Policy Matters is a quarterly series of reports that provide timely research and guidance on issues that are of concern to policymakers at the local, state, and national levels.
Volume 1, Issue 3 by David Fairris is entitled: The Effects of Living Wages on Workers and Firms: Evidence from the Los Angeles Ordinance.
Living wage laws set wage and benefit standards for companies that do business with local governments as a means of improving the quality of contracted jobs and increasing the standard of living for low-wage workers. This study represents one of the most definitive analyses of a living wage law’s impact on workers and employers. We find that:
• The Los Angeles Living Wage Ordinance has increased pay for an estimated 10,000 jobs, with limited negative impacts on business.
• Most workers affected by the living wage are poor or low-income.
• Workers experienced an immediate pay increase of roughly 20% as a result of the ordinance. This increase slowly eroded as higher- paid workers joined city contract firms as a result of the wage impact of the ordinance.
• While workers and their families have experienced measurable gains from the living wage, a significant minority still lacks health benefits and relies on government assistance.
• Most firms affected by the law have adapted to the living wage without eliminating jobs.
• Employers have recovered some of the increased costs of the living wage through reductions in labor turnover and absenteeism.
Caution is warranted in applying these results nationally because the occupational mix of city contract workers in Los Angeles is a small subset of the much larger set of low-wage occupations across the country. Also, the services of living wage workers are purchased largely out of public-sector budgets; similar wage mandates may have very different effects in the private sector. Still, on the whole, the evidence suggests significant and positive effects for workers from living wage laws, and limited down- side to employers.
David Fairris is professor of economics at the University of California, Riverside. He has published widely in the areas of labor-management relations, workplace health and safety, and the impacts of minimum wages. He acknowledges support for this research from the Labor and Employment Research Fund at the University of California, the Ford Foundation, and the Los Angeles Alliance for a New Economy.