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Cities that pay a living wage find it works

The minimum wage, raised by Congress to $5.25 an hour in 1997, provides less than two-thirds of the $8.45-an-hour that a 40-hour-a-week worker with a year-round job would need to lift a family of four out of poverty. And that figure already meant a significant drop in real income for the hourly worker as compared with his situation when the first minimum wage law was enacted.

The current wage would need to be 50 percent higher to match the purchasing power of $1.60 in 1968.

These figures make it clear that the federal minimum wage falls far short of the living wage to which, according to Catholic social teaching, every worker is entitled. And, as more concerned citizens recognize that no significant improvement at the level of federal government is possible as long as big-business money determines congressional votes, they are looking to other ways to effect the changes that a sound public policy demands.

The approach that has produced the best results was first tried out eight years ago in Baltimore. A coalition of religious and trade union groups persuaded the city council to enact a law requiring contractors who do business with the city to pay their workers a living wage. Similar legislation has since been enacted in 83 cities, and campaigns are underway in more than 75 additional cities, counties, states and college campuses.

A typical ordinance requires contractors who work for local governments to pay an hourly rate that brings the worker’s annual income up to $18,000, the federal poverty level for a family of four. A city with living costs higher than the national average may build in that factor. Santa Cruz, Calif., for example, stipulates $12.50 an hour.

Many ordinances add other community standards, such as health benefits, vacation days, environmental standards and language that encourages union organizing.

Implementation of a Santa Monica, Calif., law imposing a living wage provision on hotels and other major businesses in a tourist area on the coast has been suspended by the courts pending a referendum to be held next November.

Chambers of Commerce and other representatives of big business have strongly opposed the idea of a living wage since it was first proposed. Many small companies, they insisted, would be driven out of business by the additional costs. The actual experience for almost a decade does not bear them out. A study by Johns Hopkins University two years after Baltimore had passed the ordinance showed that the city’s increased contract costs had grown by only 1 percent, which was less than the inflation rate for the period.

More recent studies at Michigan State University and the University of Massachusetts at Amherst confirm that the impact on business has been small. And Miami-Dade County has reported that the raises for 2,800 employees to bring them up to the living wage mandate had increased its total budget by less than one/fifth of 1 percent.

Perhaps the most impressive testimony is that of David Neumark, an economist at Michigan State University known for his criticisms of living wage laws, who was commissioned by the conservative Public Policy Institute of California to study the impact of these laws on low-wage workers and low-income families.

Having surveyed the experience of 36 cities in various parts of the United States from 1996 to 2000, he reached a conclusion he found surprising. The net effect, he reported, is a modest decrease in family poverty. Even though steep wage increases may cause some job loss, they “make it less likely that a family with a living wage worker will live in poverty, especially in cities where the law applies more broadly.”

National Catholic Reporter, August 16, 2002