wage for males – that is, the living wage – in Aus-tralian industrial relations institutions at the turn of the twentieth century.Over the course of the twentieth century, female wages have steadilyimproved from the 55 percent of the male rate at which they had first beenset. Equal pay cases in 1969 and 1971 removed formal sex discriminationin wage fixing – and thereby confirmed the individual as the unit of wagedetermination.

Meanwhile, both family structures and the gender composition of thelabor force have changed enormously. Couple families with dependants arenow only 39 percent of all households, for example, and women in them areemployed at the rate of 61 percent (ABS 2000c). However, no tribunal orgovernment inquiry has grappled with what these transitions mean forestablishing a reference point for pay and hours of work. Living wage cam-paigns of the future need to develop and take a position on this question.

Current policy practice and debate offer some clues. Dutch public


policy, for example, now assumes an ideal of 1.5 workers per household,and is gearing wages, hours of work, and social security policy to thisnorm. Particularly impressive are initiatives to improve the quality anddesirability of part-time work. This approach can foster more equitablesharing of paid and unpaid work in families while maintaining labor stand-ards. By contrast, in Australia neo-liberal academics, sponsored by theBusiness Council of Australia, propose the introduction of a tax creditregime similar to that operating in the United States. Their proposal advo-cates cutting minimum wages, and using tax credits to supplement familyincomes that fall below subsistence level (BCA 1999). This approach isindifferent to the consequences of severing the link between reasonableliving standards and wage fixing, which include falling job quality, increas-ingly long working hours for the low paid, and grave poverty in manysingle person households. In our view, basic living standards for mostmembers of the working age population should be maintained by livingwages, not by the tax-transfer system in the first instance (Buchanan andWatson 1997; Watson 1999).

Links between wage determination and the tax-transfer system

Although we emphasize the importance of living wages, well-designedlinks between the wage determination and tax-transfer systems are crucialfor maintaining living standards across the life-cycle. Gunter Schmid andhis colleagues (1995; 1998) show this might be achieved in their work ontransitional labor markets. They argue that fairer sharing of risks over thelife-cycle will help make key transitions – for example, from school towork, to parenthood, and into retirement – easier. In this approach, unliketax credit schemes we discussed above, social security and tax arrange-ments work to enhance rather than undermine labor market standards. Bysharing risk, new social structures would increase choice by supporting avariety of pathways from which individuals could choose when navigatingdifferent life course transitions. Each pathway would provide a decentwage that does not require unreasonable hours of work to maintain adecent material standard of living (for elaboration, see ACIRRT 1999:Chapter 7; Buchanan and Thornthwaite 2001).

Challenging consumption norms

Most debates on the living wage focus on the needs of the low paid.However, the Australian wage-fixing system has always recognized thatfair wage relativities are crucial to a just wages structure. We believe itimportant to build on this tradition. Pragmatically, those with weak bar-gaining power are not just the low paid, as many women’s occupations –for example, librarians – demonstrate, and campaigns for wage justiceshould address their needs.


Living wage approaches to wage setting embody ideas about consump-tion norms. However, as income growth at the top of the earnings distribu-tion fuels increasing inequality, consumption norms and aspirations aredestabilized. Juliet Schor has identified the dynamic of the “work–spendcycle” (Schor 1991) and linked this dynamic to a growing “culture ofcompetitive consumption” (Schor 1998; see also Frank 1999). Accordingly,developing a sustainable living wage for all means controlling excessgrowth in high incomes.

For living wage ideals to become more than advanced charity – and sodiscretionary – for the weakest, living wage campaigns must address wagerelativities and the problem of changing consumption norms. Living wagetheory and practice need to be anchored in a vision of flourishing life atwork and beyond. Rising labor standards should act as a “productivitywhip” to high quality job creation, and individuals should have improvedchoices over the life-cycle. Productivity gains should be distributed asshorter working hours for all, and the obsession with money/materialrewards reduced. Living wage campaigns can support a vision of life worthliving, in which the importance of markets and possessions steadilyrecedes. Australian living wage campaigns – although impressive – stillhave a long way to go.

Notes1 The names of the institutions have changed over time; the Commonwealth Tri-

bunal is now called the Australian Industrial Relations Commission.2 In May 2001, the ACTU and twelve unions applied to the Australian Industrial

Relations Commission (AIRC) for a test case to introduce reasonable hours ofwork as an award condition for Australian employees (ACTU 2002). TheACTU sought to have fourteen awards varied “by deleting from them the provi-sions (if any) requiring an employee to work reasonable overtime” and byinserting in them three subclauses specifying that employers must not requireemployees to work unreasonable hours of work, that employers must notrequire employees to work overtime against their wishes, and that there be pro-vision for paid breaks after extreme working hours (Giudice et al. 2002: para. 2).The Full Bench of the AIRC heard the ACTU’s claim alongside a claim by theAustralian Chamber of Commerce and Industry (ACCI) to vary two awards toinsert in them provisions relating to annualized wage rates and other matters.The Bench handed down its decision on July 23, 2002. The Bench was satisfiedby the evidence led by the ACTU that “Australia has average working hoursthat seem longer than most other OECD countries, with average annual hourstending towards the very top of the rankings, comparable with the United States,although not as high as Korea” (Giudice et al. 2002: para. 5). The Bench alsoagreed that links between extended hours and adverse consequences for healthand productivity had been demonstrated (ibid.: para. 6–7). However, the Benchrejected the ACTU’s claim, awarding instead “a test case provision of a morelimited kind” (ibid.: para.10). The more limited provision allows for employeesto refuse to work overtime when this work would result in unreasonable hours,having regard to several factors. These included factors contained in theACTU’s claim (risks to health and safety, employees’ personal circumstances),


and, crucially, additional factors not included in the ACTU’s claim centred onthe needs of the workplace or enterprise (ibid.: para. 14). The Bench rejectedentirely the ACCI’s claim (ibid.: para. 16–18).

3 For example, Commission decisions have stated that “modest safety netincreases will have a minimal impact on inflation” (AIRC 2001: para. 86–7), andthat “moderate wage increases do little or nothing to diminish job prospects”(ibid.: para. 98). Further, the Commission recognized that “employees on lowwages experience difficulties making ends meet and affording what are generallyconsidered by the broader community as basic necessities” (ibid.: para. 126).Finally, the Commission acknowledged that “whilst safety net adjustments arenot perfectly targeted to meeting the needs of the low paid they assist in meetingthose needs” (ibid.: para. 127).

4 Most awards set down “junior” wages for workers between 15 and 21 years ofage, paid at less – often much less – than the adult rate. Excluding youngworkers, therefore, reduces the reported proportion of workers in the laborforce overall receiving very low wages.

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Low Wage Jobs Solve Unemployment?, Research Paper No. 29, Department ofthe Parliamentary Library, Canberra. Available: http://www.aph.gov.au/library/pubs/rp/1998-99/99rp29.htm

Wooden, M. (2002) “The Changing Labour Market and its Impact on Work andEmployment Relations,” in R. Callus and R. Lansbury (eds), Working Futures:The Changing Nature of Work and Employment Relations in Australia, Sydney:Federation Press, pp. 51–69.


10 The fight for living standards inNew Zealand

Prue Hyman

Until the mid-1980s, wage determination in New Zealand labor marketsoccurred primarily through centralized bargaining systems. Documentsknown as awards and agreements prescribed wages and conditions settledby collective bargaining between employers or their agents and tradeunions. They typically covered a number of employers within an occupa-tion or industry. High levels of unionization and such bargaining arrange-ments were important factors in producing wage differentials that werelow by international standards, with the spillover effects of awards extend-ing to employees not directly covered. Although “fair wages” were ini-tially defined with reference to prevailing rates, over time the conceptbecame conflated with appropriate living standards as well, specifically afamily wage for male breadwinners and a lower wage rate for women.Minimum wages were supplemented by the safety net of an overallminimum wage covering all employees, together with other elements of aminimum code of conditions. These welfare state provisions also focusedon (male) wage earners and the unemployed.

In contrast, since 1984, in what became known as “the New Zealandexperiment,” both major political parties (Labour and National) havebeen committed to orthodox structural adjustment policies. Bargaininghas become more decentralized and union density has diminished, alteringthe context for discussions of “fair” or “living” wages. Polarization ofearnings has been the result. This polarization has gender and ethnicimplications as well.

This chapter will discuss the historical background to the fights for ade-quate living standards in New Zealand. The following section reviews localusage of the terms fair wage, family wage, living wage, minimum wage,and social wage, as well as the nature of government allowances that sup-plement low wages. The chapter then outlines the minimum wage andminimum code policies since 1946. It concludes that the level of theminimum wage continues to be a key site for struggle, but should not beaddressed in isolation from the social wage and other elements of socialwelfare systems.

Defining wage standards

The 1894 Industrial Conciliation and Arbitration Act established the basicframework of industrial relations in New Zealand for nearly a century.Agreements on wages and other matters between unions and individual orgroups of employers were enforceable if filed with the Clerk of Awards.Where agreement was not reached, conciliation and, if necessary, arbitra-tion by the New Zealand Arbitration Court (hereafter the Court) set upunder the Act led to agreements or awards, with a maximum currency ofthree years. Unions obtained wage increases from individual employersand then applied to the conciliation and arbitration machinery for moregeneral application of the increases in awards for the relevant type of work.

In this period, the principles used by the Court were largely those offixing a “fair wage,” by which was meant “what reasonably good employ-ers were actually paying for a particular class of labour” (Woods 1963: 95).Thus different minima were set in different awards on this fair wage basis.In 1907, however, the Harvester Award in Victoria, Australia, promul-gated the principle of a wage designed to guarantee a (male) worker acertain standard of living. This marked the institutionalization of the“family wage” or “living wage,” equivalent terms for some time in Aus-tralasia, and applying irrespective of whether individual men or womenactually had dependants. This decision clearly had an impact on the Court,even though it said little about living wage policies before 1914. However,by 1908 it had adopted a rate of 8 shillings a day as a basic rate forunskilled male labor using fair wage arguments.

Such a general basic rate inevitably led to efforts for increases in linewith price changes. This began to elide fair wage and living wage concepts,even though they were potentially contradictory. During the First WorldWar, the Court followed price movements more directly

on the grounds explicitly stated that it was concerned particularly withthe preservation of a reasonable living standard . . . In 1918 the Courtwent so far as to state that an industry which could not afford a rea-sonable living wage should cease operations.

(Woods 1963: 97)

This argument is still used by those seeking to increase the minimumwage. In 1920, amending legislation included the requirement that awardsshould provide for a “fair living wage,” thus completing the mixing ofthese concepts. By 1922, “it was preponderantly concerned with maintain-ing a minimum purchasing power for industrial workers” (ibid.: 103),although not all workers were covered by the Court’s decisions. By themid-1920s, the growth of the political Labour movement and party gavemomentum to a trade union campaign for increases beyond the cost ofliving in basic wage rates.

The fight for living standards in New Zealand 139

In 1925, the Court was asked by Government to make a statement onits wage fixing principles. The living wage part of their response statedmore explicitly than ever before the view that the minimum (male) rateshould be sufficient to maintain a man, his wife, and two dependent chil-dren, refuting a suggestion that it should cover three children since twowas close to the average. When the Labour Party won power for the firsttime in 1935, legislation was passed requiring the Arbitration Court tomake a general order fixing basic minimum wage rates. The male rate wasto be sufficient to maintain him, his wife and three (not two) dependentchildren, apparently based on the argument of encouraging larger familiesas good for the country. The basic wage so fixed, however, did not involvea general wage increase, so implicitly the Court must have considered in1936 that current minima were sufficient under this criterion. Wartimeprovisions then intervened and the first legislation on a minimum wagecovering all employees was enacted in 1945.

Despite their earlier commitment to equal pay, the Labour governmentdid not question the gender biases implicit in the family wage concept thatawarded higher wages to men. The 1936 decision had set the female rateat only 47 percent of the male rate, increasing to 66 percent in 1947, withthe differential not abolished until the full implementation by 1977 of the1972 Equal Pay Act. Clearly attaching the same meaning to the terms“family wage” and “living wage” is compatible with a significant genderbias in each.

In 1950, the Court argued that the family wage aspects of the 1936 legis-lation had been made “more or less obsolete.” This was due first togovernment setting overall minimum wages under the 1945 Act and,second, to the system of family allowances, first introduced as a smalltightly income tested benefit in 1926 (2s per week for third and subsequentchildren) and made universal in 1946. According to Nolan, the concept ofthe family allowance “was developed at the official level in opposition tothe doctrine of the living wage” (2000: 157) in an attempt at a compromiseplacating union desires for living wages and employers’ for fair wages. Sheargues that while the family allowance was hardly a feminist policydesigned to promote women’s interests or recognize the value of unpaidwork, it nevertheless was promoted by some women’s groups and eventu-ally led to liberal feminist gains, so that “family allowances ultimatelyundermined the male breadwinner wage” (Nolan 2000: 139). Theallowances gave some women an income in their hands for the first timeand by starting to delink men’s wages from responsibility for dependants,thus setting the scene for equal pay for women.

The first Labour government also developed the framework of awelfare state for both those in paid work and the unemployed. They com-bined aspects of universal and targeted provisions, including free healthcare and education, provision of state housing, and unemployment bene-fits (Du Plessis 1995). The New Zealand and Australian combination of

140 Prue Hyman

labor market and welfare provisions have frequently been characterized asa (male) wage earners’ welfare state and the value of the provisions notedby their inclusion in the term “social wage:” “Adding to wages-as-incomethe various services provided by the government we have the ‘socialwage’” (Easton 1986: 81).

A full income concept, the social wage included all non-wage benefitspaid by employers as well as contributions from government revenue towage earners or the whole population. Such government payments may beincome targeted or otherwise available in the form of income supple-ments, general or targeted, or through vouchers or subsidies geared specif-ically to food, housing, health, superannuation, or education. Not all ofthese alternatives have been used in New Zealand, where the vouchersystem has been strongly resisted. Using the social wage concept, explicittrade-offs were bargained between the Australian government and unionmovement under a long-run Accord with other benefits such as improve-ments in subsidized work based superannuation, substituted for generalwage increases. The Accord was a formal arrangement between thecentral trade union body and mainly Labour governments that providedfor negotiation of such trade-offs beneficial to both sides. No such formalsystem for trade-offs has been instituted in New Zealand despite somemoves towards a Compact by the Moore Labour government in 1990 andrecent hints about a social dialogue.

The New Zealand experiment

The process of dismantling market regulations was started by a Labourgovernment between 1984 and 1990. The Labour Party has always hadclose links with the trade union movement. Hence it meets union demandsto a greater extent than more right-wing National governments, moreregularly raising minimum wages and supporting frameworks conducive tocollective bargaining. As a result, Labour did not fully tackle deregulationof the labor market, unlike the subsequent National government elected in1990. However, Labour, too, took seriously business concerns over highnon-wage, compliance, and other transactions costs involved with employ-ing labor, and enacted legislative provisions encouraging a US-type enter-prise bargaining system.

The National government rapidly enacted the 1991 Employment Con-tracts Act (ECA) that did not even mention trade unions, subsuming themunder bargaining agents and weakening their ability to recruit and repre-sent members. In place of awards came collective or individual contracts,with a theoretical symmetry between employer and employee in choice ofrepresentation and the form of contract, but in practice vastly enhancedemployer power (Hyman 1994). One US-based observer judged thechanges to the New Zealand industrial scene as:


visible and dramatic, because in an astoundingly short time it movedfrom being a socialized country with labor law that was highly protec-tive of unions and with one of the highest levels of union density in theworld to a country that was extremely hospitable to free market ideaswith a labor law founded on Chicago school ideas.

(Dannin 2001: 1091)

The legislation, together with a weak economy, inevitably led to a rapidfall in union coverage, from the internationally high level of 55.7 percentof wage and salary earners in 1989 to 21.4 percent in 1999 (May et al.2001). Simultaneously, there was a sharp reduction in collective, and espe-cially multi-employer bargaining.

In this situation, the priority for individual unions was survival forthemselves and their members by attempting to make their servicesimportant and attractive. The legislative framework was more favorablethan previously to competition between unions rather than one encourag-ing a largely captive membership in particular types of work. In addition,the curtailment of union rights and power made it more difficult to per-suade employees that it was worth joining any union. In this climate,unions had to concentrate on retaining members and obtaining reasonablecollective contracts, being forced to bargain, in most cases, employer byemployer. The central organization to which most unions were affiliated,the New Zealand Council of Trade Unions (CTU), was also weakened bydeunionization, and was criticized from the left for not having foughtharder against the ECA, by, for instance, calling a general strike.

In the individualistic climate of the 1990s, with government antipathy tocollectivism and trade union power, the area where progress looked mostpossible was on individual rights. To soften the ECA measures, NationalMinister of Labour Bill Birch, in a media statement (1991) promised tostrengthen the minimum code as a “safety-net” for employees. However,all that this produced was a new statutory entitlement to five days paidleave per year for sickness or bereavement.

The National Party lost power in 1999 after three three-year terms ofoffice. The second election under a new proportional representationsystem made Labour the largest parliamentary party. However, it neededa coalition partner for its majority, in the shape of the more left-wingAlliance Party. This government repealed the ECA, and its 2000 Employ-ment Relations Act (ERA) went some way to restoring union recognitionand rights, including powers of entry to workplaces. Union membershiprecovered slightly with a 9 percent increase over the two years to Decem-ber 2001, as against an increase in employment of 4.3 percent. However,some see the ERA changes as being largely a matter of details rather thanfundamental aspects of industrial law (Dannin 2001). The resources of thebusiness pressure groups have changed the climate of opinion sufficientlyto ensure that a Labour/Alliance government was unable and/or unwilling

142 Prue Hyman

to move further towards union opinion. Hence there was no return tonational awards, with enterprise bargaining still predominant, despite afew multi-employer deals and a new emphasis on good faith bargaining.The legislation is being reviewed by the current Labour government, re-elected in 2002 with a more right-wing coalition partner, United Future,the Alliance having split and lost its representation.

Minimum wage rates have been raised, as usual, more since 1999 underLabour than in the previous nine years. Three recent increases took thelevel to $8.50 (New Zealand dollars) per hour in March 2003, while youthrates for 16- and 17-year-olds rose to $6.80 per hour. There have also beenother improvements to the minimum code, with enhancements to holidayslegislation under way and paid parental leave introduced from July 1,2002, thanks largely to the efforts of the Alliance while the junior partnerin government.

Minimum wage and minimum code activism

Debates over the appropriate level of the minimum wage and elements ofthe minimum code reveal the positions of major stakeholders regardingwage setting processes. Orthodox economic theory has been utilized tominimize wage increases and even to advocate elimination of theminimum wage. Yet, empirical evidence that the minimum wage has direeffects is scant. The New Zealand case further suggests that it is better toview the social welfare and wage regulation systems as complementaryinstitutions rather than substitutes.

Setting New Zealand’s minimum wage

From April 1946, the New Zealand adult minimum wage provided aminimum weekly rate for men of $10.50 and for women of $6.30 (60percent), with a gender differential continuing until the mid-1970s. Therate is not automatically raised each year, although it must be reviewedannually. Of the twenty-nine OECD (Organization for Economic Co-operation and Development) countries, seventeen had national minimumwages in 1998 (this has since increased, with a minimum wage establishedin the UK) and twelve of these had some form of indexation. Price indexa-tion and relativity to average wages have often been suggested in NewZealand, but never adopted.

The ratio of the minimum wage to average wages has fluctuated widelyover the years with extremes of 83 percent initially (in 1946) and 30percent in 1984 (see Table 10.1). The proportion fell below two-thirds by1963. It then fell gradually to 44 percent in 1972 and was restored toalmost two-thirds in 1973, in line with a recommendation of the 1972Royal Commission on Social Security. Adjustments in the next elevenyears were few and well below price and general wage increases in a


period of high inflation, so that the ratio had fallen to 30 percent in 1984after nine years of National government. The minimum was raised in threesteps between 1985 and 1987 to reach 52.5 percent under the Labourgovernment. Further slippage under the National government from 1990to 1999 and only partial restoration by Labour/Alliance have led to thecurrent fairly low relativity around 43–44 percent.

In 1998, when the ratio was 43.7 percent, the New Zealand minimumwage was eighth highest in US$ or purchasing power parity of the seven-teen OECD countries with minima, with largely the lower income coun-tries lower ranked. New Zealand was similarly around the middle onrelativity to average total earnings for full time workers, at sixth of thethirteen countries with data available. According to the then Alliance

144 Prue Hyman

Table 10.1 Minimum wage levels in New Zealand

Date and political Minimum wage Ratio of minimum party in power (before tax) weekly wage to average

$ Hour $ Weekweekly earnings(ordinary time) (%)

1946 (L 35–49) Labour 0.26 10.50 831951 (N 49–57) National 0.33 13.17 671957 (L 57–60) Labour 0.47 18.75 741963 (N 60–72) National 0.51 20.33 661969 National 0.59 23.50 561972 (L 72–75) Labour 0.68 23.50 441975 Labour 1.37 54.88 601978 (N 75–84) National 1.61 64.41 49Feb. 1984 National 2.10 84 30Feb. 1985 Labour 2.50 100 34Sep. 1985 Labour 4.25 170 54Feb. 1987 Labour 5.25 210 53Feb.1988 Labour 5.625 225 51May 1989 Labour 5.875 235 50Sept. 1990 Labour 6.125 245 471991/4 National 6.125 245 by 1994, 42March 1995 National 6.25 250 43March 1996 National 6.375 255 42March 1997 National 7.00 280 441998/9 National 7.00 280 by 1999, 41March 2000 Labour and 7.55 302 44Feb. 2001 Alliance Coalition 7.70 308 42Feb. 2002 L/A Coalition 8.00 320 42March 2003 Labour/United 8.50 340 n/a yet: ~ 43/44

Sources: Brosnan and Wilkinson (1989); New Zealand Department of Labour publications(various years).

NoteSelected years until 1981, then each increase in the minimum wage shown. Male minimumonly until 1970s.

Associate Minister of Labour and Minister of Women’s Affairs, LeilaHarre, in 2002, there is “nothing at all rational about the level it sits at”(2002: 4). She added: “Why 42% of the average? Why not 50% or theEuropean goal of 66%?”

Two economists, strong advocates of a high minimum wage, have calledfor New Zealand to return to a level around the 80 percent of the earliestyears (Brosnan and Wilkinson 1989). They use both equity and efficiencyarguments, citing the need for incentives to train and retain staff and raiseproductivity. The authors also refer to desirable multiplier effects ofhigher wages, an analysis no longer fashionable, and reject the orthodoxaccount of low pay simply reflecting low skill, “an argument of impreg-nable circularity in which the outcome, low pay, is used as the only evid-ence for the alleged cause – low skill and personal inefficiency” (ibid.: 35).Instead they see the explanation of low pay in the “social structuring ofjobs and workers” and “related considerations of industrial and politicalpower” (ibid.: 37).

For most paid work, the minimum wage is symbolic only, with few jobshaving written contracts or agreements at or just above that level.However, some low-paid work specifies the minimum wage, whatever it isat the time, as the minimum for that contract. In addition, low-paid andcasual (or contingent) labor, an increasing proportion of the total, mayhave no written contract, relying on oral communication, and in thesecircumstances the minimum wage does at least provide a theoretical safetynet.

The CTU’s annual submissions seeking an increase in the minimumwage have regularly called for clearer definitions of its purpose, develop-ment of explicit criteria for setting it, and a formal process of consultationover the application of the criteria. Their 1998 submission suggested threereference points, first, “the level of the unemployment benefit, becauseworkers should not be worse off after taking waged employment,” second,“some stable relationship to the average wage to stop the low paid gettingleft too far behind,” and third, “regard to the level of minimum rates incollective agreements so that the minimum wage can be a factor in elimin-ating ‘low pay ghettoes’ from the labour market.” The minimum wage,they argued:

should not be seen as a primary wage fixing instrument, but rather as asafety net protection against exploitation for those who do not haveconditions of employment determined through a (fair) process ofcollective bargaining, and who do not have the personal leverage(skills etc.) to secure an adequate employment contract.

(New Zealand Council of Trade Unions 1998: 2, 4, and 8)

Hence it should constitute a minimum social standard, implying that “ifjobs will only be provided at wages below some level, society would rather


not have them,” with the need for the minimum to be set because “thereare some people who for reasons of lack of knowledge or out of despera-tion will work for sub-standard wages, and others ruthless enough toemploy them.” It follows for the CTU that “a benefit-based social stan-dard would not represent an acceptable level of wages or constitute aminimum living wage” (ibid.: 10, 14). However, the CTU considers thatthe minimum wage should have a role in tackling the problems of low payand be used to resist widening inequalities. On the latter, it has beentotally unsuccessful in recent years. Their 2002 submission sought a $2increase in the minimum wage from $8 to $10 but only one-quarter of thiswas granted. While wanting the rate to play only a minor, safety net role,they argued that labor market deregulation has by necessity increased itsprotective role.

