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Should New York Demand a Living Wage? Two Experts Face Off on a Red-Hot Fight
Daily News
Robert Pollin

June 27, 2010
View the Original Article


Should working people in New York City be guaranteed a living wage when their employers are recipients of large subsidies from the taxpayers? That is the central question at stake for the City Council and Mayor Bloomberg. Under a proposed bill, employees at firms that receive city subsidies must pay their workers $10 per hour, with an additional $1.50 per hour supplement if the workers are not receiving health benefits from their job. This is a substantial boost over the current federal minimum of $7.25.

It's hard to take issue with the basic objective behind living wage proposals, which is to ensure that all workers are paid enough to support themselves and their families at a minimally decent standard. The argument for the current New York proposal seems stronger still: In those cases when some businesses get an economic advantage courtesy of the taxpayers, they should especially uphold the community's basic standards of fairness.

In fact, living wage laws deliver significant benefits to the affected workers and their families. We know this from studying the experiences of the roughly 140 municipalities around the country that have implemented such measures since the mid-1990s, including Los Angeles, Chicago, Boston, Syracuse and Albany.

With the Boston law that passed in 1998, for example, many workers getting living wage raises boosted their savings and assisted their families in lowering their debts and making significant purchases, such as a car. Others reduced their working hours or started taking classes to improve their long-term job prospects. The incidence of poverty also fell sharply.

The issue gets more complicated when opponents of living wage standards invoke the "law of unintended consequences" to justify their position. That is, they say that while living wage laws may seem like they would benefit low-wage workers and their families, in fact they mostly end up hurting them. As their argument goes, because living wage laws require businesses to pay low-wage workers well above what they would offer on their own, they end up hiring fewer workers. Unemployment then rises among low-wage workers, hardly a desirable outcome.

I have heard such arguments countless times since 1996, when I first began researching this question as part of the initial debate on a living proposal for Los Angeles. But the facts simply don't support the contention. Businesses subject to living-wage laws have not produced fewer job opportunities for low-wage workers. Research on the Boston measure - a law far broader than what's being considered in New York - found no significant difference in overall hiring levels among firms which were required to follow the living wage law compared to unaffected businesses. The patterns are similar for San Francisco, Los Angeles and Santa Fe.

The reason living wage laws have not reduced job opportunities is that the costs to affected firms are almost always small - generally below 1% of their sales. For example, if retail outlets covered by the law raised the price of shirts from $20 to $20.20 (a 1% increase), that 20-cent price rise would fully cover their living wage costs. Productivity also usually improves in affected firms because workers become more committed to their jobs.

Overall, living wage laws around the country have helped low-wage workers and their families, while the negative employment effects predicted by their opponents have not generally materialized. This same pattern should emerge again if New York City passes the Fair Wages for New Yorkers Act.

Pollin is professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts-Amherst. His books include "The Living Wage: Building a Fair Economy" and "A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States."