Living Wage Movements: Global Perspective (Advances in Social Economics)

Living Wage Movements

“In this volume, Professor Figart has drawn together 18 scholars for the first 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 fascinating detailed view of the ethical, political, economic and social foundations of the standard of living of the working classes in many nations. I highly recommend it for courses on labor economics, public policy and comparative political economy.” Professor Phillip O’Hara, Global Political Economy Research Unit, Curtin University, Australia

Living wage activism has spanned time and space, reaching across decades and national boundaries. Conditions generating living wage movements early in the twentieth century have resurfaced in the twenty-first century, only on a global scale: “sweated” labor, macroeconomic instability, and job insecurity. The original essays in this volume assess the movement for higher living standards in the USA, Canada, Europe, and Australasia. Each of the individual chapter authors has extensive experience in academia or research institutes, in public policy, or in the labor movement. A variety of innovative efforts to achieve living wages are profiled. Minimum wage increases, 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 employees in service and sales occupations have been noteworthy beneficiaries. Upon reviewing the empirical evidence, the book’s contributors make strong cases both for and against living wage activism. The effective blend of historical, contemporary, and global perspectives provides opportunities for teachers, scholars, and activists to evaluate how we can address low pay at the organizational and macroeconomic levels. Deborah M. Figart is Professor of Economics at Richard Stockton College, USA.

Advances in social economics Edited by John B. Davis Marquette University

This series presents new advances and developments in social economics thinking on a variety of subjects that concern the link between social values and economics. Need, justice and equity, gender, cooperation, work poverty, the environment, class, institutions, public policy and methodology are some of the most important themes. Among the orientations of the authors are social economist, institutionalist, humanist, solidarist, cooperatist, radical and Marxist, feminist, post-Keynesian, behavioralist, and environmentalist. The series offers new contributions from today’s most 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 Economics Premises, findings and policies Edited by Edward J. O’Boyle The Environmental Consequences of Growth Steady-state economics as an alternative to ecological decline Douglas Booth The Human Firm A socio-economic analysis of its behaviour and potential in a new economic age John Tomer Economics for the Common Good Two centuries of economic thought in the humanist tradition Mark A. Lutz Working Time International trends, theory and policy perspectives Edited by Lonnie Golden and Deborah M. Figart

The Social Economics of Health Care John Davis Reclaiming Evolution A Marxist institutionalist dialogue on social change William M. Dugger and Howard J. Sherman The Theory of the Individual in Economics Identity and value John Davis Boundaries of Clan and Color Transnational comparisons of inter-group disparity Edited by William Darity Jnr. and Ashwini Deshpande Living Wage Movements Global perspectives Edited by Deborah M. Figart

Living Wage Movements Global perspectives

Edited by Deborah M. Figart

First published 2004 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2004. © 2004 Selection and editorial matter, Deborah M. Figart; individual chapters, the contributors All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-62945-0 Master e-book ISBN

ISBN 0-203-67062-0 (Adobe eReader Format) ISBN 0-415-32002-X (Print Edition)

Contents

List of illustrations Notes on contributors Acknowledgments List of abbreviations 1 Introduction to living wages around the globe

ix xi xv xvii 1

DEBORAH M. FIGART

PART I

What is a living? 2 The right to an individual living wage

13 15

JOHN A. RYAN

3 Wages and hours: historical and contemporary linkages

27

ELLEN MUTARI AND DEBORAH M. FIGART

4 Living wage laws and the case for a targeted wage subsidy

43

DAVID A. MACPHERSON

5 The determination of living wages

51

DAVID H. CISCEL

PART II

Living wage and low pay campaigns: contemporary global activism

67

6 The living wage movement mushrooms in the United States

69

DAVID B. REYNOLDS

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Contents

7 Organizing homeworkers in Toronto’s garment industry

85

JONATHAN EATON AND ALEX DAGG

8 Living wage and low pay campaigns in Britain

101

DAMIAN P. GRIMSHAW

9 The living wage in Australia: history, recent developments, and current challenges

122

JOHN BUCHANAN, IAN WATSON, AND GABRIELLE MEAGHER

10 The fight for living standards in New Zealand

138

PRUE HYMAN

PART III

Evidence and lessons from US empirical studies

155

11 The Miami living wage ordinance: primary and secondary effects

157

BRUCE NISSEN

12 Minimum wages and living wages: raising incomes by mandating wage floors

171

DAVID NEUMARK

13 The economic impact of living wage ordinances

188

MARK D. BRENNER

14 Living wages in US communities: an analysis of costs of services and economic development

210

ANDREW J. ELMORE

Index

225

Illustrations

Figure 9.1 Living wage claims and Australian Industrial Relations Commission safety net decisions, 1997–2003

129

Tables 5.1 US poverty thresholds for 2002 5.2 Living wage budgets for single-parent families with two children 5.3 The labor hours required to earn a living wage in Memphis, Tennessee 8.1 Evidence of low pay among private cleaning contractors 8.2 Recommended and accepted minimum wage rates, 1999–2003 8.3 Percentage increase in average hourly earnings, 1998–2002 8.4 The relative level of the National Minimum Wage, 1999–2002 9.1 Key features of the ACTU’s living wage claim 9.2 Labor market coverage of different forms of industrial regulation and average annual wage increases, 1996 9.3 Wage growth among low-paid workers, 1989–99 9.4 Change in weekly total earnings of full-time adult non-managerial employees, 1996–2000 10.1 Minimum wage levels in New Zealand 12.1 Minimum wage workers and low-income families 12.2 Percentage change in proportions of families in ranges of income-to-needs distribution, minimum wage increase vs. no increase 12.3 Effects of living wage laws 12.4 Estimates of effects of contractor living wages on wages of below-median wage workers 13.1 Economic impact of various living wage ordinances: prospective evidence

54 59 63 105 108 109 110 126 127 130 131 144 177

178 180 183 194

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Illustrations

13.2 Economic impact of various living wage ordinances: retrospective evidence 14.1 City contract cost increases after passage of living wage laws, 2001 14.2 Human services contract cost increases after passage of living wage laws, 2001 14.3 Projected versus actual increases in contract costs 14.4 Impact of living wage laws on city economic development projects

199 212 213 214 217

Contributors

Mark D. Brenner is Assistant Research Professor at the Political Economy Research Institute, University of Massachusetts-Amherst, USA. He completed his PhD in economics at the University of CaliforniaRiverside, specializing in development and labor economics. His most recent work addresses the institutional factors surrounding rising wage inequality in the United States as well as the economic impact of living wage proposals in several cities: Los Angeles, Santa Monica, New Orleans, and Boston. John Buchanan is Deputy Director (Research) at the Australian Centre for Industrial Relations Research and Training (ACIRRT), University of Sydney, Australia. Previously he was director of policy research in the Federal (Australian) Department of Industrial Relations. His major research interests are the demise of the classical wage earner model of employment, management determinants of labor productivity, and the role of the state in nurturing new forms of multi-employer coordination in the labor market. David H. Ciscel is Professor of Economics and faculty affiliate at the Center for Research on Women at the University of Memphis, USA. He has authored two living wage monographs for the MidSouth region and is active in the local living wage campaign. In addition to his regular publication in the Journal of Economic Issues and other heterodox economics journals, he writes on labor issues for regional newspapers. Alex Dagg is the elected Director of the Union of Needletrades, Industrial and Textile Employees (UNITE) Ontario Council, Canada. In 1999, she was elected an International Vice-President of UNITE at the Union’s quadrennial international convention. Alex has been an active lobbyist for improved working conditions for homeworkers and sweatshop workers in the garment industry. She was a member of the Advisory Group on Working Time and the Distribution of Work set up by Minister Lloyd Axworthy in 1994 and was the labor representative to the former Federal Minister of Labor Alphonse Gagliano’s

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Contributors “Collective Reflection on the Changing Workplace” in 1997. Alex was also appointed by the federal government to represent labor at the International Labour Organization (ILO) in Geneva at the conventions in 1995 and 1996 dealing with the issue of homeworkers, which resulted in a convention on the issue.

Jonathan Eaton is a PhD candidate at the Centre for Industrial Relations at the University of Toronto. He obtained his BA (Economics) and LLB from Queen’s University at Kingston, and his LLM from the University of Toronto. From 1994 to 2002, he worked with UNITE, the Union of Needletrades, Industrial and Textile Employees, as a research coordinator and as assistant to the Canadian director. His research interests include nonstandard work, equality in employment, and union renewal. Andrew J. Elmore received his law degree from the UCLA School of Law, specializing in public interest law and policy. He is a Staff Attorney and Skadden Fellow with the Legal Aid Society in New York City. He has previously published in the UCLA Law Review, and is interested in labor and employment law and policy, particularly with regard to the US low-wage and immigrant workforce. Deborah M. Figart is Professor of Economics at the Richard Stockton College of New Jersey, USA. She is co-author (with Ellen Mutari and Marilyn Power) of Living Wages, Equal Wages: Gender and Labor Market Policies in the United States (Routledge, 2002) and co-author (with Peggy Kahn) of Contesting the Market: Pay Equity and the Politics 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 the Service Economy (Sage Publications), and Women and the Economy: A Reader (M.E. Sharpe). She has published numerous papers and essays on labor market issues. Damian P. Grimshaw is Senior Lecturer in Employment Studies and Associate Member of the European Work and Employment Research Centre at the Manchester School of Management, UMIST, UK. His research involves a number of international and UK projects, with a strong policy focus on European employment, gender equality, low pay, public sector pay, gender pay inequality, and privatization of public services. His recently published books include The Organisation of Employment: An International Perspective, with Jill Rubery (Palgrave, 2002) and Managing Employment Change: The New Realities 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 Victoria University of Wellington, New Zealand, recently retired from being

Contributors xiii Associate Professor in Economics/Women’s Studies. Her 1994 book, Women and Economics: A New Zealand Feminist Perspective (Bridget Williams Books), covers theoretical and applied areas of feminist economics. She spent two years in government at the New Zealand Ministry of Women’s Affairs and is heavily involved with gender analysis and policy, locally and internationally, including gender impacts of globalization. David A. Macpherson is the Abba P. Lerner Professor of Economics and Research Affiliate of the Pepper Institute on Aging and Public Policy at the Florida State University, USA. His specialty is applied labor economics. His current research interests include pensions, discrimination, industry deregulation, labor unions, and the minimum wage. He is the author of many articles in leading labor economics and industrial relations journals. He received his PhD from the Pennsylvania State University in 1987. Gabrielle Meagher is Senior Lecturer in Political Economy at the University of Sydney, Australia. Her research program combines feminist political economy and labor studies. Her current research examines the problem of poor industrial and cultural recognition of paid caring work. Her recent book is Friend or Flunkey? Paid Domestic Workers in the New Economy (UNSW Press, 2003). Ellen Mutari is Assistant Professor in the General Studies Division of the Richard Stockton College of New Jersey, USA. She has published on the theory and methodology of feminist political economy, women’s employment during the Great Depression, working time, gender statistics, and race- and gender-based discrimination. Previously, she coauthored Living Wages, Equal Wages: Gender and Labor Market Policies in the United States (Routledge, 2002) and is co-editor of Gender and Political Economy: Incorporating Diversity into Theory and Policy (M.E. Sharpe, 1997). David Neumark is a Senior Fellow at the Public Policy Institute of California, USA. He was previously an economist at the Federal Reserve Board, and taught at the University of Pennsylvania and Michigan State University. In addition to research on minimum wages and living wages, his recent research focuses on discrimination, segregation, affirmative action, the economics of aging, and the school-to-work transition. Bruce Nissen is the Director of Research at the Center for Labor Research and Studies, Florida International University, USA. His two most recent books are Which Direction for Organized Labor? Essays on Organizing, Outreach, and Internal Transformations (1999) and Unions in a Globalized Environment: Changing Borders, Organizational Boundaries, and Social Roles (2002). He also works with

xiv Contributors community and labor groups such as South Florida Jobs with Justice and 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 authored Living Wage Campaigns: An Activist’s Guide to Building the Movement for Economic Justice, now in its fourth printing. Reynolds headed two major studies on the impact of Detroit’s living wage law. He sits on the steering committee of the Michigan Living Wage Network. His latest book, Taking the High Road: Communities Organize for Economic Change, is available from M.E. Sharpe. John A. Ryan (1869–1945), designated as a Right Reverend by Pope Pius XI in 1933, was a leading figure in advocating moral arguments for just economic policies in the early twentieth century. He studied economics at St. Paul seminary and moral theology at the Catholic University of America, later joining the faculty at Catholic. His first book, based on his dissertation in 1905, was A Living Wage, published in 1906. Ryan followed this with numerous books, pamphlets, and articles until his death in 1945. In 1919, he was head of the Social Action Department of the National Catholic Welfare Conference. His arguments became more popular with the election of President Franklin Delano Roosevelt, and Ryan was influential among Roman Catholics in the Roosevelt administration. He lobbied for New Deal social programs and minimum wage and maximum hours provisions in the Fair Labor Standards Act of 1938. Ian Watson is Senior Researcher at the Australian Centre for Industrial Relations Research and Training, where he has been working on large-scale workplace surveys of earnings, industrial coverage, and other issues. He was one of the authors of Australia at Work: Just Managing (1999) and Fragmented Futures: New Challenges in Working Life (2003). In his time at ACIRRT, he has worked on a range of projects including immigrants in the labor market, labor market inequality, the problem of the working poor, and development of a Health of the Labour Market index.

Acknowledgments

I have spent twenty years studying and writing about labor market issues in one form or another, especially wages and wage setting. One thing that I have always liked about doing research on wages is the politics of wage setting. The dawning of wage labor brought with it the activism surrounding debates over living standards. What is an acceptable standard of living? At what level should societies set a living wage? Should a minimum wage be less than a living wage? I have also relished the interdisciplinary nature of research on wage setting. Wages are part of the process of provisioning in market economies. Therefore, relative wage levels result from complex political and economic processes involving the macro and micro economy, including business, households, and the government, but also encompassing customs, habits, and norms. In market economies, however, wages are also a key form of identity. That means that wages have social and psychological dimensions. My particular interest in the feminist political economy of wage setting was further developed by my work with Ellen Mutari and Marilyn Power in Living Wages, Equal Wages: Gender and Labor Market Policies in the United States (Routledge, 2002). As part of our research, we investigated historical and contemporary living wage movements. Upon completing that book, I thought there was a story still to be told: an international story. Activism around the issue of living wages and living standards is a global phenomenon. It has always been so. In the late nineteenth and early twentieth centuries, living wage advocates met at international conferences to share information, theories, and strategies. They corresponded as individuals and published as organizations. One country’s legislation served as a model and building block for the next. The same crossfertilization is occurring today, this time aided by the rapid pace of today’s high-tech information networks. With the help of friends and colleagues in economics associations, I assembled a team of authors to write about living wage issues on their “home turf.” In particular, I would like to thank Mark Brenner, David Reynolds, Jill Rubery, and Frances Woolley for facilitating introductions between myself and various contributors. I also thank each of the chapter

xvi

Acknowledgments

authors for their energy, commitment to scholarship, and attention to details and deadlines. Though several of the chapters have been presented in draft form at academic conferences, each chapter was written for this volume, with the exception of a reprinted chapter from Monsignor John A. Ryan’s A Living Wage in 1906. My appreciation also goes to the staff at Routledge (Taylor & Francis), especially economics editor Robert Langham and editorial assistant Terry Clague. Many of the authors of the chapters in this volume have been involved in living wage research and activism in their communities. We share the label of “scholar-activist.” However, we would have little to write about without the heroic work of grassroots activists and national/international policy advocates who devote themselves to improving the living standards of low-wage workers. My greatest appreciation, therefore, is for the work of living wage advocates past, present, and future.

Abbreviations

ABS ACCI ACIRRT ACORN ACTU AFDC AFL AFL-CIO AFSCME AIRC BCA BLS BNB BUILD CBI CCLW CCNE CEC CIO CLUE CPI-U CPS CTU ECA EDF EITC EPI ERA EU

Australian Bureau of Statistics Australian Chamber of Commerce and Industry Australian Centre for Industrial Relations Research and Training Association of Community Organizations for Reform Now Australian Council of Trade Unions Aid to Families with Dependent Children American Federation of Labor American Federation of Labor-Congress of Industrial Organizations American Federation of State, County and Municipal Employees Australian Industrial Relations Commission Business Council of Australia Bureau of Labor Statistics, US Basic Needs Budget Baltimoreans United in Leadership Development Confederation of British Industry Community Coalition for a Living Wage (Miami-Dade, Florida) Connecticut Center for a New Economy Commission of the European Communities Congress of Industrial Organizations Clergy and Laity United for Economic Justice Consumer Price Index for All Urban Consumers Current Population Survey Council of Trade Unions, New Zealand Employment Contracts Act (New Zealand) European Disability Forum Earned Income Tax Credit Economic Policy Institute Employment Relations Act (New Zealand) European Union

xviii Abbreviations FLSA GAW GED GLA GMB GMFI HERE HRDC HUD HWA IAF ICARE ILGWU ILO LAANE LAX LICO LMPG LPC MIAESR MWA NAACP NAS NHS NICWJ NIRA NMW NOW OCSJ OECD PERI SEIU SMART SNA SSC SSC SUB TANF TELCO TGWU TUC TUPE

Fair Labor Standards Act (US) guaranteed annual wage General Equivalency Diploma Greater London Authority General, Municipal and Boilermakers’ Union Guaranteed Minimum Family Income (New Zealand) Hotel, Entertainment, and Restaurant Employees Union Human Resources Development Canada Department of Housing and Urban Development, US Homeworkers Association Industrial Areas Foundation Interchurch Coalition for Action, Reconciliation and Empowerment International Ladies’ Garment Workers’ Union International Labour Office Los Angeles Alliance for a New Economy Los Angeles International Airport Low Income Cut-Off Labour Market Policy Group of the Department of Labour (New Zealand) Low Pay Commission (United Kingdom) Melbourne Institute of Applied Economic and Social Research Ministry of Women’s Affairs (New Zealand) National Association for the Advancement of Colored People National Academy of Sciences National Health Service National Interfaith Committee for Worker Justice National Industrial Recovery Act (US) National Minimum Wage (United Kingdom) National Organization for Women Ontario Coalition for Social Justice Organization for Economic Co-operation and Development Political Economy Research Institute Service Employees International Union Santa Monicans for Responsible Tourism Safety Net Adjustments Solidarity Sponsoring Committee State Services Commission, New Zealand supplemental unemployment benefit Temporary Assistance to Needy Families East London Community Organisation Transport and General Workers’ Union Trade Union Congress (UK) Transfer of Undertakings Protection of Employment Regulations

Abbreviations xix UAW UNITE USDA USDL WOTC

United Automobile Workers Union of Needletrades, Industrial and Textile Employees United States Department of Agriculture United States Department of Labor Work Opportunity Tax Credit

1

Introduction to living wages around the globe Deborah M. Figart

Wage policies in industrialized countries have exemplified tensions between impersonal markets and very personal needs. Neoclassical economic theory, for example, views wage setting as impersonal and workers as a means of production. Marginal productivity theory concludes that competitive labor markets generate wages that are directly linked to productivity, or the actual job that is being performed. This wage is considered fair because of the equality of the exchange (commutative justice). If the worker considers the wage inadequate, he or she is free to search for a better bargain. Any attempts to raise wages above market-determined levels 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 of subsistence. Human beings must have access to the goods and services necessary to support and sustain themselves and their dependants. Within social economics and other schools of heterodox economic thought, there is a rich literature on the subject of adequate living standards, how they reflect cultural norms, and how they should be defined. These approaches question the necessary efficiency of market processes. Classical economists such as Adam Smith maintained that supply and demand fluctuations in wages were short-term phenomena, but that subsistence-level wages were fundamental to viable economic growth. Karl Marx’s version of the labor theory 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 nineteenth century, theoretical formulations based on classical political economy vied with the emerging neoclassical paradigm. Socialists, most notably Sidney and Beatrice Webb (1897), argued that capitalism was an inefficient system, wherein short-sighted employers with disproportionate bargaining power would treat individual workers as disposable commodities. Labor supply and labor demand did not enter the market on equal terms. The resulting low wages were a disincentive to technological innovation and therefore discouraged the efficient use of resources. Other living wage activists cited Pope Leo XIII, who issued an 1891 encyclical Rerum

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Deborah M. Figart

Novarum (“On the Condition of Labor”). The encyclical based the concept 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 supplemented below-subsistence wages (either through charity or social welfare programs) in order to maintain adequate living standards. Low-wage employers were therefore either social “parasites,” according to the first view, 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 raise living standards in industrialized countries through public policy. The first minimum wages were very limited in coverage. Minima were applied to women only, to workers in certain sectors such as the “sweated trades,” and/or in specific regions or geographical areas. The first country-wide minimum wage was installed in New Zealand in 1894. Australia followed in 1904 and Great Britain and Ireland in 1909. In 1918, the Canadian provinces of British Columbia and Manitoba enacted minimum wage legislation; they were followed by four others in 1920. The United States passed its first federal, gender-neutral minimum wage in 1938. Most continental countries of the European Union have had continuous minimum wage legislation only since World War II. But minimum wages are not necessarily living wages. Compromises were made. Coverage was limited. Debates over the setting of and increases in national minimum wages show that the terms “minimum wages” and “living wages” are contested. They are shaped by arguments about what constitutes appropriate living standards for different groups of workers (see, for example, Paulsen 1996; Waltman 2000; Figart et al. 2002). “Minimum wages” have come to be considered a “wage floor” for unorganized labor, many of whom are women and/or members of racial and ethnic minority groups. It has been up to trade unions to organize and bargain on behalf of workers to achieve the higher standard of living associated with “family wages.” In recent decades, this struggle has not been easy. Labor market liberalization and deregulation since the 1980s have increased earnings inequality. According to the European Foundation for the Improvement of Living and Working Conditions: This increase in earnings inequality raises concerns about the consequences for the lives of workers located at the lower end of the wage distribution, with a growing proportion of workers receiving a wage so low as to harm their ability to maintain decent living standards. (2002: 1) The disjunction between regulated minimum wages and family-sustaining living standards has led to the revitalization of living wage movements

Introduction to living wages

3

across the globe. New models of public policy initiatives are emerging. In the United States, for example, a living wage policy has come to be identified with a particular type of municipal ordinance first developed in Baltimore, Maryland, in the mid-1990s. These ordinances require private sector employers who receive public funds (through supplier contracts, tax breaks, cash grants, subsidies, loans or development bonds, enterprise zone 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 tax dollars should not be used to subsidize employers who pay poverty-level wages – echoing the parasitic industries argument advanced by the Webbs a century earlier. By 2003, over 100 US cities, counties, school boards, and other public entities have passed such living wage ordinances.1 In other countries, 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, temporary, or casual employment. All of these efforts have required coalitions and cooperation among government, labor, and community groups. While hours of work play a role in determining low pay, low-paid workers can also be found in year-round full-time jobs. The issue of poverty-level wages is especially crucial for women and workers from racial and ethnic minority groups (Sklar et al. 2001). Across the globe, the share of low-income workers is disproportionately female, and most likely employed in less-skilled sales and service occupations. These workers are cleaning buildings, preparing and serving food, tending to children, the elderly, and the sick, performing routine office tasks, or selling and sewing garments. 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 in seven employees in the European Union is low paid (European Foundation for the Improvement of Living and Working Conditions 2002). The incidence of low pay is greater for women than men in the USA, the European Union, Canada, Australia, and New Zealand (Jepsen 2000: Table 1). Women, therefore, are the direct and indirect beneficiaries of policies and legislation, such as eradicating low pay, that are gender-neutral on the surface (see Blau and Kahn 1992; Rubery 1992; Hunter and Rimmer 1995). The thirteen succeeding chapters of Living Wage Movements: Global Perspectives cover the origins of living wage movements and debate over policy interventions, explain how a living wage has been and is determined, survey and assess campaigns in the USA, Canada, the United Kingdom, Australia, and New Zealand, and, through empirical research, analyze the economic and political impact of living wage campaigns and ordinances passed in the late twentieth and early twenty-first centuries. Each of the individual chapter authors has extensive experience in

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Deborah M. Figart

academia or research institutes, in policy advocacy organizations, or in the labor movement. Several “scholar-activists” have been directly involved in living wage campaigns: Bruce Nissen (Miami, Florida), David Reynolds (Detroit, Michigan), Jonathan Eaton and Alex Dagg (Canada), David Ciscel (Memphis, Tennessee), and Mark Brenner (Boston, Massachusetts). Some of these same and other authors in the volume have provided expert 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, and Mark Brenner (USA), and John Buchanan (Australia). Feminist economists Prue Hyman, Ellen Mutari, and Deborah M. Figart have been active in equal pay and pay equity campaigns and research in New Zealand and the US.

Low pay and living wages: global perspectives One early case for a living wage was made by ethicist, teacher, and scholar-activist Monsignor John A. Ryan (1869–1945). His approach was heavily influenced by Pope Leo XIII’s 1891 encyclical Rerum Novarum. Ryan’s 1905 PhD dissertation from the Catholic University of America was published as A Living Wage: Its Ethical and Economic Aspects (1906). In the chapter excerpted in this volume, “The right to an individual living wage,” John A. Ryan summarizes alternative grounds for establishing a living wage principle in wage setting that were influential in late nineteenth- and early twentieth-century living wage movements. He critiques three forms of argument common among activists at the time, preferring to ground his defense of living wages on an individualistic notion of human dignity rather than on appeals to the common good or the common estimate of a just price. Ryan disagrees not only with the Webbs’ parasitic industries argument but also with several Catholic writers’ interpretation of Aquinas and other scholastic thinkers from the Middle 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 substantially equal does the rule of equality or gains seem to accord with our everyday conceptions of justice.” Further, Ryan rejects a simple equality between the wage and the labor performed because, in a reverse causality, a low wage could be consistent with a low expenditure of energy under sweatshop conditions. Ryan’s defense of living wages, presented in Chapter 2, is based on a concept of natural rights, specifically an individual’s right to an appropriate distribution of the common bounty of nature. This right is maintained by fulfilling one’s obligation to participate in productive labor. Within a market 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

Introduction to living wages

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thus little bargaining power over wage rates. Ryan viewed a living wage as a means to a “decent livelihood,” the ability to live in “a reasonable degree of comfort” (1906: 73).2 In his subsequent volume, Distributive Justice, he specifies the elements of a living wage as access to: food, clothing, housing sufficient in quantity and quality to maintain the worker in normal health, in elementary comfort, and in an environment suitable to the protection of morality and religion; sufficient provision for the future to bring elementary contentment, and security against sickness, accident, and invalidity; and sufficient opportunities of recreation, social intercourse, education, and church membership to conserve health and strength and to render possible the exercise of higher faculties. (Ryan 1916: 361) Employers were obligated because Ryan viewed private ownership as a form of stewardship, a less fundamental right than the employee’s right to a life of dignity. Ryan’s books, A Living Wage and Distributive Justice, were published during the Progressive Era, a period of US history in which many social reformers were concerned about the wages and working conditions of the largely immigrant labor force working in sweatshop industries. Actively involved in advocating for living wages throughout his career, Ryan later worked with Roosevelt advisors on the New Deal, and testified in the US Congress in favor of legislation to establish a minimum wage in the United States. These two crucial periods in the history of living wage movements are also described in Chapter 3, “Wages and hours: historical and contemporary linkages.” In this chapter, Ellen Mutari and Deborah M. Figart examine the shifting meaning of the concept of living wages in different political, economic, and social contexts, providing snapshots of three living wage movements in the USA. In response to the problem of sweated labor during the Progressive Era, social reformers advocated minimum wages for women. The first federal minimum wage law was passed during the Great Depression in order to enhance the purchasing power of nonunionized male breadwinners. Union-negotiated guaranteed wage plans were a response to fears of job insecurity during the post-war period. Based on their historical survey, they remind contemporary living wage activists that discussions of wage levels are inseparable from issues of working time in determining living standards. Living wage policy initiatives, including minimum wages across the globe and the living wage ordinances that have been passed in the USA, have provoked strong responses from those who are wary of interference with market mechanisms. David A. Macpherson is one such skeptic. In his chapter, “Living wage laws and the case for a targeted wage subsidy,” Macpherson elucidates some problems with living wage policies, and,

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specifically, the US ordinances that he terms “mandates.” The economic costs, he argues in Chapter 4, are far worse than the intended benefits. Rather than burdening employers, Macpherson would place the responsibility for maintaining living standards on the state. Specifically, Macpherson advocates expanding wage subsidies that are provided as tax credits either to employers of low-wage workers or directly to low-income working families. Such subsidies can be targeted so they have less damaging effects on employment and prices and they are directed specifically to low-income families. His contribution, therefore, highlights the tension between those living wage advocates who view such subsidies as enabling “parasitic” employers to maintain substandard employment practices and those who regard some jobs and some workers as necessarily low-wage. David H. Ciscel returns to another issue raised by Msr. Ryan: how do we know what constitutes a living wage? In “The determination of living wages” (Chapter 5), Ciscel carefully traces the mathematical methods in which “adequate” living standards have been calculated in the USA. He notes that this type of social science is, in itself, a political act. The author begins by reviewing how US poverty thresholds were set up in the 1960s, how poverty lines have been critiqued, how they led feminist economists to create alternative Basic Needs Budgets, how this academic research created a flurry of self-sufficiency studies and construction of family budgets that played key roles in living wage campaigns. Ciscel then summarizes how he applied the methodological approaches used in the various calculations of sufficiency to his own living wage study for Memphis, Tennessee. He concludes that defining a living wage is not difficult; the more problematic issue is how it can be provided and by whom – labor markets or the state. He also reflects on the implications of the politics of defining living standards for economic theory.

Cross-national case studies Part II of the volume consists of five chapters that highlight aspects of global activism around the call for better living standards. It opens with the story in the United States. In Chapter 6, “The living wage movement mushrooms in the United States,” David B. Reynolds shows the growth of grassroots activism around economic justice. Reynolds surveys the groups that have elected to participate in living wage coalitions and why, and then outlines common elements in US living wage campaigns. Six large, citywide campaigns (Baltimore, Los Angeles, San Jose, Chicago, Boston, and Detroit) are analyzed in more detail. The author categorizes these six as taking three forms: (1) part of a broader project in pursuit of economic justice; (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 living wage campaign in Toronto, Canada, that reached beyond traditional

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municipal services to marginalized workers in the global economy. Chapter 7 is entitled “Organizing homeworkers in Toronto’s garment industry.” Clothing manufacturing is a low-wage, labor-intensive industry committed to flexible production. Firms rely on a labor pool of immigrant women who work out of their homes so that the employers can match productive efficiency with labor flexibility. The city of Toronto, with over 550 fashion manufacturers, has witnessed an increase in the incidence of poverty among low-wage workers. Concern led the International Ladies’ Garment Workers’ Union, now called the Union of Needletrades, Industrial and Textile Employees (UNITE) as a result of a union merger, to act. A union investigation of working conditions showed that the average wage was below the minimum wage in the province of Ontario. Additionally, homeworkers toiled for long hours without receiving an overtime premium or benefits. Children, too, often pitched in to raise production inside the home. The union decided to publicize the results of this study and push for legislation to protect homeworkers. Eaton and Dagg’s chapter tells the story of a “no sweat” campaign. A broad coalition that included a new group, the Homeworkers Association, launched a variety of innovative efforts to achieve living wages in the garment industry. The campaign had one chief success thus far when the Labor Ministry in Ontario announced regulatory changes that gave homeworkers the same rights as other employees regarding hours of work, overtime pay, and paid public holidays. The British campaign to secure fair wages for low-paid workers lies between the European model of regulation through legislation and collective bargaining coverage and the decentralized collection of living wage ordinances in the USA. In Chapter 8, “Living wage and low pay campaigns in Britain,” Damian Grimshaw provides a comprehensive analytical survey of efforts to improve the UK national minimum wage and the lobbying to incorporate a “fair wage” clause into the European Union Directive on public procurement. The chapter, though, begins by describing a successful US-type campaign for a living wage in the municipality of East London. Like living wage campaigns in the USA, the coalition in East London brought together trade unions, community and civic organizations, religious groups, and schools. Although Great Britain was among the first countries to legislate minimum wages in the twentieth century, coverage under the legislation waned after World War II, and the Conservative-led government abolished Wage Councils, the machinery that set minimum wages by industry, in 1993. The Labour Party’s new government of 1997 immediately established the Low Pay Commission, an independent body for study, recommendation, and analysis. A National Minimum Wage was introduced in April 1999. As shown in the empirical analysis by Grimshaw, regular increases in the minimum wage since 1999 have had a significant impact on many low-paid workers. Further, the insertion of “fair wage” clauses into

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contracts of public services workers has diminished subsidies for private firms and has begun to reverse a previously growing two-tiered or segmented labor market of “good jobs” and “bad jobs.” John Buchanan, Ian Watson, and Gabrielle Meagher explore what the Australian case offers researchers and practitioners in other countries interested in living wage campaigns and policies. Unlike the decentralized activism around living wage ordinances in the USA, “living wages” have been and are an integral part of a centralized, national system of wage determination. Quasi-judicial industrial tribunals, under authority granted by the Australian parliament, play a major role in setting legally binding wages or “awards.” The tribunals have endorsed arguments for basing awards on living standards, advocated by the Australian Council of Trade Unions (ACTU). Buchanan and his colleagues elaborate how this has occurred in Chapter 9, “The living wage in Australia: history, recent developments, and current challenges.” A legislated “basic wage” or a “family wage” for men dates to the early twentieth century; the wages of women and indigenous people were an exception, however. Reflecting global trends toward decentralization and laissez-faire in Britain in the 1980s and 1990s, changes in government and institutional arrangements lessened the role of centralized awards. In 1996, the Australian Council of Trade Unions revitalized the ideal of a living wage and launched a new, three-phase living wage campaign. ACTU sought to raise the minimum wage for workers not covered by collective bargaining, especially those employed in contingent or part-time work, as well as provide a demonstration effect that would increase wages for higher skilled workers. Buchanan, Watson, and Meagher conclude their chapter by analyzing the success, even if modest, of ACTU’s annual living wage claims. Incomes of workers did rise across income groups, but living standards still continued to polarize. Women were the clear beneficiaries, however, as the percentage increase in women’s wages outpaced the percentage change in men’s wages, causing a slight narrowing of the gender-based wage gap. New Zealand has also had a relatively centralized wage-setting process, although collective bargaining between employer organizations and unions, rather than wage boards, is the primary mechanism. In Chapter 10, “The fight for living standards in New Zealand,” Prue Hyman discusses the erosion of this centralized system since the 1980s. Centralized bargaining is supplemented by a legislated minimum wage and a minimum code setting baseline standards for various forms of leave and statutory holidays. Under the “New Zealand Experiment,” decentralized market mechanisms and enterprise-level bargaining supplanted centralized wage determination processes. Living wage activism has focused on raising the legislated wage floor, reintroducing a universal child benefit, and debating the appropriate level for a tax credit program called the Guaranteed Minimum Family Income. One of the insights from the New Zealand case

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

Evaluating policy initiatives Part III presents an array of the latest empirical research on the impact of the living wage campaigns and living wage ordinances. Much of the prior research has only been able to assess the impact ex ante, that is, before living wages were fully implemented. This new research offers readers varied evidence of the effect of living wages on employment and other economic indicators, municipalities, firms, and workers themselves, ex post. Because it was evident that workers who receive raises benefit from living wage policies, the contributions to Part III focus on less intuitive findings regarding the impact of employment and public sector budgets. Some of the larger campaigns are covered in the chapters, including Miami, Detroit, Los Angeles, and Boston. Bruce Nissen examines the experiences with living wage policy in Miami-Dade County, Florida in Chapter 11, “The Miami living wage ordinance: 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 interested parties; (4) the economic impact; and (5) the level and extent of diffusion of the Miami living wage movement throughout the state of Florida. The May 1999 ordinance covered the county, the county’s service contractors, the local public hospital and its auxiliaries, and some ground service workers at Miami airport. In 2001, coverage was extended to all service contracts 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, mostly due to the relatively small numbers of contracts that were covered. Through a survey of firms, Nissen found, surprisingly, the contractors covered by the ordinance had a mostly positive reaction to the policy. Though their costs had slightly risen, the wage mandate seemed to “level the playing field” for competitive bidding. The greatest impacts of the Miami living wage ordinance were felt by the workers themselves and the community coalitions that worked for the public policy. Labor, community, and faith-based alliances were built and carried over to other economic and social justice campaigns in the state of Florida. And covered employees 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 in Chapter 12. Neumark is less sanguine about mandating higher wages to eradicate poverty and inequality. In “Minimum wages and living wages: raising incomes by mandating wage floors,” he reviews the economic

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theory on mandated wage floors, summarizing the concepts of labor supply, labor demand, and the sensitivity of employment to wage increases, or what economists call “employment elasticity.” He then assesses the newest empirical research on the impact of minimum wages on employment, work hours, wages, and income inequality, including some of his own oft-cited scholarship. On balance, he finds that higher wages, accomplished through raising the federal minimum wage or passing local living wage ordinances, do not accomplish their hypothesized objectives of helping low-income workers and their families, and that the longrun costs likely outweigh the benefits. The use of national data sets to estimate the anticipated empirical effects of living wages, the methodology adopted by Neumark, is challenged by Mark Brenner. In Chapter 13, “The economic impact of living wage ordinances,” Brenner directly challenges the Neumark findings. He also provides a comprehensive survey of the existing empirical research on the impact of living wages to date. Brenner separates his analytical review into two groupings: (1) prospective studies (estimated effects while the minimum wage was being debated, but before implementation); and (2) retrospective studies (research reports that draw on the actual experience of US cities following implementation). His meta-analysis of studies covers the following municipalities: Baltimore, 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 overall evidence suggests that managers in firms affected by living wage ordinances are likely to adopt alternative measures rather than reduce the number of employees or move their base of operations. Some evidence indicates that living wage ordinances do increase the cost of some city contracts, but this depends on the size of the contract and is therefore not a generalized finding. Unlike Neumark’s analysis, Brenner concludes that the benefits of a living wage exceed the costs, and the potential to affect living standards of low-paid workers is significant. The costs of human service contracts under US living wage ordinances is investigated further by Andrew J. Elmore in Chapter 14, “Living wages in US communities: an analysis of costs of services and economic development.” The chapter is among the first to present a comprehensive overview of the direct expenses after implementation of living wage ordinances. The author conducted structured interviews with government administrators and law-makers from twenty cities, counties, and townships across the USA. Elmore allows officials to speak for themselves about the impact of living wage ordinances; their voices add considerable legitimacy to the debate. For further evidence, he also analyzed any studies conducted by the localities.

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The chapter first specifies the increases in local contract costs, in dollar terms and as a percentage of the city budget. As shown in Brenner’s chapter, Elmore finds that contract costs did rise due to living wage ordinances, but the increases were moderate. Only a few municipalities in Elmore’s survey extended living wage coverage to employees in human services. These human services contracts had a larger percentage impact on municipal budgets, though these increases, too, were still modest. Contractors appeared to absorb the higher labor costs. In debating living wage initiatives, law-makers have also voiced concern that a high wage mandated under a living wage ordinance could discourage private firms from participating in economic development programs, especially the creation of jobs in a low-wage sector such as retail. The author therefore next turns to investigate ten cities with a living wage requirement for economic development 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 the living wage requirements. Finally, the chapter presents various factors that may have limited the negative impact of living wage laws on both contract costs and local development programs, providing lessons for other municipalities and the living wage movement as a whole. The chapters in Living Wage Movements: Global Perspectives illustrate that a variety of approaches have been utilized to ensure adequate living standards. In part, this reflects ideological differences about the appropriate form of state intervention in markets and the role of wage labor in provisioning. Society cannot be economically sustained unless social reproduction, the daily and intergenerational renewal of the labor force, takes place. Living wage advocates support public policies that ensure this process by requiring employers to provide their workers with living wages. Minimum wage laws and living wage ordinances reflect the political standpoint that employers should bear the primary responsibility for underwriting these costs. The success of such regulations, as the research in this volume demonstrates, depends on the depth and breadth of coverage, the teeth of enforcement, and the regularity of wage rate increases. Wages, however, are not the only means of provisioning, even in advanced industrialized countries. The state can directly provide income to supplement or replace inadequate income. While some of the book’s authors view wage subsidies as less intrusive upon market mechanisms, others regard them as fostering low-wage labor markets. Yet, the state must clearly have a role in economic provisioning. While wage labor is an important economic and social contribution that deserves adequate recognition and remuneration, combining labor market policy with more comprehensive welfare state provisions – paid parental leave, universal access to health care – could provide citizens with the best opportunities for realizing human potential.

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Notes 1 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 International 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 Wage Movement,” 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 Australian Experiences,” in J. Humphries and J. Rubery (eds), The Economics of Equal Opportunities, Manchester: Equal Opportunities Commission, pp. 245–73. Jepsen, M. (2000) “What Do We Know about the Link between Low Pay, Gender and 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 Condition of Labor, New York, NY: The Paulist Press. Nordlund, W.J. (1997) The Quest for a Living Wage: The History of the Federal Minimum Wage Program, Westport, CT: Greenwood Press. Paulsen, G.E. (1996) A Living Wage for the Forgotten Man: The Quest for Fair Labor Standards, 1933–1941, Selinsgrove, PA: Susquehanna University Press. Pollin, R. and Luce, S. (1998) The Living Wage: Building a Fair Economy, New York, NY: The New Press. Rubery, J. (1992) “Pay, Gender, and the Social Dimension to Europe,” British Journal 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 Distribution of Wealth, New York, NY: The Macmillan Company. Sklar, H., Mykyta, L., and Wefald, S. (2001) Raise the Floor: Wages and Policies that Work for All of Us, New York, NY: Ms. Foundation for Women. Waltman, J. (2000) The Politics of the Minimum Wage, Urbana, IL: University of Illinois Press. Webb, S. and Webb, B.P. (1897) Industrial Democracy, London: Longmans, Green, & Company.

Part I

What is a living?