Three key government departments advise Cabinet on the annualreview of the minimum wage (Treasury, Labour, and the State ServicesCommission). All are regularly cautious, using the orthodox economicanalysis of wage employment trade-offs. Treasury goes further, oftenarguing along with right-wing pressure groups such as the powerful NewZealand Business Roundtable that the minimum wage should be abol-ished altogether. The underlying philosophy is a belief that labor marketsare perfectly competitive, with wages simply reflecting productivity, andexploitation of employees a myth. Treasury is committed to only the“wages as a price” or orthodox view, with little or no attention to “wagesas a living,” let alone the deeply gendered and racialized aspect of wagesetting, “wages as a social practice” (Mutari et al. 2001). For example:

A minimum wage has distortionary effects in the labour market whichare likely to hinder long term employment prospects and harm thevery workers that the policy is designed to assist . . . It is not obviouswhether workers being paid a low wage are being exploited, orwhether they are receiving an amount which is appropriate, given thetraining they are receiving and their current productivity . . .[Minimum wage regulation] does not pass a cost/benefit test . . . It islikely that its objectives could be better achieved by other means, suchas income assistance.

(New Zealand Treasury 1987: 288, 290)

Similarly, the State Services Commission (SSC), which has a particularconcern with the effects on the government budget of higher pay in thepublic sector, argued in their 1997 submission that an increase in theminimum wage was inconsistent with a policy of getting disadvantaged jobseekers into employment. Even the Labour Market Policy Group of theDepartment of Labour (LMPG) regularly predicts adverse employmenteffects in response to minimum wage increases. These departmentssupport employer organizations’ resistance to raising the minimum wage.

146 Prue Hyman

In contrast, the Ministry of Women’s Affairs’ (MWA) submissionsargue for increases. Their comments on drafts of official papers forCabinet on the 1998 and 1999 Minimum Wage Reviews question conven-tional wisdom, arguing that appropriately set minimum wages can raiseproductivity levels and economic efficiency. On the issue of possibleexploitation, they wrote:

The issue of vulnerable workers who need protection from exploitationrelates not only to those who lack the necessary information and skillsto bargain effectively but also to workers who lack bargaining power,for whatever reason. The protection of vulnerable workers is not only aquestion about whether monopsonies are present in the labour market,it is also a question about the ability of the industrial relations structureto protect workers from discrimination and exploitation.

(Ministry of Women’s Affairs 1998: 2–3)

In 1999, MWA expressed concern over the draft Cabinet Paper’s concen-tration on economic impacts of minimum wages at the expense of socialimpacts:

The paper contains extensive discussion of the employment effects ofan increase, even though they may be statistically insignificant . . . Yetconversely there is no discussion of the social impacts . . . in particular,of what it means to live on the minimum wage and the flow-on effectsfor other areas of social policy.

(Ministry of Women’s Affairs 1999a: 1)

The MWA’s recommendation in 1999 was for an increase to $8 per hour,which was finally reached in 2002. They argued that “the minimum wage isa direct means of improving income adequacy for individuals in low wagework, amongst whom women and Maori are disproportionately represen-ted” (Ministry of Women’s Affairs 1999b: 2), with about 57–58 percent ofthose directly benefiting being women.

Given the vehemence of Treasury arguments, it might be expected thatempirical evidence on the impacts of the minimum wage were stronger inNew Zealand than elsewhere, with negative employment effects ofincreases clearly established. In fact, this is far from the case, with lesssound empirical econometric evidence controlling for other factors thanelsewhere. The most quoted article (Maloney 1995) does find negativeemployment effects for young adults, but has been subjected to methodo-logical criticism, while Chapple (1997) found mostly insignificant results. Alater study of females with no qualifications, a “high risk” group, found“little evidence that the increases in the adult minimum wage diminishtheir employment prospects” (Pacheco and Maloney 1999: 67). The CTUis concerned about the objectivity of the studies and their interpretation,


pointing out that some of Maloney’s work had been commissioned by theNew Zealand Business Roundtable.

All of these studies referred to difficulties with data, including lack of asufficiently long time series. Pacheco and Moloney, faced with findingsapparently failing to conform to orthodox theory, suggest interpretationsof their results to rescue it: “Politicians might opt to raise the minimumwage when general economic conditions suggest that any adverse effectswill be minimal” (1999: 67). This could be plausible but for the fact thatthe ratio of the minimum to the average wage has fluctuated very widelywith Labour governments raising them more often and by greater amountsthan National administrations, whatever the economic situation.

New Zealand’s minimum code provisions

In addition to the minimum wage, the minimum code in New Zealandenshrines a number of provisions that can be improved on in contracts butnot eroded. These include annual leave, statutory holidays, sick leave, andparental leave. The latter is partly, if minimally, paid since July 2002. Theminimum annual leave is three weeks, with eleven additional days forstatutory holidays and five days of sick leave entitlement, which can beaccumulated for up to three years. A private member’s bill to increaseannual leave to four weeks is before Parliament, but opposed by govern-ment at this stage not on principle, but due to cost to employers. TheEqual Pay Act of 1972 and the employment related anti-discriminationprovisions of the Human Rights legislation are also sometimes classified asfalling under the minimum code.

The New Zealand social welfare system’s supplementary targeted assis-tance to low-income earners forming part of the social wage includessupport for bringing up children (Family Support), assistance with housing(Accommodation Benefit), and health cost subsidies (the Community Ser-vices Card). Basic benefits cover those unemployed without time limits,although requiring active work search. Other benefit categories are forsickness, disability, and sole parenting (DPB), with a low level of addi-tional income from labor force activity or other sources permitted beforesharp abatement of benefit income. Both low-income earners and benefi-ciaries are eligible for family support for dependent children, again tightlytargeted to low-income households, a small universal child benefit havingbeen abolished in 1991. The Greens and Alliance parties both campaignedin the 2002 election for the reintroduction of this universal child benefit, atthe rate of $15 per child. In 1986 a Guaranteed Minimum Family Income(GMFI) was introduced, now converted into a family tax credit. This aug-ments the income of two-parent households where either parent or both incombination are in paid work for 30 hours or more per week and com-bined income is very low. Sole parents not claiming DPB and in the laborforce for 20 hours or more per week are also eligible.

148 Prue Hyman

The low level of GMFI, together with inadequate publicity of its avail-ability, the absence of price indexation, and effective 100 percent marginaltax rates on other income, made usage very low. Family Support is now atthe level of $47 per week for the first child and $32 per week for sub-sequent children under 13 years old, with extra amounts for older children.The increase of $5 for the first child over 15 years is derisory comparedwith the rate of inflation, while income thresholds for targeting have alsofailed to keep pace with price increases. The abatement regime means thatone-child families on the average wage receive no child support at all (StJohn 2002).

The issues over whether adequacy of wages for living should be thebusiness of employers, government, both, or neither attract hot debate. Itcan be argued that social welfare “top ups”1 may subsidize employers andreduce the pressure to pay adequate wages. Associated high effective mar-ginal tax rates may also provide disincentive effects on both employersand employees to increase wages by raising hours or productivity, training,and skills. However, New Zealand has tended towards retention of bothbasic benefits and top-ups for poverty alleviation, despite some movestowards US-style welfare reform policies. Overall, New Zealand retainsthe position that “minimum wages and social welfare are not alternativesbut essential complements” (Brosnan and Wilkinson 1989: 38).

Implications for the twenty-first century

In New Zealand as elsewhere the costs of structural adjustment programshave fallen largely on low-income groups. Real average earnings levelsstagnated until recently, with individual median real incomes of activelyengaged men and women decreasing between 1981 and 1996 by 24 percentand 13 percent respectively (Martin 1997). Recent studies of income distri-bution all show widening gaps both with respect to earnings and totalhousehold incomes. Between 1983–84 and 1995–96 the bottom decile ofhouseholds had a fall in real per capita income of 8.8 percent while the topdecile gained 26.5 percent, and the top 5 percent a massive 36.4 percent.The Gini coefficient of inequality rose from 0.353 to 0.404, while wage andsalary income, the highest percentage of the total, is distributed even moreunevenly (Podder and Chaterjee 1998).

At a more micro level, differentials generally and between top manage-ment pay rates and others are widening throughout the capitalist world,with New Zealand being no exception. The neoclassical economic rationaleis the need for increased returns to scarce skills, with top salaries reflectinghigh productivity, responsibility, and performance in a complex andtechnologically advanced environment with international competition forsuch skills. The differentials are now, this position argues, closer than inearlier years to where they should be, as they were previously artificiallynarrow due largely to over-egalitarian attitudes and outmoded industrial


relations/collective bargaining systems with centralized award systems inNew Zealand.

However, some argue in New Zealand as elsewhere that wideningdifferentials are undesirable and unnecessary. From one economicsprofessor:

There are plenty of good reasons why some people doing some jobswill be paid more than others. But if we don’t get a tolerable incomedistribution at source – in the pay packets – we will never get it. So ifnot equal pay, we must insist on fair shares. This means reversing thepast decade’s trend towards a hollowing out of the income distributionin the name of “international competitiveness”: top people payingthemselves more and paying those at the bottom less . . . There is noreal question about whether a relatively rich country like NewZealand can “afford” to pay everybody a decent living wage. Indeed,can we afford not to, in the long run?

(Hazledine 1998: 172)

Similarly, US challenges to the market’s verdicts on worth include theview that

the widening of earnings inequality is less the result of ‘natural’changes in the distribution of skills or the logic of labor markets than areflection of shifts in relative power between owner of capital andwage and salary workers.

(Kuttner 1997: 85)

Rejecting explanations based on skill gaps, Kuttner argues instead thatreturns to skills have fallen for all but the highest paid.

Widening pay gaps have differential gender and ethnic implications inaddition to the obvious class aspects. Earlier high levels of unionization/centralized bargaining in New Zealand were important factors in low wagedifferentials not only generally, but also between women and men, as notedin the international literature (see, for example, Curtin 1991; Saar 1992;Whitehouse 1992). Part-time workers and female-dominated areas of workin small workplaces were covered by awards to a greater extent than else-where (Hill 1992). So far, it appears that the negative impacts on thegender earnings gap of the reversal of these institutional frameworks arelargely balanced by the reduction in vertical segregation, with more womenmoving into higher level positions. However, differentials between womenare increasing, with the protection of an effective minimum wage particu-larly needed by women over-represented in low-paid work. There are alsowide wage gaps between white New Zealanders and Maori (the indigenouspopulation) and Pacific Islanders. Asian New Zealanders tend to be lessdisadvantaged, although the experience of immigrant groups is varied.

150 Prue Hyman

The issue of poverty among the working poor receives comparativelylittle attention in New Zealand. In the media, alternative perspectives tothe orthodoxy are hard to find. Negative reactions to high executive payand widening differentials are labelled the politics of envy of “tallpoppies,”2 with the traditional rationales strongly argued. There are fewsites for debate. Minimum wages are set by government following submis-sions by the major stakeholders that receive only superficial publicity.Privacy of wage information has become the norm in an era of individualcontracts. Low pay is seen as inevitable in a relatively poor performingeconomy with higher growth rates and trickle-down the only possibleremedies.

Collective action by the low paid is less prevalent than in the past, withindustrial action by professional groups, particularly in the education andhealth sectors becoming more common. These groups have more indus-trial power than the really low paid and undervalued female-dominatedgroups in the health sector. Equal pay for work of equal value or payequity has a toehold on the political agenda, but the enterprise bargainingdominated industrial relations system makes it hard to devise a workablesystem to remove the gender bias embedded in pay scales and paysystems.

The scope and magnitude of government-subsidized elements of livingcosts are greater in New Zealand than in the United States, for example,in health and education, as well as benefit systems discussed earlier. Thisdifference may help explain why a living wage as such is a more majorcampaign issue in the USA than in New Zealand. In addition, the muchsmaller size and consequent lesser role of local government make city-based campaigns less relevant. However, the living wage concept has notvanished, as one of the CTU quotes above shows. It may well gain greatercurrency if increasing inequality and high poverty levels for low-incomefamilies and children continue. But there has also been an increasingpolarization of amounts of paid work, with two-earner (“work rich”)families contrasting with no earned income (“work poor”) families (Callis-ter 1998). Living wage campaigns could marginalize further families andchildren dependent on the benefit system. An alternative focus may becontinuing to seek the best combination of employer and governmentsupport for those with low wages, together with government support forthose unable to find employment. A range of strategies to attack theproblem of low wages will include arguments for a more equal earningsdistribution. A realistic minimum wage will certainly remain part of thisapproach.

Notes1 These are government assistance to low-income individuals and households,

available to wage earners and/or beneficiaries on the basis of need where


particular conditions are met, for example, housing dependent on area andweekly rental.

2 The New Zealand term for individuals standing out because of achievements,income, etc.

References

Birch, W. (1991) “Employment Contracts Act/Minimum Code: Statement byMinister of Labour,” April 23.

Brosnan, P. and Wilkinson, F. (1989) Low Pay and the Minimum Wage, Welling-ton: New Zealand Institute of Industrial Relations Research.

Callister, P. (1998) “ ‘Work-rich’ and ‘Work-poor’ Individuals and Families:Changes in the Distribution of Paid Work from 1986 to 1996,” Social PolicyJournal of New Zealand 10: 101–21.

Chapple, S. (1997) “Do Minimum Wages Have an Adverse Impact on Employ-ment? Evidence from New Zealand,” Labour Market Bulletin 2: 25–50.

Curtin, J. (1991) “Women, Trade Unions and Equal Pay” in Proceedings ofUnion/Tertiary Research Conference 4: 154–72.

Dannin, E. (2001) “Hail, Market, Full of Grace: Buying and Selling Labor LawReform,” The Law Review of Michigan State University-Detroit College of Law4 (Winter): 1090–144.

Du Plessis, R. (1995) “Women in a Restructured New Zealand: Lessons for Aus-tralia,” in A. Edwards and S. Magarey (eds), Women in a Restructuring Aus-tralia: Work and Welfare, St Leonards, NSW: Allen and Unwin, pp. 244–59.

Easton, B. (1986) Wages and the Poor, Wellington: Allen and Unwin.Harre, L. (2002) “Keynote Speech to the 16th Conference of the Association of

Industrial Relations Academics of Australia and NZ,” New Zealand Journal ofIndustrial Relations 27 (1): 3–12.

Hazledine, T. (1998) Taking New Zealand Seriously: The Economics of Decency,Auckland: HarperCollins.

Hill, L. (1992) “Review of Out of the Chorus Line: The Progress of Women inNew Zealand Unions,” Women’s Studies Association Newsletter 13 (2): 28–9.

Hyman, P. (1994) Women and Economics: A New Zealand Feminist Perspective,Wellington: Bridget Williams Books.

Kuttner, R. (1997) “The Limits of Labor Markets,” Challenge 24 (3), May/June:75–102.

Maloney, T. (1995) “Does the Adult Minimum Wage Affect Employment andUnemployment in New Zealand?” New Zealand Economic Papers 29 (1):1–19.

Martin, B. (1997) Income Trends Among Individuals and Families, 1976 to 1996,Population Conference Briefing paper 2, Population Studies Centre, Hamilton:University of Waikato.

May, R., Walsh, P., Thickett, G., and Harbridge, R. (2001) “Unions and UnionMembership in New Zealand,” New Zealand Journal of Industrial Relations 26(3): 317–28.

Ministry of Women’s Affairs (1998) Letter to Labour Market Policy Group, 27October.

Ministry of Women’s Affairs (1999a) Letter to Labour Market Policy Group, 6October.

152 Prue Hyman

Ministry of Women’s Affairs (1999b) Letter to Labour Market Policy Group, 3November.

Mutari, E., Figart, D., and Power, M. (2001) “Implicit Wage Theories in Equal PayDebates in the United States,” Feminist Economics 7 (2): 23–52.

New Zealand Council of Trade Unions (1998) Submissions on the Review of theMinimum Wage, Wellington: NZCTU.

New Zealand Department of Labour (2002) Report on the Quarterly EmploymentSurvey, Wellington: NZDOL.

New Zealand Treasury (1987) Government Management, Vol. 1, Wellington:Government Printer.

Nolan, M. (2000) Breadwinning: New Zealand Women and the State, Christchurch:Canterbury University Press.

Pacheco, G. and Maloney, T. (1999) “Does the Minimum Wage Reduce theEmployment Prospects of Unqualified New Zealand Women?” Labour MarketBulletin 7: 51–69.

Podder, N. and Chaterjee, S. (1998) “Sharing The National Cake in Post ReformNew Zealand: Income Inequality Trends in Terms of Income Sources,” Paper toConference of New Zealand Association of Economists.

Saar, P. (1992) Out of the Chorus Line: The Progress of Women in New ZealandUnions, Wellington: New Zealand Council of Trade Unions.

St John, S. (2002) “Address to Green Party Conference,” 31 May–3 June, Auck-land, unpublished.

Whitehouse, G. (1992) “Legislation and Labour Market Gender Inequality: AnAnalysis of OECD Countries,” Work, Employment and Society 6 (1): 65–86.

Woods, N. (1963) Industrial Conciliation and Arbitration in New Zealand, Welling-ton: New Zealand Department of Labour.


Part III

Evidence and lessonsfrom US empiricalstudies

11 The Miami living wage ordinancePrimary and secondary effects

Bruce Nissen

The contemporary living wage movement has been one of the mostsuccessful and enduring causes of local labor and community activism.Although early versions of living wage ordinances were passed in DesMoines, Iowa, in the late 1980s and in Gary, Indiana, in 1991, the modernmovement is usually dated from passage of an ordinance in Baltimore in1994. This intriguing social movement has attracted a fair amount of pressand scholarly interest. A survey of web sites found by doing an early 2003search of the term “living wage” uncovered fourteen living wage and cam-paign web sites. Some of the major web sites devoted to the issue ingeneral had links to twelve studies on the projected impact of a particularliving wage ordinance, five studies on implementation, and twenty-sevengeneral living wage publications.

However, few analyses have looked at a particular living wage experiencein a multi-faceted way. Studies usually either look at the economic impactan ordinance has had or will have, or they examine the “social movement”impact, or they examine the life changes of a worker (or set of workers)covered by the policy. But few look at all of these things, or attempt a com-prehensive examination of a living wage campaign and ordinance in all ofthese spheres. This chapter hopes to partially fill the gap by examining theexperiences with a living wage in Miami-Dade County, Florida.

Following a brief explanation of the Miami-Dade living wage campaignand resulting ordinance, the remainder of this chapter will examine theeffects that passage of a living wage ordinance for Miami-Dade Countyhas had in five areas: (1) economic impacts on the various affected parties(the county, covered workers, covered employers); (2) terms of public dis-course on issues of poverty and work; (3) levels of local social movementactivity; (4) diffusion of the living wage movement throughout the state;and (5) political reactions from conservative and business interests.

The Miami-Dade living wage campaign and ordinance passage

In the spring of 1997, individuals from the local central labor council, acoalition of local human service providers, and a couple of unaffiliated

individuals began meeting, with the idea of getting a living wage ordinanceintroduced before the Miami-Dade County Commission. None of thoseinvolved knew exactly what should be in a living wage ordinance, how topick a wage level that qualifies as a “living wage,” how one would assessthe likely costs of an ordinance, and similar basic aspects of how livingwage ordinances worked. But all had heard of living wage movements andordinances elsewhere, and they wished to pursue the idea.

For the first few months, most time was spent gathering information ontypical living wage ordinances, discussing whom it should cover, reachingout to new allies, and thinking about how groups and individuals couldwork together. In October of 1997, the author became active in the coali-tion’s work, eventually publishing an economic impact study of likely costsof such an ordinance. By 1998, when a campaign began in earnest, approx-imately a dozen groups, including the local NAACP chapter, the GrayPanthers, a public housing tenant’s council, several labor unions, andothers had joined the originators of the coalition, now known as theCommunity Coalition for a Living Wage (CCLW).

Because opposition from the business community was anticipated, thecoalition tried to build a social movement in favor of passage. Despitethese attempts, solid grassroots organizing was never done, and until thefinal two weeks before passage of the ordinance in May of 1999, very littlethat looked like a social movement developed (Nissen 2000). In the finaltwo weeks prior to passage, the central labor council developed a phonebank, bought 300 “Living Wage Now!” T-shirts, and bussed approximately300 workers to the county chambers for the final vote. For those twoweeks, the campaign for passage had something of the flavor of a “socialmovement,” but overall this was not a major or sustained social move-ment.

Much to the surprise of supporters, organized business opposition failedto appear, and a living wage ordinance was passed, covering the countyitself, the county’s service contractors, the local public hospital and its aux-iliaries, and some ground service providers working under permit with thecounty at the Miami Airport. It required initial payment of $8.56 per hourwith health insurance benefits, or else $9.81 per hour ($1.25 per hourmore) without health insurance. These rates would be indexed for infla-tion in coming years; by early 2003 the rates were $9.00 per hour and$10.30 per hour. In 2001, coverage at the airport was extended to allservice contracts working under permits with the county at the MiamiAirport.

What have been the impacts of this campaign and ordinance? Thefollowing sections will relate (1) economic effects; (2) public discourse(“framing”) effects; (3) social movement effects; (4) diffusion effects; and(5) elite political reaction effects of the passage of this ordinance.

158 Bruce Nissen

Economic impacts

Economic impacts could be measured in many ways. Most obviously, thereis the potential impact on the county’s budget through increased costs forthe higher wages paid. Second, there is the impact on low wage individualsand families receiving the higher wage. Third, there is the impact on thecontractors who will be paying higher wages to their employees. Fourth,there are the possible “ripple” impacts to the community, such as changesin use of public health facilities, changes in home ownership, changes inpoverty levels, changes in purchasing power, and the like. This fourth cat-egory is virtually impossible to accurately measure in a cost-effective way,however, especially for a law affecting the pay of such a small number ofworkers. Therefore, it will not be considered further here, even thoughthere are undoubtedly impacts of this nature.

The economic impact on the county’s budget was a primary considera-tion for the county commissioners when they passed the ordinance. I pro-duced a report on this topic, The Economic Impact of a Living WageOrdinance on Miami-Dade County in October of 1998 (Nissen 1998). Thatreport found that the county itself had 508 full-time workers and 1,283 part-time workers earning below $8.56 per hour. Covered county contractorshad approximately 1,448 full-time employees (almost half of their 2,983workers) earning below this wage level. (The study did not address costsfor airport firms working under permit with the county, or for the publichealth system, since data on these employers were difficult to obtain, andthe direct impact on the county budget, if any, was even more obscure.)

The cost of bringing county and county contract workers up to the des-ignated living wage was estimated according to a “worst case,” “mostlikely case,” and “best case” scenario. “Worst case” assumed no savingsfrom efficiency gains (i.e., from lower turnover, less absenteeism, moremotivated employees, etc.) due to the higher wages, only increased wagecosts. This would amount to $8.5 million additional costs per year after athree-year phase-in period. The “most likely case” assumed some modestefficiency gains, and estimated the total cost to be approximately $5million. And the “best case” scenario assumed that the county couldsimultaneously curb corrupt granting of contracts with resulting huge andclearly preventable cost overruns, and that it would be able to curb theinfluence of highly paid lobbyists over the contract granting process. Inthis case, all additional costs could be nullified by curbing corruption.

Compared to my “most likely” $5 million cost estimate, the countyitself calculated that the cost would be $15.5 million. They asserted thatover twice as many contracts would be covered as had been estimated inmy study, and they calculated zero efficiency gains, only additional wagecosts, all of which would be passed through to the county. They refused toshare their methodology or calculations, however, so it was impossible tocheck the accuracy or even the basis of any of their conclusions.

The Miami living wage ordinance 159

In November of 2002, three years after the law went into effect, I begana study to determine actual costs after the three-year phase-in period wascomplete. County personnel in the two departments dealing with imple-mentation and oversight of the law produced separate lists of covered con-tractors that did not match. Repeated attempts to get one unified list witha correct set of contractors were unsuccessful as of May 2003. The county’srecords were such a mess that they were unable to agree on who wascovered.

Despite this difficulty in obtaining accurate data, I did eventually obtainlists that had about a 70 percent overlap in their claimed coverage. Buteven for the “consensus” list of contractors that all agreed were covered,the county was unable to give me costs of contracts given out for thosesame services in years prior to implementation of the living wage. There-fore, I have been unable to use previous bid patterns and inflation figuresto calculate the additional cost of the living wage, beyond what the costswould have been absent the law. As of June 2003, the county claims to stillbe attempting to obtain those figures. It is not clear that they ever will beable to.

This indicates a tremendous problem with implementation of the law.Costs are virtually impossible to determine if the county is unable to evenknow exactly which contractors are covered. Furthermore, contractorsmay not be complying if the county is not closely monitoring them.

However, direct county employees are getting the living wage, meaningthat at least 1,791 full- and part-time county workers earned a payincrease. Furthermore, one can optimistically assume that all of thoseworking for the “consensus” list of covered contractors are paying theliving wage. (Members of an appointed “oversight board” that attempts toenforce compliance assure me that most of these employers have beeninvestigated, and they are now complying.)

Even here, it is difficult to estimate what the costs to the county are. Itis clear that they are lower than I had estimated, simply because feweremployees of service contractors are being covered. I had estimated that266 contractors would be covered; the county assumed about twice thismany. In fact, the latest lists indicate that approximately 100–120 contrac-tors are actually being required to comply. Furthermore, my study hadshown that 42 percent of the contractor employees earning a pay increaseas a result of the living wage ordinance would be working for temporaryhelp employers. Yet the county had allowed its largest ($10 million) officeand clerical “temp help” contract to be granted recently with no livingwage requirement despite clear language in the ordinance covering suchcontractor firms. While a couple of very small “temp help” contracts arelisted as covered by the ordinance, approximately 80 percent of all poten-tially covered workers in the temp help category worked under this onecontract alone. Because of problems like this, it is impossible to determinehow many workers are covered, and impossible to determine how much

160 Bruce Nissen

this has cost the county, absent reasonably good data. But my best estim-ate is that probably only half as many contract workers have obtained payincreases as I originally estimated, i.e., perhaps 700–750. Combined withthe county’s own 1,800 full- and part-time workers with enhanced pay, thetotal may be 2,500. (These figures do not include workers at the MiamiAirport, who will be covered later. Also, they ignore the public healthsystem.) A very rough estimate of the cost to the county is approximately$3 million per year.

Thus, costs to the county have been less than anticipated, largelybecause county personnel have interpreted the ordinance so narrowly thatonly about 120 contracts are covered, far fewer than my estimate of 266 orthe county’s own original estimate of approximately 500. While the costsare less, so, too, are the benefits, both to affected workers and to thesurrounding community.

What has been the impact on the low wage individuals and familiesreceiving the living wage? I originally received a small grant from a localnon-profit organization that receives county money to study this question,but the money was withdrawn due to a budget crisis before I was able tocontact and interview workers who had received wage increases. But thetypical worker is probably a lot like Norma De La Rocha, a janitorialworker at the county’s headquarters whose wages initially went from $5.60an hour to $8.56, later rising to $8.81 and $9.00 due to inflation adjust-ments. She told a newspaper reporter that the pay increase enabled her tosave enough to buy a house. She stated, “I know my salary isn’t so big, butat least it’s enough to pay the mortgage” (Buckley 2002: 27A). Through-out the country, living wage recipients report changes such as this: beingable to buy a low-cost house, being able to send a daughter to a public uni-versity, being able to rent rather than sleeping on cardboard in a sister’sgarage, etc. The impacts are obvious, often dramatic, and enormouslypositive for stable and productive living patterns.

What about the economic impact on the contractors covered by theordinance? Frequently, service contractors who will be covered are thestrongest opponents to passage of living wage ordinances. They fear thatthe higher wages they will have to pay will make them uncompetitive.However, such reasoning ignores the fact that all competitors for thepublic contracts covered by a living wage ordinance also have to pay thehigher wages, thus “leveling the playing field” rather than making anyindividual contractor unable to compete.

In Miami-Dade County, the limited evidence available shows thatcovered contractors have a mixed, but mostly positive, reaction to theliving wage policy. Bill Murphy, senior vice-president of a large securityfirm covered by the living wage ordinance told a newspaper reporter, thatworkers’ loyalty to the company had increased, and that his company wassupportive (Buckley 2002: A27).

In early 2003, I surveyed four of the six janitorial firms that county


records indicated are covered by the ordinance and two of the nine land-scaping firms so listed. Firms in these two areas were chosen because theyare likely to be “high impact” firms that had to raise their workers’ wagesconsiderably as a result of the ordinance. Five of these six contractorsindicated that they had to increase their employees’ pay as a result of theordinance. Of the five, two reported that their employee turnoverdecreased significantly as a result; three reported no change. One reporteda significant decrease in employee absenteeism; four reported no change.Two reported a significant increase in employee effort; two reported nochange, and one gave an unclear answer. Two reported a significantincrease in employee morale, one reported somewhat of an increase inemployee morale, and two reported no change.

Contrary to the claims of some living wage opponents, most contractorsdid not raise their educational hiring standards, thus disadvantaging lesseducated poor workers. One commented, “You want them to have acollege degree to clean bathrooms? You’re kidding!” Three of the fiveindicated no change at all in hiring standards, while one now required a bitof experience, unlike before, and another now required a high schooldiploma or GED.

Two of the contractors indicated that the living wage ordinance had noeffect on how hard it was to compete for county contract. One said it madeit easier and two said that it made it harder. The two negative respondentsgave as reasons lower profits due to higher unemployment insurance rates,and “headaches.” Three of the five believed that the quality of service theyprovide to the county has gone up as a result of the ordinance.

Four of the five indicated that their costs had gone up as a result of theordinance. Most indicated that they paid for these higher costs mostlythrough higher bid prices on the contract (up by 20–35 percent) and lowerprofits (down by 5–40 percent).

Finally, asked to give their overall assessment of the ordinance and howit had impacted them, responses were varied. One stated,

I am in favor of it. I can get employees of better quality. Most peopledon’t want to work for less. I am 100 percent in support of LivingWage. We bid only on Living Wage contracts. It’s better for ourbusiness.

One responded, “I love it.” But other responses were more ambivalent, oreven negative. One responded, “It is good for the employees. They getmore money, but it is difficult for the business.” One commented, “I amnot in favor with (sic) the Living Wage,” but then went on to argue thatsome type of pay standards (perhaps of a bit more flexible nature) wouldbe good. This same contractor stated, “On a 1–10 scale, I give it a 6.5”,indicating not that high a level of dissatisfaction. The final respondentstated:

162 Bruce Nissen

I think it is rough. Bad for small business, but it is good for gooddecent guys. Make a base line on the bids . . . I’ve been in the systemfor thirty years. I’ve been there before the law and after the law . . . Ingeneral, I think it’s a good thing for the guys to earn good money. Butthey should make it fair to the companies so that we don’t have to cutthe corner, you know what I mean.

While this last reference is a bit unclear, probably this contractor means by“cut the corner” lowering one’s profit rate.

The economic impacts of the living wage ordinance can be summarizedas follows. Costs to the county have been quite small ($3 million in a totalbudget of over $350 billion), but beneficial poverty-reducing benefits havealso been relatively small due to the small number of workers covered.Inept and lax implementation has made the ordinance less extensive andless effective than it otherwise could be. Impacts on affected workers andtheir families have been beneficial and quite substantial, on an individualbasis. And impacts on county contractors have been mixed, but primarilybeneficial. The benefits concern improved quality of work and effort fromtheir employees; the drawbacks involved lowered profit margins for aminority of the firms.

Impact on public discourse

Evaluating the impact of the living wage campaign and ordinance onpublic discourse in south Florida is difficult. No local “before and after”public opinion polls on relevant issues exist, so one is forced to rely onmore subjective estimates based on more qualitative evidence. Neverthe-less, it appears that both the campaign and ordinance have changed the“framing” of poverty issues in the area somewhat. “Working poverty” hasbecome a new term in the public lexicon. In an editorial favoring passageof the living wage ordinance, the Miami Herald wrote, “Nobody shouldwork for the public and remain in poverty because of it” (Miami Herald1999: 10A). A glossy south Florida business magazine featured a profile onme that focused on the living wage issue that was surprisingly positive. Mymessage, “Using tax dollars to subsidize or create ‘working poverty’ ispoor public policy, because it lowers rather than raises living standards inthe community,” was allowed clear and full expression (Musgrave 2002).

This message is very resonant with the feelings of most south Floridaresidents, making it hard for conservative or business interests to divertthe public “terms of debate” to the sanctity of a “free” market, or to thejustice of strictly market-derived economic outcomes. The Miami HumanServices Coalition has built upon the changed terms of public discussionby issuing a report on what constitutes a “self-sufficient” income in each ofFlorida’s counties. “Self-sufficiency” is the wage needed for a family of acertain size to meet basic needs without public or private assistance


(Pearce and Brooks 2002). They use this report to develop legislative andother initiatives.

Therefore, I believe that the living wage message has proven to be apotent “framing” for public discourse on issues of work and poverty. It hasto some degree allowed progressives to “seize the high ground” in publicdebates, and has often forced opponents to retreat or to resort to convo-luted arguments that higher wages actually hurt low wage workers.

Social movement impacts

The degree to which living wage campaigns help to build social move-ments for progressive social change is in many ways equally important as,or even more important than, the direct economic impacts such as thoseevaluated above (Nissen 2001). By this measure, the Miami-Dade ordi-nance has accomplished a fair amount. At the time the living wage cam-paign was initiated, there were no formal or informal labor-communityalliances in the area. The Community Coalition for a Living Wage(CCLW) began to develop ties between organized labor and other ele-ments of the community in common struggle for a jointly understoodcommunity good: higher wages for low-wage workers. The living wagevictory inspired the creation of other organizations that have continuedthe struggle for social and economic justice.

Directly as a result of the living wage victory, the nationwide organi-zation ACORN (Association of Community Organizations for ReformNow) sent an organizer to Miami and began an ACORN chapter.ACORN had failed in an earlier attempt to create a viable chapter inMiami, but they decided the place had more potential than they had real-ized when the living wage was won. Shortly thereafter, ACORN alsocreated a chapter in neighboring Broward County.

In addition, some of those involved in the Miami-Dade living wageeffort became encouraged and decided to start other organizations. In1998, one individual working in the CCLW who had a long history as botha community and labor organizer started a South Florida Interfaith Com-mittee for Worker Justice. Only a few clergy and lay people attendedinitial meetings, and the group struggled to establish itself during the nexttwo years. But it eventually obtained sufficient funding for a paid staff ofone, and since has become very active in a variety of worker rights issues –from basic rights for immigrant workers, unionization rights, and publicpolicy measures for workers in poverty. By 2003, it was widely consideredone of the most active and effective such interfaith organizations in thecountry.

In 1999, another CCLW activist, who was a veteran civil rights activistfrom the 1960s, began a chapter of the national labor-community groupJobs with Justice (JwJ) through the auspices of the local National Associ-ation for the Advancement of Colored People (NAACP) chapter and

164 Bruce Nissen

some local labor leaders. The new South Florida Jobs with Justice hasengaged in a number of high profile mobilizations. It brought over 20,000people to the state capital in Tallahassee to protest an end to state affirma-tive action, and has also been prominent in Haitian immigrant workers’rights issues, “union busting” situations, voters’ rights marches, and publicschool class size education initiatives. By 2003, the national JwJ organi-zation considered it one of the best local chapters in the nation.

It is difficult to determine how much of this would have happened evenif there had been no living wage campaign in Miami. But it does seemapparent at least some of the reason for the newly acquired activism, anddefinitely of the new prominence of labor-community coalition efforts, isdue to the living wage campaign and victory. The campaign developedunion contacts with other progressive community forces, and the victoryinspired others to undertake new efforts.

The CCLW persisted after the Miami-Dade County victory. In 2001, itwon a similar ordinance in the city of Miami-Beach. As of 2003, it hasongoing campaign efforts in the cities of Coral Gables, South Miami, andMiami. In a notable change from the earlier county effort, churches andprominent ministers and lay people have come forward to play a majorrole in these latest efforts. There is no doubt that the “living wage” visionhas animated a growing response from people in the faith communities.

Diffusion effects

The Miami-Dade living wage victory stimulated interest throughout thestate. Shortly after passage of the ordinance, Florida Impact, a non-profitstatewide faith-based economic justice organization, invited me and fourother of the CCLW’s core activists to explain the living wage concept andhow the ordinance was won to a statewide meeting in Orlando.

From this meeting, a spider web of contacts diffused the movementthroughout the state. A Saul Alinsky-style1 church-based communityorganizing group in the city of Jacksonville, Interchurch Coalition forAction, Reconciliation and Empowerment (ICARE) invited me to speakto their pastors at a daytime meeting, and to an assembly of 150 of theirkey church member activists at an evening meeting. Subsequently a cam-paign was begun in that city. A central labor council leader fromGainesville who attended the Orlando meeting also had me do a trainingsession for fifty activists from many organizations. After the training, aliving wage campaign was born.

Church, labor, and academic activists from the city of Orlando who hadattended the Florida Impact meeting later began a campaign and againinvited me to attend their opening meeting to advise them on how to start.A sister organization to ICARE, the Tampa-based Hillsborough Organi-zation for Progress and Equality (HOPE) later began a living wagecampaign after being introduced to the concept in a national training


conference in Miami where I had been invited to talk about the Miami-Dade living wage victory. Again, I was flown to Tampa to kick off theliving wage drive at a community meeting in a church and a private lun-cheon with a number of pastors.

I was not the only CCLW activist asked to play the role of “JohnnyAppleseed” spreading the living wage message. CCLW colleague ArthurRosenberg, a Florida Legal Services lawyer who had drafted the initialversion of the Miami-Dade ordinance, helped spread the living wagemovement to the two counties just north of Miami-Dade County. Hespoke to the Palm Beach chapter of the National Organization for Women(NOW); then word spread to politicians and union leaders. A campaignbegan. The same individual, through Legal Services connections, initiateda campaign in Broward County, just north of Miami-Dade County.

Not all of these campaigns were as successful as was the Miami-Dadeone. Gainesville, Orlando, and Palm Beach campaigns only resulted inrelatively meaningless ordinances affecting only direct public employees.Few workers won pay increases, and service contractors were not coveredat all. Jacksonville and Tampa still have no legislation, although effortswere still underway as of the spring of 2003. Broward County efforts didresult in a major victory; in October 2002, a strong ordinance at pay levelshigher than those at Miami-Dade County ($9.57 with health care coverage,$10.82 without, and indexed for inflation) was passed. Building on thatvictory, a number of Broward County cities (Ft. Lauderdale, Hollywood,and Pompano Beach) are considering living wage legislation as of thesummer of 2003.

But whatever their degree of success, all of these campaigns weredirectly inspired by the Miami-Dade living wage victory. In fact, thespread of the living wage “contagion” throughout the state has been sogreat that it has provoked a backlash, as will be related in the followingsection.

Political backlash effects

Conservative and business interests did not look upon the spread of theliving wage movement throughout the state of Florida with equanimity. InGainesville, the Chamber of Commerce fought the proposed legislationstrongly, and eventually succeeded in watering it down to an almost mean-ingless final version. In Orlando, an individual from a business trade groupsat in on living wage committee meetings to spy on them without revealingher business ties. In Palm Beach, the county chair of the Republican Partythreatened virtual expulsion from the party against a county commis-sioner, causing him to reverse his vote and thereby kill a meaningfulmeasure. In Broward County, the Associated Builders and Contractors, astaunchly anti-union group purporting to be an association of constructioncontractors but actually funded by and including a large number of

166 Bruce Nissen

conservative business forces, attempted to kill the legislation even thoughno building contractors would be affected.

A Washington, DC, “think tank” that is heavily funded by and appearsto be a front group for the National Restaurant Association, the Employ-ment Policies Institute, has long had as its primary agenda opposition toall minimum wage increases (or even to minimum wages at all). Thisorganization commissioned Florida State University economist DavidMacpherson (author of Chapter 4 in this volume) to prepare a study enti-tled The Employment Impact of a Comprehensive Living Wage Law: Evid-ence from Florida (Macpherson 2002). In my view, the study is nothing butmathematical prediction of hundreds of thousands of lost jobs in the stateshould it adopt a statewide universal minimum wage of either almost $9per hour, or over $10 per hour.

Aside from mixing apples with oranges (living wage laws with minimumwage laws), the so-called study relies on a theoretical assumption of a high“elasticity of demand” for low wage labor that is far from universallyaccepted by economists. (That means that it is assumed that there will belarge losses of jobs if wages go up.) Once this questionable assumption ismade, and once a limited living wage law is conflated with a universalminimum wage law covering all employers in the state, it is impossible toobtain any result other than massive job loss (Chapman 2002). No empiri-cal evidence is given of actual job loss from any of the living wage ordi-nances passed to date. Finally, the study contains a political attack onsupporters of a living wage, red-baiting a number of them and hinting thata small cabal of conspirators is behind the living wage movement, not abroad-based coalition of unions, faith-based organizations, communitygroups, and working families.

The Macpherson study and the efforts of its national and local fundersand supporters had the most impact at the state level, where RepublicanFlorida governor Jeb Bush and a legislature solidly controlled byconservative business-friendly Republicans is in control. In the years 2001and 2002, legislation had been introduced to make passage of any livingwage bill in the state illegal. Both times the bills were stalled in committee,however, largely due to opposition from the Miami-Dade delegation,which was intent on protecting its existing living wage ordinance. That del-egation to the state legislature is primarily Republican and Cuban Amer-ican. Not wishing to alienate the Cuban community, which is an importantelement in the Republican Party’s dominance of the state, statewideRepublican leaders had let the measure stall.

However, in 2003, a coalition of business groups chose to make this leg-islation a high priority. The state Chamber of Commerce, the Floridachapter of the National Restaurant Association, and the state AssociatedBuilders and Contractors pushed hard on the issue. They were also backedby the Associated Industries of Florida, an extremely powerful businesslobbying force in the state. This coalition backed a bill to prohibit cities or


counties in Florida from setting a minimum wage level higher than thefederal one. Out of sensitivity to the feelings of the Miami-Dade delega-tion, this bill did allow one exemption: local governments could legally setminimum wage levels for their own or related public sector employees, aswell as those of private contractors contracting with the local government.That meant that some of the Miami-Dade living wage ordinance would beallowed to stand: the part covering contractors. However, the portion ofthe law covering those businesses working under a permit with the countyat the Miami airport would be invalidated. Somewhere between 2,000 and4,000 workers at the airport, primarily baggage and food handlers, wouldlose coverage under this law. Most would face pay cuts from $10.30 perhour (which is what most covered businesses were paying rather than$9.00 per hour plus health care coverage) to the minimum wage ($5.15 perhour) or close to it (White 2003: C1).

In May 2003, this piece of legislation was passed in the Florida legis-lature. A great deal of controversy followed. Elected Miami-Dade officialsfrom both parties protested and requested Governor Bush to veto it. TheMiami Herald editorialized against the legislation and asked the governorto veto it (Miami Herald 2003). Miami-Dade County Mayor Alex Panelasand a number of local politicians and community leaders held a press con-ference at the airport to protest the law and to request Governor Bush toveto it (Cordovi 2003: 3C).

In early June, Governor Bush signed the legislation into law whileissuing disclaimers and diversionary statements to confuse the publicabout the actual effect of what he was doing. He wrote a letter accom-panying his signature that stated:

I am signing this legislation with the express expectation that it willnot be used to reduce the wages of any current employee . . . I expectemployers to honor the law and to honor their commitments to theseindividuals on both legal and moral grounds. This administration willuse its power and resources to ensure that they do.

(Clark 2003)

He also claimed to have called company heads to warn them not to usethe law to cut airport workers’ pay, even though that was precisely whatthe legislation he was signing would permit. Bush also claimed that hewould seek new legislation making it clear that security-sensitive jobsshould be exempt from the new law (ibid.). Despite these attempts tomollify opposition, his signature meant that the Miami-Dade ordinancewould lose more than half its coverage. It also meant that any futureliving wage ordinances in the state would have to be only of a limitednature (covering only public employees and/or employees of direct con-tractors with the public entity).

Thus, the living wage movement has not only gained momentum, it has

168 Bruce Nissen

also generated a political backlash from business and elite interests. In astate such as Florida where wealthy and corporate interests openly controlmuch of the political process, a backlash from such sources can indeed bepotent.

Conclusion

This chapter has analyzed the various impacts of the Miami-Dade livingwage campaign and ordinance. In doing so, it attempts to avoid looking atany one effect (or set of effects) in isolation. Instead, multiple impacts areanalyzed together. That done, what does the picture look like?

In general, the living wage campaign and the resulting ordinance havehad positive impacts. However, those impacts are often of less magnitudethan fervent supporters or boosters may wish them to be. Wage increaseswere won, but for far less workers than intended. Public discourse onissues of work and poverty has changed somewhat, but the hegemony of“free market” language and frameworks of analysis has not beenfundamentally shaken. “Social movement” dynamics were furthered, butthe living wage has not been a “magic bullet” able to create a full-blownsocial movement from nothing. Very real but also somewhat modest gainshave occurred in attempts to stimulate labor–community coalitionactivism. The movement has spread rapidly, but has encountered obs-tacles to success in most other parts of the state. And, finally, a backlashfrom business and elite interests has grown rapidly, especially at thestatewide political level.

Nevertheless, the Miami-Dade living wage movement has to be con-sidered a success. The living wage issue has generated widespread publicsupport, well beyond that of most other progressive causes. It also hasbeen much more successful than most in generating working relationshipsbetween unions and community groups. While in some respects the Miamiliving wage victory may be considered a “small” success, this “small”success stands out amid a series of defeats for working families, unions,and their allies in the recent period. Large victories, when they do come,usually result from a series of such “small” successes.

Note1 Saul Alinsky is often considered the “father” of modern community organizing

in the United States. He founded the Industrial Areas Foundation (IAF), anetwork of community organizations based in churches that organizes and fightsfor the interests of low-income communities. An IAF affiliate in Baltimore, Bal-timoreans United in Leadership Development (BUILD), was instrumental inthe passage of the 1994 Baltimore living wage ordinance that kicked off themodern living wage movement.


References

Buckley, C. (2002) “S. Florida governments ‘lead by example,’ ” Miami Herald(Broward County edition), September 1, pp. A1, A27.

Chapman, J. (2002) “A Critique of the Employment Policies Institute’s Analysis ofa Potential Florida Living Wage Law,” unpublished; available from the author atthe Economic Policy Institute, 1660 L Street, NW, Suite 1200, Washington, DC20036.

Clark, L. (2003) “Panelas Critical of New Pay Law,” Miami Herald, June 5. Avail-able: http://www.miami.com/mld/miamiherald/6016050.htm (accessed June 10,2003).

Cordovi, A. (2003) “Pay-reduction Bill Protested,” Miami Herald (BrowardCounty edition), May 30, p. 3C.

Macpherson, D. (2002) The Employment Impact of a Comprehensive Living WageLaw: Evidence from Florida, Washington, DC: Employment Policies Institute.

Miami Herald (1999) “Pass the Living Wage,” Editorial, May 11.Miami Herald (2003) “Retain Local Living-Wage Laws,” Editorial, May 18.Musgrave, J. (2002) “Waging War on Wages: FIU Professor Bruce Nissen Works

to Get South Florida Workers Out of Poverty,” Fasttrack: Inside South FloridaBusiness, Summer, 28–9.

Nissen, B. (1998) “The Economic Impact of a Living Wage Ordinance on Miami-Dade County,” Miami: Florida International University, Center for LaborResearch and Studies. Available: http://www.fiu.edu/~clrs; then click on“publications.”

Nissen, B. (2000) “Living Wage Campaigns from a ‘Social Movement’ Perspective:The Miami Case,” Labor Studies Journal 25 (3): 29–50.

Nissen, B. (2001) “The ‘Social Movement’ Dynamics of Living Wage Campaigns,”Proceedings of the 53rd Annual Meeting of the Industrial Relations ResearchAssociation, New Orleans, January 5–7, 232–40.

Pearce, D. and Brooks, J. (2002) The Self-Sufficiency Standard for Florida. Miami:Human Services Coalition.

White, N. (2003) “State Bill Cuts in Half MIA Wages,” Miami Herald, May 3, 1C,2C.

170 Bruce Nissen

12 Minimum wages and living wagesRaising incomes by mandatingwage floors

David Neumark

A number of policy proposals and initiatives have been used in the UnitedStates to attempt to reduce poverty, or more generally to assist low-income families, by increasing incomes of families at the bottom end of theincome distribution. My research over the past decade or so has focusedon studying the effectiveness of two policies that attempt to accomplishthis by mandating higher wages for low-wage workers: minimum wagesand living wages.