2

The right to an individual living wage1 John A. Ryan

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

The grounds for living wages: alternative views The advocates of the living wage doctrine do not all reach their common conclusion by the same process of reasoning. Some of them base it on the social benefit to be derived from maintaining the workers in a condition of the highest industrial efficiency; others, on the manifest justice of giving a man sufficient to repair the energy that he expends in his labor; others, on the “common estimate” of what constitutes a just price for work; and still others, on the personal dignity of the laborer, or his right to possess the requisites of a decent human life. Prominent among those who defend the principle of a minimum wage on social grounds are Sidney and Beatrice Webb (1897), and their line of argument is typical of that large class of writers who habitually regard the rights and welfare of the individual from the viewpoint of society. They maintain that the state ought to enforce a national minimum of wages which would provide the laborer with “the food, clothing and shelter physiologically necessary, according to national habit and custom, to prevent bodily deterioration” (1897: 751). By this means the community would rid itself of the industrial evil called “parasitism,” that is, the existence of trades or businesses in which the wages paid are too low to maintain the workers in industrial efficiency, and to enable them to reproduce and rear a sufficient number to take their places. These industries take from the nation’s capital stock of character, intelligence, and energy more than they

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give back, and therefore steadily degrade the character and industrial efficiency of the whole people. Hence, as a matter of simple protection to the national 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 is only partially satisfactory to anyone who regards the laborer primarily as a being endowed with a personality and rights of his own. Like every other person, he exists primarily for himself, not for society; and he has rights that are derived from his own essential and intrinsic worth, and whose primary end is his own welfare. Society exists for the individual, not the individual for society, and when there is question of fundamental rights and interests, the good of the individual, that is, of all the individuals, should be the supreme consideration. Social welfare when taken as an ideal of effort entirely apart from the welfare of the particular individuals of whom society is composed, is either an empty abstraction or, concretely, the welfare of a portion only of its members – the strongest, or most efficient, or most intelligent. Individual rights ought, indeed, to be interpreted consistently with the legitimate interests of society, but this is only another way of saying that no person’s rights should be extended so far as to violate the rights of other persons; for the vital fact about injury to society is always that some wrong is done to a group of human beings. And, despite the alleged evils of “parasitism,” it is quite conceivable that in some contingencies social utility would be promoted by paying some of the least efficient workers a wage insufficient to repair expended energy or to bring out their highest productive effort. The nation, like the individual employer, might find it profitable to wear out quickly a portion of its productive power. The difference between the product of some laborers at bare subsistence wages and at a wage adequate to replace their outlay of energy and evoke their fullest productivity, might not equal the difference in remuneration. In such cases the attempt to obtain the highest industrial efficiency would be economically unprofitable. No doubt the advocates of the view here criticized are too humane to conclude that society is justified in seeking its own utility at the cost of inhumanity to any section of its members. They would probably insist that this course would in the long run be productive of more harm than good, owing to the resulting moral deterioration. With this contention the defender of natural rights would agree, since he holds that true and permanent social utility, economic, moral and spiritual, can be secured only by a general observance of the moral law and the law of rights as deduced from the essential nature of man; but he would insist that the doctrine which derives the laborer’s claim to a decent livelihood from considerations of social utility is not only unsound in theory but extremely dangerous in practice. Once this view becomes general, the condition of the “sweated classes” will be even more hopeless than it is today; for only the few are capable of perceiving, or

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anxious to secure, what will be beneficial to society “in the long run.” The many will see only the apparent social utility of cheap goods and cheap services. The Rev. Charles Antoine, S.J. (1899), declares that there ought to be an objective equivalence between the labor performed and the wage received. That is to say, the laborer’s remuneration must be sufficient to replace 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. While this formula has a certain show of exact, rigorous justice, it can be interpreted and applied in such a way that the “equivalent” compensation will be less than a living wage. For the energy expended by the laborer is replaced, substantially, as long as he continues to work with his accustomed efficiency. Any wage that is uniform from day to day will provide him with the material means of realizing this end. The fact is that the amount of energy expended by the laborer, who is wholly dependent upon his wages, is always limited by his wages and can never be in excess of them. The subsistence received by the men and women employed in sweatshops does not repair a large amount of energy, but, on the hypothesis that they continue at work, it replaces all that they actually expend. The rule that Father Antoine proposes cannot be made the basis of a change for the better, since it is even now in force throughout the world of industry. In fact, it would work very well side by side with “the iron law of wages.”

A third view: the “just price” Other writers derive the right to a living wage from the principle of just price. Following the Schoolmen [or the Scholastics], they maintain that for every commodity, whether goods or labor, that men buy and sell, there is a price that is just and fair. It is the price at which the things exchanged will be equal. Now the equality that may exist between economic goods can be nothing else but an equality of utility. And this equality is to be understood, not absolutely, in the sense that both exchangers will derive the same amount of satisfaction from the goods received, but relatively to the inconvenience that each suffers by depriving himself of the good transferred (see, for example, Aquinas 1894). It was as obvious to the Schoolmen as it is to us, that in every economic exchange both parties make a gain, or think they do – otherwise the transaction could never take place. The utility that each obtains from the thing received is greater than he would have enjoyed by continuing in possession of the thing parted with. Now, justice requires that these net gains should be the same for both sides. Such is the precise and commonly accepted meaning of the scholastic formula: “In an onerous contract the two parties should be benefited equally.” It is held to be a deduction from the personal equality of all human beings. Men have equal rights, not only to subsist upon and acquire

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the fruits of the earth, but to profit by the exchange of such goods as they have legitimately acquired (see, for example, Castelein 1899: 208). Since the price of goods is merely their value expressed in terms of money, their value must always be so assessed and determined that the price will be just – that both parties will obtain the same quantity of net advantage. Understood in this sense, the value of things is primarily an ethical attribute. It is measured and formulated with reference, not merely to 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 shoes are unequal, the goods have not been rightly valued, and the contract is not in accordance with ideal justice. In a word, justice is not realized by exchanging commodities at any valuation that the contracting parties see fit to put upon them, nor at any other valuation whatever, except the one that is just, the just price. Who is to ascertain and fix this just value of things in actual transactions? Not those who make the exchange, for they are liable to form prejudiced estimates, and the stronger bargainer will be tempted to use his power at the expense of the weaker. In the opinion of the Schoolmen, the valuation could be most reasonably and justly determined by the community. They admitted, indeed, that the just price of goods was incapable of exact determination, and consisted of a “certain estimate” or approximation (“quadam aestimatione”). Hence, they said, it is susceptible of three grades, lowest, medium and highest, all of which are legitimate as rules of practical justice. This method of social appraisal seemed to them to be a fairly satisfactory device, inasmuch as it reduced the influence of the individual bias and individual selfishness (against which the whole doctrine of just price was directed) to a minimum. Nor was the community to act arbitrarily in arriving at its common estimate; it was morally bound to take into account certain objective factors, chiefly, the cost of production, the scarcity, 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 the laborer’s right to a living wage. Their argument runs thus: the workingman has a right to a just price for his labor; the just valuation of any kind of labor is that formed by the common estimate, or social judgment, of what is reasonable; now the social judgment declares that a man’s wages ought never 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 estimate to which they refer is not the economic social estimate. The latter is determined solely by the movement of demand and supply, is produced unconsciously, by the “higgling of the market,” and is always expressed in actual market prices. The ethical estimate is a deliberate pronouncement of the social judgment, made independently of the price-determining action of competition. It declares the prices and wages that ought to exist,

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not those that do exist. In this sense the social estimate, we are told, maintains that when men are paid less than a living wage, they are victims of injustice.

Critique of the “just price” In considering the bearing of the doctrine of just price upon that of a living wage, we must distinguish between its objective and subjective aspects. Equality of gain for the two exchangers is the objective standard of ideal justice; while the subjective application of the abstract rule to the concrete facts of industry is found in the social estimate, which is assumed to be the best available expression of the requirements of practical justice. Now, our contention is that neither the ideal standard nor the method of applying it affords a satisfactory logical basis for the living wage principle. The criterion of equal gains for the two parties to an economic exchange would seem, at first sight, to possess all the requisites of a correct rule of justice. Inasmuch as men are endowed with equal rights to acquire the resources of the earth, it seems reasonable to conclude that when two of them enter into a contract for the exchange of goods that they have lawfully acquired – a contract in which neither intends to enact the role of a philanthropist, but both wish to gain as much as possible – they have a right to equal quantities of gain. As we saw in the last chapter [Chapter 4 of A Living Wage], equal rights to the earth do not, indeed, imply rights to equal amounts of it or its products; but this is owing to the existence of other titles of ownership, such as superior needs, efforts and productivity, which modify the content of the primary and fundamental title. No such considerations stand in the way of men’s rights to equal gains from the exchange of their goods. When we look deeper, however, we find that there are other and very good reasons for rejecting this standard of equal gains. In the first place, there is the difficulty of putting it into practice. No statement of a just price in terms of money can be formulated which will enable the two contracting parties to make equal gains in the case of any good that is frequently bought and sold. Different men may purchase the same article from the same merchant at the same rate, and yet the personal 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 merchant’s gains on all the transactions are equal. And the chances of inequality are increased when the purchasers deal with different sellers. The situation is the same when the commodity dealt in is human labor. It is morally impossible to appoint a rate of wages from which the employer and every employee will obtain the same amount of net utility. Not only is this standard impracticable (except by an approximation so broad as to render it superfluous), but in a large proportion of cases it is unsound theoretically. For example, the man who gives his last dime to a

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prosperous baker for a loaf of bread, gains far more by the transaction than does the baker. The profit made by the latter is very small, say, one cent, and represents the satisfaction of a very trifling want. The other party to the contract has stilled the keenest pangs of hunger, and possibly warded off imminent starvation. Any other utility that he might have procured for his dime, is, in comparison with the one that he really obtained, insignificant. Consequently, the utility of the bread to him, whether considered in itself or relatively to any other good that he might have got for his money, is much greater than the advantage accruing to the baker. And yet no one would assert that in the ordinary conditions of production ten cents is not a sufficiently large price for a loaf of bread. In accordance with a well-known law of value, the utility of a good to an individual is always proportioned to the importance and intensity of the want that it satisfies; hence the more dissimilar the material conditions of the exchangers, the more will the gain of the poorer exceed that of the richer. If the two are to gain equally, the poorer man must pay a price that all fair-minded persons would regard as outrageously exorbitant. Only in contracts between persons whose incomes are substantially equal does the rule of equality or gains seem to accord with our everyday conceptions of justice. When, for instance, a shoemaker gives a tailor a pair of shoes in return for a pair of trousers, their gains are about equal, since the wants supplied are nearly equal in importance. The inequality that we are discussing is even more striking and more frequent in labor contracts. No matter how low the wage, the laborer gains more than the employer. The man who works for 75 cents a day satisfies in some fashion his most important and intense wants. Compared with this result the pain-cost of the exertion that he puts forth 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 of money which, in a great many cases, represents a few cigars or some equally secondary utility. According to the equal gain principle, the laborer is getting more than is just, although his remuneration is far below the limit of a living wage. As a general rule, the employer who has any considerable number of men on his payroll does, indeed, obtain from the aggregate of his wage contracts more utility – a greater satisfaction of wants 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 contract it is smaller than the advantage received by the other party, the laborer. As a matter of fact, the Schoolmen never made any consistent attempt to apply the principle of equality of gains to industrial contracts. When they declared that the community, or, more precisely, those members of it whose reputation for fairness was highest, was the most competent agency to determine the concrete price that would safeguard equality between buyer and seller, they also declared, as we have seen above, that the decision of the community, the social estimate, ought to be based upon the

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general utility, the relative supply, and the cost of production of the commodity. Now these are objective factors, but they are in no sense an expression 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 complete setting aside of their ideal standard . . . So much for the theoretical standard: the practical criterion, the “social estimate,” is unsatisfactory, either as a justification or as a measure of the living wage. To begin with, it is too vague. Does it describe the unanimous, or morally unanimous, judgment of the community – what the older writers called the “sensus communis”? Or, is it another name for “public opinion”? Does it mean custom? Possibly it refers to the deliberate judgment of a body of men chosen from the various classes, intellectual, industrial, and religious, of the community. Let us see whether any of these social 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 assume that he holds, at least in the abstract, that the laborer ought to have the means of living comfortably and decently. But concerning the amount of subsistence goods comprised in the idea of a decent livelihood, the “sensus communis” lacks definiteness. The best that it can give us is a compromise derived from a multitude of individual or class estimates. We have, however, no means of ascertaining the content of this compromise, or average estimate, and, even if we had, we cannot be certain that it would be in harmony with reason and justice. In judging of the larger and more general questions of morality, the common convictions of mankind are sufficiently trustworthy; but in details its judgment is easily perverted by the influence of bad and long established custom. Second, that somewhat capricious form of the social estimate, called public opinion, is vitiated by defects similar to those just enumerated. Its verdict concerning the precise requisites of a living wage will necessarily be too general, and too difficult of ascertainment. It is, moreover, essentially variable and therefore untrustworthy. Indeed, if we accept the press as its mouthpiece we must admit that it has not declared in favor of even the principle of a living wage. In the third place, it is undoubtedly true that a fairly definite standard of 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 afford the conditions of a decent livelihood – witness the remuneration of the “sweated” classes . . . Finally, the pronouncement of a carefully selected and representative committee would, it is probable, be sufficiently definite and trustworthy. If the social estimate, thus understood, declared that every laborer ought to have a living wage, and defined what it meant by this phrase, its decision would probably satisfy all reasonable minds, and

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be the nearest approach to a correct estimate of a living wage that is practically attainable. Since, however, no such judicial body exists, its assumed pronouncements cannot be made to serve as the basis of the living wage doctrine. The theory which founds a living wage upon the principle of just price has been discussed at this length because the concepts and formulas underlying it dominated the industrial theory and practice of Europe for centuries, and because they are still quite common in ethical literature. One after another the Schoolmen of the Middle Ages asserted and expounded the principle that goods and labor had a certain just price. And they were right; for when we admit that a commodity can be sold at an exorbitant price we tacitly assume that it has some other price which is not exorbitant, which is just. An action cannot be adjudged wrong except by reference to some standard of right. The precise determination of that standard is another matter . . .

The dignity of a living wage Finally, we come to the doctrine which deduces the laborer’s right to a living 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 community has an abstract right to a decent livelihood, and that this right becomes concrete and actual when the material goods controlled by the community are sufficient to provide such a livelihood for all, and when the individual performs a reasonable amount of useful labor. It is assumed that the first condition is verified; and it is maintained that the second is fulfilled by the man who labors for hire during a working day of normal length. His general right to as much of the earth’s fruits as will furnish a decent livelihood is clear; the correlative obligation of his fellow members of the community to appropriate and use the common bounty of nature consistently with this right, ought to be equally clear. Now, the simple and sufficient reason why this general right of the laborer takes the special form of a right to a living wage is that in the present industrial organization 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 there are no unappropriated goods within his reach. To force him to make the attempt would be to compel him to live on less than a reasonable minimum. And the obligation of paying him this amount of wages rests upon the members of the industrial community in which he lives; for they have so appropriated the resources of nature, and so distributed the opportunities and functions of industry that he can effectively realize his natural right of access to the goods of the earth only through the medium of wages. As long, therefore, as the present organization of industry exists, the obligation of not hindering the laborer from enjoying his right

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to a decent livelihood will be commuted into the obligation of paying him a living wage. The right to a living wage is asserted to be valid against “the members of the community in which the laborer lives.” Whether the term “members” refers merely to the employers, or to other persons as well, or to the community in its civil capacity, that is, the state, will be fully discussed in later chapters. For the present it is sufficient to point out that the right exists, and that it holds against those who are responsible for converting the laborer’s opportunity of getting a living into the opportunity of receiving wages. “The industrial community in which the laborer lives” can be defined only approximately. It describes that section of the world’s inhabitants with which the laborer comes into somewhat close economic relations, chiefly, those who are primarily benefited by his labor, and those who have appropriated that portion of the earth’s resources that otherwise would be practically within his reach . . . One of the principal reasons why the right to a living wage has been obscured in the minds of many men, is the complexity of modern economic life. An example or two will illustrate this contention. Let us suppose that six men settle upon a no-man’s land, and proceed to divide it amongst them. Although it is capable of affording a comfortable livelihood for all six, five of them – an undoubted majority – organize a government, and divide the land in such a way that the portion allotted to the sixth will barely keep him alive. Each of the other five is thus enabled to enjoy something more than a decent livelihood. Now, it is safe to say that ninety-nine of one hundred men would condemn this proceeding as unjust. They would maintain that the right of the sixth man to the whole amount of land distributed was just as good as the right of any of the others, and that no reason, title, or justification existed for depriving him of an equal share, 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 man has previously visited or claimed. Instead of dividing up the land, they till it in common, and distribute its produce. Not all of them, however, labor upon the soil; there is a shoemaker, a weaver, a tailor, a carpenter, and so on; every man performs the task for which he is best fitted. But the distribution of their common product is so carried out that forty-five can live in abundance, while the remaining five have merely the means of continuing to exist and work. The services of these latter, so the other five assert, are not worth more than this pittance. Again it is palpable that the common product of a common property has been unjustly apportioned by the arbitrary action of the majority; for the five, we assume, perform a reasonable amount of useful labor. The case is precisely the same, at least in principle, in the more complex and elaborate industrial conditions of today: the members 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 of nature when they so take advantage of the existing distribution of private

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property as to deny him a living wage. In exercising their right of access to the earth, they make it impossible for the laborer to exercise his as fully as is demanded by decency and justice. And they do it just as effectively, they are 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 location as are the harshly treated members of those two isolated communities. A few workingmen could, indeed, find a living elsewhere, but the overwhelming majority must stay where they are, or merely exchange places with one another – unless the whole machinery of industry is to stop, and mankind to perish off the face of the earth. The controllers of the industries and material resources of a community cannot get along without wage-workers; rather than make the attempt, they would gladly pay every one of them a living wage which is a clear indication that they regard the laborer as really worth that amount. Hence the complexity of the present industrial system obscures, but in no way annuls, either the rights of the laborer, or the correlative obligations of his fellow citizens. Another cause of the prevailing indifference toward these rights and obligations is ignorance and neglect of the common, or social, aspect of property. All too general is the notion sanctioned by the definitions of property in the Roman Law and in the Civil Code of France, that a man has a right to do with his own what he pleases. Such a claim is obviously absurd, since men have not a right to do as they like with their faculties, to say nothing of the bounty of nature which was created for the benefit of all. They have a right to do with their own only that which is consistent with the rights of others. The private proprietor too often forgets that his right of ownership is valid only as a means to his right of use, and that the latter is a right common to all mankind, which he is obliged to interpret and exercise within such limits that its realization shall be possible for his fellow men likewise. He forgets that when he appropriates a portion of the earth’s resources for his own use and benefit he diminishes by that much the amount available for private ownership by the rest of men. He forgets that his less fortunate neighbors, among whom must be counted the laborers, have, on account of their inborn right of access to the world’s material goods, some sort of claim to that part thereof which he calls his own. The exaggeration of the scope of individual ownership, and of the ability of the propertyless man to take care of himself in the competitive struggle, has converted into a maxim of business ethics the contention that employer and employee have no property rights against each other except those expressly named in the labor contract. The fact that a contract may be the occasion of a right, which it does not explicitly provide for, is entirely overlooked. It is forgotten that the laborer enters the wage-contract as a man endowed with a natural and indestructible right to a decent livelihood, which the contract renders impossible of realization except through the medium of wages. His right to a living wage is merely the former right as

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modified and determined by the contract. In so far as it is valid against his employer, it is produced neither by his contract with the latter nor by his right to a decent livelihood, taken separately, but by the two in conjunction . . . To the objection that some laborers possess other means of living in addition to their labor power, the answer is that these are rather rare exceptions. Whether they also have a right to a living wage is of comparatively small importance. Still it would seem that the question ought to be answered in the affirmative, since they perform as much labor as their less fortunate fellows. At any rate, there are good social reasons for paying them 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 women and children. According to the foregoing reasoning, it is evident that those women who are forced to provide their own sustenance have a right to what is a living wage for them. Since they have no other way of living but by their labor, the compensation therefore should be sufficient to enable them to live decently. Again, women doing the same work with the same degree 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 remuneration as their male fellow workers. Distributive justice requires that equally competent workers be rewarded equally. Moreover, when the women receive less pay than the men, the latter are gradually driven out of that occupation (see, for example, Smart 1895). Unless we hold that an increase in the proportion of women workers is desirable, we must admit that social welfare would be advanced by the payment of uniform wages to both 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 who cannot perform the work of adults, have a right to a wage sufficient to afford them a decent livelihood. They are entitled to this because their wages, generally speaking, constitute their sole source of maintenance. It must be noted that a living wage for children refers to their essential needs as members of a family, not to the requisites of boarding-house life, as this is not the condition in which working children are usually placed. Finally, children of either sex who perform the work of adults ought to receive the wages of adults, for the same reasons that justify the payment of men’s wages to equally efficient women.2

Notes 1 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” (the title in the table of contents) or “The Right to an Individual Living Wage” (the title on the opening page of the chapter), published by The Macmillan Company in 1906. It has been shortened slightly, section titles were added, and some changes were made to conform to house style (e.g. in the original, Ryan

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consistently capitalized the phrase “Living Wage”). The reader is to interpret ellipses [. . .] as text that has been deleted from the original. Those interested in a full-length presentation are encouraged to consult the source publication. 2 In speaking of a living wage, whether for men, women, or children, it is assumed that they are employed during the whole of the working time of the year. Consequently, women who are obliged to devote all their attention to household duties for a considerable portion of the year, and children who attend school, are not entitled to a living wage for the entire year. As we shall see, the right to a living 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 Condition 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.

3

Wages and hours Historical and contemporary linkages Ellen Mutari and Deborah M. Figart

. . . the workingman’s right to a decent livelihood is, in the present economic 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 this volume, Msr John Ryan asserts that his living wage doctrine is an historically contingent principle. The right to a living wage is equivalent to the right to a “decent livelihood” given “the present economic and political organization of society.” By this, Ryan means that advocacy of living wages is predicated on the institutionalization of wage labor as the primary 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 social norm in most industrialized countries. Even so, which of society’s members 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 and even citizenship rights, working for wages was viewed as relatively undesirable. For example, the term “wage slavery,” a dominant metaphor in the United States, signified the demeaning status associated with waged work in the early nineteenth century (Roediger 1991). Over the course of the nineteenth century, the expansion of industrialization, and, with it, the separation of factory work from the household, meant that an increasing proportion of people, especially men, came to rely on working for a wage as their primary means of provisioning. Masculinity, in the process, was redefined. Breadwinning came to be viewed no longer as subjection to a master, but rather as a means to economic independence, the benefits of consumer society, democratic citizenship, and status as head of one’s household (Connell 1993; Glickman 1997). Under this male breadwinner ideal, young single women from families with limited means engaged in wage labor for a few years before getting married. Married women, however, were supposedly excluded from wage

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labor unless their families had no other method of meeting subsistence needs. Despite this ideal, many women did engage in remunerated work in both the formal and informal economy. Married women working from the home were crucial to the garment industry in many countries. Other women continued their work in family businesses such as farming or handicrafts. Some took in boarders, did laundry at home, and performed a variety of other income-generating activities. And many women did work for wages, as domestic servants, in factories, and in shops (Honeyman and Goodman 1998; Figart et al. 2002). The proliferation of wage labor was thus a precondition for, as well as a result of, the emergence of living wage movements. Living wage movements legitimated wage labor by differentiating respectable forms of employment from those that were considered oppressive or exploitative. Living wage standards, however, reflected the gendered (and, especially in the United States, racialized) social order in which these movements flourished. Working men joined unions and struggled with employers to achieve a family wage, defined as a wage sufficient to support a dependent wife and children (Glickman 1997; Honeyman and Goodman 1998). In fact, another chapter of Ryan’s A Living Wage (the chapter subsequent to the one excerpted in this volume) argues for men’s “right to a family living wage” rather than simply an individual living wage; he defines this as the ability to support a spouse and four or five children. For Ryan and many other living wage advocates, living wages for women were fairly consistently construed as less than living wages for men. Wage-setting processes as well as levels were often gendered. Unionized male workers sought to establish a breadwinner wage primarily via collective bargaining. Efforts to improve working women’s living standards across industrialized countries, in contrast, largely focused on “protective legislation” aimed at reinforcing motherhood as women’s primary life purpose (Wikander et al. 1995; Mutari 2000).1 The discourse of living wage movements resonated across the theoretical and political spectrums in the early twentieth century. During this period, economists, policy-makers, and business leaders, as well as labor leaders and social reformers, understood economic activity as a process of provisioning, that is, of producing and reproducing human material life. While market forces had long been understood to play a role in setting wages, market outcomes could be judged on their ability to provide a living and regulated when they failed to do so (Figart et al. 2002). This chapter explores three examples of twentieth-century living wage movements. These “snapshots,” taken from the United States, indicate that living wage movements take different forms in various political, economic, and social contexts. While broadly defined as a remedy for low wages, in different historical contexts, the meaning of low wages can vary dramatically. Therefore, we examine how living wage advocates defined the problem that living wage policies were meant to address at the time.

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Important insights with implications for contemporary living wage movements emerge from this analysis. One is the inter-relatedness of issues of wages and hours in these different historical contexts. The nature of the linkage, however, changes. At the turn of the twentieth century, when low pay was associated with “sweated” labor, overwork was key. During the Great Depression, lack of employment, 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 of stimulating the economy. Guaranteed annual wage plans, encouraged by both the FLSA and the (World War II) War Labor Board, represented an even stronger melding of wages and hours by stabilizing income in response to cyclical fluctuations. The issues became de-coupled by the institutional arrangements established during the post-war period. The unraveling of these institutions has generated a new set of concerns for contemporary living wage activists.

Snapshot 1: The genesis of wages and hours legislation in the USA The period from 1880 to 1920 was a pivotal time for living wage movements in the USA and other industrialized countries. During what is referred to as the Progressive Era in the United States, business concentration combined with mass immigration and macro-economic fluctuations placed many workers in a weak position to negotiate a price for their labor. Social activists called attention to this lack of bargaining power. In response, social reformers advocated factory safety and inspection laws and labor regulations such as maximum hours and minimum wages. In Europe, Australia, and the United States, however, most of the so-called protective legislation during this period was gender-specific. That is, the labor regulations usually applied to women (and children) but not adult men. Protective legislation in the United States was passed in individual states but not federally. From 1912 to 1923, minimum wage legislation for women was enacted in fifteen states, the District of Columbia, and Puerto Rico (US Department of Labor, Women’s Bureau 1928). Wage minima for specific occupations within industries were set by industrial boards comprised of representatives from business, labor, and the community. The decision to focus on women workers was partly a strategic response to the laissez-faire stance adopted by the US Supreme Court. A New York maximum hours law that applied to male workers (a ten-hour limit for bakers) was overturned by the court in a 1905 ruling (Lochner v. New York 1905), on the ground that labor regulations violated the workers’ freedom of contract. In 1908, the court held, however, that women’s freedom of contract could be superseded in the interest of protecting their

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reproductive health and thus the society’s interests (Muller v. Oregon 1908). Massachusetts subsequently passed the first US minimum wage law in 1912; the Supreme Court did not rule in a 1917 case, challenging the constitutionality of this relatively weak legislation. It seemed, for a brief time, that protective legislation was acceptable for women but not men. In 1923, however, the Supreme Court voided Washington’s stronger minimum wage legislation (Adkins v. Children’s Hospital). State-level minimum wage laws remained in effect in many states but became virtually unenforceable (Lehrer 1987; Nordlund 1997; Power 1999). In order to establish minimum wage laws and other gender-specific protective legislation, social reformers perpetuated the rationale that identified women primarily as mothers rather than as workers. The “living wage” established by these regulations was not the family-sustaining or breadwinner wage advocated by unions for male workers. Most discussions about appropriate levels presumed that working women required, at best, a wage sufficient for a temporary spell of independence (as a “woman adrift”). At the lower end, policy-makers argued that a working woman needed only enough to contribute to her own support within an extended family, thereby benefiting from the “economies of family life.” At the same time, such legislation was a tool for combating the harsh conditions experienced by low wage women workers, especially the young daughters of recent European immigrants who were employed in manufacturing under “sweatshop” conditions. Their labor force intermittency made unionization difficult and their bargaining position weak. Therefore, while some social reformers accepted the essentialist viewpoint endorsed by the Supreme Court, others advocated gender-specific legislation purely for strategic or pragmatic reasons (see Figart et al. 2002: Chapter 5). States enacted separate laws regulating minimum wages and maximum hours. Furthermore, the states with maximum hours laws were not necessarily those with minimum wage laws, or vice versa. For the social reformers advocating labor legislation, the two issues were integrally related. The “problem,” as they defined it, was sweatshops (see, for example, Kelley 1998). Sweatshops were small manufacturing operations where employees worked long hours for minimal pay in crowded and sometimes unsanitary or dangerous working conditions. Many sweatshops operated out of apartments in tenement buildings and other locations that were not constructed for industrial use. In other cases, mothers and children performed piece work in their own homes. Living wage advocates argued that sweatshops proved that untamed competition did not breed efficiency. In fact, those innovators who introduced new technologies and the best practices toward their labor force would be undercut by ruthless employers who simply pushed their workforce to work harder, faster, and longer. Below-subsistence wages meant that charity or the meager social welfare programs of the time would be called upon to ensure social reproduction. At stake was not simply the

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daily renewal of the labor force, but the intergenerational renewal as well. Young women who received inadequate nutrition, were poorly housed, or tempted by poverty into accepting favors from men would be less able to fulfill their future role as the virtuous mothers of the next generation of workers. For this reason, sweatshop employers were described as “parasitic,” meaning that they were leeches on the community as a whole (Power 1999).2 Minimum wage laws and maximum hours laws were separate policy instruments, but they were strategically linked by social reformers’ definition of sweatshops. Overwork and exploitation were seen as mutually reinforcing. Low pay necessitated long hours of work, especially when piece work was performed in the home. Long hours bred health and safety hazards. Depleted workers were less efficient, depressing productivity and therefore wages. Further, the issues became associated legally. The Lochner and Muller decisions regarding maximum hours established precedents that enabled minimum wage regulations, at least in the short run until the Adkins decision (Lehrer 1987). The connection between wages and hours became more explicit in the next round of wage regulations, the gender-neutral laws established during the Great Depression of the 1930s.

Snapshot 2: Wages and hours in one law The advent of the Great Depression of the 1930s redefined how social reformers viewed the inter-relationship of wages and hours and thus reshaped and reinvigorated the living wage movement in the USA. Macroeconomic problems were crucial, as millions of workers could not gain a living for their families. The unemployment rate skyrocketed from 3.2 percent in 1929 to 24.9 percent in 1933. Other “discouraged workers” were uncounted because they stopped looking for work, statistically dropping out of the labor force. The unemployment rate was still as high as 20 percent in 1938 when the Fair Labor Standards Act was passed by the US Congress and did not fall below 14 percent before the end of the decade (Margo 1993). Working men found themselves unable to be breadwinners and more women became “added workers,” finding jobs gendered as female in less cyclically sensitive industries (Humphries 1976; Mutari 1996). Further, prevailing economic discourse among living wage advocates began to reflect nascent Keynesian concepts, including the importance of increased purchasing power to jump-start the faltering economy. The first attempt to regulate wages and hours as part of President Franklin Delano Roosevelt’s New Deal policies came as part of the National Industrial Recovery Act (NIRA) of 1933. In coupling wage and hours standards, the National Industrial Recovery Act linked a laborsupported movement for shorter hours with social reformers’ call for minimum wages. This was not the position favored by the American

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Federation of Labor (AFL), the largest federation of unions in the US at the time. Historian Landon Storrs observed that “what organized labor and some businessmen had accepted in the states for women workers they found 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 of Alabama in 1932. The skilled craft unions that comprised the AFL sought shorter hours as a means of spreading the available work over a larger pool of workers, but they staunchly defended collective bargaining as the appropriate means of setting wages for male workers. Secretary of Labor Frances Perkins had deep roots among the social reformers who had strategically crafted protective legislation during the Progressive Era. They considered wages and hours to be inextricably linked. Without wage regulations, shorter hours could impoverish the lowest paid workers. Perkins had been rebuffed when she proposed amending 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 favorable union-organizing provisions to be incorporated into Section 7a of the NIRA; the unions traded off their opposition to wage setting by industrial boards for the right to unionize (see Figart et al. 2002: Chapter 6). The NIRA did not survive a constitutional challenge and was overturned by the US Supreme Court in 1935. Even as the constitutional challenge to the NIRA was being decided, flaws within the system it effected were becoming obvious. Domination of the National Recovery Administration (the administrative body overseeing enforcement) by employers, implementation of low standards under the codes, and scanty enforcement had generated substantial criticism by and frustration for social feminists and labor unions even before the court acted. In particular, sex and race discrimination were institutionalized in many of the industry codes (see Storrs 2000). Minimum wages for women were lower than minimum wages for men, for example. Perkins herself wrote that she believed at the time that the NRA “would blow up by internal combustion” (1946: 248). Two key factors – the separation of legislative and executive powers and federal responsibility for interstate commerce – became central elements to the construction of a federal wage and hours bill that could survive constitutional challenge. Nevertheless, wage regulations with enforcement mechanisms would not have been possible had the Supreme Court not reversed its position of unrelenting hostility to market intervention. The Fair Labor Standards Act of 1938 (FLSA) established only a 25-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 of Labor. In the first years of implementation, there were also industry committees that could set higher minimums in specific industries, but not more than 40 cents per hour. The minimum wage quickly became a wage floor

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enforced by a complaint-driven litigation mechanism rather than by active investigation of labor conditions. Coverage was limited from the start. The language of the Act most clearly applied to wage workers in manufacturing, mining, wholesale trade, some transportation, and utilities. Agricultural work was exempted from the wages and hours provisions, although in the final law child labor in the fields was banned. Most retail sales occupations were omitted on the basis of the interstate commerce provisions. Executive, administrative, supervisory, and professional work were also unprotected, since the regulations were intended to apply to waged, not salaried, workers. Taken together, these restrictions excluded most female-concentrated jobs. Further, the two job categories that contained the vast majority of African Americans – farm labor and domestic service – were not covered by the FLSA, following the pattern set by most earlier state-level minimum wage laws. Once again, minimum wage regulations were structured to define certain groups as possessing inadequate bargaining power and other groups as able to negotiate their own wage. The focus had shifted, however, from young women in sweatshops to “unskilled” and unorganized male workers (see Nordlund 1997; Mutari 2000). The law was worded to reassure unions that government regulation would not intervene in industries regulated by collective bargaining. Skilled male workers in unions could use their bargaining power to define acceptable living standards and labor markets to ensure a share of productivity gains. Unorganized workers were given a legislated wage floor. In testifying on behalf of the legislation, one prominent labor leader, John L. Lewis, argued that: The unskilled workers or those in the lowest grade of the scale of occupations in an industry are entitled to receive the subsistence or living wage, and above this guaranteed minimum, semiskilled or skilled employees are paid differentials established by precedent or through collective bargaining, based on skill, experience, and productivity, and hazard. (US Congress 1937: 275, emphasis added) Since few female-dominated industries and occupations were covered by the FLSA, the weaker, virtually unenforceable state laws continued to be the primary protection for working women. Multiple meanings of the term living wage persisted into the twentieth century. These definitions reflected different visions of what constituted a living for different groups of workers and how these visions could be strategically achieved. The legacy of gender-specific minimum wages was that labor legislation was stigmatized as appropriate for weak members of the labor force – the unskilled and the unorganized. Such protection was difficult to reconcile with hegemonic concepts of masculinity and

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whiteness. During the Depression, however, state protection was now considered necessary for relatively powerless unskilled and unorganized male workers. A new hierarchy was created between those men who needed protection and those who could represent their own interests through unions. Excluded from this dichotomy were African American males. Concentrated in the excluded industries of agriculture and domestic service, they did not fall under the FLSA umbrella. Nor were they represented by unions, both because of the industries in which they were concentrated and due to the legacy of the labor movement’s racism. Neither mechanism for achieving a breadwinner wage was available. Multiple wage earners, rather than a male breadwinner, was the logical implication for African American families. As movements for gender and racial-ethnic equality progressed over the course of the century, new groups became included under the federal statute. FLSA coverage was extended to many new groups of workers through a series of amendments in the 1960s and 1970s. More workers in retail came under the FLSA umbrella in 1961. In 1967, laundries, public schools, nursing homes, the construction industry, and some farm workers became covered. Changes in 1974 were aimed at domestic workers with fairly regular employment (see Nordlund 1997; Figart et al. 2002: Chapter 6). Women workers and workers of color, originally excluded from coverage because of the occupations and industries in which they worked, came to constitute the majority of minimum wage workers. During roughly the same period that coverage expanded, however, the real value of the minimum wage diminished. At the peak of its purchasing power in 1968, a worker earning the federal minimum wage in a yearround, full-time job (2,080 hours annually) could support a family of four at the federally-defined poverty threshold. As increases in the minimum wage became less frequent, the minimum wage ceased to be a familysupporting wage (Figart 2001). At its current value of $5.15 per hour, a full-time, year-round worker would not earn enough to keep a family of two 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 an important insight: an hourly wage alone does not determine a worker’s standard of living. The number of hours worked per week, month, and year also matters. Indeed, at the end of his 1938 State of the Union address, Roosevelt hinted at the importance of this issue when he advocated: thinking in terms of regularizing the work of the individual worker more greatly throughout the year – in other words, in thinking more in terms of the workers’ total pay for a period of a whole year rather than in terms of his remuneration by the hour or by the day. (1967: 2840)

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For this reason, the provisions of the FLSA included language designed to support the institutionalization of guaranteed annual wage plans. This relatively short-lived concept fused the issues of wages and hours, providing 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 movement for guaranteed annual wages. This movement peaked in the USA during the mid-twentieth century.3 The emergence of mass production industries, along with policies to foster mass consumption of the products of these industries, created large firms with bureaucratic management and diminished skill and autonomy for workers. While individual workers lost bargaining power through this deskilling process, employers did seek to maintain long-term relationships with employees who were familiar with proprietary production processes. Internal labor markets began to augment external labor markets in setting wages and other conditions of employment. The internal labor market strategy was particularly popular in the mass production industries. These industries – from steel and automobiles to tires – were organized by the new labor federation, the Congress of Industrial Organizations (CIO). The CIO differed from the AFL in that it saw the future of unionization as protecting the interests of unskilled and semiskilled workers rather than just the interests of skilled craftsmen. In an attempt to cushion mass production industry workers from the seasonal and cyclical demand for their labor (that is, the shifting hours or weeks that corporations employed them throughout the year), many CIO leaders took 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 providing the income security held by most white-collar professionals. Salaried white-collar workers traditionally had such protection, earning a stable salary despite shifting work loads. Union President Walter Reuther summarized the rationale behind wage 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. But the workers live by the year and get paid by the hour. That is where the 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;

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when we have won the battle for a rise of minimum hourly rates . . . we may be able to go into the question of guaranteed annual wage” (Kaplan 1947: 32). GAW policies were thus primarily supported by unions in maledominated industries. In fighting for a GAW, unionized men were pursuing a marker of middle-class masculinity. The pace of adopting GAW plans quickened in the 1930s, as workers and even some employers sought stability in a period of economic uncertainty. According to the US Bureau of Labor Statistics (1948), the number of plans nearly doubled from 1931 through 1935. A Keynesian or macroeconomic version of the living wage argument was advanced as a major reason for fostering GAW plans: “To many, the appeal of annual-wage guarantees is that in critical periods these plans will provide the purchasing power to stabilize consumption and employment” (Feldman 1947: 835). Although the Social Security Act of 1935 established an unemployment insurance program to stabilize income, living wage advocates maintained 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 did not conflict with GAW plans, Section 7(b)(2) of the FLSA exempted firms from payment of the overtime wage premium (up to twelve hours a day and fifty-six hours a week) if they possessed bona fide guaranteed annual wage or employment agreements. The deep economic dislocations of the 1930s were followed by high capacity utilization during World War II. It was only as anticipation of the war’s end heightened concern over the cyclical sensitivity of employment that the GAW issue reemerged (Kaplan 1947). In 1944, the United Steelworkers of America demanded guaranteed annual wages in a case heard by the National War Labor Board. The Board deferred its decision; however, it recommended the president appoint an advisory committee to study the subject. The resulting study, termed the Latimer Report, was issued in January of 1947 (see Latimer 1947). The report found 196 current plans in operation in the United States, covering less than 1 percent of workers employed in non-agricultural or non-governmental establishments. The majority of the companies with plans were small firms, producing primarily consumer goods with predictable seasonal, rather than business cycle, fluctuations in output. Based on the limited scope of GAW plans, the report recommended private supplements to unemployment benefits as a more feasible means of implementing wage guarantees in cyclically sensitive industries. During the boom years after World War II, the drive for the GAW lost steam. The United Steel Workers, the United Auto Workers, and the Marine Workers’ Union continued some initiatives through this period, with little initial success. Rather than a guarantee of the full wage from the employer, the unions shifted their demand to a supplemental unemployment benefit or SUB, modeled on the recommendation of the Latimer Report. Latimer himself authored an unsuccessful brief in support of

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income guarantees for the Steelworkers’ union. In the mid-1950s, the UAW successfully negotiated a plan in which the employer (Ford Motor Company) would supplement the low federal unemployment insurance program. The SUB became an industry norm, one that other oligopolistic industries mirrored, effectively edging out the demand for guaranteed annual wages. The result was an interesting synthesis of social welfare provisioning (unemployment benefits) and negotiated benefit (SUB). Strategically, since GAW plans and the SUB were collectively negotiated rather than a social welfare program, they reinforced the hierarchy between those who gained their living wage through union membership and those who relied upon a state-provided hourly minimum wage. This distinction reflects the labor market structure of the 1950s and 1960s. The social contract between labor unions and large corporations meant that labor markets were segmented with trade unions controlling powerful internal labor markets that guaranteed job access, benefits, career ladders, and a regular flow of earnings. The rest of the workforce lived with a minimal government safety 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 the anxieties of the early post-war economy, when memories of the Depression were still strong and it was feared that the production boom of the war years would be a transient phenomenon. As long-term growth continued and SUB plans and Keynesian welfare state policies cushioned business cycles for skilled workers in the primary sector, the issue that GAW was designed to address lost prominence. The GAW as a living wage movement also waned and never filtered down to those workers in secondary labor markets. Despite the limited successes of the GAW movement, the concept holds lessons for contemporary living wage activists. As one proponent stated: “Wage rates represented a fiction unless a steady job ensured regular take-home pay” (Kaplan 1947: 5). The GAW was a strategic attempt to ensure living standards by focusing on income rather than wage rates. The problem, during the post-war period, was defined as job security in the wake of business cycle fluctuations. For contemporary workers, however, declines in real wages coupled with increased job insecurity and flexible hours plans have given the issue of regularizing income streams renewed relevance.