Minimum wages were first established on a national level with the FairLabor Standards Act of 1938. While coverage was initially quite restric-tive, it is now nearly universal. The federal minimum currently stands at$5.15. Numerous states have at times imposed higher minimum wages,typically for the same workers covered by the federal minimum, but withsome exceptions. The highest state minimum wages currently are inAlaska ($7.15), Washington ($7.01), Oregon ($6.90), and California andMassachusetts ($6.75).1

Living wage ordinances are a much more recent innovation. Baltimorewas the first city to pass such legislation, in 1994, and nearly ninety citiesand a number of other jurisdictions have followed suit.2 Living wage lawshave three central features. First, they impose a wage floor that is higher –and often much higher – than traditional federal and state minimumwages. Second, living wage levels are often explicitly pegged to the wagelevel needed for a family with one full-time, year-round worker to reachthe federal poverty line. Typical living wage levels as of 2002 were $7.72(Los Angeles), $8.83 (Detroit), and $10.25 (Boston). Third, coverage byliving wage ordinances is highly restricted. Frequently, cities impose wagefloors only on companies under contract (generally including non-profits)with the city. Other cities also impose the wage floor on companies receiv-ing business assistance from the city, in almost every case in addition tocoverage of city contractors. Finally, a much smaller number of cities alsoimpose the requirement on themselves and pay city employees a legislatedliving wage.

The central policy goal of both minimum wages and living wages is toraise incomes of low-wage workers so as to reduce poverty. Senator

Edward Kennedy, a perennial sponsor of legislation to increase theminimum wage, has been quoted as saying “The minimum wage was oneof the first – and is still one of the best – anti-poverty programs we have”(quoted in Clymer 1999: 449). Similarly, the Economic Policy Institute,while noting that other anti-poverty tools are needed, argues that “theliving wage is a crucial tool in the effort to end poverty.”3 Thus, whilethere is generally no single measure with which the distributional effects ofa policy can be unambiguously assessed, and while overall welfare effectsare much more complicated, evaluating the impact of mandated wagefloors on poverty is a reasonable means of assessing the success of thesewage floors.

While mandating higher wages for low-wage workers may strike a non-economist as a natural way to fight poverty, there are two reasons why theymay not help to achieve this goal. First, standard economic theory predictsthat a mandated wage floor will discourage the use of low-skilled labor,operating essentially as a tax on the use of such labor. Thus, whatever wagegains accrue to workers whose employment is unaffected may have to beoffset against potential job losses for some workers. Second, mandated wagefloors may ineffectively target low-income families. Broadly speaking, low-wage workers in the United States belong to two groups. The first is veryyoung workers who have not yet acquired labor market skills, but who arelikely to escape low-wage work as skills are acquired. The second is low-skilled adults who are likely to remain mired in low-wage work (Carringtonand Fallick 2001), and who – as adults – are much more likely to be in poorfamilies. To the extent that the gains from mandated wage floors accrue tolow-wage adults and the losses fall on low-wage, non-poor teenagers, man-dated wage floors may well reduce poverty. But there is no theoreticalreason to believe that this outcome is more likely than the reverse, with con-comitant adverse outcomes for low-income families. Thus, while theory pre-dicts employment losses and hence implies that there are likely to be bothwinners and losers from mandated wage floors, the distributional effects ofmandated wage floors is a purely empirical question.

This chapter discusses each of these issues in the context of bothminimum wages and living wages. The next section discusses some generaleconomic issues regarding mandated wage floors, focusing on the potentialdisemployment effects of minimum wages or living wages and how econo-mists measure such effects. The following two sections present evidenceon the employment and distributional effects of minimum wages and livingwages, and discuss some of the differences between living wages andminimum wages. The final section concludes.

The economics of mandated wage floors

The textbook economic theory of the effects of mandated wage floors isstraightforward. In the textbook treatment, there is a competitive labor

172 David Neumark

market for a single type of labor, for which there is an upward-slopingaggregate labor supply curve and a downward-sloping aggregate labordemand curve. Prior to the imposition of the wage floor, there is an equi-librium price of labor w and an equilibrium quantity of labor employed L.If the wage floor wf is set at a wage higher than w – so that the minimumwage is “binding” – then employers reduce their use of labor for tworeasons. First, there is a substitution effect leading employers to use relat-ively less of the now-more-expensive labor and relatively more of otherinputs (such as capital), in an effort to find a new cost-minimizing inputmix. Second, because costs must be higher with this new input mix (other-wise employers were not previously minimizing costs), the prices of theproducts that firms produce must rise. This, in turn, reduces demand foreach firm’s product, leading to a reduction in the scale of operation. Con-sequently, both this scale effect and the substitution effect lead to loweremployment, say at the level Lf > L.

In the extensive research literature on minimum wages (and the newerliterature on living wages), employment effects are typically summarizedin terms of the “employment elasticity.” The employment elasticity is theratio of the percentage change in employment to the percentage change inthe wage induced by the wage floor, or in the above example:

Employment elasticity � {(Lf – L)/L} / {(wf – w)/w}.

This summary measure is convenient because it can be used to predict thepercentage change in employment resulting from a given percentagechange in the mandated wage floor. Thus, for example, an elasticity of�0.1 implies that a 10 percent increase in the wage floor reduces employ-ment by 1 percent. Of course, one can also define elasticities of other out-comes, such as the elasticity of wages with respect to the minimum wage.

It is important to emphasize that the simple textbook model of theeffects of wage floors is just that – only a model. That the model predictsdisemployment effects does not imply that minimum wages must reduceemployment, because the model may not provide a sufficiently richdescription of the labor market. Thus, at best it leads to a prediction thatshould be tested with data. At the same time, the prediction that a highermandated wage floor reduces employment is based on a core tenet of theneoclassical economic model – that demand curves slope downward. Thismay explain why some of the evidence discussed below suggesting thatminimum wages do not reduce employment generated such a firestormamong economists.

Staying within a market-based perspective on labor markets, there aretwo classes of explanations for why wage floors may not producedetectable declines in employment, or may even in some cases increaseemployment. The first class of explanations maintains the basic competi-tive framework, but recognizes that labor is more heterogeneous than

Minimum wages and living wages 173

suggested by the simple textbook model. When there are different types oflabor differentiated by skill level, employers may substitute from one typeof labor to another. Furthermore, some of the higher-skill individuals maynot be in the labor market initially, but may instead be in school and onlydrawn into the labor market by the higher wages employers are willing topay after the wage floor is imposed. In this case, even though overallemployment is still predicted to decline, possibilities for substitutionamong labor types will moderate the disemployment effects – possiblysubstantially – and if we focus on subgroups of workers, employment maynot fall at all or could increase. For both reasons, disemployment effects ofwage floors may be difficult to detect statistically. (See Neumark andWascher (1996) for a summary of these arguments and related evidence.)

The second class of explanations presents a more fundamental chal-lenge to the neoclassical model by suggesting that wage floors could actu-ally increase employment in the aggregate. These explanations rest onsome version of monopsony power in labor markets. In the competitivemodel, the aggregate labor supply curve is upward-sloping, but employersare assumed to be small relative to the market and hence can hire all thelabor they want at the existing wage. In the classical monopsony modelemployers are large relative to the labor market and hence face upward-sloping labor supply curves to the firm. They must also pay workers thesame wage (that is, they cannot price discriminate). Thus, when anemployer wants to hire more labor, the cost of doing so is higher than thewage required to attract a new worker, and hence the marginal cost oflabor exceeds the wage. Because a profit-maximizing employer hires up tothe point where the marginal cost of labor equals the marginal revenueproduct, employment is lower and wages are lower than in a competitivemarket. In this case a mandated wage floor higher than the equilibriummonopsony wage can increase employment by breaking the link betweenthe wage and the marginal cost of labor curve.

This argument was originally offered in Stigler (1946), although he wasskeptical of government’s ability to predict the wage floor that would actu-ally increase employment. More modern versions of monopsony modelsbased on labor market frictions are presented in Manning (2003). Thedriving force behind monopsony – increased costs of employment of theexisting workforce when a new worker is hired – can also arise from aneed to supervise workers (Lang 1987) and in workplaces with tippedemployees (Wessels 1997).

Minimum wages

Labor economists have written innumerable papers testing the predictionthat minimum wages reduce employment. Earlier studies used aggregatetime-series data for the United States to estimate the effects of changes inthe national minimum wage. The consensus view from these “first genera-

174 David Neumark

tion” studies was that the elasticity of employment of low-skilled (young)workers with respect to minimum wages was most likely between �0.1 and�0.2; that is, for every 10 percent increase in the minimum wage, employ-ment of low-skilled individuals falls by 1 to 2 percent.4

More recent studies have used panel data covering multiple statesover time, exploiting differences across states in minimum wages. Thisapproach permits researchers to abstract from aggregate economicchanges that may coincide with changes in the national minimum wageand hence make untangling the effects of minimum wages difficult whenusing aggregate time-series data. (See, e.g., Card 1992a, 1992b; Williams1993; Neumark and Wascher 1992.) Evidence from these “second genera-tion” studies has spurred considerable controversy regarding whether ornot minimum wages reduce employment of low-skilled workers, with someresearchers arguing that the predictions of the standard neoclassical modelare wrong, and that minimum wages do not reduce and may even increaseemployment.

The most prominent and often-cited such study uses data collectedfrom a telephone survey of managers or assistant managers in fast-foodrestaurants in New Jersey and Pennsylvania before and after a minimumwage increase in New Jersey (Card and Krueger 1994). Not only do thesedata fail to indicate a relative employment decline in New Jersey, butinstead they indicate that employment rose sharply there (with positiveemployment elasticities in the range of 0.7).

On the other hand, much recent evidence using similar sorts of datatends to confirm the prediction that minimum wages reduce employmentof low-skilled workers (Burkhauser et al. 2000; Zavodny 2000), as doesearlier work with a much longer panel of states (Neumark and Wascher1992).5 Moreover, an approach to estimating employment effects ofminimum wages that focuses more explicitly on whether minimum wagesare high relative to an equilibrium wage for affected workers reveals twothings: first, that disemployment effects appear when minimum wages aremore likely to be binding (because the equilibrium wage absent theminimum is low); and second, that some of the small or zero estimated dis-employment effects in other studies appear to be from regions or periodsin which minimum wages were much less likely to have been binding(Neumark and Wascher 2002). Finally, a re-examination of the NewJersey–Pennsylvania study that I conducted, based on payroll records col-lected from fast-food establishments, finds that the original telephonesurvey data were plagued by severe measurement error, and that thepayroll data generally point to negative employment elasticities.6

Across this array of more recent evidence, the estimated effects oftenparallel the earlier time-series research indicating that the elasticity ofemployment of low-skilled workers with respect to the minimum wage isin the �0.1 to �0.2 range, with estimates for teenagers – who have oftenbeen the focus of minimum wage research – closer to �0.1. As further


evidence, a leading economics journal recently published a survey includ-ing economists’ views of the best estimates of minimum wage effects.Results of this survey, which was conducted in 1996 – after most of therecent research on minimum wages was well known to economists – indi-cated that the median “best estimate” of the minimum wage elasticity forteenagers was �0.1, while the mean estimate was �0.21 (Fuchs et al.1998). Thus, although there may be some outlying perspectives, econo-mists’ views of the effects of the minimum wage are centered in the rangeof the earlier and many of the more recent estimates of the disemploymenteffects of minimum wages.

While the research on disemployment effects appears to settle (formany, at least) a question regarding the labor demand effects of mandatedwage floors, it does not answer the question of whether minimum wagesraise incomes of low-wage workers, or more importantly of poor or low-income families. It is often argued that an employment elasticity as smallas �0.1 or �0.2 implies that minimum wage increases must raise incomesof low-wage workers, because the elasticity is much smaller (in absolutevalue) than �1 (e.g. Freeman 1996). However, these elasticity estimatesdo not necessarily capture the relevant parameter, which is the elasticity ofthe demand for minimum wage labor with respect to the minimum, ignor-ing the possibility that the employment effects are sharpest for those at theminimum wage. In addition, these estimates pay no regard to possiblehours effects, and use the legislated minimum wage change – rather thanthe typically smaller actual wage change induced by a minimum wageincrease – in the denominator. In the other direction, this calculation alsoignores possible wage increases for workers above the minimum wage.While these considerations suggest that the elasticity is closer to �1, theydo not necessarily imply that the elasticity is actually that large, althoughin principle it could be even larger. The critical point, though, is that theeffects of minimum wages on low-wage workers must be studied directly.Back-of-the-envelope calculations based on employment elasticities esti-mated for different purposes cannot pin down these effects.

Turning first to low-wage workers, I have recently examined the effectsof minimum wages on employment, hours, wages, and ultimately laborincome of workers at different points in the wage distribution (Neumark etal. forthcoming). This research indicates that workers initially earning nearthe minimum wage are on net adversely affected by minimum wageincreases, while, not surprisingly, higher-wage workers are little affected.While wages of low-wage workers increase, their hours and employmentdecline, and the combined effect of these changes is a decline in earnedincome. For minimum wage workers, the hours elasticities are in the rangeof �0.2 to �0.25, the employment elasticities in the range of �0.12 to�0.17, and the earned income elasticity is approximately �0.6. Clearly theevidence does not support the conclusion that minimum wage increasesraise the earnings of minimum wage workers.

176 David Neumark

Finally, in turning to the key distributional question – the effects ofminimum wages on low-income families – we must keep in mind theimperfect mapping between low-wage workers and low-income families.Specifically, while there are few poor or low-income families with high-wage workers, there are many high-income families with low-wageworkers. Table 12.1 illustrates this point. Table 12.1 looks at familyincome-to-needs ratios and the presence of low-wage workers in familiesin 1989 (based on March 1990 Current Population Survey data), and howthese would be affected by the April 1990 increase in the federal minimumwage; poverty is defined as income-to-needs less than one. The calcula-tions simply ask where workers likely to have their wages raised by the1990 minimum are in the distribution of family income-to-needs, andhence effectively assume a “best-case” scenario of no disemploymenteffects. Table 12.1 reveals that, not surprisingly, minimum wage workersare over-represented at the bottom of the income distribution. Forexample, 22 percent of potentially affected workers (defined as thosebetween the previous minimum and the 1990 minimum) are in poor famil-ies. At the same time, many of the affected workers are in families withhigher income-to-needs – e.g., nearly one-third of affected workers are infamilies with income-to-needs greater than three. Reflecting the weak linkbetween low-wage workers and low-income families, even Card andKrueger acknowledge that minimum wages target the intended benefici-aries poorly, writing: “The minimum wage is evidently a ‘blunt instrument’for redistributing income to the poorest families” (1995: 285).

The only way to directly answer the question of whether minimumwages help poor or low-income families is to look at the evidence directly.While the literature on minimum wages has emphasized employmenteffects, very recent research has turned to the distributional question(Neumark et al. 2002). Evidence based on very flexible estimates of changesin the income-to-needs distribution associated with minimum wageincreases is reported in Table 12.2. The figures reported in Table 12.2


Table 12.1 Minimum wage workers and low-income families

Income-to-needs ratio % of all workers % of affected workers

< 1 6.1 22.01 to 1.25 2.8 6.11.25 to 1.5 3.3 6.91.5 to 2 8.2 11.92 to 3 17.9 20.3> 3 61.7 32.8

Source: Burkhauser et al. (1996: Table 2).

NoteCalculations based on 1990 March CPS file covering family income in 1989, and 1990 federalminimum wage increase.

suggest that the proportions of families in poverty or near-poverty(income-to-needs less than 1.5) tend to rise following minimum wageincreases, offset by declines in the proportion of families above the povertyline, in the 1.5 to 3 income-to-needs range. These results provide no basisfor concluding that minimum wages reduce the proportion of families livingin poverty or near-poverty, and if anything indicate that minimum wagesincrease poverty. Thus, the combined evidence indicates that minimumwages do not appear to accomplish their principal policy goal of raisingincomes of low-wage workers or of poor or low-income families.

One qualification to keep in mind is that this research tends to focus onthe short-run effects of minimum wages, typically looking at effects at mosta year after minimum wage increases. I am presently working on estimatingthe longer-run effects of minimum wages. But two sets of existing findingspoint to some potentially longer-lasting adverse effects of minimum wages– effects that extend beyond disemployment effects, to those who work.First, minimum wages tend to reduce school enrollments of teenagers, atleast where these enrollments are not constrained by compulsory schoolinglaws (Neumark and Wascher 2003; Chaplin et al. 2003). Second, extendingearlier research on the relationship between minimum wages and on-the-job training, a recent study I completed finds that minimum wages reducetraining that is intended to improve skills on the current job (Neumark andWascher 2001a). Thus, minimum wages may reduce the human capitalaccumulation that leads to higher wages and incomes.

Living wages

The newest “front” in efforts to raise incomes of low-wage workers is theliving wage campaigns that have brought living wage laws to nearly ninetycities since the first such law passed in Baltimore in 1994, with campaigns

178 David Neumark

Table 12.2 Percentage change in proportions of families in ranges of income-to-needs distribution, minimum wage increase vs. no increase

Income-to-needs Income-to-needs Income-to-�0 to 1 (poor) �0 to 1.5 (near- needs �1.5 to 3

poor)

Raw data 4.5** 4.1** –3.4**

Unemployment controls 4.2** 3.5** –3.2**

Fixed state and year effects 3.8* 3.3** –4.1**

Source: Neumark et al. (2002: Table 3).

NotesThe data set covers 1986–1995. Reported estimates are percent change in proportion offamilies in cell. ** (*) indicate estimate is statistically significant at 5 percent (10 percent)level. Fixed state and year effects are based on removing common state and year propor-tional shifts from income-to-needs distribution prior to estimation.

under way in many more cities. I have recently completed two studies(Neumark and Adams forthcoming (a) and (b)) that analyze the effects ofliving wage laws on low-wage workers and low-income families (see alsoNeumark 2002).

The research begins by asking whether there is evidence that livingwage laws lead to detectable increases in wages at the lower end of thewage or skill distribution. While such effects are readily detectable withrespect to minimum wages, the question arises with respect to living wagesbecause of the low fraction of workers covered, and because of questionsabout enforcement.7 To estimate the impact on wages, the effects of livingwages are identified from comparing changes in labor market outcomes incities passing living wages with cities that do not pass such laws, parallelingthe second-generation minimum wage research that identifies the effectsof minimum wages by comparing changes in the same time period in statesthat did and did not increase the minimum wage. The same strategy isused in the estimation of other effects of living wage laws, discussed below.

As reported in the first column of Table 12.3, the evidence points tosizable effects of living wage laws on the wages of low-wage workers in thecities in which these laws are enacted. In fact, the magnitude of the esti-mated wage effect (an elasticity of approximately 0.07 for workers in thebottom tenth of the wage distribution) is much larger than would beexpected based on the apparently limited coverage of city contractors bymost living wage laws. Additional analyses reported in Table 12.3, whichhelp to reconcile this large effect, indicate that the effects are driven bycities in which the coverage of living wage laws is broader – namely citiesthat impose living wages on employers receiving business assistance fromthe city. For these business assistance living wage laws, the estimated elas-ticity of wages in the bottom tenth of the wage distribution with respect toliving wages is approximately 0.1, while for contractor-only living wagelaws the estimated elasticity is indistinguishable from zero. While the 0.1elasticity may suggest a small impact, it is an average wage increase experi-enced by low-wage workers, whereas the actual consequence would mostlikely be a much larger increase concentrated on a smaller number ofworkers directly affected by the living wage law.

As with minimum wages, the potential gains from higher wages may beoffset by reduced employment opportunities. The evidence reported in thesecond column of Table 12.3 indicates that living wages do entail disem-ployment effects. The point estimate of �0.056 reported there implies anemployment elasticity of about �0.14. More importantly, the estimateddisemployment effect is a bit bigger and statistically significant preciselyfor the type of living wage law that generates positive wage effects – inparticular, for low-skill workers covered by the broader laws that apply toemployers receiving business assistance. Thus, as economic theory wouldlead us to expect, living wage laws present a trade-off between wages andemployment.


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This sets the stage for weighing these competing effects, in particularexamining the effect of living wage laws on poverty in the urban areas inwhich they are implemented. Overall, the evidence in the third and fourthcolumns of Table 12.3 suggests that living wages may be successful at redu-cing urban poverty in the cities that have adopted such legislation. Theestimate in the third column indicates that living wages significantly reducethe probability that family earnings fall below the poverty line, and theestimate in the fourth column indicates that they significantly reduce theprobability that total family income falls below the poverty line. Parallel-ing the findings for wage and employment effects, the impact on povertyarises only for the broader living wage laws that cover employers receivingbusiness assistance from cities. The overall estimate in the fourth columnimplies an elasticity of the proportion of poor families with respect to theliving wage of about �0.19. This seems like a large effect, given a wageelasticity for low-wage workers of less than 0.1. Of course no one is claim-ing that living wages lift a family from well below the poverty line to wellabove it. But living wages may help nudge a family over the poverty line,and we have to recall that these average wage effects are likely to be mani-fested as larger gains concentrated on a possibly quite small number ofworkers and families. Thus, even coupled with some employment reduc-tions, living wages can lift a number of families above the poverty line.

In interpreting this evidence, it is important to keep two things in mind.First, while economic theory predicts that raising mandated wage floorswill lead to some employment reductions, it makes no predictions whatso-ever regarding the effects of living wages on the distribution of familyincomes, or on poverty specifically. The distributional effects depend onboth the magnitudes of the wage and employment effects (and othereffects), and on their incidence throughout the family income distribution.Second, and following from this same point, there is no contradictionbetween the evidence that living wages reduce poverty and that minimumwages increase poverty. The gains and losses from living wages may be ofquite different magnitudes, and fall at different points in the distributionof family income, than do the gains and losses from minimum wages; thisdepends in part on the types of workers who are affected by these altern-ative mandated wage floors. Obviously, though, an important area forfuture research is to parse out the wage and employment effects ofminimum wages and living wages at different points in the distribution offamily incomes.

Of course, a finding that living wage laws reduce poverty does notnecessarily imply that these laws increase economic welfare overall (orvice versa). Living wage laws, like all tax and transfer schemes, generallyentail some inefficiencies that may reduce welfare relative to the most effi-cient such scheme. Finally, there is another reason to adopt a cautiousview regarding living wages. As already noted, the effects of living wagesappear only for broader living wage laws covering employers receiving


business assistance. The narrower contractor-only laws tend to have nodetectable effects. This raises a puzzle. Why, despite the anti-povertyrhetoric of living wage campaigns, do they often result in passage ofnarrow contractor-only laws that cover a very small share of the workforceand do not benefit low-wage workers and low-income families?

One hypothesis I have explored (Neumark 2001) is that municipalunions work to pass living wage laws as a form of rent-seeking. Specifi-cally, by forcing up the wage for contractor labor, they reduce or eliminatethe incentive of cities to contract out work done by their members, and inso doing increase the bargaining power of municipal unions and raisewages of their members. There is ample indirect evidence consistent withthis, as municipal unions are strong supporters of living wage campaigns;for example, the American Federation of State, County, and MunicipalEmployees was one of the major organizers of the Baltimore living wagecampaign (Osterman et al. 2001).

As further evidence, I explored the impact of living wage laws on thewages of lower-wage unionized municipal workers (excluding teachers,police, and firefighters, who do not face competition from contractorlabor). The results are summarized in Table 12.4. The estimate in the firstcolumn indicates that these workers’ wages are indeed boosted by livingwages, with an elasticity of 0.16. The other columns, in contrast, show esti-mated effects of living wages on groups for which, under the rent-seekinghypothesis, no effects should appear (such as other city workers, orteachers, police, and firefighters), whereas under other scenarios such asliving wage increases being associated with rising city wages generally,such effects might appear. The fact that there are no significant positiveestimates for other groups of workers bolsters the likelihood that livingwages boost wages of unionized municipal workers by increasing rents.While there are other explanations of why unionized municipal workersmight support living wage laws, or why these laws are so often narrowlycircumscribed, direct gains to unionized municipal workers would appearto be rather telling evidence of rent-seeking behavior.

In sum, even if living wage laws have some beneficial effects on thepoor, this last evidence suggests that they may well be driven by motiva-tions other than most effectively reducing urban poverty. This does notimply that living wages cannot be an effective anti-poverty policy. But itcertainly suggests that living wages deserve closer scrutiny before choosingto implement them to combat poverty.

Conclusion

Where do all of these estimates leave us regarding the use mandated wagefloors to help poor or low-income families in a modern economy like thatof the United States? I suppose the most apt stance to take based on theevidence is “skeptical.” Minimum wages deliver no net benefits to poor or

182 David Neumark

Tab

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low-income families, and if anything make them worse off. Living wageshave a more salutary effect, reducing urban poverty. But while there is,therefore, a more compelling case for living wages, this evidence does notimply they are the most effective means of reducing poverty. Furthermore,the adverse employment effects of living wages on low-skill individualssuggest that living wages may reduce poverty without necessarily helpingthe lowest-wage workers, a conclusion reinforced by new evidence inAdams and Neumark (2003).

It may simply be an uncomfortable fact that trying to help low-incomefamilies through mandating higher wage floors tends to have negative con-sequences for the least-skilled workers, since such wage floors amount to atax on the employment of these workers. In this case, even if wage floorsdeliver some benefits to low-income families – as appears to be the casefor living wages, but not minimum wages – additional policies may beneeded to help the most disadvantaged workers and families. These couldtake the form of a sufficient safety net to protect families with inadequateincomes, strategies to enhance skills that would make individuals in poorfamilies more employable and employable at higher wages, and policiessuch as earned income tax credits that encourage employment by supple-menting income.

A sufficient safety net is easy to defend, in particular in the case of chil-dren who suffer consequences of low parental income, yet obviously havein no way chosen to have to live a life supported by government assistance.Unfortunately, in the United States at least, political support for a suffi-cient safety net for families with non-working adults is weak. Enhancingskills is a no-brainer in principle, but difficult and expensive to do in prac-tice (Heckman 1993). Based on the broader research record (see alsoHoffman and Seidman 2003; Neumark and Wascher 2001b), while I amskeptical regarding mandated wage floors, I am more supportive of earnedincome tax credits, which by subsidizing employment are very much theopposite of a tax on the use of low-skill labor, and which effectively targetlow-income families rather than low-wage workers.

Acknowledgments

I am grateful to William Wascher, Mark Schweitzer, and Scott Adams forresearch collaboration. Any views expressed are my own, and not those ofthe Public Policy Institute of California.

Notes1 See the US Department of Labor’s web site, http://www.dol.gov/esa/minwage/

america.htm, for details on state minimum wages.2 See http://www.epionline.org/livingwage/index.cfm, the web site of the Employ-

ment Policies Institute, for up-to-date details on living wages.

184 David Neumark

3 See http://www.epinet.org/Issueguides/livingwage/livingwagefaq.html4 For a review of the earlier time-series studies see Brown et al. (1982). Results

extending this research through the mid-1980s and finding more modest effectsare reported in Wellington (1991). A more recent time-series study using datathrough 1993 and employing more sophisticated tools of time-series analysisfinds stronger disemployment effects (Williams and Mills 2001).

5 See also the exchange on the evidence in this chapter in Card et al. (1994) andNeumark and Wascher (1994).

6 See Neumark and Wascher (2000) and the reply in Card and Krueger (2000).7 For preliminary information on enforcement of living wage laws, see Sander and

Lokey (1998).

References

Adams, S. and Neumark, D. (2003) “Living Wage Effects: New and ImprovedEvidence,” unpublished.

Brown, C., Gilroy, C., and Kohen, A. (1982) “The Effect of the Minimum Wage onEmployment and Unemployment,” Journal of Economic Literature 20 (2):487–528.

Burkhauser, R.V., Couch, K.A., and Wittenburg, D.C. (1996) “‘Who Gets What’from Minimum Wage Hikes: A Re-Estimation of Card and Krueger’s Distribu-tional Analysis in Myth and Measurement: The New Economics of the MinimumWage,” Industrial and Labor Relations Review 49 (3): 547–52.

Burkhauser, RV., Couch, K.A., and Wittenburg, D.C. (2000) “A Reassessment ofthe New Economics of the Minimum Wage Literature with Monthly Data fromthe Current Population Survey,” Journal of Labor Economics 18 (4): 653–80.

Card, D. (1992a) “Using Regional Variation in Wages to Measure the Effects of theFederal Minimum Wage,” Industrial and Labor Relations Review 46 (1): 22–37.

Card, D. (1992b) “Do Minimum Wages Reduce Employment? A Case Study ofCalifornia, 1987–1989,” Industrial and Labor Relations Review 46 (1): 38–54.

Card, D., Katz, L.F., and Krueger, A.B. (1994) “Comment on David Neumark andWilliam Wascher, ‘Employment Effects of Minimum and Subminimum Wages:Panel Data on State Minimum Wage Laws,’ ” Industrial and Labor RelationsReview 47 (3): 487–96.

Card, D. and Krueger, A.B. (1994) “Minimum Wages and Employment: A CaseStudy of the Fast-Food Industry in New Jersey and Pennsylvania,” AmericanEconomic Review 84 (4): 772–93.

Card, D. and Krueger, A.B. (1995) Myth and Measurement: The New Economicsof the Minimum Wage, Princeton, NJ: Princeton University Press.

Card D. and Krueger, A.B. (2000) “Minimum Wages and Employment: A CaseStudy of the Fast-Food Industry in New Jersey and Pennsylvania: Reply,” Amer-ican Economic Review 90 (5): 1397–420.

Carrington, W.J. and Fallick, B.D. (2001) “Do Some Workers Have MinimumWage Careers?” Monthly Labor Review May: 17–27.

Chaplin, D.D., Turner, M.D., and Pape, A.D. (2003) “Minimum Wages and SchoolEnrollment of Teenagers: A Look at the 1990s,” Economics of EducationReview 22 (1): 11–21.

Clymer, A. (1999) Edward M. Kennedy: A Biography, New York, NY: WilliamMorrow & Co.


Freeman, R.B. (1996) “The Minimum Wage as a Redistributive Tool,” The Eco-nomic Journal 106 (436): 639–49.

Fuchs, V.R., Krueger, A.B., and Poterba, J.M. (1998) “Economists’ Views AboutParameters, Values, and Policies: Survey Results in Labor and Public Eco-nomics,” Journal of Economic Literature 36 (3): 1387–425.

Heckman, J. (1993) Assessing Clinton’s Program on Job Training, Workfare, andEducation in the Workplace, NBER Working Paper No. 4428, Cambridge, MA:NBER.

Hoffman, S.D. and Seidman, L.S. (2003) Helping Working Families: The EarnedIncome Tax Credit, Kalamazoo: W.E. Upjohn Institute for EmploymentResearch.

Lang, K. (1987) “Pareto Improving Minimum Wage Laws,” Economic Inquiry 25(1): 145–58.

Manning, A. (2003) Monopsony in Motion: Imperfect Competition in LaborMarkets, Princeton, NJ: Princeton University Press.

Neumark, D. (2001) Living Wages: Protection For or Protection From Low-WageWorkers? NBER Working Paper No. 8393, Cambridge, MA: NBER.

Neumark, D. (2002) How Living Wages Affect Low-Wage Workers and Low-Income Families, San Francisco: Public Policy Institute of California.

Neumark, D. and Adams, S. (forthcoming, a) “Do Living Wage OrdinancesReduce Urban Poverty?” Journal of Human Resources.

Neumark, D. and Adams, S. (forthcoming, b) “Detecting Effects of Living WageLaws,” Industrial Relations.

Neumark, D., Schweitzer, M., and Wascher, W. (2002) “The Effects of MinimumWages on the Distribution of Family Incomes: A Non-Parametric Analysis,”unpublished.

Neumark, D., Schweitzer, M., and Wascher, W. (forthcoming) “Minimum WageEffects Throughout the Wage Distribution,” Journal of Human Resources.

Neumark, D. and Wascher, W. (1992) “Employment Effects of Minimum and Sub-minimum Wages: Panel Data on State Minimum Wage Laws,” Industrial andLabor Relations Review 46 (1): 55–81.

Neumark, D. and Wascher, W. (1994) “Employment Effects of Minimum and Sub-minimum Wages: Reply to Card, Katz, and Krueger,” Industrial and LaborRelations Review 47 (3): 497–512.

Neumark, D. and Wascher, W. (1996) “The Effects of Minimum Wages onTeenage Employment and Enrollment: Evidence from Matched CPS Surveys,”Research in Labor Economics 15: 25–63.

Neumark, D. and Wascher, W. (2000) “Minimum Wages and Employment: ACase Study of the Fast-Food Industry in New Jersey and Pennsylvania:Comment,” American Economic Review 90 (5): 1362–96.

Neumark, D. and Wascher, W. (2001a) “Minimum Wages and Training Revisited,”Journal of Labor Economics 19 (3): 563–95.

Neumark, D. and Wascher, W. (2001b) “Using the EITC to Help Poor Families:New Evidence and a Comparison with the Minimum Wage,” National TaxJournal 54 (2): 281–317.

Neumark, D. and Wascher, W. (2002) “State-Level Estimates of Minimum WageEffects: New Evidence and Interpretations from Disequilibrium Methods,”Journal of Human Resources 37 (1): 35–62.

Neumark, D. and Wascher, W. (2003) “Minimum Wages and Skill Acquisition:

186 David Neumark

Another Look at Schooling Effects,” Economics of Education Review 22 (1):1–10.

Osterman, P., Kochan, T.A., Locke, R.M., and Piore, M.J. (2001) Working inAmerica: A Blueprint for the New Labor Market, Cambridge, MA: The MITPress.

Sander, R. and Lokey, S. (1998) “The Los Angeles Living Wage: The FirstEighteen Months,” unpublished.

Stigler, G.J. (1946) “The Economics of Minimum Wage Legislation,” AmericanEconomic Review 36 (3): 358–65.

Wellington, A.J. (1991) “Effects of the Minimum Wage on the Employment Statusof Youths: An Update,” Journal of Human Resources 26 (1): 27–46.

Wessels, W.J. (1997) “Minimum Wages and Tipped Servers,” Economic Inquiry 35(2): 334–49.

Williams, N. (1993) “Regional Effects of the Minimum Wage on Teenage Employ-ment,” Applied Economics 25 (12): 1517–28.

Williams, N. and Mills, J.A. (2001) “The Minimum Wage and Teenage Employ-ment: Evidence from Time Series,” Applied Economics 33 (3): 285–300.

Zavodny, M. (2000) “The Effect of the Minimum Wage on Employment andHours.” Labour Economics 7 (6): 729–50.


13 The economic impact of livingwage ordinances

Mark D. Brenner

Opponents of living wage measures consistently warn that these initiativeswill not help, but will actually harm low-wage workers and their families.They argue that living wage laws will set off a series of unintended con-sequences which, because of the way wage floors are theorized to operatein market settings, will lower the welfare of their intended beneficiaries.Two sets of effects are of concern. The first involves the firms covered byliving wage requirements, where it is feared that higher wage floors willcause employers to shed low-wage labor through means such as workplacereorganization, substitution of new machinery or equipment, or replace-ment with higher-skilled (and already higher-paid) workers. In theextreme, firms could respond by relocating out of the area in an effort toavoid the living wage mandate. The second set of effects involves the citiesthat pass living wage ordinances. Adjusting to higher wage floors willimpose costs on some businesses, and, at least in the case of city servicecontractors, much of this could be passed back to cities in the form ofhigher contract costs. Such costs to local government could be significant,and carry with them the risk of reducing the level of existing city servicesor creating the need for additional taxes. These are matters of seriousconcern, given the precarious economic position of the lowest-paidsegment of the US workforce, the fragile condition of local governmentfinances, and the rapid proliferation of living wage measures throughoutthe country.

This chapter will address these basic issues, providing an overview ofavailable evidence concerning the economic effects of living wage ordi-nances on the local governments that pass such measures and the firmsthey cover. Because of their recent emergence and rapid proliferation,there is far less research available on the economic impact of living wagelaws when compared to state and federal minimum wages. We are fortu-nate, however, that this body of research has already produced someimportant insights into the dynamics of local wage mandates and that it isexpanding at a considerable pace.

Before turning to this empirical evidence, the next section examinessome of the theoretical and methodological issues involved in studying the

economic effects of living wage ordinances. This is followed by two sec-tions that review different sets of empirical evidence as to the effects ofthese measures: prospective and retrospective studies. Prospective (or exante) studies are conducted prior to passage of a living wage measure andevaluate what is likely to occur following implementation. While this evid-ence has been important to our understanding of living wage dynamics, wenow have a broad range of retrospective (or ex post) evidence that drawson the actual experiences of cities that have passed such measures. Thefinal section concludes by drawing together the prospective and retrospec-tive evidence to assess how firms are likely to respond to living wage man-dates.

Examining living wage effects: theoretical andmethodological issues

The relationship between wages and employment has been an issue oflong-standing and frequently intense controversy. The reasons for this arestraightforward, as David Neumark outlined in the previous chapter.Standard competitive models of the labor market are unambiguous as tothe consequences of a binding wage floor. Firms are expected to utilizeless low-wage labor, all else constant, which reduces the economy-wideemployment prospects for workers in the lowest tier of the labor market.However, as the previous chapter also made clear, the predictions of thecompetitive model are just that, predictions, which must be evaluatedagainst available empirical evidence.

Recent work in this area, now known as the “new economics of theminimum wage” literature, has cast serious doubt on the robustness ofearlier findings linking minimum wage increases with lower employmentin the aggregate (e.g. Card et al. 1994; Card and Krueger 1994; Neumarkand Wascher 1994; Card and Krueger 1995). This research has also pro-duced substantial new evidence that firms faced with higher minimumwage mandates do not behave in the manner predicted by competitivemodels: most notably that average firm employment does not decline butmay in fact increase slightly following minimum wage increases (e.g. Katzand Krueger 1992; Spriggs 1993; Card and Krueger 1994; Card andKrueger 2000). The larger issue has been well summarized by RichardFreeman: “The debate is over whether modest minimum wage increaseshave ‘no’ employment effect, modest positive effects, or small negativeeffects. It is not about whether or not there are large negative effects”(1995: 833; emphasis in original). There is also individual-specific evidencethat low-wage workers do not face lower employment prospects followingminimum wage increases (e.g. Card and Krueger’s 1995 re-analysis ofLinneman 1982 and Currie and Fallick 1994; Zavodny 2000).

As we will discuss further when we take up the issue of firm adjust-ments to living wage ordinances, there are many possible explanations

Economic impact of living wage policies 189

why individual and firm-level analyses consistently fail to find negativeemployment effects following minimum wage increases. On a theoreticallevel, one explanation, discussed in the previous chapter, may be thatalternatives to the competitive model are in fact a better description oflabor market dynamics. Two important alternatives are those models thatemphasize monopsonistic competition (e.g. Card and Krueger 1995;Bhaksar et al. 2002; Manning 2003) and those positing efficiency wageeffects (e.g. Akerlof and Yellin 1986; Stiglitz 1987). While these theoreticalinterpretations of recent minimum wage research are a significantadvancement in our understanding of labor market dynamics, they unfor-tunately ignore many “older” explanations of firm adjustments to highermandated wages, such as those advanced by the post-war institutionalistsover fifty years ago.

One important commonality among these earlier scholars was anacknowledgment of what Richard Lester called “a range of indetermi-nacy,” not just in wage determination, but also in other areas of firmoperations. This approach implicitly recognizes that it is very difficult toidentify a real-world situation in which all else will be held constant whenthe minimum wage increases, as the standard competitive model requires.By allowing firms some discretion in areas such as purchasing other inputsand setting output prices, these researchers in practice found themselvesconsidering the range of methods by which firms might adjust to higherwage mandates, including such channels as raising prices, increasing sales,changing production techniques, or raising productivity. Changing thelevel of employment, in this context, becomes only one of many ways inwhich firms may respond to higher wage mandates. Lester’s (1946) surveyof Southern manufacturers is a prime example of this method of approach-ing the minimum wage.

Interestingly, more recent evidence indicates that it is precisely thesealternative adjustment channels that firms prioritize in the face of higherminimum wages. For example, a little appreciated aspect of Card andKrueger’s fast food study in New Jersey and Pennsylvania is that “pretaxprices rose 4 percent faster as a result of the minimum-wage increase inNew Jersey – slightly more than the increase required to fully cover thecost increase caused by the minimum-wage hike” (Card and Krueger 1995:54). Similar evidence is presented in Aaronson (2001), who finds thatrestaurant prices in the United States and Canada generally rise withchanges in the wage bill, and that these changes are typically concentratedin the first quarter following a minimum wage increase. Understandinghow firms use these alternative adjustment channels to cope withincreased labor costs following the imposition of binding wage floors mayprovide the key to reconciling both the recent findings from the new eco-nomics of the minimum wage literature as well as those from the prospec-tive and retrospective living wage research reviewed here.

While these alternative theoretical and empirical perspectives may

190 Mark D. Brenner

indeed prove useful in explaining recent research on the minimum wage,the findings themselves can provide limited guidance as to the economicimpact of living wage ordinances. This is first of all because most livingwage laws do not produce the modest wage increases that the “new eco-nomics of the minimum wage” literature has traditionally examined. Moreimportant, however, is the fact that living wage laws have dramaticallymore limited coverage than traditional minimum wage mandates.Although each ordinance varies substantially, these measures typicallycover far less than 1 percent of a city’s labor force. As one example, Pollinand Luce (2000) estimated that by 1999 the Los Angeles (LA), California,living wage ordinance would apply to no more than 7,600 workers in theLA labor market. If their calculations are accurate, this means that thesecovered workers would have comprised a tiny segment of the 4.4 millionindividuals in the LA area workforce at that time, approximately 0.17percent. This implies that whatever employment changes may haveoccurred in the tiny covered sector, their effect is not discernible in thelabor market as a whole due to the much larger size of the uncoveredsegment.

These substantial differences in coverage between minimum and livingwage laws make it impossible to utilize the data sets and statisticaltechniques that are the mainstay of modern labor economics. This conclu-sion is particularly important, as it calls into question recent researchby Neumark and Adams, discussed in the previous chapter (Neumarkand Adams forthcoming (a) and (b)). The authors apply the popular“difference-in-difference” statistical technique to data from the CurrentPopulation Survey (CPS) in an effort to detect the effects of living wagelaws on the wages, employment, and poverty status of individuals in thebottom decile of wage-earners. Unfortunately, their research designsuffers from a host of methodological and empirical problems that ulti-mately invalidates their findings.

To begin, the CPS does not allow researchers to identify a respondent’splace of employment. Such information is not necessary when studyingminimum wage laws, where relatively few labor force participants areexempt from the law and those that are can be readily identified by sectorof employment. However, employer information is crucial for researchersinterested in utilizing publicly available data such as the CPS to studyliving wage ordinances, since the overwhelming majority of low-wageworkers are not covered by living wage laws, even in those sectors wherecovered firms are heavily concentrated.

However, even if it were possible to identify with precision whetherindividual respondents in the CPS worked for employers covered bya particular living wage law, this survey does not sample a sufficientnumber of covered workers at the local level for statistically reliableestimation. For example, Brenner et al. (2002) calculated that in LosAngeles, with one of the broadest living wage ordinances in the country,


there were likely to be only about eight covered workers contained in anannual CPS sample of approximately 5,000 labor force participants. Thiscauses particularly acute identification problems for the “difference-in-difference” statistical technique employed by Neumark and Adams. Intheir work, the authors propose to “identify” the effects of living wagelaws by comparing changes in wages and employment for workers in citieswith living wage laws to those in cities without such measures, controllingfor other sources of variation. Any difference in the trend betweenworkers in the two different types of cities is attributed to the living wagepolicy. However, as the authors readily acknowledge, living wage ordi-nances typically cover far less than 1 percent of the workforce in the citiesthat adopt them (Neumark and Adams forthcoming (a)). This implies,almost mechanically, that any changes taking place within living wagecities must themselves be driven by the workers unaffected by living wagelaws.

On methodological grounds alone, such a degree of mismeasurement inthe key policy variable calls Neumark and Adams’s recent findings intoquestion. However, as my colleagues and I have also demonstrated(Brenner et al. 2002), there are substantial empirical problems with theauthors’ approach to identifying the effects of living wage laws. As oneexample, Neumark and Adams find that the statistically significant wageand employment effects are concentrated in cities where living wage ordi-nances cover business assistance recipients. They conclude that perhapsthe business assistance provisions have had much broader effects thatcommonly assumed. Unfortunately, this explanation does not correspondto actual experience. After interviewing living wage administrators in allthe relevant cities, Brenner et al. (2002) found that, with the exception ofone city, there have been no economic development projects to whichliving wage requirements have been applied.1 This of course does notexplain Neumark and Adams’s statistical results, it merely invalidates theinterpretation of their findings that they advance.

Other, more serious, empirical problems appear to explain whyNeumark and Adams find statistically significant wage and employmenteffects in living wage cities. Of particular note is the close correspondencebetween living wage implementation and changes in the minimum wage.Indeed, upon examining their data more closely, more than half of theliving wage observations come from cities where, approximately one yearafter the living wage ordinance was adopted, the state or federal minimumwage was increased. Because Neumark and Adams find statisticallysignificant living wage effects only with a one year lag, this creates asevere problem. Indeed, one of the great weaknesses of the “difference-in-difference” methodology is that it is unable to accurately separate theeffects of different policy interventions if their timing coincides. AsBrenner et al. (2002) have argued, increases in the minimum wage are amuch more plausible source of the effects which Neumark and Adams

192 Mark D. Brenner

have attributed to living wage laws, particularly given the large number ofworkers earning exactly the minimum wage in their sub-sample of theCPS. Ultimately, the combination of these methodological and empiricalproblems makes it impossible to draw any policy conclusions, either posi-tive or negative, from Neumark and Adams’s research. Their work,however, reinforces the methodological imperative to examine the effectsof living wage ordinances at the local level, using data more suited to thetask. Fortunately, this has been the approach adopted in virtually everyother treatment of living wage effects, which we review in the next twosections.

The economic impact of living wages: prospective evidence

As noted earlier, the relatively recent emergence of living wage ordi-nances initially necessitated impact analysis using prospective means. Thevarious prospective studies reviewed in this section draw on a range ofdata sources, including city data on the number and size of affected con-tracts, surveys of potentially covered firms and workers, and governmentdata on workers and firms including the Census, Current PopulationSurvey, County Business Patterns, and local-area unemployment insur-ance (ES-202) data. The entire range of prospective work that touches onthe cost of living wage laws (including internal city reports, consultantstudies, and other material) is not reviewed. Instead, the analysis is limitedto a subset of this work that meets two criteria: (1) studies that present anestimate of the number of workers likely to be affected by a local livingwage law; and (2) studies that provide some sense of the relative cost ofeach proposal. The former point precludes discussion of many of theinternal analyses conducted by city staff or other public officials while thelatter limits the consideration of several other consultant reports such asthe analysis of Los Angeles by Williams and Sander (1997) and that ofChicago by Tolley et al. (1999). Table 13.1 summarizes the ten prospectivestudies that meet these two criteria.

Scope of ordinances

In the past decade, the living wage rubric has come to encompass a varietyof discrete policy initiatives throughout the country (Luce 2002), and themeasures represented in Table 13.1 are no exception. In total, these tenordinances comprise five distinct types of coverage. First is the mostprevalent form of living wage policy, which places wage requirements oncity service contracts. This is a component of the living wage measures inLos Angeles, Miami-Dade County, San Jose, Detroit, and San Francisco.Both the San Francisco and New York2 measures also cover workers inthe second category of social service provision, particularly homecare andchildcare, while Los Angeles, San Jose, and Detroit also cover workers in


Tab

le 1

3.1

Eco

nom

ic im

pact

of v

ario

us li

ving

wag

e or

dina

nces

: pro

spec

tive

evi

denc

e

City

(so

urce

)W

age

incr

ease

W

orke

rs

Tot

al c

ost

Rel

ativ

e m

easu

reas

a p

erce

ntag

e co

vere

dre

lativ

e to

of

the

min

imum

ec

onom

ic

wag

eac

tivity

(%

)

Los

Ang

eles

, Cal

ifor

nia

(Pol

lin a

nd L

uce

2000

)71

7,62

61.

5F

irm

out

put

Mia

mi-

Dad

e, F

lori

da (

Nis

sen

1998

)66

1,95

61.

8a,b

Con

trac

t val

ueSa

n Jo

se, C

alif

orni

a (B

enne

r an

d R

osne

r 19

98)

117

1,56

13.

0a,b

Fir

m r

even

ueSa

n F

ranc

isco

, Cal

ifor

nia

(Rei

ch e

t al.

1999

a)91

12,3

803.

9a,b

Con

trac

t val

ueD

etro

it, M

ichi

gan

(Rey

nold

s 19

99)

622,

300

2.5b

Con

trac

t val

ueSa

n F

ranc

isco

Air

port

and

Por

t (R

eich

et a

l. 19

99b)

9114

,190

2.7

(air

port

) O

pera

ting

cos

ts4.

6 (p

ort)

New

Orl

eans

, Lou

isia

na (

Pol

lin e

t al.

2002

)19

47,0

500.

9O

pera

ting

cos

tsO

akla

nd, C

alif

orni

a A

irpo

rt a

nd P

ort (

Zab

in e

t al.

1999

)44

3,11

11.