Implications for contemporary living wage movements The concept of living wages is an organic concept, evolving with changing circumstances. As we have seen, it has been posed as a remedy for a variety of ills related to low wages, including overwork in sweatshops, underwork during a cyclical downturn, and as a way of ensuring macroeconomic stability during a period of uncertainty. The consistent hallmark

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of living wage arguments, nevertheless, is their challenge to the dominant economic paradigm that determines fair wages on the basis of commutative justice only. For neoclassical economists and those endorsing their world-view, market mechanisms – the laws of supply and demand – are the most efficient and objective means of ensuring the equivalence of exchange. Fairness, in this framework, is separable from measures of wellbeing. The understanding of economic activity as provisioning has gradually faded into the background. Current living wage initiatives can be seen as attempts to reassert the provisioning view of economic activity and to give community interests and well-being primacy over market forces. In the United States, coalitions of community groups, faith-based activists, and labor unions have worked to pass legislation called municipal “living wage ordinances,” mandating that private businesses receiving public funds should pay their own workers a living wage. The dollar threshold typically sought is the hourly rate equivalent for one full-time earner to keep a family of three or four above the federal poverty line; the legislated compromise is usually lower, attempting to balance the family-sustaining threshold with the political realities of negotiating with city government. Once again, the political economic context has shaped how living wage activists have formulated their issue. The end of the twentieth century was a period marked by dramatic changes in the political economy, in the social consensus on the proper role of the state, and in attitudes toward family structure. The US economy underwent a period of restructuring, as new technologies and industries combined with globalization to challenge the institutions that had fostered stability during the post-war period. Sweatshops, both in the USA and abroad, sprouted like weeds. A prolonged period of economic instability beginning early in the 1970s was followed by an apparent boom in the mid-to-late 1990s that still left many behind. As the twenty-first century begins, sluggish growth has prompted fears of depression and deflation. Many of the institutional arrangements of post-war capitalism – Keynesian income stabilization policies and welfare state provisions, among others – have been unraveled through a series of neoliberal economic polices. The demise of active state policy coincided with a return to laissez-faire principles regarding market forces. Flexible work hours are part of this larger trend in the global political economy. The concept of a 40-hour norm is being replaced by the idea that work schedules should accommodate demand fluctuations and managerial strategies. This has led to an expansion of part-time jobs, extensive hours of overtime, and jobs with irregular hours. The US Congress, for example, is considering policies that would restructure the overtime provisions of the Fair Labor Standards Act to ease overtime penalties. Policies to increase work time flexibility have already been widely adopted in Europe (Mutari and Figart 2001). All three of the conditions generating twentieth-century living wage

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movements thus coexist: “sweated” labor, macroeconomic instability, and job insecurity. Finally, the male breadwinner family describes an everdecreasing subset of households, degendering the concept of living wages in comparison with the breadwinner wage emphasis of mid-twentiethcentury movements. Living wage activists have revived arguments that employers whose employees are among the working poor are parasitic, linking this argument to the rise in what has been called corporate welfare. If private sector employers receive tax subsidies and other benefits from state and local government, then those same employers have a social obligation to pay employees a family-sustaining wage. Organizers point to skyrocketing pay and perks for executives and administrators while low- and middleincome earnings stagnate or decline. An implicit or explicit ethical argument in many of the local living wage campaigns is that corporate America has a responsibility to treat their employees decently, in addition to piling up quarterly dividends for owners/shareholders. In this guise, living wage ordinances are a response to increased income inequality. The growing concentration of low-wage jobs in cities as a result of publicly subsidized downtown revival projects is another catalyst for living wage activism. Many jobs in new city convention centers, sports stadiums, hotels, restaurants, and airports are minimum wage or near-minimum wage jobs. The ordinances are also a response to reductions in the relative size of the public sector, specifically the push to privatize government services. Privatization has consisted of the outright sale of public sector assets and especially the contracting out of services once provided by public employees. Spawned by Reaganomics in the USA and Thatcherism in Great Britain, conservative politicians, economists, and businesspeople promoted privatization as a means of enlarging the domain of market forces. By the mid-1980s, there were tangible advances in the outsourcing of physical and commercial services in state and local government. Some localities have stripped themselves of public assets such as water, wastewater treatment, and electrical utility operations. Others have hired out services such as trash collection, recycling, and cleaning government buildings and parks to the private sector. Private firms are administering health services, absorbing public hospitals, managing educational institutions including public and charter schools, directing and staffing correctional facilities, and overseeing public assistance (welfare) case loads. Privatization was pitched as a cost-saving mechanism because it often replaced union workers with nonunion workers. With public sector downsizing, unionization rates in the public sector began to fall during the 1980s. This was a dual blow to the labor movement. Private sector union density had already begun to decline in the 1960s and 1970s, precipitated by the relative decline in manufacturing and the more aggressive challenge by management to union organizing campaigns. At first, union organization in state and local government was able to hold off labor’s decline, as

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state governments passed legislation authorizing collective bargaining in state and municipal government. Momentarily, public sector union organizing outpaced private sector membership growth but privatization began to take a toll on the newly unionized public sector labor force, especially women and people of color. The trends toward neo-liberalism provided the soil for germination of a new living wage movement. Unlike their historical counterparts, the issue of adequate living standards has been largely disengaged from debates over working time. Contemporary living wage ordinances, as well as minimum wage laws, focus primarily on the hourly rate paid to workers who are paid by the hour. However, as we have seen, an hourly wage alone does not determine a worker’s standard of living. The number of hours worked per week, month, and year also matters. Because of the proliferation of jobs with non-standard hours, it is more important than ever that contemporary living wage movements focus on the linkage between wages and hours. While workers need an adequate living standard, they also need fewer weekly hours of paid work so that family responsibilities can be met. The role of wages, the primary means of provisioning during the twentieth century, may need to be rethought. Therefore, living wage policies need to re-link discussions of wages and hours in ways that – given the shift in gender norms away from the traditional breadwinner family – promote gender equity and provide time and resources for social reproduction.

Notes 1 Australia is the exception. The 1896 law that established a system of minimum wages set by industrial wage boards was initially introduced as gender-specific legislation but amended before passage (Howe 1995: 322–3). 2 This parasitic industries argument is summarized and critiqued by Ryan in Chapter 2 in this volume. 3 Organized attempts to regularize income for wage workers date back to the early 1890s. The wallpaper industry is credited with an early version during this period, guaranteeing employment rather than wages.

References Becker, J.M. (1968) Guaranteed Income for the Unemployed: The Story of SUB, Baltimore, MD: The Johns Hopkins Press. 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 Economic Review 37 (5): 823–47. Figart, D.M. (2001) “Raising the Minimum Wage and Living Wage Campaigns,” in M.C. King (ed.), Squaring Up: Policies to Raise Women’s Incomes in the United States, 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.

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Glickman, L.B. (1997) A Living Wage: American Workers and the Making of Consumer Society, Ithaca, NY: Cornell University Press. Honeyman, K. and Goodman, J. (1998) “Women’s Work, Gender Conflict, and Labour 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 Legislation in Europe, the United States, and Australia, 1880–1920, Urbana, IL: University of Illinois Press, pp. 318–36. Humphries, J. (1976) “Women: Scapegoats and Safety Valves in the Great Depression,” Review of Radical Political Economics 8 (1): 98–121. Kaplan, A.D.H. (1947) The Guarantee of Annual Wages, Washington, DC: Brookings Institution. Kelley, F. ([1898]1998) “The Sweating System in the United States,” in Kathryn Kish Sklar, Anja Schüler, and Susan Strasser (eds), Social Justice Feminists in the United 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 Advisory Board, Office of War Mobilization and Reconversion, US Office of Temporary Controls, 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 of Economic Perspectives 7 (2): 41–59. Mutari, E. (1996) “Women’s Employment Patterns During the U.S. Inter-War Period: 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: Edward Elgar, pp. 639–44. Mutari, E. (2002) “The Fair Labor Standards Act of 1938 and Competing Visions of the Living Wage,” Review of Radical Political Economics 32 (3): 408–16. Mutari, E. and Figart, D.M. (2001) “Europe at a Crossroads: Harmonization, Liberalization, 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 Federal Minimum 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 Economics 5 (1): 61–78. Roediger, D.R. (1991) The Wages of Whiteness: Race and the Making of the American Working Class, London: Verso. Roosevelt, Franklin D. ([1938]1967) “Fifth Annual Message,” in F.L. Israel (ed.), The State of the Union Messages of the Presidents, 1790–1966, Vol. III (1905–66), New York, NY: Chelsea House Publishers, pp. 2833–41. Ryan, J.A. ([1906]1912) A Living Wage: Its Ethical and Economic Aspects, London: Macmillan. Seastone, D.A. (1955) “The History of Guaranteed Wages and Employment,” Journal of Economic History 15 (2): 134–50.

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Shishkin, B. (1953) “Some Problems with Annual Wage Guarantees,” Proceedings of the Annual Meeting – Industrial Relations Research Association 6 (December): 84–95. Storrs, L.R.Y. (2000) Civilizing Capitalism: The National Consumers’ League, Women’s Activism, and Labor Standards in the New Deal Era, Chapel Hill, NC: University of North Carolina Press. US Congress, Joint Hearings Before the Committee on Education and Labor, U.S. Senate, and the Committee on Labor, House of Representatives [US Congress] (1937) Fair Labor Standards Act of 1937. 75th Congress, Washington, DC: US Government Printing Office. US Department of Labor, Bureau of Labor Statistics (1948) Guaranteed Wage Plans in the United States, Bulletin No. 925, Washington, DC: US Government Printing Office. US Department of Labor, Women’s Bureau [Women’s Bureau] (1928) The Development of Minimum Wage Laws in the U.S., 1912 to 1927, Bulletin no. 61, Washington, DC: Women’s Bureau. Wikander, U., Kessler-Harris, A., and Lewis, J. (eds) (1995) Protecting Women: Labor Legislation in Europe, the United States, and Australia, 1880–1920, Urbana, IL: University of Illinois Press.

4

Living wage laws and the case for a targeted wage subsidy David A. Macpherson

Beginning with Baltimore, Maryland, in 1994, a growing number of cities and counties in the United States have enacted so-called “living wage” ordinances. At this writing, over 100 local governments have enacted living wage ordinances, and campaigns are active in dozens of jurisdictions. These ordinances generally require covered employers to pay a minimum wage much higher than the state or federal wage requirement. The laws may also require one wage standard for employers who provide health insurance and a higher wage standard for employers who do not provide such insurance. The coverage of the ordinances tends to vary. Initially, the laws were narrowly drawn to cover only employees of local governments and their service contractor. For example, contractor ordinances were enacted in Baltimore, Maryland (1994), Milwaukee, Wisconsin (1995), Portland, Oregon (1996), and Miami-Dade County, Florida (1999). However, as the number of jurisdictions adopting such laws grew, the living wage proponents drafted the legislation to cover a greater number of private employers. Today, a typical living wage proposal covers not only contractors, but also private employers receiving financial assistance, such as tax abatements or subsidies, from the local government. Examples of localities adopting ordinances covering private sector employers who receive government 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 a local minimum wage binding on employers who do business within a defined geographic area. An example is Santa Fe, New Mexico, which has passed a law which requires private employers with 25 or more workers to pay at least $8.50 per hour starting on January 1, 2004. This figure will be raised to $10.50 on January 1, 2008. Another example is Santa Monica, California, which has passed a law requiring all employers in the “Coastal Zone” having over $3 million in annual sales to pay at least $10.50 an hour if stipulated health benefits are provided, and at least $12.25 an hour if benefits are not provided. In some jurisdictions, such as the City of New

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Orleans, Louisiana, the living wage movement has also advocated local minimum wages tied to the national minimum wage with very broad employer coverage.1 Although living wage mandates bear some similarity to the “prevailing wage” requirements in the federal Davis-Bacon Act (of 1931) and similar state statutes, they are fundamentally different. The Davis-Bacon Act requires that federal contractors pay wages prevailing in the locality where they do business. This means union scale or market wages. The philosophy behind the Davis-Bacon wage standards is that the federal government should not depress wages through its contracting activity. Unlike the Davis-Bacon Act, living wage laws set a wage standard based on a family’s needs. In this respect, the laws seek to make operational the socialist principle for wage determination: “to each according to his needs.” Proponents of living wage ordinances contend they are necessary to alleviate poverty among workers who are unable to support their families despite working full-time. The advocates commonly assert that public money should not be used to support “poverty wages” (as in the web site of the Association of Community Organizations for Reform Now or ACORN, a prominent national organization that organizes living wage campaigns (see http://www.livingwagecampaign.org)). Increasingly, they also argue that the national minimum wage is insufficient to lift families out of poverty and that localities should pass higher, and in their view, more adequate minimum wages. Proponents also contend that at the higher wages, employers experience increases in productivity and morale, and reductions in labor turnover that completely or largely offset any adverse economic effects (for a summary of these arguments, see Pollin and Luce 1998: Chapter 4). However, as I will argue below, in making their case for local living wage laws, the activists either ignore or discount potentially harmful economic effects such as reductions in employment, business relocation, higher prices, and the displacement of low-skilled workers by more qualified workers.

Who is supporting the movement and how do they define a living? A combination of activists and academics have lined up behind living wage campaigns. The ACORN, the New Party, and trade unions all have been active in supporting and funding living wage efforts. Other national organizations participating in the campaigns have included the Economic Policy Institute (EPI), the Political Economy Research Institute (PERI), the Center for Community Change, and the National Campaign for Jobs and Income Support. ACORN has established a Living Wage Resource Center to assist activists in organizing living wage campaigns all across the country. It has also published an activist’s guide to organizing such campaigns (see Reynolds 2000). PERI, at the University of Massachusetts at

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Amherst, under the leadership of radical political economist Robert Pollin, frequently provides technical assistance to local campaigns in the form of reports to and testimony before local governmental bodies. In 1998, Pollin and sociologist Stephanie Luce published a book, The Living Wage: Building a Fair Economy (Pollin and Luce 1998), advocating living wage laws and laying out a framework for promoting the laws to local governments. A number of other academics, usually sociologists or liberal-toprogressive economists, have joined the movement. These include David Reynolds of Wayne State University, Bruce Nissen of Florida International University, both of whom have authored chapters in this volume, and Michael Reich of the University of California at Berkeley. The Washington, DC-based Economic Policy Institute, a “think tank” funded by the US labor movement and more liberal foundations, produces statistical analysis in support of living wage campaigns and generally advocates for higher minimum wages and living wage ordinances. ACORN, the Center for Community Change, and the National Campaign for Jobs and Income Support are all national organizations heavily involved in community organizing.2 They use living wage campaigns to build broad communitybased coalitions in support of government regulation of the economy at the local, state and national level. The starting place for advocates attempting to define living standards has frequently been the Census Bureau’s poverty thresholds for a family of either three or four persons. The Census publishes these thresholds annually. For the year 2002, for instance, the Census poverty threshold for a two-adult, two-child family was $18,244. ACORN, a key leader in the living wage movement, has recommended a minimum hourly wage based on the annual poverty threshold divided by the total annual hours worked by a full-time, full-year employee (i.e., 2000–2040 hours). This would place the “living wage” in 2002 between $8.94 and $9.12 per hour. Typically, this would be the wage requirement for an employer who paid for a certain standard of health insurance coverage. For employers not meeting this health insurance standard, the wage mandate would be incrementally higher, usually by a maximum of $1.00 to $2.00. Thus, employers not providing paid health insurance could face a wage mandate of $10.00 or more. In fact, this closely tracks the actual experience with such ordinances. For example, the median hourly wage rates in living wage ordinances adopted in 2002 were $9.00 with benefits and $10.87 without (see Employment Policies Institute 2003). However, just as the coverage of the living wage proposals have expanded with the movement’s successes, so too has the wage standard in such proposals escalated. Increasingly, movement spokespersons are calling for national and state minimum wages to be replaced by a universal “living wage” mandate (Pollin and Luce 1998: Chapter 6). These expanded proposals usually cite budget studies showing how much it allegedly costs a family to live on a basic needs budget in a given geographic area. For

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example, the Economic Policy Institute (2001) has published a major compilation of budget studies for major metropolitan areas. According to the report, Hardships in America, in 1999, a “basic needs” budget for a family with 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 in Washington, DC. For that same year, the published US Census Bureau national poverty threshold for a family with two adults and two children was $16,895. The push for living wage mandates based on budget studies such as the Economic Policy Institute’s could lead to living wage demands as 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 local economies and harm those workers with limited skills and experience. They also cost far more than alternative subsidies that target only lowincome families, which means that the living wage ordinances lead to higher taxes or cuts in government services compared to targeted subsidies. Finally, to the extent that living wage laws affect private sector employers, they cause price hikes that are paid by many low-income families who receive no benefits from the laws. Because living wage laws are relatively new, most of the evidence of employment losses from wage mandates comes from studies of the minimum wage. This research confirms that for every 10 percent increase in employee’s pay from a wage mandate, at least 2 percent of the affected employees will lose their jobs as a result of that mandate. Thus, with living wage ordinances that seek to raise worker’s pay by huge multiples of the minimum wage, the employment losses could be quite large. In fact, decades of time series studies of the employment effects of minimum wage hikes on teenagers have produced a consensus among economists that a 10 percent increase in the minimum wage produces a 1–3 percent short-term reduction in teenage employment (see, for example, 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 series studies are not working at the minimum wage, this job loss estimate is considered low for minimum wage workers. The impact for a worker at the minimum 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 percent increase in pay, the effect for workers at the minimum wage is at least a 5 percent reduction in employment (ibid.: 2155). More recent research confirms that a 10 percent wage hike leads to at least a 2 percent decrease in employment for the workers affected by the hike (for contrary evidence, see Card and Krueger 1995). David Neumark, for example, also an author in this volume, finds that for workers at the

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minimum wage, a 10 percent increase in the minimum wage reduces employment by about 2 percent and reduces hours of work by roughly 6 percent. Some studies using micro-data on individuals, or panel data using year, US state, and the unit of observation, have documented much higher negative employment effects (for example, Burkhauser et al. 2000). Longer-term effects are likely to be even larger because there is more time for employers to make adjustments in personnel. In addition to creating job losses, it is generally thought that higher minimum wage levels shift the distribution of employment toward those with higher skills, who can better compete at the higher wage, at the expense of the least-skilled, who cannot. Evidence showing job displacement of low-skilled workers is provided by Lang and Kahn (1998) and Turner and Demiralp (2000). Even the living wage activists acknowledge that such effects are likely. As Bruce Nissen wrote in his report on the possible effects of the Miami-Dade County Living Wage Ordinance: “One can somewhat confidently predict that the wage increases and the newly offered health care benefits will result in a higher caliber of worker and measurable increases in efficiency” (1998: 16, emphasis added). Employers are likely to raise their hiring standards, leaving those job applicants with marginal skills no opportunity to work at “living wages,” and possibly no opportunity to work at all. Also, as Nissen notes, while some employers may experience efficiency gains, from the employer perspective, this does little more than partially offset the increases in labor costs. Furthermore, if such efficiency gains do occur, employers will need fewer workers and therefore less hiring or layoffs are likely to occur. To the extent that living wage ordinances succeed in raising wages of employees subject to the law, those benefiting are primarily not from lowincome families. One study, for example, reports that living wage ordinances reach relatively few poor or low-income families. Only 15 percent or less of those families benefiting from living wage ordinances are in poor families and 35 percent or less are in families in the bottom fifth of the wage distribution (see Turner and Barnow 2002). Living wage laws also do little to raise the disposable income of poor families, who face payroll taxes and the phase out of government benefits as their income rises. Advocate Robert Pollin has claimed that the proposed New Orleans minimum wage (set $1.00 above the federal minimum) would raise the average 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 losses are considered, family income would rise by only 2.9 to 4.4 percent. By contrast, a refundable credit such as the Earned Income Tax Credit raises disposable income by the full amount of the credit. Living wage ordinances that affect private sector employers also raise prices to consumers as those employers pass on the costs to their customers. Again, most of what we know about this process comes from studies of minimum wage laws. A recent study (MaCurdy and McIntyre

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

A better method: targeted wage subsidies A targeted wage subsidy provides funds to workers at the low end of the income distribution. Wage subsidies are typically provided as a tax credit to employers or families. For example, the Work Opportunity Tax Credit (WOTC) provides a tax credit to employers who hire certain types of lowskilled workers. The Earned Income Tax Credit (EITC) provides a wage supplement via an income tax credit to low-income working families and individuals. The tax credit rises with the amount earned until a ceiling is reached and then it is phased out for higher income workers. A larger tax credit is provided for bigger families. If the tax credit exceeds the taxes owed, then the family or individual receives a lump sum payment from the government. There are three main advantages of targeted subsidies. First, wage mandates cause low-skilled workers to be laid off, while wage subsidies do not. A higher minimum wage raises the cost of low-skilled workers to employers. As a result, employers will tend to substitute more skilled labor and capital for now relatively more expensive low-skilled labor. In addition, to the degree that firms raise prices due to the wage increases, they will lose customers and further reduce the number of workers employed. But wage subsidies either raise or have no effect on the employment of low-skilled workers, since they either lower or do not raise the cost to employers of hiring such workers. Employer-based subsidies like the WOTC increase the demand for low-skilled workers by lowering the cost of 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 families. Many of those who gain from minimum wage increases are secondary workers in higher income families. On the other hand, wage subsidies, by increasing the incentive to work, affect more poor families. They are also more cost-efficient because funds only go to those in need. Third, wage subsidies are more efficient than wage mandates in increasing the disposable income of workers in poor families. Many poor families receive aid from the government such as food stamps and the EITC, which is reduced as their income levels rise. As a result, much of the earnings

The case for a targeted wage subsidy

49

gain from minimum wage increases is lost through taxes or benefit reductions. Wage subsidies such as the EITC are either not taxed or taxed at a lower effective rate than wage income. Furthermore, benefit reductions are currently smaller for wage subsidies than wage increases. A potential problem with a living wage subsidy is that some states have no state income tax and thus no mechanism to issue to a state income tax credit. However, the state or local governments could piggyback on the federal EITC program and issue checks for the wage subsidy. This approach is already implemented in ten states. These governments use the federal eligibility rules and express their credit as a percentage of the federal 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 by causing layoffs. In addition to creating job losses, it is generally thought that higher minimum wage levels shift the distribution of employment toward those with higher skills, who can better compete at the higher wage, at the expense of the least-skilled, who cannot. Many of the wage gains would go to low-wage workers in higher income families rather than to those most in need. Finally, living wage laws extended to private sector employers cause price hikes that are paid by many low-income families who receive no benefits from the laws. I have outlined why targeted tax credits, or wage subsidies, are a better policy to assist poor families. In contrast to wage mandates, wage subsidies either raise or have no effect on the employment of low-skilled workers. Also, wage subsidies are clearly targeted at low-income families and thus are more cost-efficient than wage mandates. Finally, wage subsidies are more efficient than wage mandates at raising the disposable income of workers in poor families since they reduce other government aid such as food stamps by a much smaller amount.

Notes 1 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 was passed in February 2002 and was overturned by the State Supreme Court in September 2002. Local minimum wages have been defeated in ballot initiatives in Houston, Texas ($6.50, defeated January 1997), Denver, Colorado ($6.50, $7.15 in 1999, defeated November 1996) and Tucson, Arizona ($7.00, defeated November 1997). Also, a local minimum wage of $7.00 was defeated in Albuquerque, New Mexico, in a legal challenge to the petitions. 2 Both the Center for Community Change and the National Campaign for Jobs and Income Support are based in Washington, DC. 3 See also Shaviro (1999) who shows that low-income families lose much of any wage gains through payroll taxes and government benefit reductions.

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References Brown, C. (1999) “Minimum Wages, Employment and the Distribution of Income,” 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 Wage Increases Bite: An Analysis Using Data from the SIPP and CPS,” Southern Economic Journal 67 (1): 16–40. Card, D. and Krueger, A. (1995) Myth and Measurement: The New Economics of the Minimum Wage, Princeton, NJ: Princeton University Press. Economic Policy Institute (2001) Hardships in America: The Real Story of Working Families, 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 Distribution 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 State Minimum Wages, Washington, DC: Employment Policies Institute. Neumark, D., Schweitzer, M., and Wascher, W. (2000) The Effects of Minimum Wages Throughout the Wage Distribution, NBER Working Paper 7519, Cambridge, MA: National Bureau of Economic Research. Nissen, B. (1998) “The Impact of a Living Wage Ordinance on Miami-Dade County,” unpublished. Pollin, R. and Luce, S. (1998) The Living Wage: Building a Fair Economy, New York, NY: The New Press. Pollin, R., Luce, S., and Brenner, M. (1999) Economic Analysis of the New Orleans Minimum Wage Proposal, Research Report Number 1, Amherst, MA: Political Economy Research Institute, University of Massachusetts. Reynolds, D. and ACORN Living Wage Resource Center (2000) Living Wage Campaigns: 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 Detroit Living 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 and Inner-City Teens,” unpublished.

5

The determination of living wages David H. Ciscel

The mathematical computation of a living wage is a political act. That act provides an illustration of the failures of the labor market to support large numbers of men and women. With a simple chart (e.g., comparing a “living wage” to some measure of earnings), the living wage shows why so many working adults are unable to purchase basic necessities. And it provides clear documentation of the strong gender bias to labor market payoffs. The determination of income-adequate family budgets has a long history. Living wage and family wage campaigns also have a long and sometimes checkered history (Ciscel 2000). The US Bureau of Labor Statistics (BLS) created its first family budget almost a century ago (Johnson et al. 2001). That early BLS computation found that a cotton mill worker required an annual income of $713 to provide a “fair” standard of living for a family of five. If researchers have been addressing this issue for so long, why is the computation of a living wage still so controversial and so important? There are several reasons. But each reason can be traced back to the paucity of income provided by employment for many workers: the failure of markets to work equitably in a rich nation. First, there is the inadequacy of the current poverty standards published by the federal government. Built forty years ago on a faulty methodological foundation, poverty thresholds continue to provide the policy standard that we use to judge whether or not society has provided an income for a family to live independently and with a basic standard of living. Almost every living wage study indicates that poverty thresholds are not just wrong by a little bit. For a family to be self-sufficient requires a yearly income twice what the published poverty threshold numbers indicate. Second, the key legal floor to wage labor in the United States is the federal minimum wage set by amendments to the Fair Labor Standards Act of 1938. Once considered everyman’s “labor contract,” the minimum wage – at $5.15 per hour – provides a potential yearly income that is only a third of an adequate living wage. In addition, the minimum wage is under constant ideological attack by orthodox economists as an egregious inefficiency in labor market operation. Conventional wisdom in most economics texts uses the minimum wage to illustrate the horrible consequences of

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government intervention in the marketplace. Little or nothing is ever mentioned of the worker’s ability or inability to survive on such wages. And rarely is research mentioned that illustrates the positive labor market impact of minimum wages. Third, the outcomes in most labor markets are deeply gendered. The rates of pay earned by women continue to be significantly different and lower than those earned by men. Living wages are important to women, because women supporting families find it difficult to earn a large enough income to provide for financial self-sufficiency. The welfare reform movement 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 income and other subsidies to stay at home to raise children. With welfare reform in the 1990s, Temporary Assistance to Needy Families (TANF) required poor women to go into the paid labor market. The theory behind TANF is that a working woman will, over time, earn an income necessary to move her family off of government subsidies and toward self-sufficiency; but the earnings from welfare-to-work jobs usually are not adequate in duration, wage levels, or stability to accomplish these goals. Consequently, earning a living wage has become a critically important issue for millions of women with families who were transferred quickly into the labor market over the past several years. Finally, the computation of a living wage is an important educational tool. Most people reading this chapter live a life of relative ease. Money comes in through work or family and it is spent. How often do we calculate what it takes to just get by? How much money in rent, in food expenditures, in health insurance or childcare does it really take to be selfsufficient? And what does self-sufficiency really mean to someone with an adequate income? If the government or an endowment pays over half the costs of your college education, are you really self-sufficient in school? A living wage points out that we are really all tied together. Many of the things that we purchase – safety, homes, and insurance – are partially subsidized by others either through mutual associations or through government subsidy. This chapter will blend the two issues. It will review how a living wage is computed and why it is important. To compute a living wage, we will need to review poverty thresholds in the US and the computation of basic needs and self-sufficiency. In this chapter, I will also explain the politics of the simple mathematics. What is the living wage challenging? Why is such hostility vented towards it?

Poverty thresholds in the United States US poverty guidelines were set up in the 1960s in response to that decade’s policy concern with poverty in America. President Lyndon B.

The determination of living wages 53 Johnson’s War on Poverty set as its goal the elimination of poverty in the United States. The official poverty thresholds were developed by Mollie Orshansky of the Social Security Administration in 1963–64 based on the United States Department of Agriculture (USDA) economy (thrifty) food plan, the cheapest of the four food plans developed by the USDA (Orshansky 1965). At the time, it was found that low income families spent roughly a third of their income on food. The poverty line was therefore calculated by multiplying the lowest USDA basic food plan times three.1 The poverty thresholds are updated annually for inflation using the Consumer Price Index (CPI-U). Other than several minor adjustments to the measure and considerable debate concerning the adequacy of the poverty threshold measure, it remains the official standard today (Fisher 1992). A leading proposal in favor of a new poverty threshold comes from the National Academy of Sciences (NAS 1995). Two of its recommendations indicate its bias toward patriarchal subsistence rather than a concern for self-sufficiency for a modern family. First, Recommendation 1.2 states in part: ‘The poverty thresholds should represent a budget for food, clothing, shelter (including utilities), and small additional amount to allow for other needs (e.g., household supplies, personal care, non-work-related transportation)’ (NAS 1995: 4). No allotment is made for child care expenses. Second, Recommendation 2.1 explains: ‘A poverty threshold . . . should be derived from Consumer Expenditure Survey data for a reference family of four persons (two adults and two children)’ (ibid.: 6). While the NAS report continues by recommending adjustments for different regions and different family types, it begins by ignoring one of the primary sources of poverty today: working women supporting small children. For example, while 11.7 percent of population in the United States lived below the poverty threshold in 2001, 22.4 percent of female-headed households lived in poverty (US Census 2000). Table 5.1 illustrates the US poverty thresholds for 2002. While numbers are also available for larger families, this table shows two things. First, the range 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 fulltime work year (assuming no paid vacation), the single parent would have to earn $6.20 to $7.25 per hour to reach the poverty threshold. A twoparent family, where the second laborer works 50 weeks per year, 30 hours per week, requires a wage of $4.14 to $5.21 per hour. With the minimum wage of $5.15 per hour and the typical welfare-to-work wages running between $6.00 and $7.00, per hour, the poverty threshold paints a modestly 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 fulltime, year-round employment, though that has been difficult to accomplish for many low-wage workers in the past decade. The poverty thresholds, along with the minimum wage, have helped

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Table 5.1 US poverty thresholds for 2002 (US$)

Single-parent family Hourly wagea Two-parent family Hourly wageb

One child

Two children

12,400 6.20 14,480 4.14

14,494 7.25 18,244 5.21

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

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

Calculating a basic needs budget One of the first academic forays into the living wage debate was authored by Trudi Renwick and Barbara Bergmann (1993). Renwick and Bergmann created an alternative to the poverty thresholds called the Basic Needs Budget (BNB). Hoping to correct the deficiencies in the official definition of poverty, they developed an adequacy standard for family consumption, calculated family taxes and added in appropriate non-cash and transfer benefits that families are entitled to receive. Renwick and Bergmann used national Bureau of Labor Statistics data on family budgets to construct separate standards for food, housing, health care, transportation, and personal care/miscellaneous for 1989. In addition, they added in child care costs for children less than 5 years of age. The BNB excluded expenses for recreation, education, and various entertainment and miscellaneous expenditures. After constructing the cost of goods and services, the authors developed a pre-tax income required to support those income levels. This pre-tax income also adjusted for non-cash benefits (food stamps, rent subsidies, etc.) that a family were entitled to were added in before calculating the BNB. The results, which assumed the family receives all 1989 entitlements before calculating the BNB, are listed below: • •

Parent at Home, Two Preschool Children: $6,288 per year (64 percent of $9,885 federal poverty line) – $9,752 in 2001 dollars. Parent at Work, Two Preschool Children: $18,098 per year (183 percent) – $25,848 in 2001 dollars.

The determination of living wages 55 •

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-parent families grew from 39 percent of the total (official poverty threshold) to 47 percent of the total (the BNB definition). The authors urge adoption of their system for computing family budgets, arguing that it would be easy to expand to other types of family structure, easy to adjust for changes in the family market baskets, and a real move toward measuring income adequacy in the definition of poverty. Interestingly, the BLS “reference family” – 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 wage analysis. First, there is the important gender agenda. Poverty is often about the problems of women. This study focuses on that issue. While the number of explicit references to women in the article is fairly small, the BNB is designed to show the impact of poverty on female-headed households. Second, the study features an “at home” single mother with preschool children. That mother receives all the current 1989 social benefits, including AFDC payments, but still requires an additional $6,288 to meet the BNB. Third, the BNB, for the single mother with preschool children, explicitly included the cost of child care. BNB income levels, stated in terms of 2001 dollars, are not dramatically different from the self-sufficiency or living wage studies of the late 1990s. Renwick and Bergmann’s BNB study reflects an interesting component of living wage research: a study can start from a different perspective or policy agenda and the outcome is remarkably similar. Computing what it takes to have a modestly decent standard of living in the USA is not difficult. The hard part is persuading the body politic to implement it. Indeed, the biggest problem with the BNB is political. It is basically an attempt to persuade the bureaucracy of the federal government to redefine the meaning of poverty. After shifting to a BNB-like poverty definition, new governmental statistics would clearly illustrate that the levels of poverty in the United States are much higher than they were previously thought to be. But even under the old definition of poverty, it has been clear 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 studies have made. Living wage or self-sufficiency studies are generally written as documents to “persuade” the public that the incomes of low-wage workers are just too low and that labor markets should be reshaped to deliver more income to that segment of the population.

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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 first sort the items that should or should not be in a budget that provides a basic standard of living. Then they aggregate to estimate the consumption costs of self-sufficiency in a geographic area or for a particular type of family. Three representative studies will be reviewed here: (1) The SelfSufficiency Standard for North Carolina (Outtz et al. 1997); (2) What is a Living Wage for Memphis? (Ciscel 1999; Ciscel 2002); and (3) The Cost of Living in Minnesota (Steuernagel and Ristua 1998; Cederberg et al. 2001). These three studies are not unique in the living wage literature, but they 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 introduction to help give the studies credibility. The studies often refer to other examinations of self-sufficiency, showing the common elements that tie this research agenda together across the nation. Second, the studies provide details on the family basket of goods and services, assuming the family purchases necessities in the marketplace. Self-sufficiency is defined in terms of the ability of a family to purchase a basic standard of living in the United States. This definition excludes raising one’s own food, walking to work, or building one’s house. Third, the studies are familyand locale-specific. Each attempts to estimate the costs of living for different family configurations and cost of living differences that exist among cities and between rural and urban living environments. A strong element to every study is the cost of supporting the female-headed family with small children. Both the replacement of AFDC with TANF and the rise of childhood poverty have strongly influenced the focus of self-sufficiency studies. What is self-sufficiency? The North Carolina study opens by defining it: The Standard defines what income would be high enough to meet basic needs (including paying taxes) in the regular marketplace without public subsidies – such as public housing, food stamps, Medicaid or child care – or private or informal subsidies – such as free babysitting by a relative/friend, food provided by churches or local food banks, 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 household labor required to operate and maintain a family. The Minnesota study addresses the issue of how much is enough income by pointing out what is not included in a self-sufficiency budget:

The determination of living wages 57 The cost analysis is based upon monthly budget requirements necessary to achieve a “no frills” standard of living. No money is included for debt payments or skills training. There is no entertainment budget, no restaurant meals, no vacation, and nothing set aside for emergencies, 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 selfsufficiency, it does little more than that” (1999: 11). These studies provide considerable detail on the market basket of goods that make up the self-sufficiency budget. Every budget provides details for food, housing, health care, child care, transportation, and personal/miscellaneous expenses of living. In addition, most of the studies explain income tax/social security tax deductions, and tax rebates through the Earned Income Tax Credit (EITC) program. Some attempt additional calculations for child care allowances. For the food budget, two issues stand out: (1) choice of a specific USDA budget; and (2) out-of-home food costs. Uniformly, everyone rejects the USDA thrifty food plan that was the basis for the original poverty guidelines. In its place, self-sufficiency budgets substitute the USDA “low-cost food plan,” a more nutritionally sound budget and one that costs about 25 percent more than the thrifty plan. Interestingly, in the era of drive-through and fast food, none of the self-sufficiency budgets allow for food prepared away from home. Assuming that families, where all adults work, will prepare all breakfasts, lunches, and dinners, package them, and eat them at work or school certainly stretches credibility in today’s world. But it also points out how conservative these budget estimates are. How housing costs are budgeted is likewise fairly standardized. The studies use the US Department of Housing and Urban Development’s (HUD) “fair market rents.” Both the Minnesota and North Carolina study assume that a single parent and child require a two-bedroom apartment while the Memphis study assumes a one-bedroom apartment. The Minnesota study assumes that two parents and two children require three bedrooms, while the other studies assume two bedrooms. The studies use the 40th percentile or the median for rents, assuming that the low-end rents probably result in fairly dilapidated housing conditions. Adjustments for utilities and telephone vary from study to study, but none allow for longdistance telephone service or a cell phone. In the categories of medical care and child care, there are similar methodologies for determining the appropriate basket of services. The Memphis study used the premiums required from the state-managed health care plan, TennCare. The other studies used a standard family

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premium usually representing a third to a half of the actual cost of a health care policy. Though somewhat unrealistic for many workers going into the low end of the labor market or into contingent employment, these studies assume a group policy. Finally, these studies tend to minimize the costs of deductibles and leave no money for uninsurable portions (teeth, mental, and eye care costs) of the health care family budget. Child care is based on surveys of child care cost in each US state. With the conversion of AFDC to TANF, most states maintain a child care expense survey to help establish subsidies, so good data are available for this portion of the analysis. Like so much of the self-sufficiency budget analysis, these estimates of medical costs and child care tend to be at the low end, providing expenses far below what middle-class parents would expect to pay for health care and child care. The costs of transportation are generally linked to the expenses of operating an old car. Since sprawl is a characteristic of most small and large urban areas, most studies note how impractical the use of public transportation is. The Minnesota study provides considerable detail, breaking down driving time between work- and non-work-related driving for different types of families. While the costs attempt to include all the normal costs of driving including minor repair, insurance and registration, none of the three studies examined here provide funds for initial purchase of a new or used car when this one wears out. Finally, every study includes a category for personal care, clothing, and miscellaneous. Sources on estimates of this category vary. Though cleanliness and personal appearance are key features of most modern advertising, the studies tend to relegate this important category of our standard of living to a second-class level. The studies implicitly fear that these expenses seem frivolous though they are clearly extremely important to the vast majority of US consumers. The North Carolina study is important for its comprehensiveness. Not only 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 compare urban and rural differences and it delineates the differences on family budgets imposed by infants, preschoolers, and older children. However, both the Memphis study and the Minnesota study (which also provides urban/rural differences) are more focused on presentation of data for persuasion. Consequently, they provide fewer tables that are more accessible to the reader. Indeed, the updates for the Minnesota study (2001) and the Memphis study (2002) are even more reader-friendly and also include more peripheral information on poverty and low wage employment potential in their regions. Table 5.2 provides a comparison of the three studies for one family type: a single parent with two children. Note that though childcare, tax, housing, and transportation assumptions are quite different, the results are

The determination of living wages 59 Table 5.2 Living wage budgets for single-parent families with two children

Food Housing Transportation Child care Medical Care Clothing/Misc Taxes Monthly Annual Hourly Wage

Minnesota 2001

Memphis 2002

North Carolina 1997

$362.00 $599.00 $378.00 $637.00 $261.00 $230.00 $369.00

$371.42 $790.00 $153.25 $468.75 $300.00 $201.33 $322.25

$303.24 $599.00 $109.60 $703.17 $161.10 $187.61 $511.99

$2,836.00 $34,032.00 $16.36

$2,607.00 $31,284.00 $15.64

$2,575.71 $30,908.52 $14.63

Sources: Ciscel (2002); Outtz et al. (1997); Cederberg et al. (2001). Note The North Carolina study is for the Raleigh/Durham/Chapel Hill MSA. Each study computes working hours slightly differently.

quite similar. Regional differences are, of course, important, but they do not obscure the basic message. For a single parent family to be self-sufficient, the family would require an income of $30,000 to $35,000 per year. If that 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 this chapter, the modest estimates of the self-sufficiency studies indicate that the minimum wage provides little more than a third of a living wage budget and the poverty thresholds provide only about half of a decent standard of living.

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

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that they allow a sufficiency budget to incorporate two dynamic economic developments: the growth of average income and the commensurate increase in general living standards, plus the change in relative prices” (2000: 17). Relative living wage standards are based on some percentage of the median income level (or 150 percent of the poverty threshold). Consequently, the relative measure is based on available government income measures, is easy to compute, and adjusts as community income levels adjust. But, of course, relative family budgets do not actually specify family needs to maintain a standard of living. Finally, subjective measures involve interviews of families requesting information about what they need to live decently. Subjective measures, though they clearly are more democratic and involve those individuals involved in and affected by the analysis, are difficult to design, to administer, and to make reliable. How Much is Enough? provides an important service to living wage researchers. The text works its way through every component of a living wage budget, reviews the various methods used by the nineteen studies under review, and suggests a “best choice” approach to each budget component. Most of the recommendations are excellent, though the EPI methods for computing health care costs are complex. In addition, EPI is slightly more generous in personal expenditures than the typical living wage study. EPI reviews the items – credit card debt, savings, insurance, and consumer durables – that are missing from almost all living wage studies. In the biggest missing element of family budgets, food consumed away from home, the EPI study does not help correct the errors of other studies. The EPI study claims “Although 45% of low-income families consume at least one meal outside the home a day, the USDA does not include these costs in its food plans. There is no adequate way to adjust the food plans to reflect these costs” (Bernstein et al. 2000: 40). Finally, a simple breakdown is provided of the nineteen studies (in 1996 prices). For a 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 is broken 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 consumer expenditures, this living wage budget probably dramatically underfunds the budget component of housing and transportation.