5 (a

irpo

rt)

Fir

m r

even

ue4.

31(p

ort)

c

Sant

a M

onic

a, C

alif

orni

a (P

ollin

and

Bre

nner

200

0)87

2,07

83.

9 (a

ll)F

irm

rev

enue

10.4

(hot

el)

9.6

(res

taur

ant)

New

Yor

k C

ity,

New

Yor

k (S

onn

et a

l. 20

02)

5762

,000

0.3b,

dF

irm

rev

enue

Not

esa

Per

cent

ages

for

city

ser

vice

con

trac

ts o

nly.

bC

alcu

lati

ons

incl

ude

dire

ct c

osts

onl

y.c

Fig

ure

is fo

r th

e R

eal E

stat

e D

ivis

ion

at th

e P

ort o

f Oak

land

onl

y.d

Fig

ure

is fo

r N

ew Y

ork

Cit

y su

bsid

y re

cipi

ents

onl

y.

the third category of economic development assistance. The living wageordinances in Los Angeles, San Francisco, Oakland, and New York extendliving wage coverage to the fourth category of lessees and other tenants oncity property, while the Santa Monica and New Orleans living wage meas-ures comprise the fifth category of geographically-based wage policies.Each of these measures also differs in terms of the provision of otherbenefits, with all the laws except the New Orleans city-wide minimumwage proposal offering some sort of health benefits coverage. In addition,the living wage ordinances in Los Angeles, San Jose, Oakland, and SantaMonica also make provisions for a minimum number of paid days off.

Turning to the mandated wage increases, as can be seen from thesecond column of Table 13.1, these measures vary widely in this regard aswell. The range spans the relatively modest 19 percent increase represen-ted by the $6.15 per hour minimum wage proposed for the city of NewOrleans, to the 117 percent increase over the California minimum wagewhich the $12.50 per hour proposal for the city of San Jose represents.Taken together, the ordinances stipulate, on average, a 71 percent increaseover the prevailing minimum wage.

The third column of Table 13.1 reports the number of workers likely tobenefit from each living wage measure. Here, too, there is wide variationamong the different types of living wage measures, with the number ofestimated beneficiaries ranging from as low as 1,561 in San Jose, to as highas 62,000 in New York City. By and large the number of workers coveredby each ordinance corresponds to the breadth of coverage in each case.For example, the city-wide minimum wage proposal in New Orleans wasexpected to cover close to 47,000 individuals – more than 10 percent of thecity’s population. The San Jose living wage measure, when applied to the235 firms holding eligible city service contracts, is projected to cover only1,561 individuals – a mere 0.2 percent of the San Jose population.3 Oneanomaly appears to be the case of New York, where approximately 62,000individuals are expected to gain from the proposed living wage law. Whilethis figure is much higher, in absolute terms, than any of the other citiesunder consideration, upon closer inspection it appears to be roughly in linewith the scope of the most comparable ordinance under considerationhere, namely the city of San Francisco’s living wage law.4

Total costs relative to economic activity

We now turn our consideration to the key finding from each of the tenstudies presented in the fourth column of Table 13.1, the estimate of totalexpected costs relative to some measure of firm economic activity.Because of the range of data and methods employed in these studies, themeasure of economic activity varies across the cases listed in the table. ForSan Jose, Oakland, Santa Monica, and New York, the total cost of theliving wage ordinance was measured against firm revenue, with Los


Angeles differing only slightly in that firm output (the value of sales plusinventory) was used for relative calculations. For the estimates in Miami-Dade County, the city of San Francisco, and Detroit, the total cost ofcovered contracts was used as the metric for measuring living wage costs,while studies in New Orleans and the Port and Airport of San Franciscocompared total costs to firm operating costs (production costs net capitalcosts).

As we see from Table 13.1, these cost estimates display a wide range,from 0.3 percent of firm revenue for New York City subsidy recipients, to10.4 percent of gross receipts for luxury hotels in Santa Monica. Severalfactors influence the magnitude of these relative costs. The first is obvi-ously the size of the mandated wage increase, with more modest wageincreases generating correspondingly modest average cost increases. Themost prominent example of this is New Orleans, where the 19 percentincrease in the minimum wage was found likely to elicit a 0.9 percentincrease in operating costs on average. At the other extreme is the case ofSan Jose, where the living wage level initially proposed was a full 117percent above the California minimum wage. This relatively high livingwage level helps explain why the average cost increase for San Jose citycontractors was approximately 3 percent, as compared to the 1.5 percentaverage cost increase anticipated for Los Angeles city contractors, whofaced a 71 percent increase over the operative minimum wage.

A second factor that influences the magnitude of the relative cost esti-mates in Table 13.1 is the incorporation of a host of indirect costs, incorpo-rated into the estimates for Los Angeles, New Orleans, Santa Monica, andthe Port and Airport of San Francisco and Oakland. Commonly referredto as “ripple effects,” these non-mandated wage and benefit increases area well-established empirical phenomenon, despite some ambiguity as totheir precise magnitude. In the context of the minimum wage, researchindicates that ripple effects are typically much smaller in proportionalterms than mandated increases, and they do not reach very far up thewage distribution, perhaps no more than $1 to $2 above the newly man-dated minimum wage (e.g. Spriggs 1993; Card and Krueger 1995; Lim2002). Of course, establishing the magnitude of any ripple effects that mayresult from a living wage is necessarily a more speculative exercise thanthe estimation of its direct costs. However, in the five cases where rippleeffects are estimated, they display a strong degree of consistency, rangingfrom 11 percent to 26 percent of total costs. Clearly effects of this size arelarge enough to influence estimates of total relative cost, and any estimateswhich include these non-mandated costs will be correspondingly largerthan those focused only on direct costs alone.

Finally, a third major factor influencing the magnitude of relative costsis the degree to which living wage coverage is concentrated in relativelylow-wage industries. When such concentrations occur, relative cost figureswill be slightly higher on average, in the range of 4 percent of revenues or

196 Mark D. Brenner

operating costs. This can be seen in cost estimates for the ports of Oaklandand San Francisco, where the living wage ordinance falls most heavily onthe restaurant and retail sectors. There may also be sectors, such as thecase of Santa Monica’s hotels and restaurants, where the relative costsexceed even these figures. What is equally important to note, however, isthat many, if not most, firms covered by living wage ordinances will facemuch smaller cost increases. One example of this is the case of New YorkCity subsidy recipients – large firms concentrated in high wage industriessuch as financial services, media, and manufacturing – where cost increasesare much more modest than the figures discussed above, on the order of0.3 percent of firm revenue. Indeed, research in Los Angeles hasdemonstrated that, in fact, the vast majority of firms covered by that city’sliving wage law fall into this “low impact” category. According to Pollinand Luce (2000), a full 86 percent of covered businesses were anticipatedto have cost increases of 1 percent or less. Thus, while it is important toacknowledge the much larger impact that living wage laws will have on asmall subset of covered firms, the experience of these firms appears to bethe exception and not the rule.

To summarize, despite the vastly different scope of each living wagemeasure, coupled with the range of methodologies and data utilized toestimate the economic impact in each case, there is a striking degree ofconsistency in the projected cost figures for each city. Most cost estimatesfall into the range of 1–2 percent of firm revenue, or 2–4 percent ofcovered contract value. There are notable exceptions to these averages,such as the hotels and restaurants of Santa Monica, expected to face costincreases of approximately 10 percent of revenue. However, even in theSanta Monica case, if we calculate the average cost increase for affectedfirms other than hotels and restaurants we find that these businesses arelikely to face a cost increase of approximately 2.2 percent. Establishing themagnitude of likely cost increases is crucial if we are to accurately gaugehow firms will respond to living wage mandates. Before turning to thesequestions, however, I turn to evidence that draws on the actual experi-ences of cities that have passed living wage measures in recent years.

The economic impact of living wages: retrospectiveevidence

This section analyzes the impact that living wage laws have had on citycontract costs and bidding patterns. As noted earlier, one of the principalfears voiced by opponents to living wage laws is that these measures willnegatively affect city budgets. It is argued that if living wage laws generatesubstantial costs, particularly for city service contractors, these costs willultimately be passed back to city governments. Such costs could leavecities with the unpleasant choice of either reducing the level of existingcity services or raising additional revenue through higher taxes. A second


concern is that living wage laws may cause some bidders to reconsider thedesirability of city contracting, adversely affecting the competitiveness ofthe bidding process.

The evidence considered with regard to these questions comes fromtwo sources: information reported by cities themselves in official docu-ments or in interviews with scholars; and evaluations of city recordsconducted by independent researchers.5 In terms of the independentassessment of the effects of living wage laws, there are three major evalua-tions. Two analyze Baltimore, MD, one of the first cities in the USA topass a living wage law. These reports compare approximately two dozencontracts before and after the law went into effect (Weisbrot and SforzaRoderick 1996; Niedt et al. 1999). The third study considers similar evid-ence on changes in contract costs following living wage implementation inthree New England cities: Hartford, CT, New Haven, CT, and Boston,MA (Brenner and Luce 2003). Table 13.2 also provides several estimatesfrom local officials concerning the changes in contract costs followingliving wage implementation. These include information on several socialservice contracts in Dane County, WI, and San Francisco, CA (Elmore2003) and the thirty-one covered contracts in Corvallis, OR (Brewer2001).

Turning to the evidence, the most important point is that cities havehad a wide variety of experiences with living wage laws. For example, inthe Baltimore case, both studies found only modest increases in nominalcontract costs (in the aggregate) after the implementation of the livingwage law. Weisbrot and Sforza-Roderick (1996) reported a nominalincrease of less than a quarter of a percent in the total cost for all nineteencontracts in their study following living wage implementation, while Niedtet al. (1999), incorporating an additional year’s worth of data and severaladditional contracts, found a nominal increase of 1.2 percent for thetwenty-six contracts they analyzed. In both cases, these nominal increaseswere lower than the rate of inflation, implying that, in real terms, city con-tract costs decreased in Baltimore following the implementation of thatcity’s living wage law. This experience of declining real contract costs isnot unique to Baltimore. As is evident from Table 13.2, both Boston andNew Haven also witnessed a decline in the real value of covered contracts,and the nominal increase in contract costs for covered social services inDane County and San Francisco was below the rate of inflation in eachlocality.

Although aggregate costs declined in real terms in each of these cases, itis important to note that many of these studies documented substantialvariation across individual contracts. For instance, one small janitorialcontract in Baltimore increased in nominal terms by 47.1 percent while thecontract for summer food services declined by 11.6 percent. Meanwhile,the contract for bus services, by far the largest covered contract in Balti-more, rose by only 2.1 percent (Niedt et al. 1999). Given this wide range of

198 Mark D. Brenner

Tab

le 1

3.2

Eco

nom

ic im

pact

of v

ario

us li

ving

wag

e or

dina

nces

: ret

rosp

ecti

ve e

vide

nce

City

(so

urce

)F

isca

l yea

r W

age

incr

ease

A

vera

ge a

nnua

l N

umbe

r of

con

trac

ts

livin

g w

age

as a

per

cent

age

incr

ease

in r

eal

revi

ewed

impl

emen

ted

of th

e m

inim

um

cont

ract

cos

ts

wag

e(%

)a

Bal

timor

e, M

aryl

and

(Wei

sbro

t and

Sfo

rza-

Rod

eric

k 19

96)

FY

199

6–97

44�

1.9

19B

alti

mor

e, M

aryl

and

(Nie

dt e

t al.

1999

)F

Y 1

996–

9744

�1.

2b26

New

Hav

en, C

onne

ctic

ut (

Bre

nner

and

Luc

e 20

03)

FY

199

7–98

56�

10.9

9B

osto

n, M

assa

chus

etts

(B

renn

er a

nd L

uce

2003

)F

Y 1

999–

2000

57�

7.3

29D

ane

Cou

nty,

Wis

cons

in (

Elm

ore

2003

)F

Y 1

999–

2000

54�

2.8b,

c12

Cor

valli

s, O

rego

n (B

rew

er 2

001)

FY

200

0–01

38�

9.1

31Sa

n F

ranc

isco

, Cal

ifor

nia

(Elm

ore

2003

)F

Y 2

000–

0157

(w

ith

heal

th)

�1.

0b,c

–78

(w

itho

ut)

Har

tfor

d, C

onne

ctic

ut (

Bre

nner

and

Luc

e 20

03)

FY

200

0–01

43 (

wit

h he

alth

)33

.42

71 (

wit

hout

)

Not

esa

The

se p

erce

ntag

es a

re w

eigh

ted

by c

ontr

act v

alue

.b

Con

trac

t cos

t inc

reas

es a

re m

easu

red

in n

omin

al te

rms.

cT

hese

figu

res

are

for

the

hum

an s

ervi

ces

cont

ract

s co

vere

d by

the

livin

g w

age

law

in e

ach

loca

lity.

experience within cities, it is not surprising that there are also substantiallydifferent experiences between cities, with several reporting rising aggre-gate contract costs following living wage implementation. In Corvallis, theFinance Director reported a 9.1 percent increase in costs for contractsunder the living wage mandate. These increases were sharpest for busrepair and maintenance (34 percent), for custodial services (21 percent),and for the humane society contract (17 percent) (Brewer 2001). Brennerand Luce (2003) also report cost increases of this magnitude for the city ofHartford, where the cost of security guard services and temporary officehelp together rose 33.4 percent following living wage implementation. Oneimportant characteristic of Hartford’s covered services is that they are bidon the basis of an hourly rate, with an estimated, but not guaranteed,number of hours of service to be performed over the life of the contract.The authors argue that soliciting bids on the basis of an hourly rate iscausally linked to the higher contract cost increases witnessed in Hartford.They conclude that this method of bidding blunts the very forces ofcompetition that have held down cost pass-throughs in other cities.

Elmore (2003) also records a wide range of experience in his review ofliving wage implementation in thirteen cities. He notes first that in eachcase he considered, city officials reported higher service contract costs inabsolute dollar terms, although these increases range from very slight(approximately $9,000 in Ypsilanti, MI) to quite substantial (over $3.7million for all human service contracts in San Francisco, CA). Elmore alsodocuments the enormous variation in cost increases among individual con-tracts. He describes cases where contract costs rose by a substantialamount, such as a janitorial contract covered by Warren MI’s living wagelaw which rose by 22 percent, as well as cases where contract costsdeclined in absolute terms, as with three human service contracts in DaneCounty, WI. This variation only serves to underscore our earlier observa-tion that many factors influence city contract costs, with the living wageordinance being only one among them.

We next turn to the effect of living wage laws on bidding patterns.Here, too, city experiences vary widely. In Baltimore, for the fourteencontracts that were re-bid (as opposed to renewed) following living wageimplementation, only three displayed an increase in the number ofbidders, while eight saw a decrease. In total, there were ninety-three bidstendered for these fourteen contracts prior to the living wage, and onlyseventy-six bids tendered following the law (Weisbrot and Sforza-Roderick 1996). These figures suggest that Baltimore’s living wage lawmay have had an impact on the number of bidders willing to compete forcity contracts following living wage implementation. On the other hand,Brenner and Luce (2003) suggest that the effect of living wage laws onbidding patterns can sometimes have the opposite effect. They find, forexample, that covered contracts in Hartford saw a 20 percent increase inthe number of bids tendered following living wage implementation, while

200 Mark D. Brenner

competitively bid contracts in Boston saw no change in the number of bidstendered. By contrast, New Haven saw the total number of bids tenderedfor all contracts decline by three, from thirty-two to twenty-nine.

Regardless of the precise quantitative effect of living wage laws onbidding patterns, results from Elmore’s study, elaborated upon in thefollowing chapter, indicate that many city officials view living wage laws asat least compatible with, if not conducive of, a more competitive biddingprocess. Although fewer cities have examined this issue directly, there issome evidence that bidding has not been adversely affected by living wagelegislation. The Corvallis Finance Director reported that although severalfirms indicated they would not bid on city business because of the livingwage, in fact, every vendor contacted has submitted a bid, “and the bidshave continued to be competitive” (Brewer 2001: 1). Similarly, inHayward, CA, the Acting Finance Director reported that all contractshave remained competitively bid, and that it was the “staff’s opinion thatproductivity and service quality has not been adversely affected” (FinanceDirector’s Office 2000: 3).

Upon reflection, it is not surprising that living wage laws have had arelatively benign effect on the bidding process for city service contracts.Available evidence indicates that when savings accrue from the contract-ing out services, the majority of these savings are the result of providinglower wages and benefits to workers performing the newly privatized ser-vices (Kettl 1993; López-de-Silanes et al. 1997). In such a context, livingwage ordinances can reduce the ability of some bidders to undercut theircompetition by lowering wage and benefit levels. Thus, a living wage lawhas the effect of “leveling the playing field,” forcing contractors tocompete with one another along other dimensions such as service quality.Similar sentiments among city officials in New England are documentedby Brenner and Luce (2003).

Several conclusions emerge from the evidence discussed above. First,although cities have had a wide range of experiences with living wage laws,the preponderance of evidence indicates that living wage ordinances areunlikely to cause large increases in city contract costs. There are, ofcourse, specific contracts or types of services for which cost increases willoccur, but even in these cases the bidding terms and the competitivenessof the bidding process can modulate cost pass-throughs to the city. Withregard to the bidding process itself, here, too, the effects of living wagelaws are highly variable. There are some instances – such as in Baltimore –where living wage ordinances appear to shrink the pool of willing bidders,although there are also examples where living wage ordinances appearto have strengthened the bidding process. Available evidence indicatesthat city officials do not see these measures as an impediment to competit-ive bidding, and may, in fact, consider them an inducement. Thisheterogeneity in bidding experiences also serves to underscore the factthat the living wage ordinance is only one of many factors influencing the


competitiveness of city procurement. It also reinforces the conclusiondrawn earlier that firm behavior in the face of higher wage mandates is notnearly so straightforward as often theorized.

How do firms adjust to living wage mandates?

Thus far, we have gained an understanding of the range of costs businessesare likely to experience when faced with living wage mandates as well as asense of how city service contract costs and bidding practices have beenaffected by living wage laws. I will now try to draw out the links betweenthese two elements, turning our attention to the various means by whichfirms can confront higher wage mandates. The assessment is based on therelative magnitude of these costs, the range of outcomes observed at thecity-level, and, where possible, direct evidence on firm behavior followingliving wage implementation.

When reviewing how firms respond to wage floors, two types of adjust-ments – layoffs and relocations – are the most frequently discussed. Yetthese are not the only options firms have at their disposal, nor do theyappear to be the most likely means by which firms address the higher laborcosts associated with living wage laws. Indeed, there are three otheradjustment channels that firms can employ: raising prices; increasing firmproductivity; and increasing the share of firm income going to low-wageworkers. Available evidence indicates that adjustment is more likely tooccur through some combination of these three mechanisms, as they canbe accomplished more readily and at lower costs than either layoffs or firmrelocation.

Raising prices

For most firms covered by living wage laws, the process that would be leastcostly and disruptive would be to raise prices to reflect increased costs. Buta firm’s ability to raise prices depends on the competitiveness of themarket in which they operate as well as how price-sensitive their cus-tomers are (i.e. on the elasticity of product demand). If we first considercity service contractors, it is important to recognize that these firms willtypically face at least one serious competitor during the bidding process(Rehfuss 1989). If living wage costs are modest, on the order of 1–2percent, bid prices from covered vendors may not be affected, as thesefirms are unlikely to sacrifice the reliable income stream and healthymargins associated with government contracts over such modest changesin operating costs. This helps explain why so many cities have not wit-nessed rising contract costs following living wage implementation, sincemost covered vendors fall into this category.

If living wage costs are more substantial, however, it is likely that firmswill press the city to absorb some or all of these costs. The absolute

202 Mark D. Brenner

number of these “high impact” firms appears to be small. For example,Pollin and Luce (2000) estimate that roughly 7 percent of covered contrac-tors in Los Angeles faced cost increases greater than 10 percent. It isimportant to recognize that a significant portion of the higher costs can beabsorbed by the firm through other means, obviating the need to passthem back to city governments. However, it is nonetheless true that evenfull pass-through of such costs is a small fraction of the total city budget –0.2 percent in the Los Angeles example discussed above. Cities can alsouse competition (or the threat of it) to inhibit full cost pass-through, asillustrated by the experience in the city of Pasadena, CA. There, coveredvendors agreed to absorb between 40 to 55 percent of the higher costsassociated with living wage if the city extended their current service agree-ments rather than put them out for competitive bidding. There are alsoways in which cities can modulate cost pass-throughs by changing thestructure of contracting. One example of this includes Multnomah County,OR, where the living wage policy increased service delivery costs by 27percent. However, the county was able to limit their contract cost increaseto only 5 percent by consolidating three formerly separate janitorial ser-vices (Facilities and Property Management Division, n.d.). Brenner andLuce (2003) have also shown that pass-throughs are highest for contractsbid on a unit-cost basis (sometimes known as “cost-plus” bidding), indicat-ing that cities can also limit cost pass-throughs by changing the terms onwhich bidding occurs.6

What about those firms not directly contracting with city governments?The largest set of these firms operate concessions on city property, sellinggoods and services to the public in airports, ports, and other public facili-ties. While their ability to pass along higher costs will ultimately be gov-erned by their demand elasticities, it is important to stress that these firmsoperate in highly circumscribed markets.7 These contained environmentsstrengthen firms’ ability to pass costs on to consumers in the form ofhigher prices. Available evidence also indicates that price increases on theorder of 3–4 percent are within a range which does not undermine demand(Card and Krueger 1995).

Productivity and redistribution

In examining these two adjustment channels, we start from the premisethat covered firms are experiencing productivity gains on the order of 1percent per year prior to living wage implementation, roughly half theannual average for all US businesses over the last full business cycle. Thisimplies that for most covered firms a large portion – if not the entirety – ofliving wage costs can be absorbed with productivity increases that are thenormal course of business development. However, firm productivity islikely to grow faster following living wage implementation for at least tworeasons. First, firms are likely to be more attentive to potential cost-saving


measures, as well as more open to changes in work organization that couldcompensate for the slightly higher labor costs they now face. Second, thehigher wages associated with living wage laws are also likely to have asalutary effect on employee performance. For example, as the efficiencywage literature has made clear, paying higher wages is likely to increaseindividual effort and motivation among covered workers. These higherwages are also likely to reduce other less appreciated labor costs such asturnover and absenteeism. While difficult to quantify, the available evid-ence is clear that living wage laws can dramatically reduce both turnoverand absenteeism. The most striking example of these effects is from theSan Francisco airport, where Reich et al. (2003) have shown that turnoverfell by up to 80 percent for several low wage occupations following livingwage implementation. Similarly, Howes (2002) estimates that the SanFrancisco living wage law contributed to a 20 percent decline in turnoverfor covered homecare workers. Turnover reductions of this magnitudemay not generate savings sufficient to fully offset living wage costs.However, they will no doubt ease the financial pressure which otherwisewould spur firms to pass such costs back to the city.

Of course, channeling productivity increases into higher wages for low-paid employees entails a redistribution of income within covered firms. Bythe same token, for most firms this adjustment would occur only once, inthe first year of living wage implementation. Subsequent productivityincreases could be absorbed by the firm in whatever manner they deemappropriate, with lower-paid workers still receiving a living wage.

Layoffs and firm relocation

There are few reasons to expect that living wage laws will lead to layoffs orother negative employment consequences. This is sensible given themodest costs for most firms covered by living wage laws. However, evenfor “high impact” firms, there are many reasons to believe that some com-bination of prices, productivity, and redistribution will prevent firms fromshedding labor to comply with living wage laws. Recent empirical evidencealso supports these conclusions. Three examples stand out. At the SanFrancisco airport, Reich et al. (2003) report that total employment incovered firms increased by 15 percent following living wage implementa-tion. Brenner and Luce (2003) report that firms covered by the Bostonliving wage ordinance also saw employment increase by 15 percent overpre-living wage levels. Howes (2002) estimates that the number of home-care workers covered by San Francisco’s living wage law increased by 54percent. In the Boston case, another particularly important finding is thatemployment grew faster for those firms who were forced to raise wages tocomply with the living wage law than for those firms who did not (Brennerand Luce 2003). On a full-time equivalent basis, employment growth wasestimated to be nearly 50 percent higher for firms raising wages than for

204 Mark D. Brenner

those who did not, with the bulk of this increase resulting from firms shift-ing part-time workers to full-time schedules. While this does not suggestthat higher wage floors “caused” higher employment, it does demonstratethat the two are at least compatible, particularly in a context of rapid eco-nomic growth. It also bolsters the contention that other macroeconomicfactors are decisive in determining the precise level of employment.

When considering relocation, there are few reasons to believe thatliving wage laws will create substantial incentives for firms to move out oftheir current geographic area. First, as noted many times before, the mag-nitude of living wage costs are very modest for most covered firms, makingrelocation infeasible on a purely cost basis. Of even greater consequence isthe fact that most living wage laws regulating city service contracting applytheir wage mandates to firms regardless of their location, so firms areunable to avoid compliance by relocating out of a given locality. Reloca-tion incentives pose a more serious issue for some geographically-basedliving wage measures such as the Santa Monica and New Orleans livingwage proposals. However, even in these two cases, the available evidenceindicates that the most heavily impacted businesses – hotels and restaur-ants that comprise the core of both cities’ tourism industry – are alsoheavily tied to their current locations (Pollin and Brenner 2000; Pollin etal. 2002). Relocation would no longer allow firms to compete in the touristmarket, which is the core of their current operations. Thus, on balance, theevidence indicates that due to the specific manner in which living wagelaws function, firms under their mandate will find adjustments throughsome combination of prices, productivity, and redistribution preferable tothe more disruptive options of layoffs and relocation.

Conclusion

This chapter has reviewed the economic effects of local living wage ordi-nances, drawing on a range of prospective and retrospective research. Wehave seen that these laws are highly individualized local measures, whichprecludes using the national data sets and statistical techniques that arethe mainstay of modern labor economics to examine living wage dynamics.We have also seen that, much like recent research on more conventionalminimum wage measures, the evidence suggests that firms respond toliving wage laws in ways not readily anticipated by competitive models ofthe labor market. There appear to be several explanations for this empiri-cal regularity. First, most firms covered by living wage laws experienceonly modest costs – on the order of 1–2 percent of total economic activity– which carries with it the implication that layoffs or firm relocation arelikely to be far more disruptive and costly than other channels of adjust-ment. For some firms, the costs associated with living wage compliance aremuch greater, 10 percent or more of economic activity; however, even forthis set of firms, the evidence suggests that some combination of price


increases, productivity enhancements, and internal redistribution are theprimary means by which they adjust to these measures.

While these alternative adjustment measures make it unlikely that firmswill shed workers or move from their existing base of operations, theynonetheless have potentially serious implications for city budgets. Whilethere is clearly evidence that living wage laws raise the price of certain cityservice contracts, there is also significant evidence that this is not a gener-alized phenomenon. Indeed, both internal adjustments such as productiv-ity increases or redistribution, as well as the external force of competition,appear to preclude the full pass-through of living wage-related costs to citybudgets. While it is important to realize that even full cost pass-through byhigh impact firms is a negligible percentage of city finances – less than 0.2percent for our example of Los Angeles – it is also important to acknow-ledge that cities can affect the degree to which firms pass along living wagecosts by both altering the terms for certain services as well as changingbidding procedures for others. Thus, the weight of the accumulated evid-ence indicates that living wage laws have an important impact on the livingstandards of a modest number of beneficiaries, while diffusing the costsbroadly among city service contractors and the general public. This analy-sis reinforces the imperative to evaluate economic policies on the basis ofavailable empirical evidence, highlighting the fact that theory often servesas a poor guide in the process of policy evaluation. If the US case is anaccurate guide, available evidence suggests that living wage initiatives area concrete, but small-scale, mechanism at the disposal of local govern-ments in other countries, that can help reverse the stagnating living stand-ards of the lowest-paid workers in their community.

Notes1 It is important to distinguish between monitoring or enforcing living wage laws

and actually applying them to business assistance recipients. All business assis-tance cities were indeed enforcing their laws in the sense that they were moni-toring economic development projects to see if any fell under the strictures ofthe living wage law. However, except for San Antonio, Texas, Brenner et al.(2002) concluded that no business assistance cities had had a case where the lawwas applied to an actual business assistance recipient.

2 New York City passed a very limited living wage measure in 1996. This studyconsiders the substantial expansion of this law adopted in November 2002.

3 Population figures, from 1999, are drawn from the most recent Census Bureauestimates: http:www.//eire.census.gov/popest/archives/place/SC100K-T1.txt

4 In fact, the San Francisco ordinance, with a city-wide population of approxi-mately 747,000 in 1999, actually covers a proportionally greater share of the citypopulation than does New York, with a city-wide population of 7.4 million, 1.7percent versus 0.8 percent respectively.

5 As in the previous section, information is included only if it provides some senseof the relative magnitude of cost increases or decreases following living wageimplementation. This excludes several of the internal city reports discussed inElmore (2003).

206 Mark D. Brenner

6 Unit-cost bids are typically submitted as an hourly rate for services performed,such as for security guard services or temporary office assistance. This form ofbidding is most prevalent when cities are unsure of the exact level of servicesrequired in the future, and want to maintain the contractual flexibility toincrease or decrease their usage as concrete needs are identified.

7 It is also true that most firms highly impacted by geographically-based measuresalso have very localized product markets. This was the case for firms covered byliving wage proposals in Santa Monica, California, and New Orleans, Louisiana(Pollin and Brenner 2000; Pollin et al. 2002).

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14 Living wages in US communitiesAn analysis of costs of servicesand economic development

Andrew J. Elmore

Living wage laws requiring businesses receiving city contracts or subsidies topay a wage standard above the poverty level flow from a public recognitionthat hard work should be rewarded with adequate pay and benefits and thattaxpayer dollars should not support the creation of substandard wage jobs.While the policy goals driving these initiatives have found broad supportamong local lawmakers and the public, local lawmakers and communitiesare justifiably concerned about the degree to which living wage require-ments applied to city contracts will result in higher costs for cities, andwhether living wage requirements applied to business subsidy programs willprevent cities from using subsidies to attract and retain desired employers.

This chapter summarizes an examination of the effects of living wagelaws on local governments’ contract prices and business subsidy programs.We review the evidence for twenty cities and counties that, by late 2001,had had a living wage law in force for at least one year and were able toassemble and share with us cost impact estimates, formal internal evalua-tions, and/or other observations of the effects of their laws. Combininglarger cities like San Francisco, California, and San Antonio, Texas, withmedium-sized cities like Oakland, California, and smaller cities likeMadison, Wisconsin, and Warren, Michigan, the study reflects the experi-ences of a broad range of communities.1

The methodology of studying living wage ordinances

In order to assess the effects of living wage ordinances on local govern-ment contract costs and business subsidy programs, we contacted city andcounty officials and collected information on their communities’ experi-ences. After preliminary contacts with twenty-nine cities and counties,2 atotal of fourteen informed us that they were able to provide us with assess-ments of the impact of their living wage laws on local government contractcosts. Ten localities were able to assess the impact of living wage laws ontheir business subsidy programs. Some cities were able to provide assess-ments for one category but not the other. The end result is that the groupof communities covered in this chapter equals twenty.

For the research methodology, we conducted structured interviews withgovernment administrators and lawmakers and analyzed studies done bythe localities themselves. In all of the communities, some sort of central-ized authority possessed information on the locality’s experience with itsliving wage law. In some local governments, this took the form of anadministrator charged with overseeing implementation. In a number of thecommunities, the locality had conducted a formal review of the law’simpact that examined the degree to which the law had increased costs foror otherwise impacted their programs. We focused our questioning on theliving wage laws’ effects on the local governments’ contract costs and busi-ness subsidy programs. In an effort to limit the possible effects of biases bylawmakers and administrators – biases either in favor of or against theliving wage policy – we attempted wherever possible to draw data fromseveral sources, including interviews with different city officials andwritten city reports or analyses.

This chapter summarizes research that is among the first presenting anoverview of the direct experiences of a group of cities and counties withliving wage laws. It thereby adds new experiential insight to studies thathave examined city contract costs in an individual city after the adoptionof a living wage law (for example, Weisbrot and Sforza-Roderick 1996;Sander and Lokey 1998; Niedt et al. 1999; Brenner and Luce 2003; Reich etal. 2003), as well as to prospective analyses that have projected costimpacts prior to the adoption of living wage laws (for example, Williamsand Sander 1997; Nissen 1998; Reynolds 1999; Pollin and Luce 2000).

To date, there have been few attempts to examine the impact of livingwage laws on city business subsidy programs or to examine the effects ofliving wage laws across a group of cities. One recent study (Neumark2002) attempted to assess indirectly the impact of living wage laws on localeconomies by looking for trends in overall poverty and employment datain cities with living wage laws. However, its approach and findings havebeen questioned by other researchers (Brenner et al. 2002). While theexamination of the direct experiences of a group of cities and countieswith living wage laws does not reveal every aspect of the costs of theselaws, the experiences and analyses of local officials with first-hand know-ledge offer important insights into the impact of living wage laws.

Service contracts: lower than anticipated costs

To assess the degree to which living wage laws increased the costs of cityservice contracts, we interviewed administrators and lawmakers from atotal of fourteen cities and counties. One would expect that requiringhigher wages would result in some increase in the cost of service contracts.However, as summarized in Table 14.1, the reported increases in servicecontract prices were consistently very small, generally ranging between0.003 percent and 0.079 percent of the localities’ budgets.

Living wages in US communities 211

As expected, contract costs did increase modestly. Increases for mid-sized cities ranged from $40,000 in San Jose, California, to $265,000 inAlexandria, Virginia. Smaller cities (Hayward, California, Madison, Wis-consin, Warren, Michigan, and Ypsilanti, Michigan) reported a minor costincrease of between $6,000 and $60,000. As shown in the last column ofTable 14.1, these service contract cost increases represent a very smallproportion of the city operating budgets – in all cases less than 0.08percent. This relatively modest impact led most administrators to reportthat service contract costs as a whole did not significantly increase afterpassage of a living wage law. As Madison’s comptroller stated, “[from a]city-wide view, the actual fiscal impact [of the living wage law] has beennegligible.”3

However, administrators did note significant increases in costs for spe-cific contracts in sectors involving labor-intensive work performed by largenumbers of low-wage workers. In some localities, several such contractsincreased substantially in cost. In Hartford, Connecticut, a contract forsecurity services, the first contract covered by the city’s living wage law,increased by $160,392, or 30.5 percent from the year before. Twenty-threecontracts covered by the Alexandria, Virginia, living wage law increasedan average of 10.6 percent, and two of these increased by over 20 percent.Similarly, the city of Warren, Michigan, reported a contract price increaseof $61,848, or 22 percent from the previous year following the re-biddingof its janitorial contract. Implementation of Berkeley’s (California) livingwage law caused that city’s security contract to increase from $55,000 to$114,000, doubling in price.

These significant increases are not surprising given living wage laws’focus on increasing pay for workers at the bottom of the economic scale.One would expect contracts for labor-intensive services such as security,

212 Andrew J. Elmore

Table 14.1 City contract cost increases after passage of living wage laws, 2001

Locality City budget ($) Contract cost Increase as a % increase ($) of city budget

Alexandria, Virginia 395,636,000 265,000 0.067Berkeley, California 289,546,000 229,000 0.079Cambridge, Massachusetts 296,467,000 150,000–200,000 0.067Hartford, Connecticut 422,667,000 160,000 0.038Hayward, California 135,400,000 9,000 0.006Madison, Wisconsin 159,000,000 29,000 0.018New Haven, Connecticut 511,071,000 20,000 0.003Pasadena, California 493,596,000 240,000 0.049San Jose, California 645,000,000 40,000 0.006Warren, Michigan 136,490,000 60,000 0.040Ypsilanti, Michigan 13,000,000 6,000 0.044Ypsilanti Township, Michigan 24,745,000 6,000 0.0

groundskeeping, and janitorial services to increase. Such contracts usuallyemploy a large low-wage workforce.

The living wage laws in the above cities generally did not cover con-tracts for social services such as home health care or day care, which typi-cally involve large concentrations of low-wage workers. Human and socialservices contracts were not covered by many cities, either, because suchservices tend to be provided by counties rather than cities, or becausemany of the earlier living wage laws exempted non-profit human servicesproviders from coverage. However, three of the localities studied did havesubstantial contracting programs in the human services area that werecovered by their living wage laws: Berkeley, California; Dane County,Wisconsin; and San Francisco, California. Moreover, unlike most cities,these localities were able to provide more refined data showing theincrease in contract costs as a percentage of the annual human servicescontracting budget rather than as a percentage of the overall municipalbudget. We report the costs of these programs relative to the human ser-vices budget in Table 14.2. Note, however, that as a percentage of theoverall municipal budget, these living wage effects would be substantiallysmaller.

These human services contracts led to the largest increases as a result ofa mandated living wage. Berkeley saw a cost increase in its human servicesbudget by $170,000 to meet its living wage requirement of $9.75 an hour.Dane County increased its human services budget by $676,000 between2001 and 2002 ($338,000 each year) in order to raise the minimum wagesof approximately 645 full-time human services personnel to $8.53 an hour.San Francisco increased its human services contracts by $3,714,000, inorder meet its living wage requirement of a $9.00 minimum wage.

As the final column of Table 14.2 illustrates, although these increaseswere the largest experienced by the localities reviewed in this report, theystill represent a modest proportion of these local governments’ human ser-vices budgets. The largest proportional increase occurred in Berkeley,where the human services contracts totaling $6,099,000 increased by 2.79percent as a result of the living wage law. In San Francisco, where thehuman services contract budget is $312 million, the living wage resulted in


Table 14.2 Human services contract cost increases after passage of living wagelaws, 2001

Locality Budget for Cost increases Increase as % human services for human of human contracts ($) services services

contracts ($) budget

Berkeley, California 6,099,000 ,170,000 2.79Dane County, Wisconsin 112,000,000 ,338,000 0.30San Francisco, California 312,000,000 3,714,000 1.01

a cost increase of approximately 1 percent. The increase in Dane Countyrepresents a 0.3 percent increase in the locality’s current $112 millionhuman services budget. These experiences suggest that local governmentsthat extend living wage laws to non-profit human services programs cananticipate somewhat larger, but overall still quite modest, increases in thecosts of such contracts.

In anticipation of expected cost increases, several cities made budgetimpact projections based on the assumption that contractors would passthrough the entire cost of increased wages to the city. All cities that pro-jected a cost increase greatly overestimated the actual impact that livingwage laws had on local contract programs. Table 14.3 contrasts actualcosts increases with projected cost increases. As shown in the last columnof Table 14.3, actual cost increases were 30 percent to 50 percent lowerthan projections.

Other reports from local governments suggest that many localitiesexperienced smaller contract price increases than they anticipated. InDane County, Wisconsin, an analysis of four contracts involving low-wagework projected to increase in cost revealed that only one contractincreased in cost (by 10.2 percent) from 2001 to 2002, while the other threecontracts actually decreased in cost. The New Haven, Connecticut, Con-troller reported that “we originally thought [that the living wage lawwould have] a significant impact [on agency budgets].” However, reportsfrom agencies after the first year of implementation show that New Havencontracts have never exceeded their line in the budget, despite the law’sincreased coverage as more contracts are re-bid with the living wagerequirement.

Factors that may have limited the impact on contract costs

The modest increases in contract costs resulting from living wage lawshave surprised some observers and have led to an examination of why thisis the case. The experiences reported to us by the cities and counties in thesample suggest that two factors contribute to this result: the small numberof covered service contracts in most cities and counties that involve large


Table 14.3 Projected versus actual increases in contract costs

Locality Total budget Projected Actual Difference ($) increase ($) increase ($) (%)

Alexandria, Virginia 395,636,353 500,000 265,988 �47Berkeley, California 289,546,000 479,425 228,800 �52Cambridge, 296,466,580 300,000 150,000– �33–50

Massachusetts 200,000Pasadena, California 493,596,335 340,000 240,000 �30

concentrations of low-wage workers; and an evident capacity of many con-tractors to absorb a portion of the higher labor costs.

In most localities, relatively few of the covered service contracts involvelarge concentrations of low-wage workers. To begin with, most living wagelaws incorporate minimum size thresholds that exclude from coverageemployees of small contractors and businesses with small city contracts.Among those service contracts that are covered, many involve relatively fewworkers whose pay must be raised to meet the living wage standard. In mostcities, it is only a handful of contracts, typically those for janitorial and secur-ity guard services in which substantial numbers of workers must be givenraises in order to meet the living wage. This is particularly true for city-levelliving wage laws; they seldom cover non-profit human services programs, theservice contracting area generally involving the largest concentrations of low-wage staff. However, the limited number of covered service contracts involv-ing large concentrations of low-wage workers does not fully explain therelatively small contract cost increases that cities have experienced. Asexplained earlier, several cities found that contract cost increases were sub-stantially lower than projected – projections that generally took into accountthe distribution of low-wage workers under the covered contracts.

A second key factor contributing to limited contract cost increases,based on reports from cities and counties, appears to have been contrac-tors absorbing some of the new labor costs rather than fully passing themon to the localities through higher contract prices. Reports suggest thatcontractors absorbed some portion of the increased costs where imple-mentation of the living wage was combined with steps to increase competi-tion for city contracts, and where the living wage generated employerbenefits that offset some of the increased wage costs, such as decreasedstaff turnover and increased worker productivity.

Specifically, the enactment of living wage laws led several local govern-ments to open for competitive bidding some contracts that had not beensubject to this process for some time. Many administrators believe that thisnewly competitive contracting environment led contractors to be morewilling to absorb some of the increased costs associated with the livingwage law in order to remain competitive and secure the highly valued con-tracts. A policymaker in Ypsilanti Township, Michigan, remarked that theTownship’s major contracts had “more bidders than ever before, at evenbetter rates.” She attributed the lower bids to the living wage law, whichsubjected contracts to a competitive bidding process with fixed wage andbenefit requirements. In order to remain competitive, bidders had to “betighter and provide less of a profit margin.” In fact, an administrator fromAlexandria, Virginia, found that “[t]here have been some competitiveadvantages to rebidding. We have seen some incumbents who lost on thesecond go-round, and it may be due to the bidding process.” Contractorscontinued to see the contracts as desirable despite costs associated withthe living wage laws.


In addition, some contractors appear to have absorbed some of theliving wage-related labor cost increases, even in the absence of a competit-ive bidding process. For example, an analysis by the San Jose (California)Contract Compliance office found that in San Jose’s contract with thecity’s convention center, the living wage requirement increased labor costsby 4 percent, yet the cost for the contract increased by only 1.5 percent.The city analysis concluded that 61 percent of the increased costs weresimply absorbed by the convention center. In Hayward, California, afterexamining the payroll records of all service contracts covered by the city’sliving wage law, Hayward’s auditor concluded that service contractorschanged their pay scales to comply with the living wage requirementswithout demanding an increase in the contract prices from the city. Theauditor attributed the contractors’ willingness to absorb the increasedlabor costs to the modest size of the cost increases created by the livingwage on most city contracts. The director of purchasing of San Francisco,California, remarked that the living wage law was a “non-event” amongfor-profit service contractors, and that contractors typically paid the livingwage requirement without complaint or a request to modify in thecontract.

These reported experiences of cities and counties generally suggest thatwhere service contracts reflect generous or above-market profit margins(as may be the case for contracts that have not been competitively bid forsome time) and a living wage law increases labor costs modestly, contrac-tors are likely to absorb a significant share of the increased labor costs. Onthe other hand, where contracts have small, defined profit margins andinvolve large concentrations of low-wage workers (as is often the case fornon-profit human services contracts), the cost increases resulting from aliving wage law will be larger and it may be necessary for the local govern-ment to bear a greater proportion of them.

Finally, contractors may have absorbed some of the increased laborcosts because they were offset by savings resulting from decreasedturnover and higher productivity among the workers whose wages rosebecause of the living wage requirements. The Pasadena (California)Budget Administrator interviewed the majority of contractors affected bythe living wage requirement, a number of which reported that the law hadthe benefit of reducing turnover in their workforces. This finding is consis-tent with research studies that have concluded that living wage laws cancreate other countervailing savings for employers that offset a portion ofthe increased labor costs. For example, a study of living wage costs at theSan Francisco International Airport found that higher labor costs werepartially offset by savings to the companies in the form of reducedemployee turnover and increased productivity (Reich et al. 2003).


Business subsidy programs: targeted and sustainedeconomic development

Our investigation also examined the experiences of cities and counties thathave extended living wage requirements to their economic developmentprograms. In order to assess whether living wage requirements have pre-vented cities from using business subsidies to attract or retain desiredemployers, we looked at ten cities with a living wage requirement for eco-nomic development projects: Duluth, Minnesota; Los Angeles, California;Minneapolis, Minnesota; Oakland, California; San Antonio, Texas; SanFrancisco, California; Toledo, Ohio; Warren, Michigan; Ypsilanti Town-ship, Michigan; and Ypsilanti, Michigan. These ten represented all of thosecities across the US that had had a living wage requirement for economicdevelopment projects in place by 2000, a year before the study began, andwhere we could identify a city administrator able to assess the impact ofthe living wage policy on the city program.

We interviewed policymakers and economic development personnel inthese cities, and examined reports prepared by the economic developmentdepartments of Duluth, Toledo, and Oakland, to determine whether busi-nesses have continued to participate in economic development programsin localities where subsidized jobs must pay a living wage. As Table 14.4shows, no adverse impact on economic development projects could bedetected. Rarely was a project cancelled because of a living wage mandate.

Overall, administrators concluded that the requirement to pay a living


Table 14.4 Impact of living wage laws on city economic development projects

Locality Type of projects # Projects with # Projects living wage cancelledconditions each year

Duluth, Minnesota Health Care, 2 0Technology

Los Angeles, California Mixed Use 3 0Minneapolis, Minnesota Technology 6–7 0Oakland, California Mixed use 1 0San Antonio, Texas Technology, 4 0

Finance, Manufacturing

San Francisco, California Mixed use 1 1Toledo, Ohio Industrial n/a 0Warren, Michigan Industrial, 4–6 0

Manufacturing

Ypsilanti Township, Michigan Technology, 5 0Industrial

Ypsilanti, Michigan Industrial 1 0

wage and health benefits to employees did not result in fewer applicantsfor business subsidies. In fact, a number of cities reported banner years foreconomic development in 2001, with correspondingly low local unemploy-ment levels. Administrators who noted a decline in applications for theirbusiness subsidy programs since 2001 attributed this to general economicconditions rather than to business concerns about the living wage require-ment. For instance, Minneapolis, Minnesota, which has had a living wagerequirement in effect since 1998, has seen no drop in applications for itsbusiness subsidy program, and no complaints from businesses since itimplemented its living wage policy. In San Antonio, Texas, which in 2002expanded its living wage policy to incorporate a base living wage standardfor all of a subsidy recipient’s employees, the Economic DevelopmentDepartment successfully recruited a grocery firm to locate its meat distrib-ution plant in the city. The relocation is expected to create forty new jobsat the $8.75 rate. In negotiating the project, the company raised no objec-tions to the wage requirement. In Toledo, Ohio, which did experience adrop in applications for subsidized loans for machinery and equipment in2001, the economic development administrator attributed the decrease tocurrent economic uncertainties and not the obligation to pay a living wage.Similarly, administrators in Los Angeles and Oakland, California, attri-buted any reduction in retail development to the recent decline in tourism,rather than the living wage requirement.

Generally, few cities use economic development funds to subsidize thecreation or retention of jobs in low-wage sectors such as retail. Many local-ities do not see providing business subsidies to retailers, whose employeesgenerally earn at or just above the minimum wage, as the best use ofscarce economic development dollars. As Karen Lovejoy Roe, Supervisorof Ypsilanti Township, explained, “the Township Board . . . feels that ifyou are going to cut a person’s taxes to promote economic development,it’s only worthwhile if the employees are making a decent living standard.”As a result, few of the localities provided subsidies directly to retail estab-lishments.

However, many communities do choose to subsidize mixed-use devel-opment projects, which may include some combination of office, housing,and retail space. The economic development departments in San Fran-cisco, Oakland, and Los Angeles have mandated that developers of mixed-use development projects require that their retail tenants pay the livingwage rate.4 In these instances, local governments have had mixed successwith retail establishments. In Oakland, city officials reported that tworetail development projects had been cancelled in recent years, but attri-buted the result to factors other than the living wage law. In Los Angeles,developers of two subsidized projects, including the Staples Centerstadium development project, agreed without complaint to the living wagerequirement, while a third project proceeded by exempting some retailand restaurant staff from the requirement. In San Francisco, a super-


market, while claiming that it paid its employees a living wage, chose notto accept a subsidy package citing a desire not to be subject to the livingwage reporting requirement.

Cities reported that the overall economic climate and traditional eco-nomic development concerns were the dominant factors in decisions bydevelopers whether to seek or accept public subsidies for economic devel-opment projects involving retail components. The city of Oakland, forinstance, attributed developer decisions not to pursue subsidized retaildevelopment projects chiefly to traditional considerations, such as projectlocation, availability of parking, and consumer spending, rather than theapplicability of a living wage requirement.