The determination of living wages 61 In 2001, EPI issued a more detailed analysis of living wages, Hardships in America (Boushey et al. 2001). This report provides a basic family budget, in 1999 dollars, for six different family types for most cities in the United States. The output is impressive, though the individual town or city is lost in the massive tables at the end of the text. The strength is its review of the issue of hardship. All living wage studies imply that “life is hard” if a family doesn’t earn a living wage. This text helps document what hardship means and what hardships a family living on less that living wage would have to endure. Being short of food, missed meals, eviction, loss of utilities, lack of health insurance and care, children caring for themselves while parents work all reflect serious to critical hardships typically suffered in larger amounts by the poor than those families with higher incomes. While determining the frequency of hardships is difficult, the EPI report notes: Hardships, both critical and serious, are more common among families living below the 200% of poverty than those above . . . Some hardships are more common than others, but families living below 200% of poverty are two or three times as likely as families living above 200% of poverty to experience each of the specific critical and serious hardships. (ibid.: 29) And the key to hardship seems to be health insurance: those families with health insurance tend to do better facing all other hardships than families without health insurance. If a living wage hovers around 200 percent of the poverty threshold, then it is clear that a living wage, with a health insurance 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 analyses reviewed here to achieve a political end. The idea has been to change the focus from poverty thresholds and mere sufficiency to definitions of adequacy, or living wages. One of the things that makes a living wage budget attractive as a political instrument is that it can easily be compared to any individual monthly budget. For instance, if a self-sufficiency budget recommends $700 per month for rent and utilities and the typical rent and utilities for a locality is $2,000 per month, it makes it easy to see the gap between subsisting and living. The ACORN web site lists 103 successful city and county living wage campaigns as of March 31, 2003. In addition, there are another 121 active living wage campaigns (ACORN 2003). The group’s primary focus has been to urge local municipalities to pass living wage ordinances, local laws that call for private employers who receive local government subsidies or

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tax breaks to pay their workers (often outsourced contract workers) a living wage. In addition to ACORN, living wage ordinances have also been the focus of several faith-based organizations such as Clergy and Laity United for Economic Justice (CLUE) and National Interfaith Committee for Worker Justice (NICWJ) (Figart 2001). The ordinances are usually segmented into two tiers: a lower living wage with health benefits and higher living wage without health benefits; the difference tends to be about $1.50 per hour. Living wage ordinances have ranged from $7.00 per hour to over $12.00 per hour with health benefits. This ordinance-level living wage reflects the political art of the possible, not the research-based self-sufficiency budgets. But each living wage ordinance campaign is usually informed by a research agenda, and authors of economic and self-sufficiency studies are typically called upon to testify in favor of proposed ordinances. Examples include Michael Reich and Peter Hall’s study prepared for the living wage campaign at the San Francisco, California airport (Reich and Hall 1999) and Bruce Nissen’s study of the impact of the living wage in Miami, Florida (Nissen 1999). Moving from calculating a living wage budget to enacting a living wage ordinance is a key goal for many living wage activists. The living wage budget is usually the initial component of a campaign, making local citizens aware of the costs of living independently in today’s economy. The second stage is passing the ordinance. A major hurdle to overcome in nearly all US living wage campaigns has been the predictions of orthodox economic analysis. That is, any interference with free market operation through administrative wage increases will have the unintended side effect of harming those who are supposed to be helped through employment losses. Like minimum wage increases, local living wage laws are strongly opposed by the restaurant and hospitality industries. Pollin et al. (2002) challenge that orthodox prediction in their study of the New Orleans economy, a city very dependent on the tourist trade. They note the potential for a combination of productivity increases, price adjustments, and intra-firm cost redistribution that would probably minimize employment losses. They conclude, as other research has corroborated: “This then also suggests that the incentive for covered firms to lay off low-wage employees or relocate outside the New Orleans city limits should be correspondingly weak” (2002: 863).

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

The determination of living wages 63 are plus or minus $1,000 per year. That is, the differences have a typical range of a $1.00 per hour in pay. The more serious issue is where these incomes should come from. Table 5.3 from my living wage study (Ciscel 2002) provides an insight into these problems. If a family is going to earn $26,000 to $34,000 per year to be selfsufficient in Memphis, Tennessee, it has basically four sources of income. First, the idea of self-sufficiency can be legislatively overturned. If society decides to pay for all or some of health care, housing, transportation or child care, then the explicit dollars needed by a family are reduced. Many low-income working families make it through the year with public or charitable subsidies, but most of these subsidies are means tested; that is, the family must already be suffering some sort of hardship in order to quality. Rather than helping to guarantee a living wage income, most social welfare problems (except Social Security) tend to be safety net programs that catch those that are already falling into misery. Second, the number of workers in a family can reduce the wages that any individual family member has to earn to lift the entire family up to a living wage. Criticisms of the living wage often indicate that intact oldfashioned families have an easier time of earning a living wage. Of course, living wages would also be even easier to earn if small children were allowed 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 1 child 2 children $26,040 $31,321

Two adults with 1 child 2 children $30,143 $34,304

Hourly wagesa

Total weekly working hours required

$5.15 $6.00 $7.00 $8.00 $9.00 $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00

101 87 74 65 58 52 47 43 40 37 35 33

122 104 89 78 70 63 57 52 48 45 42 39

117 100 86 75 67 60 55 50 46 43 40 38

133 114 98 86 76 69 62 57 53 49 46 43

Source: Ciscel (2002). Note a 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 straight time for all hours worked.

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harken back to a mythical patriarchal family where a wise male organizes family work, and allocates expenditures to each member in an impartial manner. Not only did such a family never really exist, but it ignores the current construction of families – large numbers of single parent families – and the need for a more gender-friendly income production and the creation 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 at different wages. Working in a minimum wage job requires an individual to work long hours; perhaps moving from a daytime to an evening job to bring in enough income to achieve self-sufficiency. A single mother with a child could theoretically earn a living wage at the current minimum wage if she worked 101 hours per week (out of a total of 168 hours). Even $10.00 per hour requires a woman to work 52 hours of paid labor before she begins 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 two children do not have an easy time of gaining self-sufficiency. At the minimum wage, each parent would have to work 68 hours per week. With a $10.00 per hour job, 70 hours total is still required. That is, one parent would work a 40-hour week while other worked a 30-hour week before household 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 to workers? Clearly, many workers earn far less than a living wage. Earnings for workers in the post-Vietnam War era seem to be bifurcated, delivering very high incomes to those with property and advanced educational credentials, and stagnant or falling incomes to workers with low levels of formal education and those workers in the growing service and trade sectors of the economy. And, as a general rule, this functional wage segmentation occurs along the boundaries of race and gender. Figart et al. (2002) argue that working must be understood as a tripartite function of the labor market: wages as a price, as a living, and as a social practice. Wages as a price reflect the world-view of orthodox economics. Like the prices of eggs, toothpaste, or DVD players, the price of labor power fluctuates. Supply and demand are its only determinants. If wages are low, they only reflect poor on-the-job productivity or lack of individual human capital. But as Figart et al. note: Markets are human-constructed, culturally embedded institutions whose outcomes are neither infallible nor beyond challenge. Wages as a living refers to the concept of setting wages according to socially defined appropriate living standards in order to maintain the reproduction of the labor force and macroeconomic growth . . . Wages as a

The determination of living wages 65 social practice . . . are a means of reinforcing or redefining how women and 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 citizens how wages and jobs are actually allocated while recommending reform in today’s labor markets operations. Clearly, wages reflect unequal bargaining power and asymmetric information of workers relative to employers, a historical memory of the market that stigmatizes jobs entered by women and people of color, and an institutional structure defining labor markets that reinforces wage inequality. Determining a living wage is part of the process of explaining that wages need to cover the cost of supporting a family and its children. Social reproduction of the labor force is an important social goal. And that social reproduction is not merely building human capital in the next generation of workers. It is allowing a family, whatever its type, to play an active role in the political and community life of society. The simple calculation of determining how much food, housing and transportation a family needs is a profoundly political act, one that may change society’s focus from looking only at wages as a price to understanding that wages are also a living.

Note 1 The official poverty threshold does not include various non-cash benefits (housing and food assistance, for instance) that low-income families may be eligible 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 Policy Institute. Boushey, H., Brocht, C., Gunderson, B., and Bernstein, J. (2001) Hardships in America: The Real Story of Working Families, Washington, DC: Economic Policy Institute. Cederberg, H., Ristua, K., and Steuernagal, B. (2001) The Cost of Living in Minnesota: The Job Gap Economic Literacy Project, St. Paul, MN: JOBS NOW Coalition. Ciscel, D.H. (1999) What is a Living Wage for Memphis? Memphis, TN: The University of Memphis Center for Research on Women (CROW). Ciscel, D.H. (2000) “The Living Wage Movement: Building a Political Link from Market 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).

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Figart, D.M. (2001) “Ethical Foundations of the Contemporary Living Wage Movement,” 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: Routledge. 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 the United States,” Monthly Labor Review 124 (5): 28–45. National Academy of Sciences (1995) Measuring Poverty: A New Approach, available: http://www.census.gov/hhes/poverty/otherpov.html Nissen, B. (1999) The Economic Impact of a Living Wage Ordinance on MiamiDade County, Miami: Florida International University, Center for Labor Relations. 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 for North Carolina: Selected Family Types, Raleigh, NC: NC Equity Sustainable Family Initiative and The Women and Poverty Project of Wider Opportunities for Women, Inc. Pollin, R., Brenner, M., and Luce, S. (2002) “Intended versus Unintended Consequences: Evaluating the New Orleans Living Wage Ordinance,” Journal of Economic Issues 36 (4): 843–75. Reich, M. and Hall, P. (1999) Living Wages at the Airport and Port of San Francisco Bay Area, Berkeley, CA: Living Wage Research Group, Center for Pay and 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 Human Resources 28 (1): 1–24. Steuernagel, B. and Ristua, K. (1998) The Cost of Living in Minnesota: The Job Gap 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 Spending Habits,” Monthly Labor Review 122 (9): 38–9.

Part II

Living wage and low pay campaigns Contemporary global activism

6

The living wage movement mushrooms in the United States David B. Reynolds

In the past decade, living wage campaigns have emerged as one of the most significant signs in the United States of a grassroots reawakening around economic justice. Begun in 1994 with Baltimore’s pioneering ordinance, the living wage movement has spread to every part of the country. By May 2003, 102 local governments had passed living wage laws – with campaigns active in over seventy-five additional communities.1 Most notably, the ranks of active campaigns include the conservative American south – with local organizing in Alabama, Louisiana, Kentucky, North Carolina, South Carolina, Tennessee, Texas, Florida, and Virginia. To understand the character and potential of this movement, we explore six campaigns in detail. First, however, we need to briefly examine some basics.

Basics of living wage campaigns While living wage laws differ in specifics, all require firms that receive public funds to pay wages above some minimalist poverty level for the community – typically in the range of $8–12 an hour. As the living wage movement has matured, it has become more sophisticated and aggressive. Nearly all campaigns now link to health benefits by requiring a higher wage if no family health insurance is provided. More and more ordinances also mandate such public standards as paid vacation time, worker retention when contracts change hands, and measures to protect workers who wish to organize a union. Campaigns have also sought new ways to broaden their reach. About half of the living wage laws cover companies that receive tax abatements and other forms of financial assistance, in addition to contractors. Either directly in the laws or by related administrative action, campaigns have also convinced many municipalities to bring their own pay scales up to a living wage. By covering non-profits and including place-based coverage at the city airport, San Francisco’s living wage directly aided an estimated 22,000 workers.

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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 the most systematic involvement in living wage organizing. Other national organizations – such as Jobs with Justice, the AFL-CIO (American Federation of Labor-Congress of Industrial Organizations), and the National Interfaith Committee for Worker Justice – have also aided local organizing. However, the main initiative driving local living wage coalitions has come from the grassroots level. The living wage cause attracts labor and community groups because it points to basic economic issues while at the same time offering a very winnable legislative reform. A broad section of the public can sympathize at several levels – both as workers who have seen their income levels stagnate and as taxpayers who demand that public funds go to support public standards. Ironically, the living wage has proven an effective coalitionbuilding tool because it also draws significant, though usually not insurmountable, opposition. While in a small number of cases opposition has proven triumphant, more often it simply compels further activism and broader coalition building by participating groups. In terms of organized labor, most major unions in an area will, at a minimum, formally endorse a campaign. At least some labor leaders will be among the core activists. The labor movement has a long tradition of fighting for and raising the minimum wage as a way of protecting workplace bargaining power. More immediate self-interest can strengthen a union’s role, as in the frequent involvement of the Service Employees International Union (SEIU) and Hotel, Entertainment, and Restaurant Employees Union (HERE) – two unions whose membership is among the workers covered by living wage laws. However, this is not always the case. While the American Federation of State, County and Municipal Employees (AFSCME) was one of the two leaders of Baltimore’s pioneering law, in other campaigns locals have barely participated despite their direct interest in dampening privatization. In Michigan, the United Automobile Workers (UAW)’s living wage efforts appear to have come out of a tradition of socially-oriented political action rather than some immediate connection to the union’s core industry (this despite low wage supplier firms that receive local tax abatements). While some campaigns, such as in Los Angeles and Santa Cruz, have demonstrated the possibilities for using the living wage to secure concrete organizing gains, the link between the living wage and union organizing remains underdeveloped and does not serve as an important feature in most campaigns. Local AFL-CIO labor councils have proven a quite frequent, although by no means universal, player in living wage organizing. Living wage efforts provide an avenue for doing something that is both new and coalition-building, while at the same time tapping into a labor council’s traditional role of political action. In

The US living wage movement mushrooms 71 general, the living wage fits well into the AFL-CIO leadership’s top agenda of restructuring the labor movement to place a far greater emphasis on union organizing. Building ties to community groups and building coalitions around local economic development are key components to this organizing agenda. As Deborah Figart explores in her insightful article on the ethical foundations of the living wage movement (Figart 2001), faith communities have a long historical tradition of supporting worker justice. For a variety of reasons, during the second half of the twentieth century these labor–faith connections declined. Today, however, faith-based activism is on the rise in the United States. In part, religious leaders have seen years of running soup kitchens, shelters, and other work with the poor fail to stop the increase in poverty experienced in the last two decades. Thus, people of faith have begun looking for additional ways to address the economic injustice in the society. Formed in 1996, the National Interfaith Committee for Worker Justice now supports over sixty affiliates around the country (Bobo 2003). In addition to living wage campaigns, these groups support worker organizing and bargaining struggles, organize challenges to sweatshops, create worker-friendly partnerships with government agencies charged with protecting worker rights, and advocate for increases in state and federal minimum wage laws. Most notably, the endorsers of living wage campaigns have reached well beyond the “usual suspects” of traditionally liberal activist churches to include mainline denominations. At a general level, the living wage movement reflects the erosion of the old post-war interest-group liberalism. Shaped by the political and economic conditions of the post-war boom, many progressive groups developed often successful interest-group strategies of narrowly pushing a focused set of concerns relatively independent of other activist currents. The corporate restructuring of the past twenty years, however, has sharply reduced support for liberal reforms in elite circles and rendered narrow interest groups less effective than in the past. At the same time, past liberal reforms and public institutions are now under attack while broad sections of the US public have seen their standard of living erode. Thus, for a diversity of grassroots organizations today the need to connect to a broad array of partners has become a practical necessity for both longterm 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, religious, and community groups. The coalition must cultivate some champion within local elected government. Generally, but not exclusively, living wage campaigns develop in communities with elected Democratic

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majorities. Not all elected Democrats, however, automatically support living wage ordinances. Employers covered by the legislation are not always, or even typically, the main opposition. Rather, the local chambers of commerce lead the opposition supported by business people ideologically opposed to public participation in economic decisions. Nationally, the Employment Policies Institute, a think-tank funded by the restaurant and retail industry, provides a clearing for anti-living wage materials. To date, the opposition has offered no concrete evidence to back their claims that living wage laws produce job losses, tax increases, or a poisoned business investment climate. Indeed, two dozen academic studies and internal city reviews have found that the paying of a living wage costs relatively little money, has long-term cost savings and quality benefits for employers, and has produced few jobs losses (Reynolds and Kern 2003: Chapter 7). Although over one hundred communities have living wage laws, coalitions have to push for each new ordinance in a context of elected officials fearful of going into the “unknown.” For this reason, campaigns must demonstrate 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 as opponents may try to weaken the law either through amendments or various ways of undermining enforcement. Indeed, enforcement is the weakest link in the living wage movement. While most campaigns display the above elements, many go beyond this bare bones experience. Below we detail six campaigns that in different ways illustrate the potential of living wage organizing to foster a long-term economic 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 in a much larger movement-building strategy. The first living wage campaign in Baltimore revealed this character, while Los Angeles and San Jose represent some of the most comprehensive regional movement-building practices 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 coalition of fifty congregations) and AFSCME – placed organizing low-wage workers in the long term at the center of their effort. Having advocated for housing, education, and other subsidies since the late 1980s, by the early 1990s BUILD realized that such efforts were undermined by the city’s downtown-focused redevelopment strategy. Such “urban renewal” was

The US living wage movement mushrooms 73 generating large numbers of low-wage jobs. As they sought direct ways to raise the wage floor, BUILD found an ally in AFSCME. The union viewed the living wage as a way to stem privatization and develop allies for expanding collective bargaining rights for public employees (Fine 2000–01). Through solicitations at neighborhood stores, person-to-person contacts, and other means, the campaign included workers covered by the proposed living wage law in the campaign. While a seemingly natural connection, such outreach is often difficult to do, especially if the campaign wants to place covered workers in the limelight. Through the outreach, however, Baltimore’s coalition developed a list of 3,000 workers who wanted an organization for people like themselves. Today, the Solidarity Sponsoring Committee (SSC) has grown to three staff and roughly 500 dues-paying members. While most of these workers are covered by the living wage law, the SSC includes workers from other private employers. The Committee had to mobilize its members to enforce and extend the living wage law. For example, workers and their supporters twice packed the Board of Estimates chamber to denounce the Eastman Transportation Company’s violations of the living wage. Indeed, thanks to the efforts of the SSC, AFSCME, and BUILD, the city threatened to cut $14.4 million in contracts to two dozen school bus contractors who refused to raise wages by the 50 cents increase in the living wage level. The Solidarity Sponsoring Committee and the living wage coalition organized to win a right of first refusal law that provides workers the right to keep their job even if their employer loses the contract. They have secured protections for the right to organize brought back government jobs previously contracted out and blocked state plans to force welfare recipients attending community college to discontinue their education for poverty-wage work. The activists also helped win a state law banning companies from gaining public subsidies by replacing existing workers with welfare recipients. Building an organization of low-income workers has not proven an easy task, which is why so few campaigns pursue systematic contacts with covered workers. Low-wage workers often juggle many responsibilities and can change jobs frequently. To help stabilize SSC membership, organizers pulled together a basic benefit package. For $10 a month, workers received $10,000 worth of life insurance plus dental, vision, prescription, and health discounts. While not comprehensive medical care, the package does focus on crucial preventative measures. Los Angeles, California The LA living wage effort grew out of a battle to defend the jobs of 1,000 unionized workers at the city’s main, international airport, LAX. Three hundred jobs were lost when the city brought in non-union contractors, such as McDonald’s. The remaining 700 jobs promised to suffer the same

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fate. A core group from the hotel workers and service employees unions joined with several community groups to map out a response. Their strategy involved passing three pieces of legislation connecting public funds to community standards. The first required companies receiving city contracts to retain the existing workforce. Activists won this legislation in the fall of 1995. The second was the living wage law. The third established legal protections for workers’ right to organize. The eighteen-month battle to win LA’s living wage ordinance produced a broad alliance of labor and community groups. Indeed, the campaign’s coalition grew to over one hundred endorsing organizations. While the campaign had clear champions on the city council, Los Angeles’ mayor opposed the living wage, compelling the campaign to build a veto-proof supermajority. To keep the pressure on, activists organized a phone-in campaign to the city council. Organizations faxed letters of support. Over 1,000 “New Years” cards flooded in from city residents. For two weeks delegations visited the council twice a day, three days a week. Some actions were quite dramatic. For Thanksgiving, the campaign asked groups and individuals to mail counselors over a thousand decorated paper plates symbolizing the struggle to feed a family on poverty wages. For the winter holidays, one hundred clergy and other supporters accompanied a volunteer actor playing the part of the ghost of Jacob Marley who went to city hall draped with chains to decry the Mayor’s Scrooge-like opposition to the living wage. Volunteers went caroling at city hall and nearby restaurants with lyrics modified for the living wage. The living wage coalition also sought support from employers. Two top executives from Bell Industries and Pioneer Foods wrote an opinion piece published in the Los Angeles Times defending the living wage from the standpoint of their company’s success pursuing policies of higher wages. Thirty-three Hollywood film and television producers also sent a letter to the LA city council urging passage of the living wage ordinance. Organizers deliberately recruited and involved workers affected by the ordinance. At the airport, for example, workers took reporters and city hall staff on a tour highlighting the conditions under which they had to work. 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 went untreated because there was no time off permitted for a doctor visit, and no insurance or way to pay for it anyway; families crowded into tiny one-bedroom apartments in dangerous areas of town just to make rent, and visits to food pantries to manage the groceries every month. (Murray 1999) The participation of affected workers not only helped gain some positive media coverage, but also developed an activist nucleus among low-wage workers that could feed into union activity.

The US living wage movement mushrooms 75 In March 1997, the Los Angeles City Council unanimously passed the living wage. A month later they overrode Mayor Richard Riordan’s veto. The living wage campaign proved one step in the growth of a model socialmovement-oriented organization: the Los Angeles Alliance for a New Economy (LAANE). Formed on an early initiative by the Hotel and Restaurant Employees Union (HERE), LAANE has grown to staff of twenty-five. LAANE links policy development to union growth and organizing. By policy research, coalition building, and advocacy work, LAANE helps to place labor at the center of a broad local movement for economic justice. For example, since the living wage victory, LAANE has actively monitored the city’s contracting and economic development process. LAANE published several critiques of the city’s economic development strategy – one strong on corporate subsidies and weak on community standards. At LAX, the living wage coalition intervened in the processes of granting of food concessions, upholding employers willing to respect workers’ right to organize. They have also obtained amendments to the original living wage law to make clear that the airlines themselves are covered and to provide strong protections and employer sanctions in any workplace in which workers are harassed for discussing their rights under the living wage. LAANE helped establish and houses a faith-based worker support network: Clergy and Laity United for Economic Justice (CLUE). CLUE directly participated in the Los Angeles and subsequent living wage campaigns. Along with the Southern California Ecumenical Council, CLUE has called on churches to lead by their own examples by paying all their staff a living wage. CLUE has also directly aided area unions. For example, when the Westside Hotels balked at a first contract with the HERE to gradually raise housekeepers’ wages from $8.15 to $11.05 an hour, CLUE dispatched small teams in full ministerial garb to deliver brief sermons on workplace fairness while ordering coffee at several hotel dining rooms. On April 8, 1998, an interfaith procession of sixty ministers, priests, and rabbis marched through Beverly Hills to deposit bitter herbs outside the Rodeo Summit Hotel, which still had not signed the HERE agreement, and offer milk and honey to the two which had. Two months later the Summit signed.2 CLUE has organized similar religious support for a campaign against a union-busting hotel in Santa Monica, an organizing drive at St. Francis Hospital, and protests over the University of Southern California’s decisions 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 the nation’s boldest living wage ordinance. The zone-based law would have required all employers within the city’s lucrative coastal zone to pay a living wage. The ritzy-tourist industry had benefited enormously from the public investment provided within the zone only to generate an exploding low-wage workforce. To head off the measure, an alliance of wealthy hotel

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and restaurant owners placed a bogus “living wage” law on the ballot that would have covered few workers and prohibited the city from passing any further living wage statutes. LAANE and SMART helped defeat this sham proposal and won city council passage of their authentic living wage law. Unfortunately, the opposition forced the new law onto the ballot. In November 2002, their scare campaign convinced a majority of voters to rescind the law. SMART’s organizing, however, continues. Today, LAANE’s efforts to intervene in economic development work have grown to include direct negotiations with developers. By 2002, LAANE’s Accountable Development Project had helped coalitions secure private and legally binding agreements with three major entertainment, housing and retail, and industrial development projects. All three benefited from millions of dollars of public funds. The agreements include such provisions as requiring that 70–75 percent of the jobs provided by the companies that locate in the development provide: living wages, affordable housing and childcare centers, a youth center, local hiring, a neighborhood improvement fund, and card check recognition, and employer neutrality during union organizing. In one case, the developer actually approached LAANE since community support can help make a proposed development project’s journey through the public approval process much easier. LAANE aims to make community impact assessments and negotiated benefit agreements the normal procedure for the city’s own economic development efforts. San Jose, California As with Los Angeles, living wage efforts in San Jose grew as one part of a much broader movement-building strategy. Following the 1994 election of new leadership, a revitalized South Bay Labor Council began to aggressively seek alliances between labor and the community. In 1995, it established Working Partnerships USA as a non-profit policy and research institute to foster labor-community ties. The group won national news coverage when it published several reports detailing the dark side of Silicon 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 a family of four independent of public assistance. Such economic data were used in an innovative Labor/Community Leadership Institute aimed at developing a cadre of leaders oriented around a movement for economic justice. Working Partnerships actively recruits from among a diverse array of area grassroots leaders to attend the eight-session training program. Class participants discuss the regional economy, the role of unions, privatization, the role of government, and ideas for how the regional economy can be changed. The program aims not simply to develop a common understanding of the local political

The US living wage movement mushrooms 77 economy among grassroots leaders, but to forge concrete personal ties between the leaders of future labor-community coalitions. Indeed, during the course, participants work together on an actual economic-justice-oriented project in the community. Working USA also served as the conduit for developing a new Interfaith Council on Religion, Race, Economics, and Social Justice which brings together over sixty congregations and community groups. The network has helped successfully advocate for an additional $25 million in Redevelopment Agency funds for low-income housing and greater access to public benefits for immigrants. In each case, the group’s activism helped shift public dialogue from a power struggle between labor and business to demands that corporate and government practices reflect high moral ground (Brownstein 2000). It is within this broader movement-building context that the San Jose living wage campaign developed. The first round took place in 1995, when the labor council put together a coalition to attach living-wage-type standards to a local tax incentive program. The 1998 San Jose living wage campaign provided a robust channel for the central labor council and Working Partnerships to further expand its social movement institutions. The first Labor/Community Leadership Institute classes used the living wage as their group project. The Interfaith Council on Religion, Race, Economics, and Social Justice mobilized around the living wage effort – further building its membership. The central labor council and its allies mounted one of the strongest get-out-the-vote operations in the city’s district 3, when the living wage become a central issue between the union-backed incumbent and the anti-living wage opponent. The incumbent won by 200 votes. Two weeks after the election, the living wage ordinance passed by a strong 8-to-3 vote with the then highest required wage in the country. The ordinance also included worker retention provisions for new contracts, bid notifications that are sent to the central labor council, and a requirement that covered employers assure good labor relations. The latter measure seeks to hamper employers from hiring anti-union consultants or mounting aggressive anti-union campaigns. The economic justice issues highlighted by the living wage campaign continue to foster progressive activism. The labor council and Working Partnerships, for example, have launched an expanding series of campaigns on the issue of temporary work. They have worked for training and skill certification programs, portable health and other benefits, a model non-profit temporary employment agency for clerical workers, and a Code of Conduct through which temporary employment agencies agree to pay living wages, provide access to affordable health benefits and training, and use fair administrative procedures. Woven into all of this activity are efforts to organize among temporary workers and to foster new forms of labor organizations appropriate to a contingent workforce. The model shown in Los Angeles and San Jose – of a new labor-related

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non-profit founded to combine research, policy formulation, and coalition building – has been replicated in California and elsewhere. Just north of San Jose, the East Bay Alliance for a Sustainable Economy uses organizing around new and existing living wage laws to build a long-range laborcommunity economic justice coalition. The new Center for Policy Initiatives is developing a living wage campaign as a part of its broader strategy to lay the basis for a progressive movement in conservative San Diego. The recently formed Connecticut Center for a New Economy (CCNE) modeled itself after LAANE; CCNE currently maintains an ongoing, multi-pronged labor-community campaign in New Haven to transform relations between Yale, the city’s largest employer, and its lowwage workforce and poverty-stricken surrounding community (Simmons 2003).

Movement battles enhanced by strong opposition While the above examples situated a living wage campaign in larger institution-building context, Chicago and Boston illustrate how the very intensity of the battle for the living wage can expand a campaign’s scope and impact. Chicago, Illinois From the outset living wage organizers, including SEIU Local 880 and the Chicago ACORN chapter, knew that they would have a tough time in Chicago. Home of one of the great urban political machines, local political power resided with the mayor’s office. When Mayor Richard Daley announced his opposition to the living wage, the clear majority of cosponsors on the Board of Aldermen disappeared overnight. Some involved in the campaign worked not because they believed a win was likely, but in order to develop a wedge issue that would shake up local politics and build a broad coalition. The living wage coalition grew to over sixty endorsing organizations with a combined membership of 250,000. On May 1, 1996, over 500 living wage demonstrators joined a May Day march through downtown Chicago. Both the city’s Cardinal Bernardin and AFL-CIO President John Sweeney personally contacted Mayor Daley to urge his support for the living wage. When SEIU held its national convention in Chicago in 1996 delegates staged a major street parade. The campaign had to sue to gain access to Navy Pier so that living wage supporters could picket the Mayor as he welcomed delegates to the 1996 Democratic Convention. Several busloads of delegates went on living wage “tours of shame” in which they visited lowwage employers enjoying ample public funds. The ability of the campaign to mobilize hundreds of living wage supporters made such an impression upon the mayor that the fire marshal illegally barred people from attend-

The US living wage movement mushrooms 79 ing the city council meeting at which aldermen dutifully voted down the proposed ordinance. The strength of the campaign’s grassroots organizing, however, eventually secured a living wage law. After the vote, the activists began organizing ward-by-ward accountability sessions with the nineteen aldermen who had abandoned their earlier support. And coalition members directly enter electoral politics. When activist Willie Delgado first ran for State Legislature in 1996, he received few union endorsements to challenge his AFL-CIO-backed primary opponent. Following the living wage campaign, he ran and won in 1998 with the solid labor support. On April 13 of the same year, Ted Thomas, Illinois ACORN president and Chicago New Party chair, beat the machine-endorsed candidate to become alderman in the city’s 15th ward. Even though he never before held public office, Thomas, a retired postal worker, won endorsements from The Chicago Tribune, The Chicago Sun Times, and the Chicago Defender on his record as a community activist and a leader of the Chicago Jobs and Living Wage Campaign. In the midst of the next election year, Mayor Daley sought a compromise when he and council prepared to vote themselves hefty salary increases. Daley had argued that the city could not financially afford to pass the proposed law. Daley and his council allies must have concluded that they could not risk a backlash from a living wage movement more than capable of making the contradiction a public issue. While the new unanimously passed living wage law was narrower than the originally proposed ordinance, it did represent a major breakthrough in a long campaign. Soon after, Cook County passed a similar ordinance. The alliances between founders such as SEIU 880 and ACORN have continued into new campaigns, for instance, an effort to win state funding increases to home care, nursing home, and other care providers to explicitly provide a living wage. Boston, Massachusetts The same combination of broad activist thinking and strong but vulnerable opposition applied in Boston. The Boston ACORN chapter initiated the living wage campaign not simply to pass an ordinance, but to further their neighborhood organizing and to build relationships with other progressive groups. While unions joined the living wage coalition, their attention initially focused more on the 1996 elections. It was the opposition that helped intensify labor’s mobilization and strengthen the bonds between ACORN and the AFL-CIO. In February 1997, living wage organizers turned out a crowd of several hundred for a rally at which the city’s labor leaders were to formally endorse the campaign. Activists had worked hard to gain the commitment of a majority of city councilors, most of whom had run with labor endorsements, to attend the rally. Yet, with Mayor Tom Menino

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announcing his doubts about the living wage a week and a half before the event, only one councilor actually made an appearance. Following this political slap in the face, both the Greater Boston Central Labor Council and the Massachusetts AFL-CIO threw their energy into the campaign. While leaders from every labor union in the city testified at hearings, the coalition 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 business community, however, used the gap between the law’s passage in 1997 and its implementation one year later to undermine it. Business leaders mounted an intense anti-living wage media effort while lawyers from the state Chamber of Commerce searched for a legal challenge. In the end, the campaign had to trade the subsidy-based coverage (the element most at risk of a legal challenge due to restrictive court rulings on the state’s home rule amendment) for maintaining the contract living wage and a local hiring hall requirement for both contracts and subsidies. This opposition served to further cement the bonds between ACORN and the Massachusetts AFL-CIO. Both sit on the living wage Advisory Committee established by the ordinance. Since the living wage battle, the two have worked together on two state legislative efforts: a campaign that raised the state’s minimum wage and a measure to increase the state’s Earned Income Credit. In 2001, living wage supporters won amendments to the Boston ordinance increasing the wage amount to from $9.00 to $10.54 an hour, dropping the employer threshold from $100,000 to $25,000, and lowering the non-profit exemption from one hundred to twenty-five employees or less. The campaign has also won living wage ordinances in neighboring Cambridge and Somerville and helped provide crucial community support to the 2001 Harvard University living wage sit-in.

Serial campaigns in Michigan Living wage campaigns can also take on a broader significance when they grow beyond the boundaries of a single community. Michigan’s living wage campaigns illustrate this dynamic. Individually, the efforts to pass each separate law have not been particularly noteworthy. However, the living wage battle has grown to take on regional and now statewide dynamics. While the Detroit campaign made history by becoming the first in the nation to pass a living wage law via a ballot initiative, it was undertaken by a local labor movement driven by modest aims. The decision to place the ordinance on the ballot came from the political hope of raising voter turnout by giving city residents something concrete and compelling to vote for. The campaign staff was able to launch a modest outreach to clergy, with at least three dozen holding living wage events. The local ACORN

The US living wage movement mushrooms 81 chapter also contributed door-to-door activism. However, the campaign’s main efforts focused on using living wage materials to enhance labor’s traditional get-out-the-vote campaign. With the Chamber of Commerce realizing the difficulty of telling a 70 percent African-American city that raising wages was a bad idea, the get-out-the-vote effort paid off with a 80 percent vote for the living wage initiative. Since it was linked to the get-out-the-vote mobilization, the Detroit campaign never developed an autonomous living wage coalition. Nor did it have a plan for economic justice activism after the election. However, the stunning victory helped spark continued living wage activism. The metropolitan Chamber of Commerce mounted a counter-attack against the law aimed at enacting crippling amendments. A packed audience of living wage supporters at a key city council hearing helped defeat this. With city enforcement quite uneven, modest outreach to covered workers by groups such as the Detroit AFL-CIO and Jobs with Justice produced a series of employer violation complaints. In 2003, the National Lawyers Guild’s Detroit-based Sugar Law Center initiated one of the first proliving wage lawsuits on behalf of an employee not paid her legally mandated wage. The massive public support displayed by the ballot win promoted the Metropolitan Detroit AFL-CIO and other living wage supporters to initiate a series of suburban campaigns. By 2003, modest campaigns had passed laws in the cities of Warren, Ferndale, Eastpointe, Southfield, Southgate, and Taylor. South of Detroit, Monroe County passed a law only to see it repealed by a council that had flipped from a Democratic to Republican majority for the first time in its history. The significance of these ongoing campaigns lies in the collective whole. Labor and its allies have generated the ability to push local public policy reform at a regional level. Following the Detroit ballot win, activists in nearby Washtenaw County pulled together a campaign which has passed six ordinances and the nation’s only road commission living wage policy. Activists succeeded in building an endorsement list of thirty-nine organizations, fifty-nine clergy, and fifteen non-profits covered by the law. Despite some pilot efforts, the campaign was not able to sustain door-to-door style grassroots volunteer efforts or hold major rallies or demonstrations. Its mobilization capacity remained at the level of turning out supporters for council hearings. Despite these limitations, this four-year-long effort is notable at several levels. It marked the first time in many years that the two major labor organizations in the county have worked together in a sustained way. The list of endorsing clergy included mainline church leaders. The campaign also linked up with University of Michigan students organizing against sweatshops. Furthermore, the very ability of the local labor–community coalition to pass legislation around a pro-active effort marked a new experience for many local activists used to largely educational activism not tied to concrete policy victories.

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Indeed, the potential for these modest serial living wage campaigns to become something larger has prompted the Michigan Chamber of Commerce to place opposition to the living wage as one of its top legislative priorities. In late 2000 and early 2001, the Chamber made the living wage a cause célèbre throughout Michigan by attempting unsuccessfully to pass state legislation outlawing local ordinances. The battle drew in the state AFL-CIO, the Michigan Democratic Party, and eventually the building trades (when draft legislation also targeted local prevailing wage). With the opposition coming close to a state victory, both the metropolitan Detroit and state AFL-CIO, as well as several unions, found themselves pulled into a major grassroots organizing battle in the small suburb of Eastpointe. In 2001, living wage opponents forced the city’s newly passed ordinance onto the ballot. Thanks to a door-to-door effort, voters upheld the living wage. Unfortunately, a ballot campaign in city of Kalamazoo, in the more conservative western Michigan, went down to defeat in the face of a well-funded opposition that enjoyed the support of many local elected Democratic officials. A state budget proposal in the summer of 2002 to cut state aid to cities with living wage laws prompted the Detroit suburbs of Allen Park and Hazel Park to rescind their laws despite the threat being taken quickly off the agenda. In early 2003, the state House passed a living wage ban despite the likely veto by the newly elected Democratic Governor. The Chamber’s opposition reveals concern that should living wage coalitions score wins outside of southeast Michigan, such activism could prove a building block for shifting the political balance of power in a narrowly Republican-dominated state. In May 2003, living wage supporters in southeast Michigan worked with the Michigan AFL-CIO to sponsor the first gathering of living wage activists in the state. The meeting allowed experienced organizers to share their knowledge with new or stalled campaigns in the politically key parts of the western and northern Lower Peninsula. Most important, the gathering laid the basis for a coordinated statewide movement by establishing a steering committee comprising one labor 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 broaden the reach and deepen the scope of local living wage campaigns. First, conscious intention by leadership plays a central role. In many of our cases, deep coalition building, grassroots organizing, the involvement of lowwage workers, and the spillover into continued activity after the law’s passage did not simply flow automatically from the campaigns. Rather, at the outset, key organizers initiated their campaign with the larger purpose of using it to maximize these elements. The living wage is thus an important tool for those wishing to build a larger project for establishing regional

The US living wage movement mushrooms 83 power. This long-range movement-building perspective can take a formal expression, such as in LAANE or Working Partnerships, or more informally – such as the perspective of key organizers in Boston, Chicago, and Michigan. Second, as they say in union organizing circles, “management is the best organizer.” Because the regional and state chambers of commerce lead the fight against every living wage law, they compel living wage activists to broaden their coalitions and reach into their grassroots. Campaigns that do not build coalitions, but rely on ties to local elected officials and lobbying by a limited number of sponsoring groups, typically run into trouble and either end up failing or mounting broader efforts. Whether elaborate grassroots battles or more modest efforts, living wage campaigns can help by moving local progressive activism further down a social movement road. If nothing else, they demonstrate to many in the community that when local groups get together they can make a difference; setting and enacting a local policy agenda are possible. With a network of well over one hundred labor–community coalitions across the country, the living wage phenomenon highlights the existence of a clear local progressive capacity for legislative change. In many cases living wage organizing has led to further activism on local economic development, corporate accountability requirements, union building, and other economic justice issues. The challenges ahead include deepening coalition members’ level of involvement, developing long-term progressive models of regional economic development, and moving living wage activism to the state and federal level. The first two have been pursued by some of our examples. At the state level, by 2003 wage campaigns had passed minimum wage increases in Vermont, Massachusetts, California, Oregon, and Washington State. Labor–community coalitions have also won model corporate subsidy accountability legislation in Minnesota and Maine. And the nation’s deepening healthcare crisis had begun to produce new state-level labor–community alliances. These signs make clear that whether full-blown, long-term movement projects or more modest laborcommunity lobbying campaigns, living wage activism clearly represents a new and energetic grassroots impulse that promises to provide building blocks for what some day may prove to be the great social movement reawakening of the early twenty-first century.

Notes 1 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 Living Wage Resource Center. 2 HERE has used the living wage coalition’s support to win a neutrality agreement and subsequent union recognition at the new site of the Academy Awards in Hollywood, the first such union breakthrough in this area. SEIU also won union jobs for janitors using the living wage law and coalition support.

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References Bobo, K. (2003) “Religion-Labor Partnerships: Alive and Growing in the New Millennium,” Working USA 6 (4): 71–83. Brownstein, B. (2000) “Working Partnerships: A New Political Strategy for Creating Living-Wage Jobs,” Working USA 4 (1): 35–48. Figart, D. (2001) “Ethical Foundations of the Contemporary Living Wage Movement,” International Journal of Social Economics 28 (10/11/12): 800–14. Fine, J. (2000–01) “Community Unionism in Baltimore and Stamford,” Working USA 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, fourth printing. 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 New Economy and Yale,” paper presented at the UALE conference of labor educators in Miami, Florida, April 12.

Websites of Groups discussed ACORN: www.acorn.org (follow the links to ACORN’s National Living Wage Resource Center). Los Angeles Alliance for a New Economy: www.laane.org Political Economy Research Institute: www.umass.edu/peri/lwlinks.html Working Partnerships USA: www.atwork.org

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Organizing homeworkers in Toronto’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 styles arrive. She must teach herself the new design. The jacket is sold at Eaton’s department store for $275 to $375. Poi-Yee makes $5 for sewing a dress in one hour, but she has had to buy the sewing machine and cover all operating costs such as hydro and heat. The dress is sold for $150 to $200 at a high-end retail boutique. A contractor often delivers work on Friday to Yen, who must complete it by Monday morning. She must care for her children while she sews at least ten hours a day all weekend . . . In contrast to the inside factory workers with regular wages, benefits and overtime pay for overtime hours, homeworkers received none of these. (Paleczny 2000: 4)

Many Canadians were shocked to learn in the early 1990s that garment workers in our largest city were laboring under conditions more often associated with third-world sweatshops. Over the following decade, an innovative labor organization was launched, aimed at organizing and improving conditions for this particularly exploited group of workers. The project has met with both success and failure. Awareness of the issue has increased tremendously. Using creative tactics and support from diverse sources, some of the barriers of isolation and intimidation facing garment homeworkers have been broken down. But government inaction has meant that the essential features of exploitation in this sector remain unchanged. As the Homeworkers Association enters its second decade, the challenges of winning a living wage and decent working conditions for its members loom larger than ever.

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

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1993, however, the industry began to recover. Employment grew modestly, and shipments and exports grew strongly, throughout the remainder of the decade. In 2002 clothing was Canada’s tenth largest manufacturing sector with more than 93,000 employees working in 1,500 establishments.1 The city of Toronto, with over 550 fashion manufacturers, saw employment 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. Production workers make up over 85 percent of the workforce (UNITE 1997) and labor costs consume up to 40 percent of the cost of manufacturing a garment (Taplin 1994). The limp character of fabric makes automation of most assembly processes extremely difficult (Dunlop and Weil 1996). As a result, the key competitive strategy within the clothing industry has been simply to keep labor costs down. Employers rely on immigrant women as a pool of cheap labor.2 With over 30 million garment workers in 160 countries around the world producing clothing products for export, clothing manufacturing is the most globalized of all industries. Clothing manufacturing has spread in successive waves to countries with lower production costs, becoming a worldwide industry whose geographical distribution is constantly changing (ILO 1995). Wages for most Canadian clothing workers are comparable to those in other industrialized nations, but far higher than wages of workers in the developing world (UNITE 1997). As a result, the downward pressure on labor costs is intense. At the same time, the “Quick Response” strategies (getting the right product in the right quantity to the right place, with very short turnaround times) adopted by North American retailers has created an opening for domestically based manufacturers who can meet this demand (Berg et al. 1996). The basic objective of Quick Response is to reduce warehouse time, cut in-process inventory, and improve communication flow from retailers to manufacturers and suppliers by collapsing the distance between production and sale. Instead of making big orders at the start of the season, retailers are moving to a system of continuous restocking. Proximity to the market has thus become an important competitive advantage, but only if manufacturers can deliver the right products on short notice. To meet this competitive challenge, government and industry reports have pointed to the need for Canadian clothing manufacturers to produce high quality, high-value added products for specific markets using flexible production strategies (Industry, Science and Technology Canada 1991). The majority of clothing manufacturers, however, continue to be wedded to a low-wage strategy. By 1992, for example, just 9 percent of US apparel manufacturers were using “modular” or team production (Dunlop and Weil 1996). Canadian manufacturers have lagged behind even this modest

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benchmark. Instead of a trend toward innovation, production of clothing, particularly women’s clothing, has fragmented into networks of contractors, 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 industry, dominated by a handful of big players. The next level consists of a top tier of designers and manufacturers. More and more, however, manufacturing has moved from large factories to a network of small contractors who fill the middle of the pyramid. At the bottom are homeworkers. As you move down the pyramid, profit margins, bargaining power and incomes all decline steeply. Clothing industry homeworkers provide a flexible, cheap supply of labor on the doorstep of the Canadian and US markets. While the typical lead time ordering garments from Hong Kong is three months, homeworkers in Toronto can deliver a finished product literally overnight. Homeworking allows clothing companies to quickly produce their goods without the expense of salaried staff, a factory floor or machinery. Homeworkers absorb the overhead. They provide the workspace, the equipment, the electricity – even the thread. If there are no orders, they are not paid. Homeworkers provide the perfect “just-in-time” labor force.

Homework and urban poverty Poverty among low-wage workers is a growing problem in Toronto, home to one in six Canadians and half of all recent immigrants.3 Canada does not have an official poverty line. However, Statistics Canada, a federal government agency, does calculate the “Low Income Cut-Off,” or “LICO.” In 2002, the before-tax LICO for an individual living in Toronto was $19,261, and for a family of four was $36,247. Garment industry homeworkers, earning less than the minimum wage set by the provincial government, are likely to fall far below this threshold. Over two million Canadians – about one in six workers – are stuck in jobs that do not pay enough to support a family (Maxwell 2002). The incidence of poverty increased in Toronto over the 1990s, growing during periods of both recession and economic growth. Canada was hit by a deep recession in the early 1990s, followed by a slow recovery, then a return to strong job growth after 1997. Both the recession and the recovery were more pronounced in Toronto than the rest of the country, with unemployment in the Toronto Census Metropolitan Area surging from just 4.0 percent in 1989 to 11.4 percent in 1993. The unemployment rate then fell to 5.5 percent in 2000 (Jackson et al. 2001). But job growth in the latter part of the decade did not cut into poverty, in part because many of the jobs created were part-time, temporary, and contract positions that fail to pay a living wage. A study by Jackson et al. (2001) concluded that by the end of the 1990s, both the extent and depth of poverty in Toronto had

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increased. As these authors note: “Compared to the late 1980s, jobs in Toronto have become more unstable and more precarious, particularly for those at either end of the age spectrum” (2001: 6). The number of working-poor households (those where one or more income earners were employed for at least forty-nine weeks) has increased substantially. This problem is particularly evident among Toronto’s immigrant workers who comprise 44 percent (Statistics Canada 2003) of the city’s population. The poverty rate (pre-tax LICO) among immigrants in Toronto in 1996 was 32.9 percent; among recent immigrants (those who arrived between 1991 and 1996) the rate was 52.8 percent (Lee 2000). As Jackson (2002: 13) concludes: “Many racialized [minority] immigrants find themselves trapped in low-wage, insecure, no-future ‘survival jobs’ which lead nowhere.” The adage that “a rising tide lifts all boats,” has not applied to immigrant workers in Toronto, who continue to face a significant gap in employment and income opportunities even in good years (Smith and Jackson 2002). Garment industry homeworkers represent the extreme end of the spectrum of precarious, low-wage jobs that make up an increasing share of Toronto’s job market.

A union for homeworkers Concern over the rise of homeworking and the loss of factory jobs prompted the Ontario District of the International Ladies’ Garment Workers’ Union (ILGWU)4 to begin investigating the working conditions of Chinese-speaking homeworkers in Toronto in January 1991. Membership in the union, which began organizing in Toronto in 1911, had fallen from 6,000 members in 1985 to less than 2,000 in 1992 (Orwen 1992; Smith 1995). At that time, the union had no formal relationship with any homeworkers or any real awareness of how many homeworkers there were in Toronto or where they were located (Dagg 1996). A Chinese-speaking researcher was able to make contact with homeworkers by setting up a Chinese hotline telephone service, advertising in the Chinese newspapers and by word of mouth from Chinese union members. Through in-depth interviews with thirty homeworkers, the union’s researchers documented the dismal working situation of these workers. Twenty-one of the thirty homeworkers surveyed were being paid less than the minimum wage. Their average wage was just $4.64, well below the 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 rural China, added up to just one dollar per hour. Only one of the thirty homeworkers was receiving the vacation pay to which all were entitled. None of the employers were making contributions to the unemployment insurances commission or Canada pension plan, and only one employer had the permit to employ homeworkers then required by the Employment Standards Act of 1974 (Cameron and Mak 1991; Dagg 1996).

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Homeworkers were working long hours – as much as 70 hours per week in peak periods – without receiving an overtime premium. Half reported that other family members, particularly children, assisted them, providing additional unpaid labor to the contractor. Ninety percent of those interviewed reported serious health problems related to their work, such as allergies to fabric dust, stress resulting from time pressures, and ergonomic problems caused by sitting for long periods of time in a cramped space. The workers had no control over the scheduling of their work or the rate of pay. Twelve reported that they had had problems getting paid at all after the work was completed. Workers had to invest in purchasing their own industrial-quality sewing machines – in the range of $3,500. The vast majority reported that they would prefer to work in a factory, rather than at home, if they could get those jobs and if affordable childcare was available (Cameron and Mak 1991). Only one of the thirty participants could converse in English. For these workers, doing sewing in their 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 the results of this study. The time appeared to be right to push for legislative reform in the province of Ontario to protect homeworkers; in September 1990, the labor-friendly New Democratic Party (NDP) had won a surprise election victory. The union worked with a small group of women from allied organizations such as the Workers Information and Action Centre of Toronto, the National Action Committee on the Status of Women (Canada’s largest women’s organization), and Mujer a Mujer (an organization working with women in Mexico, the United States and Canada). On November 2, a formal workshop was held that marked the birth of the Coalition for Fair Wages and Working Conditions for Homeworkers. A press conference later that month, revealing the nineteenth-century conditions found among Toronto garment workers, gained significant media attention to the issue, as did a legislative lobby in December (Landsberg 1991). A key recommendation of the coalition was that the definition of employer in the Employment Standards Act be changed to encompass the emerging pattern of subcontracting in the garment industry. Under the existing legislation, only the immediate employer could be held responsible for violating minimum employment standards. The coalition’s goal was to make the principal contractor (owner of the label) accountable for working conditions of all employees working on that contractor’s products at any point in the subcontracting chain (Yalnizyan 1993).5 A system of registration of homeworkers and contractors was advocated that would address the problem of clandestine labor. The coalition also pushed the government to appoint a commission to study broader-based bargaining structures that would allow homeworkers to organize and bargain collectively. The Minister of Labor was sympathetic and indicated that he would begin a review of the matter (Dagg 1996).

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At the same time, it was recognized that a campaign focused on legislation would not be successful without the necessary organization of homeworkers themselves to push for reform. A route to achieve this objective was provided by the Associate ILGWU Member Program (AIM), which had been established in the United States as a means of keeping rank-andfile activists in the union after a plant closed down or an organizing campaign failed. Associate members in the USA had access to reduced-fee membership plan or the AFL-CIO Union Privilege Plan, a benefit plan set up 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 of the program was to eventually organize AIM members as “full” members when the time was right or the legal recognition gap could be met by the union. The ILGWU’s international office granted Toronto a formal charter to set up a new local under this program, Local 12, and the Homeworkers Association (HWA) was born. Resources to support the association were generated through a fundraising drive and a funding application to the Ontario Women’s Directorate. With the help of this funding 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 that homeworking should be prohibited. However, the union’s international leadership recognized the different situation in Canada and supported the Ontario District’s innovative campaign to organize homeworkers (Dagg 1996: 240).Whereas homeworking was banned in the US women’s garment industry in 1942, it is a legal practice in Canada (Bernstein et al. 2001). Under Ontario law in 1992, homeworkers were entitled to many of the benefits of regular employees, including the minimum wage. Contractors were required to obtain a permit from the Ministry of Labor to employ homeworkers. But most worked in isolation, unaware of these legal requirements or afraid to speak out for fear of losing what work they had. Throughout 1992, the coalition continued to build public awareness of the exploitation of homeworkers. In October, the coalition released the names of designers and clothing companies using homeworkers under illegal working conditions, and began a postcard campaign demanding that these companies do something about these conditions. The province’s Labor Minister responded to the increasing public pressure by announcing in October 1992 that legislative reforms would be enacted to benefit homeworkers (Papp 1992; Galt 1992). Over the course of the following year the three targeted retailers, who together accounted for 40 percent of the Canadian garment market, received nearly ten thousand cards from across the country. In the wake of this apparent success, the coalition built further visibility by organizing demonstrations in front of Toronto’s largest downtown shopping centre (Swainson 1992). The main strategy was to generate as much media attention as possible to build public support for changes to the legislation, and to pressure retailers and manufacturers to

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clean up their image. In a particularly memorable action in March 1993, over 1,000 women participating in the International Women’s Day march flooded the shopping center and plastered “clean clothes” stickers on the windows 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’s base. 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 find collective solutions; to provide a chance for skills and experience sharing between homeworkers and factory workers (HWA 2002).

This work is extremely challenging, because by its nature homework occurs in many locations hidden from view, and homeworkers themselves are isolated. The union had to commit to a patient and long-term approach. Many of these workers have had no experience with unions, and often come from countries where independent union organizing is suppressed. As an associate local of the union, the HWA provided an excellent way to gradually introduce workers to the concept of unionism. Members are part of a functioning local that can determine its own bylaws and elect its own executive, which meets monthly. Members pay an annual fee of $24. The HWA signed up thirty-five members in its first six months of organizing, and ninety-three by the end of the first year. Since the Ontario Labor Relations Board does not permit a bargaining unit of only one worker, there is no formal certificate for the local and the union has no legal right to bargain collectively on behalf of these women (Yalnizyan 1993; Bernstein et al. 2001). The union’s goal is to achieve labor law reform such that the HWA will ultimately be in a position to organize members into full-fledged union members with a formal collective bargaining relationship with clothing industry contractors. In the meantime, the HWA provides one-on-one advocacy and support to its members and other garment workers who lack the benefit of collective bargaining. The association’s coordinator stays in close contact with workers who are pursuing employment standards claims and keeps them advised of their rights and responsibilities under the law (such as the strict deadlines for filing complaints). In 2002 the HWA assisted workers to regain 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 counseling and referral to other community organizations for a variety of legal

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problems. Through networking among organizations serving the Chinese community, homeworkers are also referred back to the HWA. Perhaps the most important benefit provided by the HWA is to help break down the social isolation that homeworkers experience. The most popular events organized by the HWA have been social events such as family trips to Niagara Falls and other popular sites. While HWA skills programs typically involve groups of ten to twelve workers, social events frequently draw up to a hundred members and their families. As Yalnizyan (1993: 294) notes: “These women are isolated in their homes, often with young children, with little money and less knowledge about places to explore in their adopted country. Day outings provide an opportunity for these new immigrants to experience an outing with those they most trust, their family.” One homeworker, when asked by a reporter if she joined the HWA to press for higher wages responded: “Oh no, I joined for the social events.” (Sweet 1992). By overcoming their isolation and allowing homeworkers to meet other homeworkers and develop both formal and informal links, gain confidence and learn new skills, the HWA has become an important 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 language training, the children of homeworkers have the opportunity to learn Cantonese while their parents are participating in English classes. All members receive a regular Chinese newsletter. In partnership with other community-based organizations, the HWA has conducted community forums on labor rights and workplace survival skills.7 The HWA also provides an optional drug and sickness benefit plan. More recently, the HWA’s “Wear Fair Employment Project” worked to develop workers’ political literacy skills through a program of worker outreach and education. An attempt to market a jacket designed and manufactured by homeworkers under fair conditions failed, in the face of a negative response from clothing firms invited to participate. In 1993, the union surveyed an additional forty-five homeworkers who had not been involved in the first study. The results found a similar experience of exploitation, with six in ten reporting wages below the minimum wage. Half reported that in the busiest time of year, in summer just before the fall fashion season, they worked between 61 and 75 hours a week to meet their quotas. And about 30 percent reported doing work for which they were never paid. The report disclosed the names of thirty-four clothing labels that were sewn by workers who receive less than the minimum wage. The release of this study in February 1994, again generated considerable media interest, but failed to move the provincial government to action. Coalition members unfurled a banner stretching 12 feet documenting dates of worker initiatives and government promises. “What

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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 Labor Ministry announced regulatory changes to the Employment Standards Act giving homeworkers the same rights as other employees regarding hours of work, overtime pay, and paid public holidays. In addition, the new regulations required that homeworkers be paid a 10 percent premium above the regular minimum wage to cover operating costs. Employers were now obligated to provide a written summary of the terms of employment. However, legislative reforms that would have addressed the major concerns of the homeworkers’ coalition were never introduced by the New Democratic Party government before it was defeated in 1995. In 1993, the government had been relentlessly pummeled by the business community and the media for introducing a package of union-friendly amendments to the Labor Relations Act (originally passed in 1950). Apparently, this experience convinced the NDP to back off from pursuing a broader labor law reform agenda (Eaton 1994). With the election of the Progressive Conservative government in 1995, the prospects of significant legislative reform to benefit homeworkers disappeared. The Coalition for Fair Wages and Working Conditions for Homeworkers dissolved. In 1996, a new coalition group was formed: the “Labor Behind the Label Coalition.” This group came together to campaign for greater responsibility by retailers to ensure that minimum labor standards were met. Its public campaign was oriented to combat sweatshop conditions in the home and in factories in Canada and in other countries. Educational material was designed and distributed, primarily by the Maquila Solidarity Network (Paleczny 2000). A major retailer found to be exploiting homeworkers was targeted by the coalition (McHutchion 1996). However, retailers continued to be able to evade legal responsibility by hiding behind contracting and subcontracting arrangements. In 1996, the Ontario Ministry of Labor acknowledged that the garment industry in this province employed between 4,000 and 6,000 homeworkers, and that the number was growing rapidly (White 1996). By 1999, the estimated number of homeworkers working in Toronto had reached 8,000. A survey of thirty homeworkers by Ng (1999) once again found a high level of exploitation, with no improvements in wages or working conditions from previous studies. The virtual non-enforcement of labor standards in this sector is striking. The study revealed that employers continue to violate provincial laws regarding minimum wage, overtime pay and vacation pay. Many of the homeworkers interviewed said that they do not even find out how much they are being paid until after they have finished the work. In fact, the research found that in many cases employers cut the pay per piece of clothing as the women increased production, making it impossible for them to boost their hourly earnings. An interesting finding was that very few homeworkers were now being given the labels to sew on

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the clothing. As a result, it has become more difficult to trace the links between retailers and manufacturers and their subcontractors. Media interest 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 protections for homeworkers had shifted from slim to none.

Minimum wage and “No Sweat” campaigns Employment laws for most Canadian workers are within the jurisdiction of the provinces.8 Canada thus has different minimum wage rates across its ten provinces and three territories. At the beginning of 2003, this rate varied 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 has decreased 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 level that has been frozen since 1995), would provide an annual full-time income of roughly $14,200. And even this figure assumes that the worker was paid for 52 weeks a year. In fact, finding full-year employment is a major problem for low-waged workers; about one in four must work multiple jobs in order to get more hours of pay (Maxwell 2002). Ontario’s minimum wage in 2002 fell $4,826 below the before-tax low income line for a single person in Toronto (Battle 2003). The struggle to achieve a “living wage” in Canada has been largely focused on the need to increase the minimum wage (Curry-Stevens 2001; Schenk 2001). For example, “Justice for Workers,” a coalition of community groups in Toronto, began a campaign in 2002 with the immediate goal of raising the Ontario minimum wage to $10 per hour (Justice for Workers 2002). Leading up to an anticipated provincial election in Ontario in the spring of 2003, this minimum wage campaign was embraced by the province-wide Ontario Coalition for Social Justice, which represents over 200 member organizations including the Ontario Federation of Labor (OCSJ 2003). Similar demands are at the heart of a labor rights campaign launched by the Immigrant Workers’ Centre, a coalition of labor and community groups in Montreal. Activists in British Columbia (Goldberg and Green 1999) and Manitoba (Scarth 2000) have also focused on raising the minimum wage as a key tool in fighting poverty. We have not, yet, seen a broader movement to win living wage ordinances in municipalities or other institutions in Canada (Maxwell 2002). In part, this may be because a number of municipalities in Ontario and across Canada already have “fair wage” policies in place that apply to municipal contractors.9 In Toronto, the fair wage policy was implemented as long ago as 1893 in order to ensure that contractors for the city paid their workers the prevailing wages and benefits in their field of work (City of Toronto

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1998–2002). Fair wage schedules vary among municipalities, but they are usually within about 10 percent of the going union rate for that classification (Schenk 2001: 13). Fair wage policies have been extended to include provisions ensuring acceptable hours and work and working conditions (such as compliance with health and safety legislation). In practice, the scope of these policies is limited to the construction trades, and even within this sector lack of resources committed to enforcement has been a persistent problem (ibid.: 14). While Toronto’s century-old fair wage policy is of historic and practical significance for the construction trades, UNITE recognized that a new approach was needed to boost wages for workers in the city’s fragmented, and increasingly underground, garment industry. The growing activism and increased public awareness on the issue of garment-industry sweatshops that built throughout the 1990s provided the conditions to get this issue on the city administration’s agenda. On October 1, 2002, Toronto city 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 Solidarity Network 2002). The campaign in Toronto was spearheaded by a coalition that included UNITE, the Maquila Solidarity Network, Oxfam Canada, and the Toronto and York Labor Council. When the issue was presented to the administration committee of Toronto city council in May 2002, a cross-section of community organizations came to support the motion, including the Anglican Diocese of Toronto, the Canadian Council for Reform Judaism, the Canadian Union of Public Employees (representing municipal workers), the International Association of Fire Fighters, the Catholic 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 for municipal employees, including transit workers, police, fire fighters, sanitation workers, etc. The goal of the “No Sweat” campaign is to ensure that these products are made under decent working conditions, rather than in sweatshops. UNITE and the HWA called on the city to adopt a policy that requires public disclosure of factory locations and independent monitoring, so that citizens can know where and under what conditions city uniforms are made. The city’s director of purchasing was mandated by the resolution to work with UNITE and other interested parties to develop a “No Sweat” policy. By the end of 2002, eight Canadian cities and towns and nine universities had adopted procurement policies for apparel aimed at supporting fair labor policies.10 The anti-sweatshop movement in Canada has gained inspiration from the parallel campaign in the United States, where major cities such as New York, Cleveland, and San Francisco have adopted purchasing policies banning sweatshop contracts for apparel (UNITE 2003). At the national level, all of the leading Canadian organizations working to address sweatshops are joined in one

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organization formed to push No Sweat policies: the Ethical Trading Action Group. These initiatives could have a real impact in sustaining decent garment industry jobs. For UNITE and the HWA, these policies are not an end in themselves but a means to leverage power. By requiring disclosure and reporting by apparel contractors, demanding investigations and creating space for workers to organize, the No Sweat policies create a way for companies to be forced into some form of accountability. By targeting bulk purchasers such as cities and universities, activists can gain power in negotiating standards as well. While these campaigns have gained enormous energy from activists outside of the labor movement, particularly students, the essential role of UNITE and the HWA has been to provide a link to the workers in the industry.

Conclusion The goal in launching the Homeworkers Association was to create an organization that would ultimately become a full-fledged union with a formal collective bargaining relationship. However, the legal barriers in Ontario that prevented homeworkers from organizing into unions and bargaining collectively have never been removed. As a result, in part, of these legal barriers the HWA has not been able to evolve into a selfsustaining organization. The dues structure must remain low, reflecting the meager earnings of its members. At the same time, the work of organizing homeworkers is labor-intensive. It is crucial to have a staff member who develops programs and is available to provide assistance to the members. In contrast to most union locals, the HWA does not have a cadre of elected stewards who can shoulder part of the representation work. The existence of the HWA has required a commitment of financial support from UNITE. But the resources of the union itself have been severely strained in the face of on-going plant closures and restructuring in the industry. Fortunately, the HWA has been able to obtain funding from several levels of government and from independent foundations. This funding base is precarious. HWA staff must continually work on funding proposals and ideas to generate more resources. The shortage of funds has also prevented the HWA from expanding beyond its base in the Chinese community. At the beginning of 2003, the HWA had 210 members. All its programs were geared for Chinesespeaking workers. Efforts have been made to reach out to the Latino, South Asian, and Filipino communities, but the extent of follow-up has been limited due to lack of resources. At the best of times, the instability of the industry and the precarious nature of employment mean that there is constant turnover within the association’s membership. Given these challenges, the perseverance demonstrated by the members and staff of the HWA has been remarkable. Together they have

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built a dynamic institution organizing the most vulnerable, exploited and difficult-to-organize group of workers in our labor force. The HWA provides an impressive array of programs with extremely limited resources. The resilience of the organization can be seen by the fact that members have renewed year after year, and new members have continued to join, although the association has no legislative standing to represent workers and, in fact, faces both hostile employers and an unsympathetic government. The significant, long-term commitment made by the union and the determination of the homeworkers themselves have allowed the HWA to endure. The continued relevance of the organization and the potential for creative linkages were demonstrated in 2002 when the HWA joined with a diverse coalition including students, municipal unions, and religious groups to win the commitment to a “No Sweat” policy from Toronto’s city council. This campaign also illustrates that the ideas animating the living wage movement – particularly the power of local coalition building – are extending beyond traditional municipal services to new efforts to raise living standards for marginalized workers in the global economy.

Notes 1 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 75 percent of other production jobs. The low level of education of a large part of the workforce is also unique. According to HRDC data, 57 percent of the employees in the apparel manufacturing sector do not have a high school diploma, compared with 29 percent in the overall active workforce. In 2000, the average 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’s largest province. 4 In 1995, the International Ladies Garment Workers Union merged with the Amalgamated Clothing and Textile Workers Union to form UNITE, the Union of Needletrades, Industrial and Textile Employees. 5 In a class action filed on behalf of a group of Toronto homeworkers in June 2000, the union attempted to establish a legal precedent holding a group of retailers liable for the unpaid wages of homeworkers who manufactured clothing 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 improve chronic pains and discomfort. 7 The partner organizations are: Centre for Information and Community Services, Toronto Chinese Canadian National Council, Injured Workers’ Consultants, Metro Toronto Chinese and Southeast Asian Legal Clinic, St. Stephen Community House, University Settlement Recreation Centre, and Woodgreen Community Centre. 8 About 10 percent of the workforce, primarily in banking, telecommunications, and interprovincial transportation fall within the federal government’s jurisdiction.

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9 Schenk (2001) notes that the cities that have adopted fair wage policies include Toronto, 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 Richmond County (NS). Thunder Bay (ON) adopted a motion to conduct a feasibility study regarding no-sweat purchasing. This had not been completed at time of writing.

References Bailey, T. (1993) “Organizational Innovation in the Apparel Industry,” Industrial Relations 30 (1): 30–48. Battle, K. (2003) Minimum Wages in Canada: A Statistical Portrait with Policy Implications, Ottawa: The Caledon Institute for Social Policy. Beck, D. (1995) “The Clothes Behind Closed Doors,” The Georgia Straight, April 14–21, p. 11. Berg, P., Appelbaum, E., Bailey, T., and Kalleberg, A. (1996) “The Performance Effects of Modular Production in the Apparel Industry,” Industrial Relations 35 (3): 356–73. Bernstein, S., Lippel, K., and Lamarche, L. (2001) Women and Homework: The Canadian Legislative Framework, Ottawa: Status of Women Canada. Camerson, B. and Mak, T. (1991) Working Conditions of Chinese-Speaking Homeworkers in the Toronto Garment Industry: Summary of the Results of a Survey Conducted by the International Ladies Garment Workers Union, Toronto: ILGWU Ontario District Council. Canadian Council on Social Development (2000) “Canadian Fact Book on Poverty 2000 – Highlights,” available: http://www.ccsd.ca/pubs/2000/fbpov00/hl.htm Canadian Press (1994) “Union Demands NDP Act on Vow to Aid Homeworkers,” The Ottawa Citizen, February 16, p. D3. City of Toronto (1998–2002) Fair Wage Policy, available: http://www.city. toronto.on.ca/fairwage/policy.htm (accessed February 2, 2003). Curry-Stevens, A. (2001) When Markets Fail People: Exploring the Widening Gap between Rich and Poor in Canada, Toronto: Centre for Social Justice. Dagg, A. (1996) “Organizing Homeworkers into Unions: The Homeworkers’ Association of Toronto, Canada,” in E. Boris and E. Prugl (eds), Homeworkers in Global Perspective, New York, NY: Routledge, pp. 239–58. Dunlop, J. and Weil, D. (1996) “Diffusion and Performance of Modular Production in the U.S. Apparel Industry,” Industrial Relations 35 (3): 334–55. Eaton, J. (1994) “Labour Law Reform for the New Workplace: Bill 40 and Beyond,” University of Toronto LLM thesis. Galt, V. (1992) “$375 Jacket Stitched for $4, Conference Told,” The Globe & Mail, October 2, p. A1. Goldberg, M. and Green, D. (1999) Raising the Floor: The Social and Economic Benefits of Minimum Wages in Canada, Canadian Centre for Policy Alternatives, BC Office, available: http://www.policyalternatives.ca/bc/minwage.pdf Gunning, J., Eaton, J., Ferrier, S., Kerr, M., King, A., and Maltby, J. (2000) Dealing with Work-Related Musculoskeletal Disorders in the Ontario Clothing Industry, Report to the Research Advisory Council of the Ontario Workplace

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Safety & Insurance Board. Available: http://www.unite-svti.org/En/ergonomics/ study/msdisorders.pdf Homeworkers Association (2002) UNITE Homeworkers’ Association, Toronto: Homeworkers Association. Human Resources Development Canada (2003) Current and Forthcoming Minimum Hourly Wage Rates Experienced Adult Workers in CANADA, available: http://labour.hrdc-drhc.gc.ca/psait_spila/lmnec_eslc/eslc/salaire_minwage/ report1/index.cfm/doc/english (accessed February 8, 2003). Industry Canada (2002) LDCs Apparel Production and the Apparel Sector in Canada, available: http://strategis.ic.gc.ca/SSG/ap03272e.html Industry, Science and Technology Canada (1991) Fashioning the Future: Building a Strategy for Competitiveness, Report on Phase II of the Fashion Apparel Sector Campaign, Ottawa, July. International Labour Organization (1995) Recent Developments in the Clothing Industry, Geneva: International Labour Office. Jackson, A. (2002) Is Work Working for Workers of Colour? Canadian Labour Congress, Research Paper #18. Available: http://action.web.ca/home/clcpolcy/ attach/Is%20Work%20Working%20for%20Workers%20of%20Colour.pdf Jackson, A., Schetagne, S. and Smith, P. (2001) A Community Growing Apart: Income Gaps and Changing Needs in the City of Toronto in the 1990s, a report to the Canadian Council on Social Development for the United Way of Greater Toronto, Ottawa: The Canadian Council on Social Development, available: http://www.ccsd.ca/pubs/2001/wwgt/toronto.pdf Justice for Workers (2002) Campaign to Increase the Minimum Wage: It’s Time for a Fair Wage not a Poverty Wage!, available: http://www.toffeonline.org/ Landsberg, M. (1991) “Home Can Be a Sweatshop in Low-Paying Garment Trade,” The Toronto Star, November 9, p. K1. Lee, K. (2000) Urban Poverty in Canada: A Statistical Profile, Ottawa: Canadian Council on Social Development. Lindgren, A. (1999) “Garment Makers Paid Near-Sweatshop Wage; Study finds Toronto-Area Workers Have no Protections,” The Windsor Star, June 18, p. A12. McHutchion, J. (1996) “Sweatshops Thriving in Metro, Union Says,” The Toronto Star, December 12, p. C3. Maquila Solidarity Network (2002) “Toronto City Council Unanimously Supports ‘No Sweat’ Motion,” available: http://www.maquilasolidarity.org/campaigns/ nosweat/cities/toronto_oct2002.htm (accessed February 8, 2003). Maxwell, J. (2002) “Smart Social Policy – ‘Making Work Pay’,” Paper Submitted to the TD Forum on Canada’s Standards of Living, available: http://www.cprn.com/ docs/corporate/ssp_e.PDF Ng, R. (1999) Homeworking: Home Office or Home Sweatshop?: Report on Current Conditions of Homeworkers in Toronto’s Garment Industry, The Ontario Institute for Studies in Education/University of Toronto. Available: http://www.oise.utoronto.ca/depts/sese/csew/nall/99HWAR~1.htm Ontario Coalition for Social Justice (2003) “Living Wage – Living Income,” campaign page. Available: http://www.ocsj.ca/campaign.htm (accessed February 26, 2003). Orwen, P. (1992) “Rag Trade Future Unraveling Fast,” The Toronto Star, October 3, p. A1. Paleczny, B. (2000) Clothed in Integrity: Weaving Just Cultural Relations and the Garment Industry, Waterloo: Wilfrid Laurier University Press.

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Papp, L. (1992) “Garment Industry Exploits ‘Homeworkers,’ Union Says,” The Toronto Star, October 2, p. A2. Ross, J. (1999) “Garment Work Turns Homes into Sweatshops,” The Globe & Mail, June 21, p. A7. Rusk, J. (1994) “Garment Trade Conditions Protested,” The Globe & Mail, February 15, p. A16. Scarth, T. (2000) A Living Wage for Manitobans, Canadian Centre for Policy Alternatives-Manitoba, fact sheet. Available: http://www.policyalternatives.ca/mb/ Schenk, C. (2001) From Poverty Wages to a Living Wage, Toronto: The CSJ Foundation for Research and Education. Available: http://www.socialjustice.org Schoenberger, K. (2000) Levi’s Children: Coming to Terms with Human Rights in the Global Marketplace, New York: Atlantic Monthly Press. Smith, E. and Jackson, A. (2002) Does a Rising Tide Lift All Boats? The Labour Market Experiences and Incomes of Recent Immigrants, 1995 to 1998, Ottawa: Canadian Council on Social Development. Smith, V.R. (1995) “A Union for Homeworkers,” Compass, May/June, p. 21. Statistics Canada (2003) “Canada’s Ethnocultural Portrait: The Changing Mosaic,” available: http://www12.statcan.ca/english/census01/products/analytic/companion/etoimm/contents.cfm (accessed April 6, 2003). Swainson, G. (1992) “Homeworkers Seek Fair Wage,” The Toronto Star, November 17, p. A6. Sweet, L. (1992) “Canadian Dream Still Eludes Some,” The Toronto Star, July 12, p. A1. Taplin, I. (1994) “Strategic Reorientation of U.S. Apparel Firms,” in G. Gereffi and M. Korzeniewicz (eds), Commodity Chains and Global Capitalism, Westwood, CT: Greenwood Press, pp. 205–22. Union of Needletrades, Industrial and Textile Employees (1997) People, Work and Innovation: Final Report, report to the Labour-Management Partnerships Program. Toronto: UNITE, Canadian Office. Union of Needletrades, Industrial and Textile Employees (2003) “Cities Against Sweatshops,” available: http://www.uniteunion.org/sweatshops/cities/cities.html (accessed February 9, 2003). Van Alphen, T. (1994) “Help Urged for Garment Workers,” The Toronto Star, February 15, p. A7. Weinberg, S. (1999) “ ‘Sweatshops’ Thrive in Toronto, Homeworker Study Discovers,” The Toronto Star, June 18, p. A5. White, N. (1996) “Garment Industry Heads Home: Homeworkers Say Sweatshop Conditions Par for the Course,” The Ottawa Citizen, September 21, p. J1. Wright, L. (1993) “Protesters Swamp Eaton Centre,” The Toronto Star, March 7, p. A7. Yalnizyan, A. (1993) “From the DEW Line: The Experience of Canadian Garment Workers,” in L. Briskin and P. McDermott (eds), Women Challenging Unions: Feminism, Democracy, and Militancy, Toronto: University of Toronto Press, pp. 284–303.

8

Living wage and low pay campaigns in Britain Damian P. Grimshaw

The British campaign to protect low-paid workers lies between two alternative models. A first model, characteristic of many member states of the European Union, is defined by a long established and strongly embedded system of low wage regulation, constituted through either minimum wage legislation or a high level of collective bargaining coverage, or a combination of both. France is a good example of such a model. A universal minimum wage was established in 1950. The rate is maintained at a relatively high level through an automatic uprating (indexing) mechanism and the bargaining power of workers is supported through a high level of collective bargaining coverage. By contrast, the UK only introduced minimum wage legislation in 1999. The rate was (and continues to be) too low and, against a background of a steady decline in the influence of trade unions over wage setting, low wage workers have few props to support demands for higher pay. The successes of the decentralized collection of living wage movements in the USA constitute a second model. Here, local campaigns – spearheaded by community groups, unions, and religious groups – have emerged as a major force pressing for wage protection in a context of a failed societal system of institutional regulation: low minimum wage rates, weakened unions, and privatization of public services. These campaigns have successfully raised wages either by targeting private sector businesses contracting with public bodies or by organizing a state-wide effort to increase the rate above the federal threshold. In Britain, low pay campaign groups have been watching these successes with a great deal of interest. To date, however, with the exception of a remarkable living wage campaign in East London, we are yet to witness a similar proliferation. The reason that living wage campaigns have not diffused more widely may be that, compared to the USA, British workers are still afforded slightly stronger protection. The UK minimum wage is higher, unions are stronger, and the benefit regime is less stringent. But conditions for the low paid are not so far behind those in the USA. The UK has the highest share of low paid workers in the European Union. The government has failed to address the mounting problem of child poverty. The minimum

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wage is perceived by many employers as “the going rate” rather than an absolute minimum. And many workers have lost opportunities for wage advancement (through internal labor markets) as new contracts for business 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 in Britain, but this has more in common with a European model than a US model. The living wage campaign in East London is similar to some of the US living wage movements; however, it is also integrally linked with, and a catalyst to, a broader coalition of low pay campaigns. These campaigns increasingly focus on the legal arena at the level of both the European Union (EU) and the UK. Examples include campaigns to improve the relative level of the National Minimum Wage (NMW) and extensive lobbying for changes in the EU Directive on public procurement to incorporate a “fair wage” clause. Further, groups campaigning for equal pay for men and women increasingly recognize that the concentration of women in low paid jobs, most of which are part-time, is a major contributor to the gender pay gap. Thus, calls from feminist advocates and activists for gender pay audits and new guidelines for contracting organizations to avoid a “twotier workforce” add further fuel to the fight against low pay. This chapter examines these issues and assesses the implications for Britain’s low-paid workers. It begins by describing the campaign for a living wage in East London and documents some of its successes and failures. The second section sets out the three dimensions to low pay campaigns in Britain: (1) to improve the National Minimum Wage; (2) to eliminate the two-tier workforce; and (3) to prevent over-reliance on in-work benefits (government subsidies to the working poor that enable employers to suppress wages). I argue that living wage and low pay campaigns have achieved notable successes in recent years and provide new insights for our understanding 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 services trade union, Unison, the largest trade union in Britain.1 The campaign has similarities with the US model. It brings together thirty-seven organizations drawn from churches, mosques, a Buddhist center, community centers, union branches, and schools, and has subsequently received the support of some private sector employers and London civic leaders (TELCO 2003). People from these different groups had for some years shared a common concern about low pay and poor working conditions in East London. Founded in 1996 as part of London Citizens, TELCO had campaigned on a range of local issues such as street crime, pollution, and working conditions among construction workers in the developing Canary Wharf area of town.

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Together with Unison, the aim is to champion the cause of a living wage among public sector bodies and some large corporate employers in the area of East London. Their first target was the Greater London Authority (GLA). A significant portion of the GLA’s budget goes to private sector companies who bid for services contracts, largely involving low-paying “business support services” such as cleaning, catering, and security. However, TELCO does not target the service contractors since it recognizes that any agreed improvements would be vulnerable to other companies bidding for the contract at lower wage costs. Instead, it maintains that it is the client organizations that bear responsibility for the terms and conditions of contracted workers. The campaign therefore focuses on persuading public sector hospitals, schools, universities, and local authorities to introduce a “fair wage clause” (see below) into their market tenders for contracting. Since many of these service companies also have contracts with the large corporate firms in East London, a second target of the campaign has been to demand a “living wage” from the 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 of the UK Retail group. The campaign is notable in the way that its activist goals have been strengthened by a careful commissioning of independent, social science research. This includes research by the Family Budget Unit (then at King’s College London) on the minimum income standard for London families and research by Jane Wills, a geographer at the University of London, on levels of pay for workers in contracted-out public services in East London. Other activities include a conference organized at the London School of Economics, which brought together academics, activists, and representatives from the business support services industry. The first piece of research was important, both to underpin the claim for a living wage and to fill a hole in publicly available information (reflecting the lack of government action) on how much workers need for a decent living standard. The Family Budget Unit had already produced a national report in 1999 (funded by the Christian charitable trust, the Zacchaeus 2000 Trust); the report estimated the minimum band of hourly earnings needed for families to reach what it refers to as “low cost but acceptable” levels – defined as “how much it costs families of different compositions, in predetermined circumstances, to maintain indefinitely, a living standard which, though simple, provides a healthy diet, material security, social participation and a sense of control” (Parker 1999, cited in Unison 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 the findings were not altogether surprising given the conclusions of a previous independent inquiry chaired by Sir Donald Acheson into inequalities in health that, “people living on low incomes, including those whose income

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consists entirely of state benefits, have insufficient money to buy items and services necessary for good health” (Acheson 1998: 35). The research commissioned by Unison for the TELCO campaign requested the Family Budget Unit to estimate a living wage for the area of East London (Parker 2001). For a two-parent family, with one parent working full-time (38.5 hours) and one part-time (17 hours), with two children (a boy aged 10 and a girl aged 4), a “low cost but acceptable” net weekly income was estimated at £322. A single parent working part-time with two children would need £272 each week (ibid.: Table 4). TELCO subsequently 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 the extent to which workers providing contracted-out public services in East London were paid between the minimum wage (by then, the adult rate was £3.70) and the recommended living wage standard of £6.30 (Wills 2001). The research collected evidence from ninety-seven low-paid workers in East London and covered issues of basic pay, working conditions, family circumstances, and attitudes to work. For example, among thirty-four workers providing cleaning, catering, and security services at different hospitals in the area, pay rates ranged from £4.05 to £6.69, with the vast majority earning less than £5 an hour. Of twenty-one cleaners working on contracts for transport companies, none received above £5 an hour, with the lowest rate falling to £3.75. Also, among eleven cleaners working on contracts at Canary Wharf, only window cleaners earned above 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 weekly income needed to support their families, either by working overtime (up to 30 additional hours a week, typically at a basic rate of pay) or by taking on 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 their employer. These workers often have no pension, no sick pay and only minimal holiday entitlement. Poverty pay and poor conditions of work are exacerbating social and economic deprivation in London’s East End. (2001: 23–4) The campaign has had some notable successes and failures. To date, the most significant achievement is the agreement in March 2003 by the North East London Strategic Health Authority that all contractors providing services to the local hospitals (around fifteen in total) should pay their staff equivalent terms and conditions to collectively bargained rates for National Health Service (NHS) staff, allowing contractors to phase in

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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 and the private contractors, ISS and Compass, with TELCO members working very closely with local Unison branches. Ultimately, it appears that threat of strike action brought the needed breakthrough, although at the time of writing around 300 cleaning and catering staff were still on strike over the pay claim at one hospital. As part of this campaign, TELCO and Unison submitted detailed documents to the Strategic Health Authority and to individual NHS Trusts to support the case for higher pay. These documents argue the case for a living wage, at the 2003 value of £6.50, but ultimately make the weaker recommendation that NHS Trusts ought to ensure contractors pay staff equivalent rates to NHS staff; here we see the limitations of the local campaign since there are good reasons why unions would not wish to threaten the national collective bargaining system which sets wages for NHS ancillary workers. As such, the campaign was ultimately won by achieving what is known as a “fair wage” agreement (see below). As Table 8.1 demonstrates, a fair wage still represents a major increase in pay and thus a significant success for TELCO. The example shows that the basic rate of £4.42 earned by privately employed cleaners rises to £5.43–£5.58, the minimum band of pay set by nationally bargained terms and conditions for NHS workers, and there are significant increases in bonuses, overtime, and unsocial hours premia. The fair wage agreement also improves workers’ non-wage conditions such as sick pay, annual leave entitlement, and compassionate leave. Other smaller successes in East London include individual agreements made by several schools to change their contracting arrangements with companies to include a living wage clause. Also, TELCO is hoping to Table 8.1 Evidence of low pay among private cleaning contractors Nationally bargained terms and conditions for NHS cleaners and domestics

Private cleaning firm

£5.43–£5.58 (includes London weighting)

£4.42

Bonus

21.3%

10p per hour

Overtime premia

⫻1.5 (Mon–Sat) ⫻2 (Sun, Bank holidays)

£1 per hour (Sat, Sun) ⫻2 (Bank holidays)

Unsocial hours premia

Extra increments for night and rotating shift patterns

None

Basic hourly pay

Source: Unison (2003: Table 1).