Finally, the experiences of these cities and counties suggest that livingwage requirements may help cities in directing public funding away fromretail projects that often bring fewer returns to their communities. In fact,Oakland’s experience suggests that the failure of its proposed retail pro-jects to move forward may have been a blessing in disguise. Using thesame property and fewer taxpayer resources, Oakland sold most of thecity land originally slated for retail development to a telecommunicationsmanufacturer that is expected to create 1,200 high-wage jobs withoutrequiring city subsidies. The remainder of the property is being developedinto an automotive facility by a unionized firm that pays its employees ator above the living wage standard. Thus, to the degree that a living wagerequirement limits the feasibility of economic development strategiesfocused on low-wage sectors such as retail, this may help cities in directingeconomic development resources towards other sectors that more readilyyield good jobs for the community.

Factors that may account for little negative impact on economicdevelopment programs

Administrators attributed the living wage laws’ limited impact on eco-nomic development programs to the fact that many business subsidy pro-grams were already focused on recruiting businesses in sectors that offerhigher wages and the greater public acceptance of economic developmentprograms that incorporate living wage policies. Several administrators, infact, commented that because their economic development programsalready aimed to recruit firms paying better-than-average wages, the livingwage law did not change their way of operating but rather formalized apre-existing policy preference. As a consequence, only two cities identifiedbusinesses that they sought to recruit with taxpayer subsidies where theemployer had to raise some workers’ pay in order to meet the living wagestandard. Duluth, Minnesota, reported that in 2000, a health maintenanceorganization recruited with a public subsidy package raised wages forninety-five workers in order to meet the city’s living wage standard.Secondly, Toledo, Ohio, reported that in 2000, a telephone answering


company seeking a public subsidy raised pay for twenty-five employees inorder to meet the city’s living wage standard. However, Minneapolis, Min-nesota, San Antonio, Texas, and the Michigan municipalities of Warren,Ypsilanti Township, and Ypsilanti reported that jobs at businesses typ-ically targeted by their economic development programs – chiefly firms inthe industrial and technology sectors – already paid a living wage and thusno wage adjustments were required by firms recruited with subsidyawards. For the majority of the localities, living wage laws did not requirechanges in the operation of their economic development programsbecause the programs already targeted for recruitment firms that paidliving wages.

Some cities indicated that their living wage policies actually boostedpublic acceptance of local economic development programs. They foundthat residents who questioned the value of providing taxpayer subsidies tobusiness were less hostile to an economic development program that guar-antees that the jobs created pay at least a living wage. According to a SanAntonio, Texas, economic development agent, the living wage law has“helped eliminate the controversy associated with [the economic develop-ment] program [because] . . . groups hostile to incentives in the past aren’tas hostile with the living wage component.” A Los Angeles, California,administrator who negotiated with the developer of the Staples Stadiumdevelopment project echoed this sentiment by noting that project’s accep-tance of the living wage requirement “aided the developer in gettingcommunity support.”

Administrators also report that living wage laws can help focus eco-nomic development programs by prioritizing high-wage job creation. Forexample, the economic development director of Duluth, Minnesota,recounted that in the 1970s, when Duluth had one of the highest unem-ployment rates in the country, the city used tax dollars to attract any jobsit could, regardless of the wage level. However, with a more moderateunemployment rate in the 1990s, the city adopted a living wage law to“formalize a strategy of [promoting] living wage jobs.” As a result, Duluthnow provides subsidies only to firms such as software and health care com-panies that expand the city’s base of better-paying jobs. The manager con-cluded that the living wage law “sends a strong signal to policymakers thatthey need to seek higher wage jobs.”

Seeking to maximize the number of better-paying jobs supported bytheir programs, some economic development agencies have extendedliving wage requirements to subsidy projects not actually covered by theirlocal ordinances. The Los Angeles community development agency hasapplied a living wage requirement for developers seeking public subsidiesfor retail projects that were not formally covered under the city’s livingwage law. According to a community development officer, as a result ofthese projects the city “set a baseline [for] any redevelopment project . . .Anyone that deals with us has got to pay their direct people a living wage.


And even if the [living wage law] doesn’t cover retail, it gets put on thetable.”

San Antonio’s living wage law not only provided the city with an incen-tive to focus on attracting high-wage jobs, but also encouraged its eco-nomic development department to think strategically about how toprepare local residents for these positions. Its living wage law helped thecity focus its tax abatement pool on recruiting high-wage firms such asBoeing, Chase Bank, and a commercial airline overhaul company. Turningthen to the task of equipping as many residents as possible with the skillsnecessary to be hired and advance in these jobs, San Antonio designed aworkforce development program that combined worker training, financialassistance for students attending college and technical schools, andapprenticeship placements.

Conclusion

The experiences of an initial group of twenty cities and counties demon-strate that living wage requirements have not significantly increased con-tracting costs or adversely affected the operation of economic developmentprograms. The overall cost increases were quite low and less than antici-pated, generally ranging from 0.003 percent to 0.079 percent of the locali-ties’ total budgets. In some communities, a few service contracts involvinglarge concentrations of low-wage workers increased in cost more substan-tially, but cost increases were still quite modest overall. The municipalitiesthat extended living wage laws to their local business subsidy programsfound that these policies did not prevent them from attracting new busi-nesses to their communities. Several cities found that applying a living wagestandard to these programs focused their economic development agencieson recruiting higher wage employers, and in some cases generated publicsupport for the use of taxpayer dollars to support private businesses. Thesefindings should allay fears of local governments and residents that livingwage laws will result in large cost increases for local governments orprevent their communities from attracting businesses offering good jobs.

Acknowledgments

I would like to thank Annette Bernhardt, Nathan Newman, Paul Sonn,Kate Rubin, and Roslyn Powell of the Brennan Center for Justice forinvaluable editorial assistance, and Stephanie Luce and Jen Kern forsharing their extensive knowledge about cities and counties with livingwage laws, and for their insightful comments on earlier drafts. I would alsolike to thank the University of California Institute for Labor and Employ-ment for generous funding and support. This chapter is based on a longerstudy I drafted for the Brenner Center for Justice at the New York Uni-versity School of Law (Elmore 2003). See www.brennencenter.org


Notes1 We considered local governments with budgets exceeding $700,000,000 to be

large, and local governments will budgets less than $200,000,000 to be small.2 These reporting cities and counties were drawn from an initial list of twenty-nine

localities identified as likely to have available cost impact estimates, formalinternal evaluations, and/or other observations of the effects of their living wagelaws. The following localities were contacted but could not offer any observa-tions or reports on the impact of their living wage laws: Ann Arbor, Michigan;Boston, Massachusetts; Cleveland, Ohio; Cook County, Illinois; Detroit, Michi-gan; San Fernando, California; St. Paul, Minnesota; and Tucson, Arizona. WhileMilwaukee, Wisconsin, had available some information on the impact of itsliving wage law, we did not include it because the city was unable to provide anestimate of the increase in the cost of its contracts as a result of the wagerequirement.

3 For specific sources of information from the interviews with administrators andlawmakers, refer to Elmore (2003), available at www.brennancenter.org.

4 In Los Angeles, economic development personnel only require developersto use “best efforts” to find retail vendors that pay their employees a livingwage.

References

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Brenner, M.D., Wicks-Lim, J., and Pollin, R. (2002) Measuring the Impact ofLiving Wage Laws: A Critical Appraisal of David Neumark’s How Living WageLaws Affect Low-Wage Workers and Low-Income Families, Amherst, MA:Political Economic Research Institute, Working Paper No. 43.

Elmore, A.J. (2003) Living Wages and Communities: Lower Than Expected Costs,Smarter Economic Development, New York, NY: Brennan Center for Justice,New York University School of Law, Research Report.

Neumark, D. (2002) How Living Wage Laws Affect Low-Wage Workers and Low-Income Families, San Francisco, CA: Public Policy Institute of California.

Niedt, C., Ruiters, G., Wise, D., and Schoenberger, E. (1999) The Effects of theLiving Wage in Baltimore, Washington, DC: Economic Policy Institute.

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Pollin, R. and Luce. S. (2000) The Living Wage: Building a Fair Economy, NewYork, NY: The New Press.

Reich, M., Hall, P., and Jacobs, K. (2003) Living Wages and Economic Perform-ance: The San Francisco Airport Model, Berkeley, CA: University of California:Institute of Industrial Relations.

Reynolds, D. (1999) The Impact of Detroit’s Living Wage Ordinance, Detroit, MI:Wayne State University Labor Studies Center.

Sander, R. and Lokey, S. (1998) The Los Angeles Living Wage: The First EighteenMonths, Los Angeles, CA: University of California, Los Angeles School of Law.


Weisbrot, M. and Sforza-Roderick, M. (1996) Baltimore’s Living Wage Law: AnAnalysis of the Fiscal and Economic Costs of Baltimore City Ordinance 442,Washington, DC: The Preamble Center.

Williams, D. and Sander, R. (1997) An Empirical Analysis of the Proposed LosAngeles Living Wage Ordinance, Los Angeles, CA: University of California, LosAngeles School of Law.


Index

absenteeism 162, 204Adams, Scott 179, 180, 184, 191, 192–3Alabama 69Alaska 171Albuquerque, New Mexico 49nAlexandria, Virginia 212, 214, 215Alinsky, Saul 165, 169nAllen Park, Michigan 82Alliance Party, New Zealand 142, 143,

148Amalgamated Clothing and Textile

Workers Union 97nAmerican Federation of Labor (AFL)

31–2American Federation of Labor-

Congress of Industrial Organizations(AFL-CIO) 70, 71, 78, 79, 80, 81, 82,90

American Federation of State, Countyand Municipal Employees(AFSCME) 70, 72–3, 182

Ann Arbor, Michigan 222nAquinas, Thomas 4Association of Community

Organizations for Reform Now(ACORN) 44, 45, 61, 70, 78, 79, 80,83n, 164

Australia 2, 140Australian Chamber of Commerce and

Industry 134n, 135nAustralian Council of Trade Unions

(ACTU) 8, 122, 124, 125, 128–30,134n, 135n

Australian Industrial RelationsCommission 127–9, 134n, 135n

Baltimore, Maryland 3, 6, 10, 43, 69, 70,72–3, 157, 169n, 171, 178, 182, 198,199, 200, 201

Baltimoreans United in LeadershipDevelopment (BUILD) 72–3, 169n

bargaining power 5basic wage, Australia 122–5Basic Needs Budget 6, 45, 46, 54–5Bergmann, Barbara 54Berkeley, California 212, 213, 214Beverly Hills, California 75Blair, Tony 111, 113Boston, Massachusetts 4, 6, 9, 10, 78,

79–80, 83, 171, 198, 199, 201, 204,222n

breadwinners 27, 34, 116; male 5, 27, 28,30, 39, 40, 138, 140

British Columbia, Canada 2, 94Broward County, Florida 164, 166Bush, Jeb 167, 168

California 83, 171, 196Cambridge, Massachusetts 80, 212, 214Canada 109Canadian Union of Public Employees

95Canso, Nova Scotia 98nCard, David 46, 108, 175, 177, 185n,

189, 203casual employment 3, 114, 125, 127, 132Chicago, Illinois 6, 46, 78–9, 83, 193child care 58children 15, 25; as workers 7, 25, 29, 30class 21Clergy and Laity United for Economic

Justice (CLUE) 62, 75Cleveland, Ohio 95, 222ncoalitions and alliances 6, 7, 9, 38, 70–1,

81, 83, 94, 101, 158, 164collective bargaining 8, 28, 91, 101, 138,

150commutative justice 1, 4, 38

comparable worth 110, 151Confederation of British Industry 114,

118nCongress of Industrial Organizations

(CIO) 35contingent employment 3, 8, 58Cook County, Illinois 222nCoral Gables, Florida 165Corvallis, Oregon 10, 198, 199, 200, 201costs, living wage 11

Daley, Richard 78, 79Dane County, Wisconsin 10, 198, 199,

200, 213, 214Davis-Bacon Act, US 44decentralization 8Denver, Colorado 49nderegulation 2; financial 125Des Moines, Iowa 157deskilling 35Detroit, Michigan 4, 6, 9, 10, 80, 81, 171,

193, 194, 196, 222ndignity 4, 5, 22discrimination; race 32; sex 32, 110, 116,

132distributive justice 25Duluth, Minnesota 217, 219, 220

Earned Income Tax Credit, US 47–9, 57earnings inequality 2, 64, 116, 126, 138,

146, 149–50East London Community Organisation

102–6Eastpointe, Michigan 81, 82economic liberalization 2, 38, 40, 132Economic Policy Institute 44, 45, 46,

59–61, 172economic theory classical 1; heterodox

1; institutional 190; neoclassical 1,117, 149

Edmonton, Alberta 98nefficiency wage effects 190elasticity, employment or labor 10, 46,

147, 167, 173, 175–6, 179; youth 147elasticity, product demand 202, 203Employment Contracts Act, New

Zealand 141–2Employment Policies Institute 72, 167Employment Relations Act, New

Zealand 142Employment Standards Act, Canada

88–9England see Great Britain

Equal Opportunities Commission, UK107

equal pay 25, 102, 112, 132, 140Equal Pay Act, New Zealand 140, 148equal value see comparable worthEuropean Federation of Public Service

Unions 114European Public Services Union 114European Union 2, 101, 112, 114, 117,

119n

Fair Labor Standards Act, US 29, 31,32–3, 36, 38, 51, 171

fair wage clauses and policies 7, 94–5,102, 103, 105, 112, 114, 118n, 138, 139

faith-based activism 38, 62, 70, 71, 72–3,75, 165

family allowances 140family wage 28, 138, 139; see also

breadwinners, malefeminism 140Ferndale, Michigan 81Figart, Deborah M. 1, 2, 28, 30, 32, 34,

38, 62, 64, 65, 71, 116Florida 69Ft. Lauderdale, Florida 166France 24free trade 85Freeman, Richard 189

Gainesville, Florida 165, 166Great Britain 2Great Depression 29, 31, 34, 37guaranteed annual wage 5, 29, 35–7Guaranteed Minimum Family Income

148–9garment industry 7, 28, 85–98Gary, Indiana 157General, Municipal and Boilermakers’

Union, UK 113Gini Coefficient 149

Hall, Peter 62Hamilton, Ontario Hartford, Connecticut 10, 43, 198, 199,

200, 212Harvard University 80Harvester Judgment 123–4, 132, 139Hayward, California 201, 212, 216Hazel Park, Michigan 82Hollywood, Florida 166homeworkers 7, 87–94

226 Index

Homeworkers Association, Canada90–7

Hotel, Entertainment, and RestaurantEmployees union (HERE) 70, 75,83n

household 27, 132Houston, Texas 49nHowes, Candace 204

immigrants 5, 7, 30, 87, 88, 92,106, 164,165; public benefits for 77

immigration 29; policy 124income inequality see earnings

inequalityindigenous people 8, 123–4; see also

MaoriIndustrial Areas Foundation, US 169nIndustrial Conciliation and Arbitration

Act, New Zealand 139Industrial Relations Reform Act,

Australia 124industrialization 27internal labor market 35, 37, 102International Labour

Office/Organisation 114, 119nInternational Ladies’ Garment

Workers’ Union (ILGWU) 7, 88, 90,97n

Inverness, Nova Scotia 98nIreland 2

Jacksonville, Florida 165, 166Japan 109Jobs with Justice 164–5just price 2, 4, 17–19; critique of 19–22just wage 2, 4, 12njustice, economic 6, 9, 18, 69, 70, 77, 83,

164

Kalamazoo, Michigan 82Kennedy, Edward 171–2Kentucky 69Keynes, John Maynard see

Keynesianism Keynesianism 31, 36, 37, 38Kingston, Ontario 98nKorea 134nKrueger, Alan 46, 108, 175, 177, 185n,

189, 203Kuttner, Robert 150

Labor Government, Australia seeLabor Party, Australia

Labor Party, Australia 124, 128Labor Relations Act, Canada 93labor turnover 162, 204, 216 Labour Government, New Zealand see

Labour Party, New ZealandLabour Government, UK see Labour

Party, UKLabour Party, New Zealand 138,

139–40, 141, 142–3, 144–5Labour Party, UK 7,108, 112, 115Lester, Richard 190living standard 6, 11, 45, 51living wage, calculating 6, 18, 51, 62–64,

103–4living wage claim, Australia 125–32living wage ordinances or clauses 3,

5–6, 38, 69, 106, 122, 157–8; benefits159, 161–3, 178–84, 192, 194, 195, 211,220; costs 159–63, 188, 194, 195–7,197–202, 205, 210–16; coverage191–2; employment impact 159, 161,179–84, 188 192, 204–5, 206, 211;opposition to 72, 80, 81, 82, 83, 158,166–9, 188, 197; other economicimpact 159, 161–3, 182, 202–4,217–21; social movement effects163–5

Livingstone, Ken 106London, East 7, 102–6, 118nLondon, Ontario 98nLos Angeles, California 6, 9, 10, 43, 46,

70, 72, 73–6, 77, 171, 191, 193, 194,195, 196, 197, 203, 206, 217, 218, 220

Los Angeles Alliance for a NewEconomy (LAANE) 75, 76, 78, 83,222n

Louisiana 69Low Pay Commission, UK 7, 107, 108,

110, 111, 113, 116, 118n

Macpherson, David 167Madison, Wisconsin 210, 212Maine 83Manitoba, Canada 2, 94Maori 147, 150marginal productivity theory 1Marine Workers’ Union 36Marx, Karl 1, 4, 117Massachusetts 83, 171maximum hours regulations 30, 31masculinity 27, 33, 36McDonald’s 73

Index 227

Memphis, Tennessee 4, 6, 56, 57, 58–9,63

Menino, Tom 79–80Mexico 89Miami, Florida 4, 9, 10, 43, 46, 47, 62,

157, 193, 194, 196Miami-Beach, Florida 165Michigan 80–2Milwaukee, Wisconsin 43, 222nminimum wage 51–2, 172–8; Alberta 94;

Australia 2, 40n; British Columbia,Canada 2, 94; California 196;economic theory of 172–4, 190–1;employment effects 174–8, 189–91;European Union 2; gendered 32, 33,40n, 138, 143; history of 2, 5, 29 30;increases 83, 108; indexing 101, 143,149; Ireland 2; Manitoba, Canada 2;Massachusetts 30; New Zealand 2,143–9; Ontario, Canada 88, 94;United Kingdom 2, 102, 107–11, 116,143; United States 2, 29, 171; value of34; youth rate 111, 135n

Ministry of Women’s Affairs, NewZealand 147

Minneapolis, Minnesota 217, 218, 220

Minnesota 56, 57, 58–9, 83Monroe County, Michigan 81Mulgrave, Nova Scotia 98nMultnomah County, Oregon 203Mutari, Ellen 28, 31, 38, 146

National Industrial Recovery Act, US31–2

National Interfaith Committee forWorker Justice (NICWJ) 62, 70, 71

National Party, New Zealand 138, 142,144–5

natural rights 4, 16neoliberal economic policies see

economic liberalizationNetherlands 132–3Neumark, David 46, 174, 175, 177, 178,

179, 180, 182, 183, 184, 185n, 189, 191,192–3

New Deal 5, 31New Democratic Party, Canada 89, 93New Haven, Connecticut 10, 78, 198,

199, 201, 212, 214New Jersey 190New Orleans, Louisiana 10, 43–4, 47,

49n, 62, 194, 195, 205, 207n

New York City, New York 10, 95, 193,194, 195, 196, 206n

New Zealand 2, 8New Zealand Business Roundtable 146,

148New Zealand Council of Trade Unions

142, 145–6, 147Nissen, Bruce 45, 47, 62, 159, 164, 194non-standard work see casual

employment, part-time employment,temporary employment

norms 1North Carolina 56, 57, 58–9, 69

Oakland, California 10, 194, 195, 196,210, 217, 218, 219

Oregon 83, 171Orlando, Florida 165, 166overtime 38, 105, 134n

Palm Beach, Florida 166Panelas, Alex 168parental leave 11part-time employment 3, 8, 38, 102, 125,

132, 150parasitic industries argument 2; 3, 4, 6,

15–16, 31, 39, 40n, 116Pasadena, California 203, 212, 214,

216Pennsylvania 190Pictou, Nova Scotia 98nPolanyi, Karl 115Political Economy Research Institute

44Pollin, Robert 12n, 45, 47, 62, 191, 194,

197, 203, 205, 207n, 211Pompano Beach, Florida 166Pope Leo XIII 1, 4, 12n, 22Port Hawkesbury, Nova Scotia 98nPortland, Oregon 43Portugal 109poverty 181–2, 211; child 101;

thresholds 6, 34, 38, 45, 51, 52–54, 59,65n, 87, 130, 171; working poor 88,151, 163, 164, 171

privatization 39, 40, 70, 101, 111, 112,113

productivity 31, 134, 202, 203–4, 215,216

Progressive Era 5, 29, 32protective legislation 28, 29, 30, 32provisioning 11, 27, 28, 38, 40, 140Puerto Rico 29

228 Index

race-ethnicity 2, 3, 34, 40, 65, 81, 88, 96,150, 167

regulation, wage 101; see also minimumwage

Reich, Michael 45, 62, 194, 204, 216Renwick, Trudi 54Republican Party, US 167Rerum Novarum 1–2, 4Reynolds, David 45, 194Richmond County, Nova Scotia 98nRiordon, Richard 75Ryan, John A. 4, 5

Safety Net Adjustments 127–9St. Paul, Minnesota 43, 222nSan Antonio, Texas 206n, 210, 217, 218,

220, 221San Diego, California 78San Fernando, California 222nSan Francisco, California 10, 43, 69, 95,

122, 193, 194, 195, 196, 197, 198, 199,200, 204, 206n, 210, 213, 216, 217, 218

San Jose, California 6, 10, 72, 76–8, 193,194, 195, 196, 212, 216

Santa Cruz, California 70Santa Fe, New Mexico 43Santa Monica, California 10, 43, 75,

194, 195, 196, 197, 205, 207nSchmid, Gunter 133Schor, Juliet 134scholastics 17self-employment 132self-sufficiency 6, 52, 55–9, 61, 163Service Employees International Union

(SEIU) 70, 78, 79, 83nSmith, Adam 1Somerville, Massachusetts 80social reproduction 11, 30social security 117, 133Social Security Act, US 36South Carolina 69South Miami, Florida 165Southfield, Michigan 81Southgate, Michigan 81Spain 109Stigler, G.J. 174structural adjustment 138, 149subsistence 1, 2, 16, 17, 30Suffolk County, New York 43supplemental unemployment benefit

(SUB) 36–7sweated trades see sweatshops

sweatshops 2, 4, 5, 16, 17, 21, 29, 30, 33,37, 39, 71, 85, 95, 107

Sweeney, John 78

Tallahassee, Florida 165Tampa, Florida 165, 166Taylor, Michigan 80Temporary Assistance to Needy

Families, US 52, 56, 58temporary employment 3, 77Tennessee 69Texas 69Thatcher, Margaret 111, 119nThunder Bay, Ontario 98nToledo, Ohio 217, 218, 219Toronto, Canada 6, 7, 87–98Trades Union Congress, UK 107, 112,

115Transport and General Workers’

Union, UK 113Tucson, Arizona 49n, 222ntwo-tiered work force 111–15, 116

Union of Needletrades, Industrial andTextile Employees (UNITE) 7, 86,95, 97n

unions, labor 28United Auto Workers (UAW) 35United Steel Workers of America 36,

70United States 2, 109, 110, 117, 134nUniversity of Michigan 81utility 16, 17, 21

Vancouver, British Columbia 98nVermont 83Virginia 69

wage gap, gender-based 8, 124, 130, 150wage justice 126, 133wage relativities 133wage subsidies 6, 48–9wage slavery 27wages, as a living 64–5; as a price 64–5,

as a social practice 64–5Wages Act of 1986, UK 107Warren, Michigan 81, 200, 210, 212,

217, 220Washington, District of Columbia 29,

46Washington State 83, 171Washtenaw County, Michigan 81Wear Fair Employment Project 92

Index 229

Webb, Sidney and Beatrice 1, 3, 4, 15welfare reform 52welfare state 11, 37, 138Windsor, Ontario 98nwomen 2, 3, 7, 8, 15, 25, 28, 29; 31 33,

34, 40, 65, 97n, 110, 116, 123–4, 126,130, 132, 147, 150; as mothers 30;married 27, 28; occupations 133;single 27

Work Opportunity Tax Credit, US 48

Workplace Relations Act, Australia124, 127

Yale University 78youth, working 172; see also minimum

wage, youth rateYpsilanti, Michigan 200, 212, 217, 220Ypsilanti Township, Michigan 212, 215,

217, 218, 220

230 Index