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mimic the US model of inserting living wage clauses into local authority planning tenders, so that workers in cleaning, maintenance, and construction jobs have the right to earn a living wage. However, a major disappointment has been the failure of the Mayor of London and leader of the Greater London Authority, Ken Livingstone, to engage constructively with the TELCO campaign. Despite statements reported in the media that “living wage clauses” would be inserted into contracts held between City Hall and cleaning and catering companies, there is no clear evidence that anything has yet happened. And, given that these contracts only cover relatively small numbers of staff, TELCO continues to put pressure on Livingstone to extend this pledge to cover contractors working in the city’s transport, police, and fire services (Walker 2003). The campaign is likely to generate greater resonance during 2004, election year for the London mayor. Additionally, TELCO continues to campaign for a “London Commission on Wages” that would be responsible for researching and fixing an annual living wage for London. Campaigning with Unison to transform contracting arrangements with public sector organizations was TELCO’s main area of focus until 2003. Since then, it has also been actively strengthening what was a rather unsuccessful campaign to bring some of the main private sector corporate clients into line with a living wage.2 A renewed banking campaign involves collaboration with some of the main institutional investor groups (including a number of public sector pension fund bodies), the national cleaning trade association (Cleaning and Support Services Association) and civil servants (Department of Trade and Industry) to design a three-tier benchmark of performance – low, medium, and high – that ranks the terms and conditions of employment in each contract for services provision. The aim is that contracts held by the main corporate firms will be graded and the respective positions of firms, as laggards or progressives, publicized. A proposed retail campaign will target members of the Ethical Trading Initiative, which is explicitly opposed to unethical trading with companies (or subsidiaries) in less developed countries. Here, TELCO makes the straightforward argument that practicing ethical standards abroad ought to be mirrored by ethical standards at home. This is perhaps especially pertinent given that low-paid workers in East London are increasingly drawn from a Third World pool of migrant labor. While at an early stage, the aim is to persuade the large retail organizations to insert labor standards clauses into their contracting agreements.

Low pay campaigns Campaigns for changes in the regulatory, legal, and institutional rules governing low pay were prominent during the 1990s and early 2000s. While closely related to, and benefiting from, the ground-breaking activities of

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TELCO, low pay campaigns are distinctive in their national focus and their involvement of rather more traditional social and political actors–trade unions, the Equal Opportunities Commission, the Low Pay Units, and certain Members of Parliament. The various campaigns include the 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 by the newly elected Labour government to introduce a National Minimum Wage (NMW) in 1999. Prior to the NMW, Britain had a somewhat patchy history of low pay protection. The first legislation of this kind was the introduction of Trade Boards in 1909 to set minimum wages, enforceable under criminal law, but restricted to the so-called “sweated trades.” Initially, four sectors were covered – tailoring, paper-box making, machine-made lace, and chain-making (Dobb 1944). Coverage was gradually expanded and Boards renamed as Wages Councils. By 1962, there were sixty Councils covering 3.5 million workers. A subsequent period of rationalization meant that by 1990, twenty-six Councils only covered 2.5 million workers (Machin and Manning 1994). Until 1986, each Council would set a series of hourly rates for different types of workers in the sector. The Wages Act of 1986 curtailed their role by removing workers under 21 years of age from their coverage, limiting wage setting to one basic minimum and one premium rate, requiring them to consider the impact on jobs when setting minima, and simplifying the procedure for abolishing the Councils (Kessler and Bayliss 1998). In 1993, the Wages Councils were abolished with the exception of the Council that covered agriculture. Research on Wages Councils has found that their activities had no adverse employment effects (Craig et al. 1982), that the gradual decline in the relative level of Council minima contributed to the rise in wage inequality in the affected industries (Machin and Manning 1994), and that abolition led to a substantial fall in pay rates for job vacancies (Cox 1994). The waning power of the Wages Councils and their eventual abolition shifted the balance of long-running political debates in Britain concerning the merits of a national minimum wage. Perhaps surprisingly, it was only in 1986 that the Trades Union Congress (the only central organization that acts as spokesperson for the British trade union movement) adopted for the first time a resolution in favor of a minimum wage. Prior to this, the “traditional”

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union view was that legislation on wage setting would necessarily hinder free collective bargaining (Bain 1999), a reflection of the union movement’s historical antipathy to any involvement of the state in the realm of industrial relations. Employer opposition to a minimum wage also weakened during the mid-1990s,3 reflecting both a pragmatic desire to influence the level at which it was set and a shift in the conventional economic view (associated with the empirical research of Card and Krueger (1995) in the USA and Machin and Manning (1994) in the UK, among others). The Labour Party included a pledge to introduce a minimum wage in its 1992 election manifesto and, when successfully elected in 1997, immediately established the independent Low Pay Commission to recommend the level at which it ought to be introduced and its application to young workers. The members of the Commission include representatives of employers and trade unions, as well as academics.4 It funds empirical research, listens to oral evidence from a range of organizations, receives several hundred written submissions, and undertakes a program of visits across the country. To date, the Commission has published four reports. In the First, Third, and Fourth Reports, it recommended adult and development rates for two consecutive years (see Low Pay Commission 1998, 2001, 2003). The remit of the Second report was to assess the initial impact of the NMW (see Low Pay Commission 2000). Beginning with the Fourth Report, biennial recommendations are made in February for implementation 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 Recommended Accepted (£) (£) April 1999 June 2000 October 2000 October 2001 October 2002 October 2003 October 2004

3.60 3.70 – 4.10 4.20 4.50 4.85b

3.60 3.60 3.70 4.10 4.20 4.50 4.85

■

Development rate and coveragea Recommended Accepted (to (to cover 18–20 cover 18–21 year-olds) (£) year-olds) (£) 3.20 3.30 – 3.50 3.60 3.80 4.10b

3.00 3.20 – 3.50 3.60 3.80 4.10

Source: Low Pay Commission (1998, 2001, 2003). Notes a 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 new job with accredited training. b Recommended rate subject to confirmation by the Commission in early 2004.

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accepted by the government. After initial government concerns to proceed rather more cautiously, since October 2001 the Commission has accepted the rates in full, with the major exception of excluding 21 year-olds from the 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 higher earnings growth than the median earner. However, while the relative gains were significant among low-paid part-time workers immediately after the introduction of the NMW in 1999, they were actually lower than earnings growth among part-time workers at the median and highest decile during 2000–01, reflecting the negligible 10 pence increase in 2000. Overall, while the NMW has halted the relative decline of low-paid workers’ earnings, it does not yet appear to have contributed towards a significant compression of the wage structure. Low pay campaigning groups have welcomed the new NMW legislation, but argue that it is lacking in three important respects. The Low Pay Unit and many trade unions campaigned for a level at half male median earnings. However, as Table 8.4 shows, the NMW has so far fluctuated around just 40 percent of male full-time median earnings (a generous estimate given that overtime earnings are excluded from the denominator male median earnings). While this is high compared to countries such as the USA, Canada, Japan, Spain, and Portugal, it is low compared to most European countries where the ratio stands at close to 50 percent or higher.5 The then-Chair of the Low Pay Commission defended the initial level against those who campaigned for what he called a “mechanistic formula” of half male median earnings (Bain 1999). Crucially, he argued that the recommended level of £3.60 provided cover to a sufficient proportion of workers, estimated at around two million workers or 9 percent of the workforce. However, this argument no longer holds due to acknowledged problems with statistics on low pay workers; the best recent estimate 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-time Lowest decile Median Upper decile

5.4 4.8 5.5

3.3 2.8 2.9

5.2 5.5 7.0

4.3 3.9 4.8

Part-time Lowest decile Median Upper decile

9.1 4.8 5.7

2.8 1.4 2.2

3.8 5.3 4.2

6.9 4.5 5.2

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

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that a more suitable benchmark for comparison is median earnings for all workers, since the combined average of male and female earnings is a better reflection of the total composition of employment (1999: appendix). Such a comparison obviously brings the relative level of the minimum wage closer to half median earnings. The problem, however, is that analyses of women’s pay demonstrate that women’s work is undervalued compared to comparable work performed by men (for a review, see Grimshaw et al. 2002a); as such, the decision to include women’s average pay in a benchmark reference incorporates, and leaves unquestioned, problems of gender discrimination in the labor market. The same argument applies to the need to exclude part-time workers’ earnings from a benchmark wage. The second problem identified by campaigning groups is the lack of a mechanism for automatic increases. In June 2001, the government granted the Low Pay Commission a permanent role in monitoring the minimum wage, but still reserves the right not to follow its recommendations. Other European countries have a form of indexation that automatically links the minimum rate to changes in inflation or wage growth. For example, France indexes its rate to the consumer price index, subject to a minimum increase of half the rise in average earnings, and the Netherlands links its rate to average earnings growth, contingent upon the ratio of welfare recipients to employment (OECD 1998). The absence of an indexing mechanism in the UK (and the USA) offers government the opportunity to exploit the situation for political gain – referred to in the USA as “Washington’s dirty little secret” (Sachdev and Wilkinson 1998). In the UK, 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 (Jan– May)

2000 (June– Dec)

2001 (Jan– Sep)

2001 (Oct– Dec)

2002 (Jan– Sep)

2002 (Oct– Dec)

Half male median earnings

£4.39

£4.52

£4.52

£4.76

£4.76

£4.96

£4.96

Adult NMW

£3.60

£3.60

£3.70

£3.70

£4.10

£4.10

£4.20

39.9%

41.0%

38.9%

43.1%

41.4%

42.4%

46.9%

48.2%

45.2%

50.1%

48.1%

49.2%

NMW as a % of: Median 41.0% male earnings Median 48.4% female earnings

Source: New Earnings Survey (various years, National Statistics, London). Note All earnings data are for full-time employees and exclude overtime pay and hours worked.

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

Ending the two-tier workforce The slow but steady policy of successive governments, from Prime Ministers Margaret Thatcher to Tony Blair, to privatize public services has targeted some of the most vulnerable groups of British workers by outsourcing their jobs to private contractors. There are three periods to date. Between 1980 and 1993, cumulative legislation on “compulsory competitive tendering” required public service employers in health and in local and central government to invite tenders from the private sector for the provision of a range of services, including cleaning, catering, laundry, and security. All the services are labor-intensive and, once the Fair Wage Resolution was abolished in 1983,6 private firms competed for contracts by whittling down labor costs. Research subsequently showed that the outsourcing regime worsened pay significantly, led to work intensification as a result of cuts in hours and jobs, and reduced the use of supervisory workers (Mailly 1986; Bargaining Report 1990; Escott and Whitfield 1995). During the second period, while the contracting regime continued, the legislative framework changed in 1993 when the government amended the Transfer of Undertakings Protection of Employment (TUPE) Regulations (1981) to bring them in line with the European Commission’s Acquired Rights Directive of 1977.7 TUPE protects employees by providing for continuity of employment post-transfer, and maintains their level of pay, hours of work, sickness benefit, and holiday entitlement. Since 1993,

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transferred workers have therefore enjoyed a greater level of protection. However, problems remain. Since all open-ended employment contracts specify the manager–worker relationship very imprecisely, there is considerable opportunity for new private sector employers to apply an ostensibly similar set of terms and conditions far more stringently. For example, informal rules governing leave and sickness may be abandoned and workers may be required to work harder and subjected to more intensive monitoring (Cooke et al. 2003). Also, the regulations do not apply to workers who are directly recruited by the private sector contractor and, given relatively high rates of staff turnover among many of these lowpaying occupations, new recruits can very quickly constitute a majority of the contractor’s workforce. Evidence of two tiers of employment conditions is growing. For example, a survey of 190 local government service contracts in 2000 found 62 percent paid new starters a lower basic rate of pay than transferred staff, and between 44 and 73 percent provided worse unsocial hours premia, 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 its first term of office, when re-elected in 2001, it made the dual-pronged commitment of quickening and broadening the privatization of public services (by making greater use of private contractors) and ending the twotier workforce (subject to proof that it existed). This third period of privatization has been characterized by a campaigning focus on ending the two-tier workforce, with shifting government statements, public sector strikes, the formation of constructive links to living wage and equal pay campaigns, and policy developments at the EU level. Significantly, representatives of contractors also recognized the need for action. In 2001, the Director General of the Business Services Association (representing twenty of the largest contractors, employing more than 500,000 staff) admitted that, “the contracting industry in the 1980s and some of the 1990s had a bad reputation, some of it deserved, for only being interested in cutting costs. We often bid at unrealistically low prices just to win the contract” (cited in Wintour 2001). The government introduced a new procurement rule in local authorities (the March 2001 Best Value Order) that allowed them to consider “non-commercial” aspects of a contractor’s bid for services. But the new rules stopped short of excluding contractors who did not have regard for favorable employment conditions. Instead, despite having made a commitment to address the problem of the two-tier workforce, the government focused its attention on convincing the public that a change 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 TUC made a new Fair Wages Resolution a key objective. By the spring of 2002, trade union leaders lined up to voice their frustration with government:

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It is now six months since promises on protecting workers’ rights were made and it is time they were honoured. Pressure from within our union is mounting for the deal on ending the two-tier workforce to be delivered. (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 thrown out with the rubbish. The time has come for Tony Blair to stop bowing down to big business and to start standing up for the people who elected him. (John Edmonds, leader of the GMB) Downing Street has always reacted to any talk of making its contractors comply with good employment conditions by getting out the garlic and crucifix. (Jack Dromey, TGWU)8 Campaigns against the two-tier workforce developed rapidly alongside traditional action to defend pay. Unions were forced to defend pay among public sector workers in response to the 2002 round of pay offers, which promised just 3 percent to the 1.2 million local government workers. Unison made the argument that a quarter of a million of local government workers were earning less than £5 per hour (Parker 2002a) and, along with the GMB (General, Municipal and Boilermakers’ Union) and the TGWU (Transport and General Workers’ Union), successfully balloted members for a wave of national strikes during the summer involving an estimated 750,000 workers (Parker 2002b). After just one day of planned strikes, the unions won. In August, employers agreed to a two-year pay deal, which increased pay by 8 percent, except for workers on the two lowest grades who 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 contractors to match the pay deal for the lowest-paid workers so as to prevent local authority workers being undercut by bids from private contractors (a potential problem also noted in the Low Pay Commission’s Fourth Report, 2003: 70). Their concerns were justified. In the following months, union branches reported evidence of local authorities threatening to privatize services to avoid paying the higher minimum rates, since contractors were only bound to pay the minimum wage of £4.10. The journalist and writer, Polly Toynbee (2002), did much to bring the issue of inequality and low pay among these hidden public services workers to public attention: Out in the wild woods beyond the pale of the directly employed local government workers are some 700,000 others not covered by any agreements, who are employed by outside contractors. In the whole of

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Then, despite intense lobbying by the Confederation of British Industry (CBI), in February 2003 the government announced the introduction of a new statutory code, that was implemented in April 2003. In wording that brings the UK position closer to the International Labour Office (ILO) Labour Clauses (Public Contracts) Convention No. 94 (1949), it requires private contractors to provide new recruits with terms and conditions of employment which are “no less favourable” than those of workers transferred from local government.9 While campaigns in the UK appear to have been slowly winning the reestablishment of a weak form of Fair Wages resolution, they may receive a significant boost from debates at the level of the European Union. Since the late 1990s, controversy surrounding legal regulation of public procurements in the European Commission has increased, with the possibility that a new EU Directive might enable all contracts to include a “social clause” on labor standards. Prior legislation had been developed primarily to ensure a competitive internal market for contracts across member states and the traditional view of the European Commission has been that contracts ought to be awarded according to economic criteria: that is, the lowest price or “the most economically advantageous” offer (Commission of the European Communities 1998). Against this position, the European Public Services Union, and other organizations, have campaigned for including labor standards, as well as other social and environmental criteria, in such contracts (in line with the ILO Convention No. 94). In May 2000, the Commission proposed two new Directives in order to modernize, simplify, and improve the flexibility of procurement; but non-commercial considerations were still generally ruled out, in part due to the need for criteria to be “directly linked to the subject of the public contract in question.” Again, campaigning organizations challenged this view. The Coalition for Green and Social Procurement, which brings together the European Federation of Public Service Unions, Oxfam, the European Fair Trade Association, Greenpeace Europe, and others, called for the Commission to amend its legislation to incorporate “objective social considerations” – reflecting both narrow and broad public interest concerns – as valid criteria for choosing between two contractors of otherwise equal merit. Then, in May 2002, the Commission adopted a new position (yet to be negotiated with the European Parliament and Commission at the time of writing), which makes some positive concessions, though its ambiguity

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provides “a recipe for future conflict” in the courts, leaving the European Court “to tidy up the mess on a case-by-case basis” (Bercusson 2002). At its best, the proposed directive may enable member states and contracting authorities: to include labor standards as contract performance conditions; to require information on labor standards as part of the tender; to exclude contractors for violating labor legislation; and to use labor standards as secondary award criteria (Bercusson 2002; European Disability Forum 2002). But trade unions argue that it fails to incorporate a clause for fair labor 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 have been absent (it is more difficult to campaign against Treasury officials), but a number of prominent journalists and academics have made an argument that links directly to demands for a living wage and for equal treatment between women and men. Given the long tradition of welfare payments to supplement earnings in Britain, and the many lessons regarding their negative effects, both on society and the economy, it is all the more surprising that governments continue to address in-work poverty in this way. The failure of the Speenhamland Law, applied in the midst of the industrial revolution during 1795 to 1834, provides an important lesson (Polanyi 1957). Speenhamland established in-work benefits based on the notion of a “right to live.” Subsidies in aid of wages were commonly granted in accordance with a scale linked to the price of bread, with additions for the worker’s family. While universally popular at first, among parents, workers and employers, in the long run it led to the pauperization of the workforce. Employers could obtain workers at any wage, since the subsidy brought 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 level of pay (given that most employers paid less than the scale). And workers paid above the subsidy scale found their pay driven down in competition with subsidized workers. Polanyi concludes his assessment of this period as follows: To later generations nothing could have been more patent that the mutual incompatibility of institutions like the wage system and the “right to live,” or, in other words, than the impossibility of a functioning capitalistic order as long as wages were subsidized from public funds . . . Aid in wages must be inherently vicious, since it miraculously injured even those who received it. (1957: 81–2) But in the twenty-first century, low-paid British workers still rely heavily on government aid and its coverage has been expanded under the Labour

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government. The Working Tax Credit is the central plank of the government’s anti-poverty strategy. When the National Minimum Wage was introduced at the low level of £3.60, Ministers and the Chair of the Low Pay Commission argued that it had to be viewed in conjunction with the benefit system (tax credits, housing benefit, and others). Estimates suggested that for those in rented accommodations, a single parent with one child working 35 hours a week would earn the equivalent of £6 per hour and 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 seriously flawed. First, in principle, it rejects the duty of employers to pay for the social costs of maintaining their workforce, thereby intensifying pressures towards the commodification of work (see Beynon et al. 2002: 243–8) and keeps afloat “parasitic” employing organizations (Figart et al. 2002: 79). Second, as presently designed, the tax credits discriminate against women since 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 subsidies and, in the absence of a sufficiently high minimum wage, makes them vulnerable to competition from workers who do receive subsidies. Third, the policy potentially reduces the bargaining power of labor (see Sachdev and Wilkinson 1998; Prasch 2002) and creates an in-work poverty trap by removing the incentive for workers to increase their earnings since additional pay is clawed back in reduced benefits and increased tax. As employers reduce low wages to the minimum level, there is a risk that a new line of segmentation is drawn between a “minimum wage labor market” and the main market (Sutherland 1999). This not only traps workers in a form of institutionalized undervaluation of work, but also, as Polanyi warned, increases the cost of state subsidy. The government seems aware of the need to level up the minimum wage 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 higher rates. Simulations of the impact of the National Minimum Wage on receipt of benefits already indicated that the introductory level was too low to bring a significant reduction – a fall of just 2.5 percent in numbers claiming in-work benefits and 6 percent in expenditure (Gosling 1999). Evidence of a polarization in the labor market is mixed. In some low-paying sectors, such as cleaning, there is a clear U-shaped distribution of hourly earnings with a large concentration earning the minimum rate, few earning just above 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).

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Conclusion: understanding the dynamics of the low wage economy While living wage campaigns in Britain are not nearly as significant as their counterparts in the USA, they have played a crucial role in the fight against low pay both as a catalyst to wider trade union action and in linking up with other actions on improving the level of the National Minimum Wage, introducing a Fair Wage clause into public procurement contracts and making the case against in-work subsidies as a main antipoverty device. The living wage and low pay campaigns are of obvious importance in highlighting the issue of poorly paid work and have enjoyed some success in pressuring and convincing employing organizations to improve levels of pay, either directly or through inserting clauses into contracts with suppliers. Less obvious is the role these campaigns have played in illuminating the central mechanisms of wage setting in low-paid labor markets – mechanisms that bear little resemblance to those identified in neoclassical economists’ accounts of wage determination. The first mechanism is the systematic undervaluation of work by employers. Here, low pay campaigns repeat the claims of generations of Marxist-inspired scholars (especially in the fields of industrial relations and labor process theory) who show that workers must exercise their potential collective bargaining power to bring pay close to the value of their labor. It follows that, for the low paid, work is especially at risk of being undervalued due to low unionization, low accreditation of education and skills, and few alternative job opportunities. While this mechanism highlights the need to campaign on the inherently conflictual capital–labor relation, the contradictions that drive (and undermine) capitalist societies also generate two other conflicts: capitalist against capitalist in the battle for market position and sales; and capital against state in the effort to both nurture efficient use of capital and to protect the welfare of citizens. What the low pay campaigns have so successfully demonstrated is that all three conflicts impact directly upon wage setting. Employing organizations compete against each other to win contracts for services provision and, in the absence of regulations that allow for consideration of labor standards, bids are won on the basis of lowest cost. This second mechanism forces employers to drive wages down to the minimum, regardless of other pressures they face such as those arising from external labor market conditions, recruitment difficulties, a need to provide staff with incentives, or, even, a straightforward ambition to pay better wages. Without further changes in the EU’s model of public procurement, increasing internationalization of competition for contracts will only intensify this downward pressure on wages. A third mechanism regulating the British wage structure is driven by the interaction between the minimum wage and the social security system,

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reflecting, in part, the dual pressures on the state both to foster private capital accumulation and to legitimize the vagaries of capitalism through policies of income distribution and social protection (O’Connor 1973). With a low minimum wage, in-work benefits in the form of tax credits trap an increasing number of low-paid workers in poverty; employers are encouraged to hire subsidized workers in favor of the non-subsidized, and workers lack an incentive (and the ability) to press for wage increases. The more 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 and middle-income earners.

Notes 1 The discussion of TELCO’s living wage campaign owes a great deal to the information provided by one of the two campaign co-ordinators, Catherine Howarth, to whom I am very grateful. Discussions with Catherine helped to illuminate the strategy of TELCO and she also made corrections on an earlier draft of this chapter. 2 The campaign against HSBC involved, among other features, nuns going to the Oxford Street branch of HSBC to cash shopping trolleys full of coins (collection money from an East London church) and other activists blockading cash machines, leaving other customers queuing into the street. At the time, a spokesman for HSBC was quoted as saying, “We don’t believe it’s right to instruct contractors to pay a certain rate. We would be telling them how to run their 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 undercutting by employers paying low wages . . . could indeed have some benefits for business as well as employees, by limiting the scope for competition on the basis of very low pay, low skill strategies. (CBI evidence to the Low Pay Commission, cited in Sachdev and Wilkinson 1998) 4 For the First, Second and Third Reports, the Commission chair was an academic and the members included three employer representatives, three trade union representatives and two academics. For the Fourth Report, the Commission chair 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 in Rubery et al. 2002: Table 4.4) include the following estimates: France (61 percent); Ireland (56 percent); Greece (51 percent); Belgium (49 percent); the Netherlands (47 percent); the UK (42 percent); and Spain (32 percent). 6 Until 1983, the Fair Wage Resolution required private firms to match public sector rates of pay agreed through national wage setting; it was the only government mechanism for extending collective bargaining agreements to other firms and sectors. 7 Until then the government considered TUPE regulations to apply only to employee transfers between private sector firms, but this was eventually successfully challenged by the European Court of Justice and several court cases in Britain.

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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 ratified by eight other EU member states (Bercusson 2002).

References Acheson, D. (1998) Independent Inquiry into Inequalities in Health Report, London: The Stationery Office. Bain, G. (1999) “The National Minimum Wage: Further Reflections,” Employee Relations 21 (1/2): 15–26. Bargaining Report (1990) “Compulsory Competitive Tendering: The Effect on Wages and Conditions,” Bargaining Report May: 5–11. Bercusson, B. (2002) “Time for European Action,” Thompsons Labour and European Law Review 73, September. Available: http://www.thompsons.law. co.uk/ltext/11080002.htm Beynon, H., Grimshaw, D., Rubery, J., and Ward, K. (2002) Managing Employment Change, Oxford: Oxford University Press. Card, D. and Krueger, A. (1995) Myth and Measurement: The New Economics of the Minimum Wage, Princeton, NJ: Princeton University Press. Commission of the European Communities (1998) Public Procurement in the European Union, Brussels: Commission Communication, COM (98) 143. Cooke, F.L., Earnshaw, J., Marchington, M., and Rubery, J. (2003) “For Better and for Worse? Transfer of Undertakings and the Reshaping of Employment Relations,” International Journal of Human Resource Management (forthcoming). Cox, G. (1994) After the Safety Net: A Study of Pay Rates in Wages Council Sectors Post Abolition, Manchester: Low Pay Network Campaign Against Poverty. Craig, C., Rubery, J., Tarling, R., and Wilkinson, F. (1982) Labour Market Structure, Industrial Organisation and Low Pay, Cambridge: Cambridge University Press. Dobb, M. (1944) Wages, London: Nisbet & Co. of the Cambridge University Press. EDF (European Disability Forum) (2002) “Public Procurement: Policy Issues,” available: http://www.edf-feph.org/en/policy/publicpro/pubpro_pol_co.htm Elliot, L., MacAskill, E., and Atkinson, M. (1998) “Labour Fights Union Fury over Low Pay,” The Guardian, May 29, p. 5. Escott, K. and Whitfield, D. (1995) The Gender Impact of CCT in Local Government, EOC Research Discussion Series, Manchester: Equal Opportunities Commission. 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: Routledge. Gosling, A. (1999) “Minimum Wages, the Tax System and Incentives to Work,” Low Pay Commission Occasional Paper 2 (June): 18–28. Grimshaw, D. and Carroll, M. (2002) Qualitative Research on Firms’ Adjustments to the Minimum Wage, London: Research Report for the Low Pay Commission. Grimshaw, D., Rubery, J., and Figueiredo, H. (2002a) UK National Report on the Unadjusted and Adjusted Gender Pay Gap, European Expert Group on Gender and Employment Report to the Equal Opportunities Unit, European Commission DG Employment. Available: http://www.umist.ac.uk/management/ewerc/ egge/egge.html

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Grimshaw, D., Vincent, S., and Willmott, H. (2002b) “Going Privately: Partnership and Outsourcing in UK Public Services,” Public Administration 80 (3): 475–502. IDS (Income Data Services Limited) (2002) Youth Pay: Measuring the Value of Work, London: Research Report for the Low Pay Commission. Kessler, S. and Bayliss, F. (1998) Contemporary British Industrial Relations, London: Macmillan Press. Low Pay Commission (1998) The National Minimum Wage: First Report of the Low Pay Commission, (June) London: The Stationery Office (Cm 3976). Low Pay Commission (2000) The National Minimum Wage: The Story so Far. Second Report of the Low Pay Commission, (February) London: The Stationery Office (Cm 4571). Low Pay Commission (2001) The National Minimum Wage: Making the Difference. Third Report of the Low Pay Commission, Vol. 1, March Cm 5075; Vol. 2, June Cm 5175 London: The Stationery Office. Low Pay Commission (2003) The National Minimum Wage: Building on Success. Fourth Report of the Low Pay Commission, (March) London: The Stationery Office (Cm 5768). Machin, S. and Manning, A. (1994) “The Effects of Minimum Wages on Wage Dispersion and Employment: Evidence from the UK Wages Councils,” Industrial and Labor Relations Review 47 (2): 319–29. Mailly, R. (1986) “The Impact of Contracting Out in the National Health Service,” Employee Relations 8 (1): 10–16. O’Connor, J. (1973) The Fiscal Crisis of the State, New York, NY: St. Martin’s Press. OECD (1998) “Making the Most of the Minimum: Statutory Minimum Wages, Employment and Poverty,” Employment Outlook June, Paris: OECD. Parker, H. (ed.) (1999) Low Cost but Acceptable: A Minimum Income Standard for the UK: Families with Young Children, London: Family Budget Unit, King’s College London. Parker, H. (ed.) (2001) Low Cost but Acceptable: A Minimum Income Standard for Families with Young Children in East London, London: Family Budget Unit, King’s College London. Parker, S. (2002a) “Health Pay Boost Fans Council Unions’ Strike Call,” The Guardian, May 10. Available: http://society.guardian.co.uk/localgovfinance/ story/0,1205,713384,00.html Parker, S. (2002b) “Council Chiefs Downplay Strikes’ Impact,” The Guardian, July 17. Available: http://society.guardian.co.uk/localgovfinance/story/0,1205,756759, 00.html Polanyi, K. (1957) The Great Transformation: The Political and Economic Origins of Our Time, Boston: Beacon Press. Prasch, R.E. (2002) “What is Wrong with Wage Subsidies?” Journal of Economic Issues 36 (2): 357–64. Rubery, J., Grimshaw, D., and Figueiredo, H. (2002) The Gender Pay Gap and Gender Mainstreaming Pay Policy in EU Member States, European Expert Group on Gender and Employment Report to the Equal Opportunities Unit, DG Employment, European Commission. Available: http://www.umist.ac.uk/ management/ewerc/egge/egge.html Rubery, J. and Rake, K. (2000) Gender Impact Assessment in the UK, European

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Expert Group on Gender and Employment Report to the Equal Opportunities Unit, European Commission DG Employment. Available: http://www.umist.ac.uk/ management/ewerc/egge/egge.html Sachdev, S. and Wilkinson, F. (1998) Low Pay, the Working of the Labour Market and the Role of the Minimum Wage, London: Institute of Employment Rights. Stewart, H. (2001) “Protesters Seek Canary Wharf ‘Living Wage,’” The Guardian, December 20. Available: http://www.guardian.co.uk/Archive/Article/0,4273, 4323348,00.html Sutherland, H. (1999) “Discussion,” Low Pay Commission Occasional Paper 2 (June): 28–30. TELCO (2003) “Funding the Poorest in the NHS: The Case for East London,” London: TELCO. Toynbee, P. (2002) “Private Lives Need Help,” The Guardian, August 23. Available: http://society.guardian.co.uk/privatefinance/comment/0,8146,874074,00.html Toynbee, P. (2003a) “Mean Britain,” The Guardian, January 17, p. 21. Toynbee, P. (2003b) Hard Work: Life in Low-Pay Britain, London: Bloomsbury Publishing. TUC (Trade Union Congress) (2002) General Council Report, Trade Union Congress. Available: http://www.tuc.org.uk/congress/tuc-6413-f0.cfm Unison (2002) Justice, Not Charity: Why Workers Need a Living Wage, Submission to the Low Pay Commission by Unison and the Low Pay Unit, October, London: Unison. Unison (2003) Pay and Conditions Claim for Private Contract Staff: Barts and the Royal London Hospital Trust, London: Unison. Walker, D. (2003) “Mayor Urged to Back ‘Living Wage,’” The Guardian, March 10. Available: http://society.guardian.co.uk/socialexclusion/story/0,11499,911112, 00.html Wills, J. (2001) Mapping Low Pay in East London, London: TELCO. Wintour, P. (2001) “Private Contractors Make Wages Pledge,” The Guardian, October 16. Available: http://society.guardian.co.uk/futureforpublicservices/story/ 0,8150,574966,00.html Wintour, P. and Maguire, K. (2002) “Private Contractors ‘Cut Jobs to Save Cash,’” The Guardian, March 8. Available: http://society.guardian.co.uk/futureforpublicservices/story/0,8150,663870,00.html

9

The living wage in Australia History, recent developments, and current challenges John Buchanan, Ian Watson, and Gabrielle Meagher

Around the world, workers’ organizations are attempting to reinstate the concept of needs in wage determination processes by campaigning for living wages. This chapter examines recent Australian experiences of developing and implementing a “living wage,” and explores what the Australian case offers researchers and practitioners in other countries interested in living wage campaigns and policies. In the United States, the concept of the living wage has underpinned local activist campaigns to increase hourly earnings rates for the lowest-paid workers, typically via “living wage ordinances,” in which municipal governments mandate that businesses supplying the municipality must pay the workers involved a living wage. In 1999, researchers estimated that the number of workers covered by living wage ordinances in the United States ran to approximately 44,000 persons. The recent passage of ordinances with wide coverage, notably in San Francisco, has swelled this count by tens of thousands (Brenner 2002), in a national labor force with total nonfarm payroll employment of 130.8 million (USDL 2002). Thus, even on a generous “guesstimate,” workers covered by living wage ordinances in the United States 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 is an integral element in a national system of wage determination. Mass campaigns on the social movement model have been limited. However, the impact of the idea on wage movements has been profound. National and state industrial tribunals have accepted many of the arguments led by the unions, principally the Australian Council of Trade Unions (ACTU), in setting rates for pay for all those who do not receive wage rises through enterprise level bargaining. Accordingly, approximately 20 percent of the labor force are eligible for annual living wage increments.

Living wages in the evolution of Australian industrial relations The current Australian concept and practice of a living wage are shaped by very distinctive national circumstances. At the center are Australia’s

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unique wage setting institutions – the quasi-judicial tribunals established around the turn of the twentieth century to manage and resolve industrial disputes. Under authority granted to them by parliaments, industrial tribunals at both federal and state levels have had compulsory powers to settle disputes, to enforce decisions, and to limit direct actions such as strikes or lock-outs by parties to disputes. Arbitration tribunals also register and regulate trade unions. Legislation has prescribed – and more recently proscribed – those aspects of employment relationships about which tribunals can rule. Within the legislative framework, precedent and test cases establish the principles upon which commissioners make their legally binding decisions, called “awards.” From their establishment until 1990, tribunals at both the federal and state levels came increasingly to work in concert to set wages and conditions for a majority of workers in a highly centralized wage-fixing system. Along with tariff protection of local industry, and strict immigration controls, the arbitration system was part of the “elaborate institutional framework intended to facilitate national economic development while protecting key economic protagonists” (Boreham 2002: 179). The idea of a living wage was a founding concept in the Australian industrial arbitration system. The most famous expression of the living wage idea in Australian industrial relations history was the Harvester Judgment of 1907, which determined the wage rate for adult, unskilled, male laborers. In this judgment, pioneering social liberal and President of the Commonwealth Court of Conciliation and Arbitration1 Justice Henry Bournes Higgins established this “basic wage” as that which would support a man, his wife and three children in “frugal comfort.” Under this model, in addition to the basic wage, many workers also receive a margin for skill. Margins have been determined according to industry and occupation, not for all workers like the basic wage. Until the late 1980s, wages generally moved as follows. Labor market pressure, often arising from skills shortages in key sectors of the economy, resulted in an increase in pay for those workers whose skills were in short supply. Increases either took the form of multi-employer agreements or overaward payments. These developments in the field became the basis for varying awards. Within the award system, primary awards (in the maledominated metal, construction, and transport industries) were usually adjusted first. Once these primary awards were varied, the secondary awards linked indirectly to them were then adjusted. This system meant that wage increases arising from labor market pressure in one part of the economy were transmitted to most workers, ensuring some fairness in relative pay structures. Although workers’ needs were a central and perfectly legitimate category in the structured conflict over wage determination in Australia for most of the twentieth century, by no means did centralized wage fixing ensure living wages for all workers. The wages of women and indigenous

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people are the most obvious exceptions here. The Harvester Judgment established a family wage, and subsequent decisions set women’s rates of pay at levels significantly lower than men’s, a situation not fully rectified in law until the equal pay decisions of the late 1960s and early 1970s (Hunter 1988; Ryan and Conlon 1989). Meanwhile a gender wage gap still persists today. Indigenous people were simply excluded from the industrial relations system altogether until the 1960s, and as a group, indigenous people’s economic disadvantage remains stark (Hunter 1999). Moreover, white male workers have not always fared well under centralized wage fixing. Prevailing political ideologies, the balance of economic power between labor and capital, and the economic climate have affected wages and conditions, as the principles of need, capacity to pay, comparative wage justice, the national interest, and productivity have respectively been emphasized or de-emphasized in tribunal decisions (Macintyre and Mitchell 1989; Dabscheck 1994; Boreham 2002). More recently, as we discuss below, policy change has radically transformed the operations and outcomes of the industrial relations system, and ignited the latest revival of living wage campaigning. Yet despite the waxing and waning fortunes of the idea of a living wage, it has remained part of the living lexicon of Australian industrial relations language and practice. That is to say, when, in 1996 a union initiative explicitly (re)mobilized the idea of a living wage, its proponents drew on a tradition; they did not have to establish the validity of the term ab initio. In the late 1980s and early 1990s, however, changes to institutional arrangements in the Australian industrial relations system reduced the role and importance of awards, and increased bargaining at the enterprise level. Unions began exerting pressure for decentralization, to better manage wage relativities at the peak of a boom. A federal Labor government, acting with the support of the ACTU leadership, implemented the changes, but employers’ interests dominated in policy design. The federal Industrial Relations Reform Act of 1993 and other reforms ensured that award rates of pay were quarantined from movements in collective agreements and over-award movements. As a result, labor market pressure could increase wages for workers covered by collective agreements and over-awards, but this would not necessarily affect award rates. The new neo-liberal Coalition government’s Workplace Relations Act of 1996 further weakened the role of awards. This Act reduced to twenty the number of matters on which the Australian Industrial Relations Commission (AIRC, the Commission) can rule in making awards, leaving the remainder for enterprise level agreement, or management prerogative, where no agreement is reached. Consequently, labor market pressure can now reduce as well as increase working conditions for some workers, and the capacity of award system to protect all (or most) workers has declined. During the two decades before these far-reaching reforms of the industrial relations system began, immigration policy became less restrictive, at

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least in its racial-ethnic dimensions (Jupp 2002), and tariffs began to be reduced. Financial deregulation and the propagation of competition policy, with particular impact on public utilities, followed during the 1980s and 1990s (Bell 1997, 2002). Alongside these changes to Australia’s major economic institutions – and facilitated by them – has been profound change in the organization of work. Rates of casual employment and parttime employment are high and increasing. In November 2001, 23 percent of 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 6 percent in 2003. At the same time, what might be called “over-full-time” employment is a growing problem. Nearly half the employed labor force works longer than 35 hours per week, with 22 percent working longer than 41 hours per week. Of those working longer than 41 hours per week, 67 percent (or 14 percent of all employees) work overtime either unpaid, or compensated in other ways (ABS 2000a, ABS 2000b). As we show below, the ACTU revitalized the ideal of the living wage in response to these developments.

The living wage in Australia: 1996–2003 The living wage claim: vision and rationale The Australian Council of Trade Unions launched their living wage campaign in 1996, in the form of a claim in the Australian Industrial Relations Commission to vary awards. With this claim, the ACTU sought to provide a rallying point for a counter-offensive against the newly elected neoliberal federal government, which has been committed to breaking union power and deregulating the labor market. The ACTU also sought to increase rates of pay for the lowest-paid workers to compensate for falls in their real earnings during the first half of the 1990s. Since 1996, this campaign has resulted in annual wage increases for some of the lowest-paid workers in Australia, and has re-established need as a criterion of wage fixing when it had been almost completely eclipsed by productivity-based criteria. When formulating the original living wage claim in 1996, the ACTU envisaged three stages, each with a number of elements. This is significant because a successful claim would have redressed problems arising from changes to both the distributional impacts of decentralization of wage fixing (increased inequality), and the organization of work (increasing working hours for full-time workers, casualization). The key features of the original claim are summarized in Table 9.1. In the ACTU’s original three claims, each stage allowed for an increase in the minimum wage for the lowest-paid workers, and an increase for those workers without access to increases from enterprise bargaining. The

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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 working under federal awards • maintenance of relativities between wages for work of different skill levels • a minimum of $20 increase for those without enterprise agreements Stage 2 • a minimum $11.00 per hour or $418.00 a week for all workers working under federal awards • maintenance of relativities • a minimum $20 increase for those without enterprise agreements → protections for those working few or occasional hours per week Stage 3 • a minimum $12.00 per hour or $456.00 a week for all workers working under federal awards • maintenance of relativities • a minimum of $20 increase for those without enterprise agreements → consider reducing standard hours of work Source: ACTU (1996).

ACTU intended these measures to counter the widening disparity of earnings resulting from decentralization of wage fixing. One key problem is that enterprise agreements do not cover as many workers as was anticipated. In 1989, before the system was formally decentralized, only 23 percent of the workforce was covered by some kind of workplace or enterprise agreement. By 1995, this had risen to around 35 percent (Buchanan and Watson 1997: 23). Estimates for 2000 place enterprise agreement coverage at 35–40 percent – around 50 percent more people than a decade earlier. However, a large proportion of the workforce remains “agreement free,” and so dependent on the award system. Table 9.2 demonstrates why this mattered at the time of the original living wage claim in 1996. The data show that different forms of industrial regulation are associated with different levels of wage increase. Significantly, workers dependent on awards receive the lowest annual average wage increases. Moreover, award-dependent workers are disproportionately female, and concentrated in retail trade, health and community services, and the food service and hotel industries (ABS 2002b: 17). The living wage claim aims to achieve some kind of “catch-up” for these workers who have clearly slipped behind the field. In addition to wage increases for the lowest paid workers, each stage of the living wage claim also included provision for maintaining relativities in federal awards, such that increases in minimum rates within an award would “flow on” up the classification structure to workers in higher skill jobs. With this element of the claim, the ACTU sought to advance the principle of comparative wage justice. Further, stages two and three of the claim include additional, more ambitious elements designed to remedy problems in the distribution of working hours and in working conditions.

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Table 9.2 Labor market coverage of different forms of industrial regulation and average annual wage increases, 1996 Form of labor market regulation

Employees (%)

Estimate average annual wage increase (%)

Awards only Awards and registered enterprise agreements Registered enterprise Individual contracts

35

1.3

30 5 30

4–6 4–6 0–8

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

The proposed stage two was to focus on casualization, aiming to increase protections for the growing number of workers employed casually and/or part-time, and whom the award system had never protected effectively. The proposed stage three includes an even more ambitious element; that of opening up for consideration standard hours of work. This marks the first time the union movement has taken up this issue in nearly two decades. Implementing and updating the living wage The ACTU has not achieved all that it wanted in the original living wage claim of 1996. In particular, the non-wage aspects of the second and third stages of the claim; those aiming to enhance protection for casual workers and to stem the growth of “over-full-time” employment – have had to be pursued as separate campaigns and test cases, with varying success. Extended hours for full-time workers, for example, have been the subject of comprehensive test case on “reasonable hours.”2 At the same time, conditions 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-bycase decisions (e.g. the slow accretion of rights for casual workers in the case law of unfair dismissal). However, the wage component of the living wage claim has been incorporated into the annual decisions of the Australian Industrial Relations Commission on “Safety Net Adjustments” (SNAs) to awards. Understanding 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 to its traditional role in industrial dispute resolution, under the Australian Workplace Relations Act 1996, the Commission is responsible for establishing and maintaining a “safety net.” The precise details of the

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Commission’s powers – and obligations – are spelled out in S88B(2) of the Act that reads: In performing its functions under this Part [VI Dispute Prevention and Settlement], the Commission must ensure that a safety net of fair minimum wages and conditions of employment is established and maintained, having regard to the following: a

b c

the need to provide fair minimum standards for employees in the context of living standard generally prevailing in the Australian community; economic factors, including levels of productivity and inflation, the desirability of attaining a high level of employment; when adjusting the safety net, the needs of the low paid.

Under these provisions, each year the ACTU lodges a claim to adjust the safety net as part of its living wage strategy. The Commission then convenes a Safety Net Adjustment case to hear the claims of all with an interest in the matter. The ACTU, employer groups (mainly peak representative bodies), community groups (including the churches), state and federal governments all intervene. Each party is required to produce a written submission. These often contain comprehensive information on the state of the low-paid workforce as well as material on the state of the economy and community life more generally. Significantly, SNA cases do not simply deal with the lowest paid. Because the Act also authorizes the Commission to rule on relativities, these cases set rates of pay for all those with limited enterprise bargaining power, not just the low paid. Consequently, many middle- and upper-range white-collar jobs are also affected by SNA decisions. Once the federal Commission reaches a decision, the state tribunals usually make decisions identical to those made at federal level for workers on state awards. In making its decisions, the AIRC arbitrates between competing arguments put by employers and unions, and by conservative Coalition and Australian Labor Party governments. The rival principles in contests over the ACTU living wage claim have been as follows. Unions argue that wage increases under the Safety Net Adjustment should keep pace with community standards and ensure that benefits of growth are equitably shared. Employers argue that wages have no social function, that wage increases simply cause unemployment and inflation and reduce the incentive to bargain, and that equity is better achieved through income support programs. In weighing these competing claims, the AIRC has sought to maintain the highest possible community standards compatible with economic growth and stability.

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Results: safety net adjustment decisions Two simple measures serve to demonstrate how successful the ACTU’s living wage claims have been. First, the Commission’s reasons for its decisions in SNA cases reflect broad acceptance of the ACTU’s arguments, and rejection of the arguments of employer groups (although the Commission does not use the language of the “living wage”).3 Second, the Commission has awarded wage increases every year in excess of the amounts advocated by both the federal government and employers. Figure 9.1 compares the amounts of the ACTU’s annual living wage claims, the Federal government’s counterclaims, and the AIRC’s decisions. Clearly, the ACTU’s living wage claims have enjoyed modest but genuine success in the Safety Net Adjustment cases annually since 1997. How have living wage claims affected incomes of low-paid workers? It is difficult to distinguish the impact of change in workforce composition from the impact of regulation on income. However, evidence suggests that Australia’s system of wage determination has defended hourly rates of pay from falling as fast as they would have in the absence of intervention, and reduced the proportion of employees working at very low rates of pay. Table 9.3 shows that the proportion of employees earning less than 10 Australian dollars per hour (in constant 1999 dollars), which declined over the decade from 1989 to 1999, with the most precipitous decline experienced by female workers. A similar pattern in the proportion of employees earning less than 12 dollars per hour is also evident. Significantly, the $35

ACTU Claim AIRC Decision

$30

Federal Government Claim

$25 $20 $15 $10 $5 $0 1997

1998

1999

2000

2001

2002

2003

Figure 9.1 Living wage claims and Australian Industrial Relations Commission safety net decisions, 1997–2003. Source: HSBC, using data from the ACTU, AIRC and Government submissions.

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

1990

1994

1997

1999

Percentage of employeesa earning under $10b per hour Males 11.3 8.5 8.5 Females 16.4 13.4 10.6 Persons 13.5 10.6 9.4

8.5 10.0 9.2

8.7 9.2 8.9

Percentage of employeesa earning under $12b per hour Males 24.0 19.7 21.5 Females 33.1 30.1 28.4 Persons 28.0 24.2 24.6

20.7 27.1 23.6

20.0 23.1 21.4

Sources: Unpublished information from the ABS’s regular August supplement to the Labour Force Survey (for 1989 and 1999) and unpublished information from the ABS Income Distribution Survey (for 1990, 1994, and 1997). Notes a Adult, non-managerial employees. b Constant 1999 dollars.

gender gap has closed somewhat as the rate of improvement in men’s real earnings has lagged behind the rate of improvement in women’s earnings. Moreover, that more than one-fifth of the adult labor force4 earned less than 12 dollars an hour in 1999 is itself a symptom of broader processes at work in the economy (Botwinick 1993), and of the importance of continuing and enhancing living wage campaigns. Table 9.4 puts growth in the wages of the low paid in the context of the distribution of earnings of all employees. The picture painted here tempers optimism about the achievements of living wage campaigns so far. Although real incomes have been rising across the distribution since living wage campaigns began in the mid-1990s, incomes of workers in the lowest two deciles of earnings, on average, have increased at lower rates than those in higher deciles. (Again, women fared better than men, with the gender 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, the poverty line for a two-parent family with two children, in which the household head held a job, was a household disposable income of $553.55 (after income tax, and including housing costs) (MIAESR 2002). In May 2002, the AIRC’s Safety Net Adjustment decision in response to the ACTU’s living wage claim set the federal minimum wage at $431.40 (before income tax). Finally, although rates of pay have been defended in living wage campaigns, other aspects of job quality and living standards have not. Fulltime, permanent employment (for men) was the standard for which the Australian system of industrial relations developed, and the historical evolution – and contemporary form – of many awards reflect this history. Yet

0,500 0,564 0,625 0,692 0,769 0,850 0,938 1,052 1,253

$

$

0,493 0,559 0,620 0,682 0,751 0,832 0,920 1,028 1,224

2000

1998

1.5 0.8 0.8 1.5 2.4 2.2 1.9 2.3 2.4

%

Change

Source: ABS Employee Hours and Earnings.

1 2 3 4 5 6 7 8 9

Decile

Males

■ ■ 457 505 549 590 636 696 767 861 955

$

1998

Females

468 516 561 607 655 717 791 884 994

$

2000

2.4 2.2 2.2 2.8 2.9 3.0 3.1 2.6 4.1

%

Change

■ ■ 0,452 0,506 0,551 0,604 0,657 0,724 0,803 0,885 1,036

$

1996

Persons

0,475 0,533 0,584 0,637 0,700 0,774 0,861 0,954 1,121

$

1998

Table 9.4 Change in weekly total earnings of full-time adult non-managerial employees, 1996–2000

0,483 0,540 0,596 0,650 0,717 0,795 0,878 0,974 1,151

$

2000

5.1 5.3 5.9 5.6 6.5 6.9 7.2 7.8 8.3

%

Change 1996–98

1.6 1.4 2.1 2.0 2.5 2.7 2.0 2.1 2.6

%

Change 1998–2000

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

Challenges for the future Living wage claims in Australia have worked to defend hourly rates of pay from collapsing in an era of chronic unemployment and underemployment. Australia’s centralized wage fixing institutions remain a crucial – and apparently viable – vehicle for pursuing industrial justice, particularly for women, and despite attacks by neo-liberal governments in recent years. However, non-wage aspects of employment have become impoverished, and inequality has increased sharply. We conclude by canvassing 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 point for setting the basic wage for males – that is, the living wage – in Australian industrial relations institutions at the turn of the twentieth century. Over the course of the twentieth century, female wages have steadily improved from the 55 percent of the male rate at which they had first been set. Equal pay cases in 1969 and 1971 removed formal sex discrimination in wage fixing – and thereby confirmed the individual as the unit of wage determination. Meanwhile, both family structures and the gender composition of the labor force have changed enormously. Couple families with dependants are now only 39 percent of all households, for example, and women in them are employed at the rate of 61 percent (ABS 2000c). However, no tribunal or government inquiry has grappled with what these transitions mean for establishing a reference point for pay and hours of work. Living wage campaigns of the future need to develop and take a position on this question. Current policy practice and debate offer some clues. Dutch public

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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 this norm. Particularly impressive are initiatives to improve the quality and desirability of part-time work. This approach can foster more equitable sharing of paid and unpaid work in families while maintaining labor standards. By contrast, in Australia neo-liberal academics, sponsored by the Business Council of Australia, propose the introduction of a tax credit regime similar to that operating in the United States. Their proposal advocates cutting minimum wages, and using tax credits to supplement family incomes that fall below subsistence level (BCA 1999). This approach is indifferent to the consequences of severing the link between reasonable living standards and wage fixing, which include falling job quality, increasingly long working hours for the low paid, and grave poverty in many single person households. In our view, basic living standards for most members of the working age population should be maintained by living wages, not by the tax-transfer system in the first instance (Buchanan and Watson 1997; Watson 1999). Links between wage determination and the tax-transfer system Although we emphasize the importance of living wages, well-designed links between the wage determination and tax-transfer systems are crucial for maintaining living standards across the life-cycle. Gunter Schmid and his colleagues (1995; 1998) show this might be achieved in their work on transitional labor markets. They argue that fairer sharing of risks over the life-cycle will help make key transitions – for example, from school to work, to parenthood, and into retirement – easier. In this approach, unlike tax credit schemes we discussed above, social security and tax arrangements work to enhance rather than undermine labor market standards. By sharing risk, new social structures would increase choice by supporting a variety of pathways from which individuals could choose when navigating different life course transitions. Each pathway would provide a decent wage that does not require unreasonable hours of work to maintain a decent 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 that fair wage relativities are crucial to a just wages structure. We believe it important to build on this tradition. Pragmatically, those with weak bargaining power are not just the low paid, as many women’s occupations – for example, librarians – demonstrate, and campaigns for wage justice should address their needs.

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Living wage approaches to wage setting embody ideas about consumption norms. However, as income growth at the top of the earnings distribution fuels increasing inequality, consumption norms and aspirations are destabilized. Juliet Schor has identified the dynamic of the “work–spend cycle” (Schor 1991) and linked this dynamic to a growing “culture of competitive consumption” (Schor 1998; see also Frank 1999). Accordingly, developing a sustainable living wage for all means controlling excess growth in high incomes. For living wage ideals to become more than advanced charity – and so discretionary – for the weakest, living wage campaigns must address wage relativities and the problem of changing consumption norms. Living wage theory and practice need to be anchored in a vision of flourishing life at work and beyond. Rising labor standards should act as a “productivity whip” to high quality job creation, and individuals should have improved choices over the life-cycle. Productivity gains should be distributed as shorter working hours for all, and the obsession with money/material rewards reduced. Living wage campaigns can support a vision of life worth living, in which the importance of markets and possessions steadily recedes. Australian living wage campaigns – although impressive – still have a long way to go.

Notes 1 The names of the institutions have changed over time; the Commonwealth Tribunal 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 of work as an award condition for Australian employees (ACTU 2002). The ACTU sought to have fourteen awards varied “by deleting from them the provisions (if any) requiring an employee to work reasonable overtime” and by inserting in them three subclauses specifying that employers must not require employees to work unreasonable hours of work, that employers must not require employees to work overtime against their wishes, and that there be provision 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 the Australian Chamber of Commerce and Industry (ACCI) to vary two awards to insert in them provisions relating to annualized wage rates and other matters. The Bench handed down its decision on July 23, 2002. The Bench was satisfied by the evidence led by the ACTU that “Australia has average working hours that seem longer than most other OECD countries, with average annual hours tending 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 also agreed that links between extended hours and adverse consequences for health and productivity had been demonstrated (ibid.: para. 6–7). However, the Bench rejected the ACTU’s claim, awarding instead “a test case provision of a more limited kind” (ibid.: para.10). The more limited provision allows for employees to refuse to work overtime when this work would result in unreasonable hours, having regard to several factors. These included factors contained in the ACTU’s claim (risks to health and safety, employees’ personal circumstances),

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and, crucially, additional factors not included in the ACTU’s claim centred on the needs of the workplace or enterprise (ibid.: para. 14). The Bench rejected entirely the ACCI’s claim (ibid.: para. 16–18). 3 For example, Commission decisions have stated that “modest safety net increases will have a minimal impact on inflation” (AIRC 2001: para. 86–7), and that “moderate wage increases do little or nothing to diminish job prospects” (ibid.: para. 98). Further, the Commission recognized that “employees on low wages experience difficulties making ends meet and affording what are generally considered by the broader community as basic necessities” (ibid.: para. 126). Finally, the Commission acknowledged that “whilst safety net adjustments are not perfectly targeted to meeting the needs of the low paid they assist in meeting those needs” (ibid.: para. 127). 4 Most awards set down “junior” wages for workers between 15 and 21 years of age, paid at less – often much less – than the adult rate. Excluding young workers, therefore, reduces the reported proportion of workers in the labor force overall receiving very low wages.

References ABS (Australian Bureau of Statistics) (2000a) Employment Arrangements and Superannuation, April to June 2000, Catalogue No. 6361.0, Canberra: ABS. ABS (2000b) The Labour Force, Australia, Cat. No. 6203.0, July, Canberra: ABS. ABS (2000c) Labour Force Status and other Characteristics of Families, Australia, Cat. No. 6224.0, Canberra: ABS. ABS (2001) Labour Force, Australia, Cat. No. 6203.0, October, Canberra: ABS. ABS (2002a) Forms of Employment, Australia, Cat. No. 6359.0, Canberra: ABS. ABS (2002b) Employee Earnings and Hours, Cat. No. 6305.0, May, Canberra: ABS. ACIRRT (Australia Centre for Industrial Relations Research and Training) (1999) Australia at Work: Just Managing?, Sydney: Prentice Hall. ACTU (Australian Council of Trade Unions) (1996) “New Living Wage Case: Speakers Notes,” July. ACTU (2002) Reasonable Hours Test Case – Fact Sheet. Available: http://www.actu.asn.au/public/campaigns/reasonable/facts.html (Accessed October 2, 2002). AIRC (Australian Industrial Relations Commission) (2000) Decision on Application to Vary the Metal, Engineering and Associated Industries Award, 1998 – Part I, Print T4991. AIRC (2001) Safety Net Adjustment Adjustment, Reasons for Decision, Print R5055 [T1733]. Available: http://www.airc.gov.au/alldocuments/PR002001.htm Bell, S. (1997) Ungoverning the Economy: The Political Economy of Australian Economic Policy, Melbourne: Oxford University Press. Bell, S. (ed.) (2002) Economic Governance and Institutional Dynamics, Melbourne: Oxford University Press. Boreham, P. (2002) “Governance of the Labour Market,” in S. Bell (ed.), Economic Governance and Institutional Dynamics, Melbourne: Oxford University Press, pp. 178–99. Botwinick, H. (1993) Persistent Inequalities: Wage Disparity under Capitalist Competition, Princeton, NJ: Princeton University Press. Brenner, M. (2002) Assistant Research Professor, Political Economy Research

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Institute, University of Massachussetts, Amherst, personal communication (email), 24 September. Buchanan, J. and Thornthwaite, L. (2001) Paid Work and Parenting: Charting a New Course for Australian Families, ACIRRT Working Paper 70, ACIRRT, University of Sydney. Available: http://www.acirrt.com/pubs/WP70.zip Buchanan J. and Watson I. (1997) “The Living Wage and the Working Poor,” in M. Bittman (ed.), Poverty in Australia: Dimensions and Policies, Reports and Proceedings No. 135, Kensington, NSW: Social Policy Research Centre, UNSW, pp. 17–38. Business Council of Australia (1999), Rebuilding the Safety Net, New Directions Discussion Paper 1, March, Melbourne: BCA. Dabscheck, B. (1994) “The Arbitration System Since 1967,” in S. Bell and B. Head (eds), State Economy and Public Policy in Australia, Melbourne: Oxford University Press, pp. 142–68. Frank, R.H. (1999) Luxury Fever: Why Money Fails to Satisfy in an Era of Excess, New York, NY: Free Press. Giudice, J. (President), Vice President Ross, Vice President McIntyre, Commissioner Gay and Commissioner Foggo (2002) Working Hours Test Case Statement, Australian Industrial Relations Commission, Melbourne: AIRC, 23 July. Hunter, B. (1999) Three Nations, Not One: Indigenous and other Australian Poverty, Centre for Aboriginal Economic Policy Research Working Paper No. 1/1999. Available: http://www.anu.edu.au/caepr/working/CAEPRWP1.pdf Hunter, R. (1988) “Women Workers and Federal Industrial Law: From Harvester to Comparable Worth,” Australian Journal of Labour Law 1 (2): 147–69. Jupp, J. (2002) From White Australia to Woomera: The Story of Australian Immigration, Melbourne: Cambridge University Press. Macintyre, S. and Mitchell, R. (1989) Foundations of Arbitration: The Origins and Effects of State Compulsory Arbitration, 1890–1914, Melbourne: Oxford University Press. MIAESR (Melbourne Institute of Applied Economic and Social Research) (2002) Poverty Lines: Australia, December Quarter 2002. Available: http://www1.ecom.unimelb.edu.au/iaesrwww/miesi/poverty.html Ryan, E. and Conlon, A. (1989) Gentle Invaders: Australian Women at Work, 2nd edition, Ringwood, Vic.: Penguin. Schmid, G. (1995) “Is Full Employment Still Possible? Transitional Labour Markets As a New Strategy of Labour Market Policy,” Economic and Industrial Democracy 16 (3): 429–56. Schmid, G. and Auer, P. (1998) “Transitional Labour Markets: Concepts and Examples in Europe,” in New Institutional Arrangements in the Labour Market: Transitional Labour Markets as a New Full Employment Concept, Berlin: European Academy of the Urban Environment, pp. 11–28. Schor, J.B. (1991) The Overworked American: The Unexpected Decline of Leisure, New York, NY: Basic Books. Schor, J.B. (1998) The Overspent American : Upscaling, Downshifting, and the New Consumer, New York, NY: Basic Books. United States Department of Labor (2002) News, Bureau of Labor Statistics, Washington DC, July. Available: http://www.bls.gov/news.release/archives/ empsit_08022002.pdf Watson, I. (1999) Proposals for Wage Freeze and Tax Credits: Will Subsidising

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Low Wage Jobs Solve Unemployment?, Research Paper No. 29, Department of the 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 and Employment 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 in New Zealand Prue Hyman

Until the mid-1980s, wage determination in New Zealand labor markets occurred primarily through centralized bargaining systems. Documents known as awards and agreements prescribed wages and conditions settled by collective bargaining between employers or their agents and trade unions. They typically covered a number of employers within an occupation or industry. High levels of unionization and such bargaining arrangements were important factors in producing wage differentials that were low by international standards, with the spillover effects of awards extending to employees not directly covered. Although “fair wages” were initially defined with reference to prevailing rates, over time the concept became conflated with appropriate living standards as well, specifically a family wage for male breadwinners and a lower wage rate for women. Minimum wages were supplemented by the safety net of an overall minimum wage covering all employees, together with other elements of a minimum code of conditions. These welfare state provisions also focused on (male) wage earners and the unemployed. In contrast, since 1984, in what became known as “the New Zealand experiment,” both major political parties (Labour and National) have been committed to orthodox structural adjustment policies. Bargaining has become more decentralized and union density has diminished, altering the context for discussions of “fair” or “living” wages. Polarization of earnings has been the result. This polarization has gender and ethnic implications as well. This chapter will discuss the historical background to the fights for adequate living standards in New Zealand. The following section reviews local usage of the terms fair wage, family wage, living wage, minimum wage, and social wage, as well as the nature of government allowances that supplement low wages. The chapter then outlines the minimum wage and minimum code policies since 1946. It concludes that the level of the minimum wage continues to be a key site for struggle, but should not be addressed in isolation from the social wage and other elements of social welfare systems.

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Defining wage standards The 1894 Industrial Conciliation and Arbitration Act established the basic framework of industrial relations in New Zealand for nearly a century. Agreements on wages and other matters between unions and individual or groups of employers were enforceable if filed with the Clerk of Awards. Where agreement was not reached, conciliation and, if necessary, arbitration by the New Zealand Arbitration Court (hereafter the Court) set up under the Act led to agreements or awards, with a maximum currency of three years. Unions obtained wage increases from individual employers and then applied to the conciliation and arbitration machinery for more general application of the increases in awards for the relevant type of work. In this period, the principles used by the Court were largely those of fixing a “fair wage,” by which was meant “what reasonably good employers 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, promulgated the principle of a wage designed to guarantee a (male) worker a certain standard of living. This marked the institutionalization of the “family wage” or “living wage,” equivalent terms for some time in Australasia, and applying irrespective of whether individual men or women actually 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 for unskilled male labor using fair wage arguments. Such a general basic rate inevitably led to efforts for increases in line with price changes. This began to elide fair wage and living wage concepts, even though they were potentially contradictory. During the First World War, the Court followed price movements more directly on the grounds explicitly stated that it was concerned particularly with the preservation of a reasonable living standard . . . In 1918 the Court went so far as to state that an industry which could not afford a reasonable living wage should cease operations. (Woods 1963: 97) This argument is still used by those seeking to increase the minimum wage. In 1920, amending legislation included the requirement that awards should provide for a “fair living wage,” thus completing the mixing of these concepts. By 1922, “it was preponderantly concerned with maintaining a minimum purchasing power for industrial workers” (ibid.: 103), although not all workers were covered by the Court’s decisions. By the mid-1920s, the growth of the political Labour movement and party gave momentum to a trade union campaign for increases beyond the cost of living in basic wage rates.

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In 1925, the Court was asked by Government to make a statement on its wage fixing principles. The living wage part of their response stated more explicitly than ever before the view that the minimum (male) rate should be sufficient to maintain a man, his wife, and two dependent children, refuting a suggestion that it should cover three children since two was close to the average. When the Labour Party won power for the first time in 1935, legislation was passed requiring the Arbitration Court to make a general order fixing basic minimum wage rates. The male rate was to be sufficient to maintain him, his wife and three (not two) dependent children, apparently based on the argument of encouraging larger families as good for the country. The basic wage so fixed, however, did not involve a general wage increase, so implicitly the Court must have considered in 1936 that current minima were sufficient under this criterion. Wartime provisions then intervened and the first legislation on a minimum wage covering all employees was enacted in 1945. Despite their earlier commitment to equal pay, the Labour government did not question the gender biases implicit in the family wage concept that awarded higher wages to men. The 1936 decision had set the female rate at only 47 percent of the male rate, increasing to 66 percent in 1947, with the differential not abolished until the full implementation by 1977 of the 1972 Equal Pay Act. Clearly attaching the same meaning to the terms “family wage” and “living wage” is compatible with a significant gender bias in each. In 1950, the Court argued that the family wage aspects of the 1936 legislation had been made “more or less obsolete.” This was due first to government setting overall minimum wages under the 1945 Act and, second, to the system of family allowances, first introduced as a small tightly income tested benefit in 1926 (2s per week for third and subsequent children) and made universal in 1946. According to Nolan, the concept of the family allowance “was developed at the official level in opposition to the doctrine of the living wage” (2000: 157) in an attempt at a compromise placating union desires for living wages and employers’ for fair wages. She argues that while the family allowance was hardly a feminist policy designed to promote women’s interests or recognize the value of unpaid work, it nevertheless was promoted by some women’s groups and eventually led to liberal feminist gains, so that “family allowances ultimately undermined the male breadwinner wage” (Nolan 2000: 139). The allowances gave some women an income in their hands for the first time and 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 a welfare state for both those in paid work and the unemployed. They combined aspects of universal and targeted provisions, including free health care and education, provision of state housing, and unemployment benefits (Du Plessis 1995). The New Zealand and Australian combination of

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labor market and welfare provisions have frequently been characterized as a (male) wage earners’ welfare state and the value of the provisions noted by their inclusion in the term “social wage:” “Adding to wages-as-income the various services provided by the government we have the ‘social wage’” (Easton 1986: 81). A full income concept, the social wage included all non-wage benefits paid by employers as well as contributions from government revenue to wage earners or the whole population. Such government payments may be income targeted or otherwise available in the form of income supplements, general or targeted, or through vouchers or subsidies geared specifically to food, housing, health, superannuation, or education. Not all of these alternatives have been used in New Zealand, where the voucher system has been strongly resisted. Using the social wage concept, explicit trade-offs were bargained between the Australian government and union movement under a long-run Accord with other benefits such as improvements in subsidized work based superannuation, substituted for general wage increases. The Accord was a formal arrangement between the central trade union body and mainly Labour governments that provided for negotiation of such trade-offs beneficial to both sides. No such formal system for trade-offs has been instituted in New Zealand despite some moves towards a Compact by the Moore Labour government in 1990 and recent hints about a social dialogue.

The New Zealand experiment The process of dismantling market regulations was started by a Labour government between 1984 and 1990. The Labour Party has always had close links with the trade union movement. Hence it meets union demands to a greater extent than more right-wing National governments, more regularly raising minimum wages and supporting frameworks conducive to collective bargaining. As a result, Labour did not fully tackle deregulation of the labor market, unlike the subsequent National government elected in 1990. However, Labour, too, took seriously business concerns over high non-wage, compliance, and other transactions costs involved with employing labor, and enacted legislative provisions encouraging a US-type enterprise bargaining system. The National government rapidly enacted the 1991 Employment Contracts Act (ECA) that did not even mention trade unions, subsuming them under bargaining agents and weakening their ability to recruit and represent members. In place of awards came collective or individual contracts, with a theoretical symmetry between employer and employee in choice of representation and the form of contract, but in practice vastly enhanced employer power (Hyman 1994). One US-based observer judged the changes to the New Zealand industrial scene as:

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Prue Hyman visible and dramatic, because in an astoundingly short time it moved from being a socialized country with labor law that was highly protective of unions and with one of the highest levels of union density in the world to a country that was extremely hospitable to free market ideas with a labor law founded on Chicago school ideas. (Dannin 2001: 1091)

The legislation, together with a weak economy, inevitably led to a rapid fall in union coverage, from the internationally high level of 55.7 percent of 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 especially multi-employer bargaining. In this situation, the priority for individual unions was survival for themselves and their members by attempting to make their services important and attractive. The legislative framework was more favorable than previously to competition between unions rather than one encouraging a largely captive membership in particular types of work. In addition, the curtailment of union rights and power made it more difficult to persuade employees that it was worth joining any union. In this climate, unions had to concentrate on retaining members and obtaining reasonable collective contracts, being forced to bargain, in most cases, employer by employer. The central organization to which most unions were affiliated, the New Zealand Council of Trade Unions (CTU), was also weakened by deunionization, and was criticized from the left for not having fought harder against the ECA, by, for instance, calling a general strike. In the individualistic climate of the 1990s, with government antipathy to collectivism and trade union power, the area where progress looked most possible was on individual rights. To soften the ECA measures, National Minister of Labour Bill Birch, in a media statement (1991) promised to strengthen the minimum code as a “safety-net” for employees. However, all that this produced was a new statutory entitlement to five days paid leave per year for sickness or bereavement. The National Party lost power in 1999 after three three-year terms of office. The second election under a new proportional representation system made Labour the largest parliamentary party. However, it needed a coalition partner for its majority, in the shape of the more left-wing Alliance Party. This government repealed the ECA, and its 2000 Employment Relations Act (ERA) went some way to restoring union recognition and rights, including powers of entry to workplaces. Union membership recovered slightly with a 9 percent increase over the two years to December 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 than fundamental aspects of industrial law (Dannin 2001). The resources of the business pressure groups have changed the climate of opinion sufficiently to ensure that a Labour/Alliance government was unable and/or unwilling

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to move further towards union opinion. Hence there was no return to national awards, with enterprise bargaining still predominant, despite a few multi-employer deals and a new emphasis on good faith bargaining. The legislation is being reviewed by the current Labour government, reelected 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 under Labour than in the previous nine years. Three recent increases took the level to $8.50 (New Zealand dollars) per hour in March 2003, while youth rates for 16- and 17-year-olds rose to $6.80 per hour. There have also been other improvements to the minimum code, with enhancements to holidays legislation under way and paid parental leave introduced from July 1, 2002, thanks largely to the efforts of the Alliance while the junior partner in government.

Minimum wage and minimum code activism Debates over the appropriate level of the minimum wage and elements of the minimum code reveal the positions of major stakeholders regarding wage setting processes. Orthodox economic theory has been utilized to minimize wage increases and even to advocate elimination of the minimum wage. Yet, empirical evidence that the minimum wage has dire effects is scant. The New Zealand case further suggests that it is better to view the social welfare and wage regulation systems as complementary institutions rather than substitutes. Setting New Zealand’s minimum wage From April 1946, the New Zealand adult minimum wage provided a minimum weekly rate for men of $10.50 and for women of $6.30 (60 percent), with a gender differential continuing until the mid-1970s. The rate is not automatically raised each year, although it must be reviewed annually. Of the twenty-nine OECD (Organization for Economic Cooperation and Development) countries, seventeen had national minimum wages in 1998 (this has since increased, with a minimum wage established in the UK) and twelve of these had some form of indexation. Price indexation and relativity to average wages have often been suggested in New Zealand, but never adopted. The ratio of the minimum wage to average wages has fluctuated widely over the years with extremes of 83 percent initially (in 1946) and 30 percent in 1984 (see Table 10.1). The proportion fell below two-thirds by 1963. It then fell gradually to 44 percent in 1972 and was restored to almost two-thirds in 1973, in line with a recommendation of the 1972 Royal Commission on Social Security. Adjustments in the next eleven years were few and well below price and general wage increases in a

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period of high inflation, so that the ratio had fallen to 30 percent in 1984 after nine years of National government. The minimum was raised in three steps between 1985 and 1987 to reach 52.5 percent under the Labour government. Further slippage under the National government from 1990 to 1999 and only partial restoration by Labour/Alliance have led to the current fairly low relativity around 43–44 percent. In 1998, when the ratio was 43.7 percent, the New Zealand minimum wage was eighth highest in US$ or purchasing power parity of the seventeen OECD countries with minima, with largely the lower income countries lower ranked. New Zealand was similarly around the middle on relativity to average total earnings for full time workers, at sixth of the thirteen countries with data available. According to the then Alliance

Table 10.1 Minimum wage levels in New Zealand Date and political party in power

1946 (L 35–49) 1951 (N 49–57) 1957 (L 57–60) 1963 (N 60–72) 1969 1972 (L 72–75) 1975 1978 (N 75–84) Feb. 1984 Feb. 1985 Sep. 1985 Feb. 1987 Feb.1988 May 1989 Sept. 1990 1991/4 March 1995 March 1996 March 1997 1998/9 March 2000 Feb. 2001 Feb. 2002 March 2003

Minimum wage (before tax)

Labour National Labour National National Labour Labour National National Labour Labour Labour Labour Labour Labour National National National National National Labour and Alliance Coalition L/A Coalition Labour/United

$ Hour

$ Week

Ratio of minimum weekly wage to average weekly earnings (ordinary time) (%)

0.26 0.33 0.47 0.51 0.59 0.68 1.37 1.61 2.10 2.50 4.25 5.25 5.625 5.875 6.125 6.125 6.25 6.375 7.00 7.00 7.55 7.70 8.00 8.50

10.50 13.17 18.75 20.33 23.50 23.50 54.88 64.41 84 100 170 210 225 235 245 245 250 255 280 280 302 308 320 340

83 67 74 66 56 44 60 49 30 34 54 53 51 50 47 by 1994, 42 43 42 44 by 1999, 41 44 42 42 n/a yet: ~ 43/44

Sources: Brosnan and Wilkinson (1989); New Zealand Department of Labour publications (various years). Note Selected years until 1981, then each increase in the minimum wage shown. Male minimum only until 1970s.

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Associate Minister of Labour and Minister of Women’s Affairs, Leila Harre, 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 the European goal of 66%?” Two economists, strong advocates of a high minimum wage, have called for New Zealand to return to a level around the 80 percent of the earliest years (Brosnan and Wilkinson 1989). They use both equity and efficiency arguments, citing the need for incentives to train and retain staff and raise productivity. The authors also refer to desirable multiplier effects of higher wages, an analysis no longer fashionable, and reject the orthodox account of low pay simply reflecting low skill, “an argument of impregnable circularity in which the outcome, low pay, is used as the only evidence for the alleged cause – low skill and personal inefficiency” (ibid.: 35). Instead they see the explanation of low pay in the “social structuring of jobs and workers” and “related considerations of industrial and political power” (ibid.: 37). For most paid work, the minimum wage is symbolic only, with few jobs having written contracts or agreements at or just above that level. However, some low-paid work specifies the minimum wage, whatever it is at the time, as the minimum for that contract. In addition, low-paid and casual (or contingent) labor, an increasing proportion of the total, may have no written contract, relying on oral communication, and in these circumstances the minimum wage does at least provide a theoretical safety net. The CTU’s annual submissions seeking an increase in the minimum wage have regularly called for clearer definitions of its purpose, development of explicit criteria for setting it, and a formal process of consultation over the application of the criteria. Their 1998 submission suggested three reference points, first, “the level of the unemployment benefit, because workers should not be worse off after taking waged employment,” second, “some stable relationship to the average wage to stop the low paid getting left too far behind,” and third, “regard to the level of minimum rates in collective agreements so that the minimum wage can be a factor in eliminating ‘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 a safety net protection against exploitation for those who do not have conditions of employment determined through a (fair) process of collective 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 “if jobs will only be provided at wages below some level, society would rather

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not have them,” with the need for the minimum to be set because “there are some people who for reasons of lack of knowledge or out of desperation will work for sub-standard wages, and others ruthless enough to employ them.” It follows for the CTU that “a benefit-based social standard would not represent an acceptable level of wages or constitute a minimum living wage” (ibid.: 10, 14). However, the CTU considers that the minimum wage should have a role in tackling the problems of low pay and be used to resist widening inequalities. On the latter, it has been totally unsuccessful in recent years. Their 2002 submission sought a $2 increase in the minimum wage from $8 to $10 but only one-quarter of this was granted. While wanting the rate to play only a minor, safety net role, they argued that labor market deregulation has by necessity increased its protective role. Three key government departments advise Cabinet on the annual review of the minimum wage (Treasury, Labour, and the State Services Commission). All are regularly cautious, using the orthodox economic analysis of wage employment trade-offs. Treasury goes further, often arguing along with right-wing pressure groups such as the powerful New Zealand Business Roundtable that the minimum wage should be abolished altogether. The underlying philosophy is a belief that labor markets are perfectly competitive, with wages simply reflecting productivity, and exploitation of employees a myth. Treasury is committed to only the “wages as a price” or orthodox view, with little or no attention to “wages as a living,” let alone the deeply gendered and racialized aspect of wage setting, “wages as a social practice” (Mutari et al. 2001). For example: A minimum wage has distortionary effects in the labour market which are likely to hinder long term employment prospects and harm the very workers that the policy is designed to assist . . . It is not obvious whether workers being paid a low wage are being exploited, or whether they are receiving an amount which is appropriate, given the training they are receiving and their current productivity . . . [Minimum wage regulation] does not pass a cost/benefit test . . . It is likely that its objectives could be better achieved by other means, such as income assistance. (New Zealand Treasury 1987: 288, 290) Similarly, the State Services Commission (SSC), which has a particular concern with the effects on the government budget of higher pay in the public sector, argued in their 1997 submission that an increase in the minimum wage was inconsistent with a policy of getting disadvantaged job seekers into employment. Even the Labour Market Policy Group of the Department of Labour (LMPG) regularly predicts adverse employment effects in response to minimum wage increases. These departments support employer organizations’ resistance to raising the minimum wage.

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In contrast, the Ministry of Women’s Affairs’ (MWA) submissions argue for increases. Their comments on drafts of official papers for Cabinet on the 1998 and 1999 Minimum Wage Reviews question conventional wisdom, arguing that appropriately set minimum wages can raise productivity levels and economic efficiency. On the issue of possible exploitation, they wrote: The issue of vulnerable workers who need protection from exploitation relates not only to those who lack the necessary information and skills to bargain effectively but also to workers who lack bargaining power, for whatever reason. The protection of vulnerable workers is not only a question about whether monopsonies are present in the labour market, it is also a question about the ability of the industrial relations structure to 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 concentration on economic impacts of minimum wages at the expense of social impacts: The paper contains extensive discussion of the employment effects of an increase, even though they may be statistically insignificant . . . Yet conversely there is no discussion of the social impacts . . . in particular, of what it means to live on the minimum wage and the flow-on effects for 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 is a direct means of improving income adequacy for individuals in low wage work, amongst whom women and Maori are disproportionately represented” (Ministry of Women’s Affairs 1999b: 2), with about 57–58 percent of those directly benefiting being women. Given the vehemence of Treasury arguments, it might be expected that empirical evidence on the impacts of the minimum wage were stronger in New Zealand than elsewhere, with negative employment effects of increases clearly established. In fact, this is far from the case, with less sound empirical econometric evidence controlling for other factors than elsewhere. The most quoted article (Maloney 1995) does find negative employment effects for young adults, but has been subjected to methodological criticism, while Chapple (1997) found mostly insignificant results. A later study of females with no qualifications, a “high risk” group, found “little evidence that the increases in the adult minimum wage diminish their employment prospects” (Pacheco and Maloney 1999: 67). The CTU is concerned about the objectivity of the studies and their interpretation,

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pointing out that some of Maloney’s work had been commissioned by the New Zealand Business Roundtable. All of these studies referred to difficulties with data, including lack of a sufficiently long time series. Pacheco and Moloney, faced with findings apparently failing to conform to orthodox theory, suggest interpretations of their results to rescue it: “Politicians might opt to raise the minimum wage when general economic conditions suggest that any adverse effects will be minimal” (1999: 67). This could be plausible but for the fact that the ratio of the minimum to the average wage has fluctuated very widely with Labour governments raising them more often and by greater amounts than National administrations, whatever the economic situation. New Zealand’s minimum code provisions In addition to the minimum wage, the minimum code in New Zealand enshrines a number of provisions that can be improved on in contracts but not eroded. These include annual leave, statutory holidays, sick leave, and parental leave. The latter is partly, if minimally, paid since July 2002. The minimum annual leave is three weeks, with eleven additional days for statutory holidays and five days of sick leave entitlement, which can be accumulated for up to three years. A private member’s bill to increase annual leave to four weeks is before Parliament, but opposed by government at this stage not on principle, but due to cost to employers. The Equal Pay Act of 1972 and the employment related anti-discrimination provisions of the Human Rights legislation are also sometimes classified as falling under the minimum code. The New Zealand social welfare system’s supplementary targeted assistance to low-income earners forming part of the social wage includes support for bringing up children (Family Support), assistance with housing (Accommodation Benefit), and health cost subsidies (the Community Services Card). Basic benefits cover those unemployed without time limits, although requiring active work search. Other benefit categories are for sickness, disability, and sole parenting (DPB), with a low level of additional income from labor force activity or other sources permitted before sharp abatement of benefit income. Both low-income earners and beneficiaries are eligible for family support for dependent children, again tightly targeted to low-income households, a small universal child benefit having been abolished in 1991. The Greens and Alliance parties both campaigned in the 2002 election for the reintroduction of this universal child benefit, at the rate of $15 per child. In 1986 a Guaranteed Minimum Family Income (GMFI) was introduced, now converted into a family tax credit. This augments the income of two-parent households where either parent or both in combination are in paid work for 30 hours or more per week and combined income is very low. Sole parents not claiming DPB and in the labor force for 20 hours or more per week are also eligible.

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The low level of GMFI, together with inadequate publicity of its availability, the absence of price indexation, and effective 100 percent marginal tax rates on other income, made usage very low. Family Support is now at the level of $47 per week for the first child and $32 per week for subsequent children under 13 years old, with extra amounts for older children. The increase of $5 for the first child over 15 years is derisory compared with the rate of inflation, while income thresholds for targeting have also failed to keep pace with price increases. The abatement regime means that one-child families on the average wage receive no child support at all (St John 2002). The issues over whether adequacy of wages for living should be the business of employers, government, both, or neither attract hot debate. It can be argued that social welfare “top ups”1 may subsidize employers and reduce the pressure to pay adequate wages. Associated high effective marginal tax rates may also provide disincentive effects on both employers and employees to increase wages by raising hours or productivity, training, and skills. However, New Zealand has tended towards retention of both basic benefits and top-ups for poverty alleviation, despite some moves towards US-style welfare reform policies. Overall, New Zealand retains the position that “minimum wages and social welfare are not alternatives but essential complements” (Brosnan and Wilkinson 1989: 38).

Implications for the twenty-first century In New Zealand as elsewhere the costs of structural adjustment programs have fallen largely on low-income groups. Real average earnings levels stagnated until recently, with individual median real incomes of actively engaged men and women decreasing between 1981 and 1996 by 24 percent and 13 percent respectively (Martin 1997). Recent studies of income distribution all show widening gaps both with respect to earnings and total household incomes. Between 1983–84 and 1995–96 the bottom decile of households had a fall in real per capita income of 8.8 percent while the top decile 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 and salary income, the highest percentage of the total, is distributed even more unevenly (Podder and Chaterjee 1998). At a more micro level, differentials generally and between top management pay rates and others are widening throughout the capitalist world, with New Zealand being no exception. The neoclassical economic rationale is the need for increased returns to scarce skills, with top salaries reflecting high productivity, responsibility, and performance in a complex and technologically advanced environment with international competition for such skills. The differentials are now, this position argues, closer than in earlier years to where they should be, as they were previously artificially narrow due largely to over-egalitarian attitudes and outmoded industrial

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relations/collective bargaining systems with centralized award systems in New Zealand. However, some argue in New Zealand as elsewhere that widening differentials are undesirable and unnecessary. From one economics professor: There are plenty of good reasons why some people doing some jobs will be paid more than others. But if we don’t get a tolerable income distribution at source – in the pay packets – we will never get it. So if not equal pay, we must insist on fair shares. This means reversing the past decade’s trend towards a hollowing out of the income distribution in the name of “international competitiveness”: top people paying themselves more and paying those at the bottom less . . . There is no real question about whether a relatively rich country like New Zealand 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 the view 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 a reflection of shifts in relative power between owner of capital and wage and salary workers. (Kuttner 1997: 85) Rejecting explanations based on skill gaps, Kuttner argues instead that returns to skills have fallen for all but the highest paid. Widening pay gaps have differential gender and ethnic implications in addition to the obvious class aspects. Earlier high levels of unionization/ centralized bargaining in New Zealand were important factors in low wage differentials not only generally, but also between women and men, as noted in the international literature (see, for example, Curtin 1991; Saar 1992; Whitehouse 1992). Part-time workers and female-dominated areas of work in small workplaces were covered by awards to a greater extent than elsewhere (Hill 1992). So far, it appears that the negative impacts on the gender earnings gap of the reversal of these institutional frameworks are largely balanced by the reduction in vertical segregation, with more women moving into higher level positions. However, differentials between women are increasing, with the protection of an effective minimum wage particularly needed by women over-represented in low-paid work. There are also wide wage gaps between white New Zealanders and Maori (the indigenous population) and Pacific Islanders. Asian New Zealanders tend to be less disadvantaged, although the experience of immigrant groups is varied.

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The issue of poverty among the working poor receives comparatively little attention in New Zealand. In the media, alternative perspectives to the orthodoxy are hard to find. Negative reactions to high executive pay and widening differentials are labelled the politics of envy of “tall poppies,”2 with the traditional rationales strongly argued. There are few sites for debate. Minimum wages are set by government following submissions by the major stakeholders that receive only superficial publicity. Privacy of wage information has become the norm in an era of individual contracts. Low pay is seen as inevitable in a relatively poor performing economy with higher growth rates and trickle-down the only possible remedies. Collective action by the low paid is less prevalent than in the past, with industrial action by professional groups, particularly in the education and health sectors becoming more common. These groups have more industrial power than the really low paid and undervalued female-dominated groups in the health sector. Equal pay for work of equal value or pay equity has a toehold on the political agenda, but the enterprise bargaining dominated industrial relations system makes it hard to devise a workable system to remove the gender bias embedded in pay scales and pay systems. The scope and magnitude of government-subsidized elements of living costs are greater in New Zealand than in the United States, for example, in health and education, as well as benefit systems discussed earlier. This difference may help explain why a living wage as such is a more major campaign issue in the USA than in New Zealand. In addition, the much smaller size and consequent lesser role of local government make citybased campaigns less relevant. However, the living wage concept has not vanished, as one of the CTU quotes above shows. It may well gain greater currency if increasing inequality and high poverty levels for low-income families and children continue. But there has also been an increasing polarization of amounts of paid work, with two-earner (“work rich”) families contrasting with no earned income (“work poor”) families (Callister 1998). Living wage campaigns could marginalize further families and children dependent on the benefit system. An alternative focus may be continuing to seek the best combination of employer and government support for those with low wages, together with government support for those unable to find employment. A range of strategies to attack the problem of low wages will include arguments for a more equal earnings distribution. A realistic minimum wage will certainly remain part of this approach.

Notes 1 These are government assistance to low-income individuals and households, available to wage earners and/or beneficiaries on the basis of need where

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particular conditions are met, for example, housing dependent on area and weekly 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 by Minister of Labour,” April 23. Brosnan, P. and Wilkinson, F. (1989) Low Pay and the Minimum Wage, Wellington: 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 Policy Journal of New Zealand 10: 101–21. Chapple, S. (1997) “Do Minimum Wages Have an Adverse Impact on Employment? Evidence from New Zealand,” Labour Market Bulletin 2: 25–50. Curtin, J. (1991) “Women, Trade Unions and Equal Pay” in Proceedings of Union/Tertiary Research Conference 4: 154–72. Dannin, E. (2001) “Hail, Market, Full of Grace: Buying and Selling Labor Law Reform,” The Law Review of Michigan State University-Detroit College of Law 4 (Winter): 1090–144. Du Plessis, R. (1995) “Women in a Restructured New Zealand: Lessons for Australia,” in A. Edwards and S. Magarey (eds), Women in a Restructuring Australia: 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 of Industrial 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 in New 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 and Unemployment 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 Union Membership 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, 27 October. Ministry of Women’s Affairs (1999a) Letter to Labour Market Policy Group, 6 October.

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Ministry of Women’s Affairs (1999b) Letter to Labour Market Policy Group, 3 November. Mutari, E., Figart, D., and Power, M. (2001) “Implicit Wage Theories in Equal Pay Debates in the United States,” Feminist Economics 7 (2): 23–52. New Zealand Council of Trade Unions (1998) Submissions on the Review of the Minimum Wage, Wellington: NZCTU. New Zealand Department of Labour (2002) Report on the Quarterly Employment Survey, 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 the Employment Prospects of Unqualified New Zealand Women?” Labour Market Bulletin 7: 51–69. Podder, N. and Chaterjee, S. (1998) “Sharing The National Cake in Post Reform New Zealand: Income Inequality Trends in Terms of Income Sources,” Paper to Conference of New Zealand Association of Economists. Saar, P. (1992) Out of the Chorus Line: The Progress of Women in New Zealand Unions, Wellington: New Zealand Council of Trade Unions. St John, S. (2002) “Address to Green Party Conference,” 31 May–3 June, Auckland, unpublished. Whitehouse, G. (1992) “Legislation and Labour Market Gender Inequality: An Analysis of OECD Countries,” Work, Employment and Society 6 (1): 65–86. Woods, N. (1963) Industrial Conciliation and Arbitration in New Zealand, Wellington: New Zealand Department of Labour.

Part III

Evidence and lessons from US empirical studies

11 The Miami living wage ordinance Primary and secondary effects Bruce Nissen

The contemporary living wage movement has been one of the most successful and enduring causes of local labor and community activism. Although early versions of living wage ordinances were passed in Des Moines, Iowa, in the late 1980s and in Gary, Indiana, in 1991, the modern movement is usually dated from passage of an ordinance in Baltimore in 1994. This intriguing social movement has attracted a fair amount of press and scholarly interest. A survey of web sites found by doing an early 2003 search of the term “living wage” uncovered fourteen living wage and campaign web sites. Some of the major web sites devoted to the issue in general had links to twelve studies on the projected impact of a particular living wage ordinance, five studies on implementation, and twenty-seven general living wage publications. However, few analyses have looked at a particular living wage experience in a multi-faceted way. Studies usually either look at the economic impact an 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 comprehensive examination of a living wage campaign and ordinance in all of these spheres. This chapter hopes to partially fill the gap by examining the experiences with a living wage in Miami-Dade County, Florida. Following a brief explanation of the Miami-Dade living wage campaign and resulting ordinance, the remainder of this chapter will examine the effects that passage of a living wage ordinance for Miami-Dade County has had in five areas: (1) economic impacts on the various affected parties (the county, covered workers, covered employers); (2) terms of public discourse on issues of poverty and work; (3) levels of local social movement activity; (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, a coalition of local human service providers, and a couple of unaffiliated

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individuals began meeting, with the idea of getting a living wage ordinance introduced before the Miami-Dade County Commission. None of those involved knew exactly what should be in a living wage ordinance, how to pick a wage level that qualifies as a “living wage,” how one would assess the likely costs of an ordinance, and similar basic aspects of how living wage ordinances worked. But all had heard of living wage movements and ordinances elsewhere, and they wished to pursue the idea. For the first few months, most time was spent gathering information on typical living wage ordinances, discussing whom it should cover, reaching out to new allies, and thinking about how groups and individuals could work together. In October of 1997, the author became active in the coalition’s work, eventually publishing an economic impact study of likely costs of such an ordinance. By 1998, when a campaign began in earnest, approximately a dozen groups, including the local NAACP chapter, the Gray Panthers, a public housing tenant’s council, several labor unions, and others had joined the originators of the coalition, now known as the Community Coalition for a Living Wage (CCLW). Because opposition from the business community was anticipated, the coalition tried to build a social movement in favor of passage. Despite these attempts, solid grassroots organizing was never done, and until the final two weeks before passage of the ordinance in May of 1999, very little that looked like a social movement developed (Nissen 2000). In the final two weeks prior to passage, the central labor council developed a phone bank, bought 300 “Living Wage Now!” T-shirts, and bussed approximately 300 workers to the county chambers for the final vote. For those two weeks, the campaign for passage had something of the flavor of a “social movement,” but overall this was not a major or sustained social movement. Much to the surprise of supporters, organized business opposition failed to appear, and a living wage ordinance was passed, covering the county itself, the county’s service contractors, the local public hospital and its auxiliaries, and some ground service providers working under permit with the county at the Miami Airport. It required initial payment of $8.56 per hour with health insurance benefits, or else $9.81 per hour ($1.25 per hour more) without health insurance. These rates would be indexed for inflation 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 all service contracts working under permits with the county at the Miami Airport. What have been the impacts of this campaign and ordinance? The following 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.

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Economic impacts Economic impacts could be measured in many ways. Most obviously, there is the potential impact on the county’s budget through increased costs for the higher wages paid. Second, there is the impact on low wage individuals and families receiving the higher wage. Third, there is the impact on the contractors who will be paying higher wages to their employees. Fourth, there are the possible “ripple” impacts to the community, such as changes in use of public health facilities, changes in home ownership, changes in poverty levels, changes in purchasing power, and the like. This fourth category is virtually impossible to accurately measure in a cost-effective way, however, especially for a law affecting the pay of such a small number of workers. Therefore, it will not be considered further here, even though there are undoubtedly impacts of this nature. The economic impact on the county’s budget was a primary consideration for the county commissioners when they passed the ordinance. I produced a report on this topic, The Economic Impact of a Living Wage Ordinance on Miami-Dade County in October of 1998 (Nissen 1998). That report found that the county itself had 508 full-time workers and 1,283 parttime workers earning below $8.56 per hour. Covered county contractors had approximately 1,448 full-time employees (almost half of their 2,983 workers) earning below this wage level. (The study did not address costs for airport firms working under permit with the county, or for the public health system, since data on these employers were difficult to obtain, and the direct impact on the county budget, if any, was even more obscure.) The cost of bringing county and county contract workers up to the designated living wage was estimated according to a “worst case,” “most likely case,” and “best case” scenario. “Worst case” assumed no savings from efficiency gains (i.e., from lower turnover, less absenteeism, more motivated employees, etc.) due to the higher wages, only increased wage costs. This would amount to $8.5 million additional costs per year after a three-year phase-in period. The “most likely case” assumed some modest efficiency gains, and estimated the total cost to be approximately $5 million. And the “best case” scenario assumed that the county could simultaneously curb corrupt granting of contracts with resulting huge and clearly preventable cost overruns, and that it would be able to curb the influence of highly paid lobbyists over the contract granting process. In this case, all additional costs could be nullified by curbing corruption. Compared to my “most likely” $5 million cost estimate, the county itself calculated that the cost would be $15.5 million. They asserted that over twice as many contracts would be covered as had been estimated in my study, and they calculated zero efficiency gains, only additional wage costs, all of which would be passed through to the county. They refused to share their methodology or calculations, however, so it was impossible to check the accuracy or even the basis of any of their conclusions.

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In November of 2002, three years after the law went into effect, I began a study to determine actual costs after the three-year phase-in period was complete. County personnel in the two departments dealing with implementation and oversight of the law produced separate lists of covered contractors that did not match. Repeated attempts to get one unified list with a correct set of contractors were unsuccessful as of May 2003. The county’s records were such a mess that they were unable to agree on who was covered. Despite this difficulty in obtaining accurate data, I did eventually obtain lists that had about a 70 percent overlap in their claimed coverage. But even for the “consensus” list of contractors that all agreed were covered, the county was unable to give me costs of contracts given out for those same services in years prior to implementation of the living wage. Therefore, I have been unable to use previous bid patterns and inflation figures to calculate the additional cost of the living wage, beyond what the costs would have been absent the law. As of June 2003, the county claims to still be attempting to obtain those figures. It is not clear that they ever will be able to. This indicates a tremendous problem with implementation of the law. Costs are virtually impossible to determine if the county is unable to even know exactly which contractors are covered. Furthermore, contractors may not be complying if the county is not closely monitoring them. However, direct county employees are getting the living wage, meaning that at least 1,791 full- and part-time county workers earned a pay increase. Furthermore, one can optimistically assume that all of those working for the “consensus” list of covered contractors are paying the living wage. (Members of an appointed “oversight board” that attempts to enforce compliance assure me that most of these employers have been investigated, and they are now complying.) Even here, it is difficult to estimate what the costs to the county are. It is clear that they are lower than I had estimated, simply because fewer employees of service contractors are being covered. I had estimated that 266 contractors would be covered; the county assumed about twice this many. In fact, the latest lists indicate that approximately 100–120 contractors are actually being required to comply. Furthermore, my study had shown that 42 percent of the contractor employees earning a pay increase as a result of the living wage ordinance would be working for temporary help employers. Yet the county had allowed its largest ($10 million) office and clerical “temp help” contract to be granted recently with no living wage requirement despite clear language in the ordinance covering such contractor firms. While a couple of very small “temp help” contracts are listed as covered by the ordinance, approximately 80 percent of all potentially covered workers in the temp help category worked under this one contract alone. Because of problems like this, it is impossible to determine how many workers are covered, and impossible to determine how much

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this has cost the county, absent reasonably good data. But my best estimate is that probably only half as many contract workers have obtained pay increases as I originally estimated, i.e., perhaps 700–750. Combined with the county’s own 1,800 full- and part-time workers with enhanced pay, the total may be 2,500. (These figures do not include workers at the Miami Airport, who will be covered later. Also, they ignore the public health system.) 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, largely because county personnel have interpreted the ordinance so narrowly that only about 120 contracts are covered, far fewer than my estimate of 266 or the county’s own original estimate of approximately 500. While the costs are less, so, too, are the benefits, both to affected workers and to the surrounding community. What has been the impact on the low wage individuals and families receiving the living wage? I originally received a small grant from a local non-profit organization that receives county money to study this question, but the money was withdrawn due to a budget crisis before I was able to contact and interview workers who had received wage increases. But the typical worker is probably a lot like Norma De La Rocha, a janitorial worker at the county’s headquarters whose wages initially went from $5.60 an hour to $8.56, later rising to $8.81 and $9.00 due to inflation adjustments. She told a newspaper reporter that the pay increase enabled her to save enough to buy a house. She stated, “I know my salary isn’t so big, but at least it’s enough to pay the mortgage” (Buckley 2002: 27A). Throughout the country, living wage recipients report changes such as this: being able to buy a low-cost house, being able to send a daughter to a public university, being able to rent rather than sleeping on cardboard in a sister’s garage, etc. The impacts are obvious, often dramatic, and enormously positive for stable and productive living patterns. What about the economic impact on the contractors covered by the ordinance? Frequently, service contractors who will be covered are the strongest opponents to passage of living wage ordinances. They fear that the higher wages they will have to pay will make them uncompetitive. However, such reasoning ignores the fact that all competitors for the public contracts covered by a living wage ordinance also have to pay the higher wages, thus “leveling the playing field” rather than making any individual contractor unable to compete. In Miami-Dade County, the limited evidence available shows that covered contractors have a mixed, but mostly positive, reaction to the living wage policy. Bill Murphy, senior vice-president of a large security firm covered by the living wage ordinance told a newspaper reporter, that workers’ loyalty to the company had increased, and that his company was supportive (Buckley 2002: A27). In early 2003, I surveyed four of the six janitorial firms that county

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records indicated are covered by the ordinance and two of the nine landscaping firms so listed. Firms in these two areas were chosen because they are likely to be “high impact” firms that had to raise their workers’ wages considerably as a result of the ordinance. Five of these six contractors indicated that they had to increase their employees’ pay as a result of the ordinance. Of the five, two reported that their employee turnover decreased significantly as a result; three reported no change. One reported a significant decrease in employee absenteeism; four reported no change. Two reported a significant increase in employee effort; two reported no change, and one gave an unclear answer. Two reported a significant increase in employee morale, one reported somewhat of an increase in employee morale, and two reported no change. Contrary to the claims of some living wage opponents, most contractors did not raise their educational hiring standards, thus disadvantaging less educated poor workers. One commented, “You want them to have a college degree to clean bathrooms? You’re kidding!” Three of the five indicated no change at all in hiring standards, while one now required a bit of experience, unlike before, and another now required a high school diploma or GED. Two of the contractors indicated that the living wage ordinance had no effect on how hard it was to compete for county contract. One said it made it easier and two said that it made it harder. The two negative respondents gave as reasons lower profits due to higher unemployment insurance rates, and “headaches.” Three of the five believed that the quality of service they provide 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 the ordinance. Most indicated that they paid for these higher costs mostly through higher bid prices on the contract (up by 20–35 percent) and lower profits (down by 5–40 percent). Finally, asked to give their overall assessment of the ordinance and how it had impacted them, responses were varied. One stated, I am in favor of it. I can get employees of better quality. Most people don’t want to work for less. I am 100 percent in support of Living Wage. We bid only on Living Wage contracts. It’s better for our business. One responded, “I love it.” But other responses were more ambivalent, or even negative. One responded, “It is good for the employees. They get more money, but it is difficult for the business.” One commented, “I am not in favor with (sic) the Living Wage,” but then went on to argue that some type of pay standards (perhaps of a bit more flexible nature) would be 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 respondent stated:

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I think it is rough. Bad for small business, but it is good for good decent guys. Make a base line on the bids . . . I’ve been in the system for thirty years. I’ve been there before the law and after the law . . . In general, I think it’s a good thing for the guys to earn good money. But they should make it fair to the companies so that we don’t have to cut the 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 summarized as follows. Costs to the county have been quite small ($3 million in a total budget of over $350 billion), but beneficial poverty-reducing benefits have also been relatively small due to the small number of workers covered. Inept and lax implementation has made the ordinance less extensive and less effective than it otherwise could be. Impacts on affected workers and their families have been beneficial and quite substantial, on an individual basis. And impacts on county contractors have been mixed, but primarily beneficial. The benefits concern improved quality of work and effort from their employees; the drawbacks involved lowered profit margins for a minority of the firms.

Impact on public discourse Evaluating the impact of the living wage campaign and ordinance on public discourse in south Florida is difficult. No local “before and after” public opinion polls on relevant issues exist, so one is forced to rely on more subjective estimates based on more qualitative evidence. Nevertheless, it appears that both the campaign and ordinance have changed the “framing” of poverty issues in the area somewhat. “Working poverty” has become a new term in the public lexicon. In an editorial favoring passage of the living wage ordinance, the Miami Herald wrote, “Nobody should work for the public and remain in poverty because of it” (Miami Herald 1999: 10A). A glossy south Florida business magazine featured a profile on me that focused on the living wage issue that was surprisingly positive. My message, “Using tax dollars to subsidize or create ‘working poverty’ is poor public policy, because it lowers rather than raises living standards in the community,” was allowed clear and full expression (Musgrave 2002). This message is very resonant with the feelings of most south Florida residents, making it hard for conservative or business interests to divert the public “terms of debate” to the sanctity of a “free” market, or to the justice of strictly market-derived economic outcomes. The Miami Human Services Coalition has built upon the changed terms of public discussion by issuing a report on what constitutes a “self-sufficient” income in each of Florida’s counties. “Self-sufficiency” is the wage needed for a family of a certain size to meet basic needs without public or private assistance

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(Pearce and Brooks 2002). They use this report to develop legislative and other initiatives. Therefore, I believe that the living wage message has proven to be a potent “framing” for public discourse on issues of work and poverty. It has to some degree allowed progressives to “seize the high ground” in public debates, and has often forced opponents to retreat or to resort to convoluted arguments that higher wages actually hurt low wage workers. Social movement impacts The degree to which living wage campaigns help to build social movements for progressive social change is in many ways equally important as, or even more important than, the direct economic impacts such as those evaluated above (Nissen 2001). By this measure, the Miami-Dade ordinance has accomplished a fair amount. At the time the living wage campaign was initiated, there were no formal or informal labor-community alliances in the area. The Community Coalition for a Living Wage (CCLW) began to develop ties between organized labor and other elements of the community in common struggle for a jointly understood community good: higher wages for low-wage workers. The living wage victory inspired the creation of other organizations that have continued the struggle for social and economic justice. Directly as a result of the living wage victory, the nationwide organization ACORN (Association of Community Organizations for Reform Now) sent an organizer to Miami and began an ACORN chapter. ACORN had failed in an earlier attempt to create a viable chapter in Miami, but they decided the place had more potential than they had realized when the living wage was won. Shortly thereafter, ACORN also created a chapter in neighboring Broward County. In addition, some of those involved in the Miami-Dade living wage effort became encouraged and decided to start other organizations. In 1998, one individual working in the CCLW who had a long history as both a community and labor organizer started a South Florida Interfaith Committee for Worker Justice. Only a few clergy and lay people attended initial meetings, and the group struggled to establish itself during the next two years. But it eventually obtained sufficient funding for a paid staff of one, and since has become very active in a variety of worker rights issues – from basic rights for immigrant workers, unionization rights, and public policy measures for workers in poverty. By 2003, it was widely considered one of the most active and effective such interfaith organizations in the country. In 1999, another CCLW activist, who was a veteran civil rights activist from the 1960s, began a chapter of the national labor-community group Jobs with Justice (JwJ) through the auspices of the local National Association for the Advancement of Colored People (NAACP) chapter and

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some local labor leaders. The new South Florida Jobs with Justice has engaged in a number of high profile mobilizations. It brought over 20,000 people to the state capital in Tallahassee to protest an end to state affirmative action, and has also been prominent in Haitian immigrant workers’ rights issues, “union busting” situations, voters’ rights marches, and public school class size education initiatives. By 2003, the national JwJ organization considered it one of the best local chapters in the nation. It is difficult to determine how much of this would have happened even if there had been no living wage campaign in Miami. But it does seem apparent at least some of the reason for the newly acquired activism, and definitely of the new prominence of labor-community coalition efforts, is due to the living wage campaign and victory. The campaign developed union contacts with other progressive community forces, and the victory inspired others to undertake new efforts. The CCLW persisted after the Miami-Dade County victory. In 2001, it won a similar ordinance in the city of Miami-Beach. As of 2003, it has ongoing campaign efforts in the cities of Coral Gables, South Miami, and Miami. In a notable change from the earlier county effort, churches and prominent ministers and lay people have come forward to play a major role in these latest efforts. There is no doubt that the “living wage” vision has animated a growing response from people in the faith communities. Diffusion effects The Miami-Dade living wage victory stimulated interest throughout the state. Shortly after passage of the ordinance, Florida Impact, a non-profit statewide faith-based economic justice organization, invited me and four other of the CCLW’s core activists to explain the living wage concept and how the ordinance was won to a statewide meeting in Orlando. From this meeting, a spider web of contacts diffused the movement throughout the state. A Saul Alinsky-style1 church-based community organizing group in the city of Jacksonville, Interchurch Coalition for Action, Reconciliation and Empowerment (ICARE) invited me to speak to their pastors at a daytime meeting, and to an assembly of 150 of their key church member activists at an evening meeting. Subsequently a campaign was begun in that city. A central labor council leader from Gainesville who attended the Orlando meeting also had me do a training session for fifty activists from many organizations. After the training, a living wage campaign was born. Church, labor, and academic activists from the city of Orlando who had attended the Florida Impact meeting later began a campaign and again invited me to attend their opening meeting to advise them on how to start. A sister organization to ICARE, the Tampa-based Hillsborough Organization for Progress and Equality (HOPE) later began a living wage campaign after being introduced to the concept in a national training

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conference in Miami where I had been invited to talk about the MiamiDade living wage victory. Again, I was flown to Tampa to kick off the living wage drive at a community meeting in a church and a private luncheon with a number of pastors. I was not the only CCLW activist asked to play the role of “Johnny Appleseed” spreading the living wage message. CCLW colleague Arthur Rosenberg, a Florida Legal Services lawyer who had drafted the initial version of the Miami-Dade ordinance, helped spread the living wage movement to the two counties just north of Miami-Dade County. He spoke to the Palm Beach chapter of the National Organization for Women (NOW); then word spread to politicians and union leaders. A campaign began. The same individual, through Legal Services connections, initiated a campaign in Broward County, just north of Miami-Dade County. Not all of these campaigns were as successful as was the Miami-Dade one. Gainesville, Orlando, and Palm Beach campaigns only resulted in relatively meaningless ordinances affecting only direct public employees. Few workers won pay increases, and service contractors were not covered at all. Jacksonville and Tampa still have no legislation, although efforts were still underway as of the spring of 2003. Broward County efforts did result in a major victory; in October 2002, a strong ordinance at pay levels higher than those at Miami-Dade County ($9.57 with health care coverage, $10.82 without, and indexed for inflation) was passed. Building on that victory, a number of Broward County cities (Ft. Lauderdale, Hollywood, and Pompano Beach) are considering living wage legislation as of the summer of 2003. But whatever their degree of success, all of these campaigns were directly inspired by the Miami-Dade living wage victory. In fact, the spread of the living wage “contagion” throughout the state has been so great that it has provoked a backlash, as will be related in the following section. Political backlash effects Conservative and business interests did not look upon the spread of the living wage movement throughout the state of Florida with equanimity. In Gainesville, the Chamber of Commerce fought the proposed legislation strongly, and eventually succeeded in watering it down to an almost meaningless final version. In Orlando, an individual from a business trade group sat in on living wage committee meetings to spy on them without revealing her business ties. In Palm Beach, the county chair of the Republican Party threatened virtual expulsion from the party against a county commissioner, causing him to reverse his vote and thereby kill a meaningful measure. In Broward County, the Associated Builders and Contractors, a staunchly anti-union group purporting to be an association of construction contractors but actually funded by and including a large number of

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conservative business forces, attempted to kill the legislation even though no building contractors would be affected. A Washington, DC, “think tank” that is heavily funded by and appears to be a front group for the National Restaurant Association, the Employment Policies Institute, has long had as its primary agenda opposition to all minimum wage increases (or even to minimum wages at all). This organization commissioned Florida State University economist David Macpherson (author of Chapter 4 in this volume) to prepare a study entitled The Employment Impact of a Comprehensive Living Wage Law: Evidence from Florida (Macpherson 2002). In my view, the study is nothing but mathematical prediction of hundreds of thousands of lost jobs in the state should it adopt a statewide universal minimum wage of either almost $9 per hour, or over $10 per hour. Aside from mixing apples with oranges (living wage laws with minimum wage laws), the so-called study relies on a theoretical assumption of a high “elasticity of demand” for low wage labor that is far from universally accepted by economists. (That means that it is assumed that there will be large losses of jobs if wages go up.) Once this questionable assumption is made, and once a limited living wage law is conflated with a universal minimum wage law covering all employers in the state, it is impossible to obtain any result other than massive job loss (Chapman 2002). No empirical evidence is given of actual job loss from any of the living wage ordinances passed to date. Finally, the study contains a political attack on supporters of a living wage, red-baiting a number of them and hinting that a small cabal of conspirators is behind the living wage movement, not a broad-based coalition of unions, faith-based organizations, community groups, and working families. The Macpherson study and the efforts of its national and local funders and supporters had the most impact at the state level, where Republican Florida governor Jeb Bush and a legislature solidly controlled by conservative business-friendly Republicans is in control. In the years 2001 and 2002, legislation had been introduced to make passage of any living wage 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 delegation to the state legislature is primarily Republican and Cuban American. Not wishing to alienate the Cuban community, which is an important element in the Republican Party’s dominance of the state, statewide Republican leaders had let the measure stall. However, in 2003, a coalition of business groups chose to make this legislation a high priority. The state Chamber of Commerce, the Florida chapter of the National Restaurant Association, and the state Associated Builders and Contractors pushed hard on the issue. They were also backed by the Associated Industries of Florida, an extremely powerful business lobbying force in the state. This coalition backed a bill to prohibit cities or

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counties in Florida from setting a minimum wage level higher than the federal one. Out of sensitivity to the feelings of the Miami-Dade delegation, this bill did allow one exemption: local governments could legally set minimum wage levels for their own or related public sector employees, as well as those of private contractors contracting with the local government. That meant that some of the Miami-Dade living wage ordinance would be allowed to stand: the part covering contractors. However, the portion of the law covering those businesses working under a permit with the county at the Miami airport would be invalidated. Somewhere between 2,000 and 4,000 workers at the airport, primarily baggage and food handlers, would lose coverage under this law. Most would face pay cuts from $10.30 per hour (which is what most covered businesses were paying rather than $9.00 per hour plus health care coverage) to the minimum wage ($5.15 per hour) or close to it (White 2003: C1). In May 2003, this piece of legislation was passed in the Florida legislature. A great deal of controversy followed. Elected Miami-Dade officials from both parties protested and requested Governor Bush to veto it. The Miami Herald editorialized against the legislation and asked the governor to veto it (Miami Herald 2003). Miami-Dade County Mayor Alex Panelas and a number of local politicians and community leaders held a press conference at the airport to protest the law and to request Governor Bush to veto it (Cordovi 2003: 3C). In early June, Governor Bush signed the legislation into law while issuing disclaimers and diversionary statements to confuse the public about the actual effect of what he was doing. He wrote a letter accompanying his signature that stated: I am signing this legislation with the express expectation that it will not be used to reduce the wages of any current employee . . . I expect employers to honor the law and to honor their commitments to these individuals on both legal and moral grounds. This administration will use its power and resources to ensure that they do. (Clark 2003) He also claimed to have called company heads to warn them not to use the law to cut airport workers’ pay, even though that was precisely what the legislation he was signing would permit. Bush also claimed that he would seek new legislation making it clear that security-sensitive jobs should be exempt from the new law (ibid.). Despite these attempts to mollify opposition, his signature meant that the Miami-Dade ordinance would lose more than half its coverage. It also meant that any future living wage ordinances in the state would have to be only of a limited nature (covering only public employees and/or employees of direct contractors with the public entity). Thus, the living wage movement has not only gained momentum, it has

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also generated a political backlash from business and elite interests. In a state such as Florida where wealthy and corporate interests openly control much of the political process, a backlash from such sources can indeed be potent.

Conclusion This chapter has analyzed the various impacts of the Miami-Dade living wage campaign and ordinance. In doing so, it attempts to avoid looking at any one effect (or set of effects) in isolation. Instead, multiple impacts are analyzed together. That done, what does the picture look like? In general, the living wage campaign and the resulting ordinance have had positive impacts. However, those impacts are often of less magnitude than fervent supporters or boosters may wish them to be. Wage increases were won, but for far less workers than intended. Public discourse on issues of work and poverty has changed somewhat, but the hegemony of “free market” language and frameworks of analysis has not been fundamentally shaken. “Social movement” dynamics were furthered, but the living wage has not been a “magic bullet” able to create a full-blown social movement from nothing. Very real but also somewhat modest gains have occurred in attempts to stimulate labor–community coalition activism. The movement has spread rapidly, but has encountered obstacles to success in most other parts of the state. And, finally, a backlash from business and elite interests has grown rapidly, especially at the statewide political level. Nevertheless, the Miami-Dade living wage movement has to be considered a success. The living wage issue has generated widespread public support, well beyond that of most other progressive causes. It also has been much more successful than most in generating working relationships between unions and community groups. While in some respects the Miami living 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.

Note 1 Saul Alinsky is often considered the “father” of modern community organizing in the United States. He founded the Industrial Areas Foundation (IAF), a network of community organizations based in churches that organizes and fights for the interests of low-income communities. An IAF affiliate in Baltimore, Baltimoreans United in Leadership Development (BUILD), was instrumental in the passage of the 1994 Baltimore living wage ordinance that kicked off the modern living wage movement.

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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 of a Potential Florida Living Wage Law,” unpublished; available from the author at the Economic Policy Institute, 1660 L Street, NW, Suite 1200, Washington, DC 20036. Clark, L. (2003) “Panelas Critical of New Pay Law,” Miami Herald, June 5. Available: http://www.miami.com/mld/miamiherald/6016050.htm (accessed June 10, 2003). Cordovi, A. (2003) “Pay-reduction Bill Protested,” Miami Herald (Broward County edition), May 30, p. 3C. Macpherson, D. (2002) The Employment Impact of a Comprehensive Living Wage Law: 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 Florida Business, Summer, 28–9. Nissen, B. (1998) “The Economic Impact of a Living Wage Ordinance on MiamiDade County,” Miami: Florida International University, Center for Labor Research 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 Research Association, 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.

12 Minimum wages and living wages Raising incomes by mandating wage floors David Neumark

A number of policy proposals and initiatives have been used in the United States to attempt to reduce poverty, or more generally to assist lowincome families, by increasing incomes of families at the bottom end of the income distribution. My research over the past decade or so has focused on studying the effectiveness of two policies that attempt to accomplish this by mandating higher wages for low-wage workers: minimum wages and living wages. Minimum wages were first established on a national level with the Fair Labor Standards Act of 1938. While coverage was initially quite restrictive, 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 with some exceptions. The highest state minimum wages currently are in Alaska ($7.15), Washington ($7.01), Oregon ($6.90), and California and Massachusetts ($6.75).1 Living wage ordinances are a much more recent innovation. Baltimore was the first city to pass such legislation, in 1994, and nearly ninety cities and a number of other jurisdictions have followed suit.2 Living wage laws have three central features. First, they impose a wage floor that is higher – and often much higher – than traditional federal and state minimum wages. Second, living wage levels are often explicitly pegged to the wage level needed for a family with one full-time, year-round worker to reach the federal poverty line. Typical living wage levels as of 2002 were $7.72 (Los Angeles), $8.83 (Detroit), and $10.25 (Boston). Third, coverage by living wage ordinances is highly restricted. Frequently, cities impose wage floors only on companies under contract (generally including non-profits) with the city. Other cities also impose the wage floor on companies receiving business assistance from the city, in almost every case in addition to coverage of city contractors. Finally, a much smaller number of cities also impose the requirement on themselves and pay city employees a legislated living wage. The central policy goal of both minimum wages and living wages is to raise incomes of low-wage workers so as to reduce poverty. Senator

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Edward Kennedy, a perennial sponsor of legislation to increase the minimum wage, has been quoted as saying “The minimum wage was one of 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 “the living wage is a crucial tool in the effort to end poverty.”3 Thus, while there is generally no single measure with which the distributional effects of a policy can be unambiguously assessed, and while overall welfare effects are much more complicated, evaluating the impact of mandated wage floors on poverty is a reasonable means of assessing the success of these wage floors. While mandating higher wages for low-wage workers may strike a noneconomist as a natural way to fight poverty, there are two reasons why they may not help to achieve this goal. First, standard economic theory predicts that 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 wage gains accrue to workers whose employment is unaffected may have to be offset against potential job losses for some workers. Second, mandated wage floors may ineffectively target low-income families. Broadly speaking, lowwage workers in the United States belong to two groups. The first is very young workers who have not yet acquired labor market skills, but who are likely to escape low-wage work as skills are acquired. The second is lowskilled adults who are likely to remain mired in low-wage work (Carrington and Fallick 2001), and who – as adults – are much more likely to be in poor families. To the extent that the gains from mandated wage floors accrue to low-wage adults and the losses fall on low-wage, non-poor teenagers, mandated wage floors may well reduce poverty. But there is no theoretical reason to believe that this outcome is more likely than the reverse, with concomitant adverse outcomes for low-income families. Thus, while theory predicts employment losses and hence implies that there are likely to be both winners and losers from mandated wage floors, the distributional effects of mandated wage floors is a purely empirical question. This chapter discusses each of these issues in the context of both minimum wages and living wages. The next section discusses some general economic issues regarding mandated wage floors, focusing on the potential disemployment effects of minimum wages or living wages and how economists measure such effects. The following two sections present evidence on the employment and distributional effects of minimum wages and living wages, and discuss some of the differences between living wages and minimum wages. The final section concludes.

The economics of mandated wage floors The textbook economic theory of the effects of mandated wage floors is straightforward. In the textbook treatment, there is a competitive labor

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market for a single type of labor, for which there is an upward-sloping aggregate labor supply curve and a downward-sloping aggregate labor demand curve. Prior to the imposition of the wage floor, there is an equilibrium 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 minimum wage is “binding” – then employers reduce their use of labor for two reasons. First, there is a substitution effect leading employers to use relatively less of the now-more-expensive labor and relatively more of other inputs (such as capital), in an effort to find a new cost-minimizing input mix. Second, because costs must be higher with this new input mix (otherwise employers were not previously minimizing costs), the prices of the products that firms produce must rise. This, in turn, reduces demand for each firm’s product, leading to a reduction in the scale of operation. Consequently, both this scale effect and the substitution effect lead to lower employment, say at the level Lf > L. In the extensive research literature on minimum wages (and the newer literature on living wages), employment effects are typically summarized in terms of the “employment elasticity.” The employment elasticity is the ratio of the percentage change in employment to the percentage change in the 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 the percentage change in employment resulting from a given percentage change in the mandated wage floor. Thus, for example, an elasticity of ⫺0.1 implies that a 10 percent increase in the wage floor reduces employment by 1 percent. Of course, one can also define elasticities of other outcomes, such as the elasticity of wages with respect to the minimum wage. It is important to emphasize that the simple textbook model of the effects of wage floors is just that – only a model. That the model predicts disemployment effects does not imply that minimum wages must reduce employment, because the model may not provide a sufficiently rich description of the labor market. Thus, at best it leads to a prediction that should be tested with data. At the same time, the prediction that a higher mandated wage floor reduces employment is based on a core tenet of the neoclassical economic model – that demand curves slope downward. This may explain why some of the evidence discussed below suggesting that minimum wages do not reduce employment generated such a firestorm among economists. Staying within a market-based perspective on labor markets, there are two classes of explanations for why wage floors may not produce detectable declines in employment, or may even in some cases increase employment. The first class of explanations maintains the basic competitive framework, but recognizes that labor is more heterogeneous than

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suggested by the simple textbook model. When there are different types of labor differentiated by skill level, employers may substitute from one type of labor to another. Furthermore, some of the higher-skill individuals may not be in the labor market initially, but may instead be in school and only drawn into the labor market by the higher wages employers are willing to pay after the wage floor is imposed. In this case, even though overall employment is still predicted to decline, possibilities for substitution among labor types will moderate the disemployment effects – possibly substantially – and if we focus on subgroups of workers, employment may not fall at all or could increase. For both reasons, disemployment effects of wage floors may be difficult to detect statistically. (See Neumark and Wascher (1996) for a summary of these arguments and related evidence.) The second class of explanations presents a more fundamental challenge to the neoclassical model by suggesting that wage floors could actually increase employment in the aggregate. These explanations rest on some version of monopsony power in labor markets. In the competitive model, the aggregate labor supply curve is upward-sloping, but employers are assumed to be small relative to the market and hence can hire all the labor they want at the existing wage. In the classical monopsony model employers are large relative to the labor market and hence face upwardsloping labor supply curves to the firm. They must also pay workers the same wage (that is, they cannot price discriminate). Thus, when an employer wants to hire more labor, the cost of doing so is higher than the wage required to attract a new worker, and hence the marginal cost of labor exceeds the wage. Because a profit-maximizing employer hires up to the point where the marginal cost of labor equals the marginal revenue product, employment is lower and wages are lower than in a competitive market. In this case a mandated wage floor higher than the equilibrium monopsony wage can increase employment by breaking the link between the wage and the marginal cost of labor curve. This argument was originally offered in Stigler (1946), although he was skeptical of government’s ability to predict the wage floor that would actually increase employment. More modern versions of monopsony models based on labor market frictions are presented in Manning (2003). The driving force behind monopsony – increased costs of employment of the existing workforce when a new worker is hired – can also arise from a need to supervise workers (Lang 1987) and in workplaces with tipped employees (Wessels 1997).

Minimum wages Labor economists have written innumerable papers testing the prediction that minimum wages reduce employment. Earlier studies used aggregate time-series data for the United States to estimate the effects of changes in the national minimum wage. The consensus view from these “first genera-

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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, employment of low-skilled individuals falls by 1 to 2 percent.4 More recent studies have used panel data covering multiple states over time, exploiting differences across states in minimum wages. This approach permits researchers to abstract from aggregate economic changes that may coincide with changes in the national minimum wage and hence make untangling the effects of minimum wages difficult when using aggregate time-series data. (See, e.g., Card 1992a, 1992b; Williams 1993; Neumark and Wascher 1992.) Evidence from these “second generation” studies has spurred considerable controversy regarding whether or not minimum wages reduce employment of low-skilled workers, with some researchers arguing that the predictions of the standard neoclassical model are wrong, and that minimum wages do not reduce and may even increase employment. The most prominent and often-cited such study uses data collected from a telephone survey of managers or assistant managers in fast-food restaurants in New Jersey and Pennsylvania before and after a minimum wage increase in New Jersey (Card and Krueger 1994). Not only do these data fail to indicate a relative employment decline in New Jersey, but instead they indicate that employment rose sharply there (with positive employment elasticities in the range of 0.7). On the other hand, much recent evidence using similar sorts of data tends to confirm the prediction that minimum wages reduce employment of low-skilled workers (Burkhauser et al. 2000; Zavodny 2000), as does earlier work with a much longer panel of states (Neumark and Wascher 1992).5 Moreover, an approach to estimating employment effects of minimum wages that focuses more explicitly on whether minimum wages are high relative to an equilibrium wage for affected workers reveals two things: first, that disemployment effects appear when minimum wages are more likely to be binding (because the equilibrium wage absent the minimum is low); and second, that some of the small or zero estimated disemployment effects in other studies appear to be from regions or periods in which minimum wages were much less likely to have been binding (Neumark and Wascher 2002). Finally, a re-examination of the New Jersey–Pennsylvania study that I conducted, based on payroll records collected from fast-food establishments, finds that the original telephone survey data were plagued by severe measurement error, and that the payroll data generally point to negative employment elasticities.6 Across this array of more recent evidence, the estimated effects often parallel the earlier time-series research indicating that the elasticity of employment of low-skilled workers with respect to the minimum wage is in the ⫺0.1 to ⫺0.2 range, with estimates for teenagers – who have often been the focus of minimum wage research – closer to ⫺0.1. As further

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evidence, a leading economics journal recently published a survey including economists’ views of the best estimates of minimum wage effects. Results of this survey, which was conducted in 1996 – after most of the recent research on minimum wages was well known to economists – indicated that the median “best estimate” of the minimum wage elasticity for teenagers was ⫺0.1, while the mean estimate was ⫺0.21 (Fuchs et al. 1998). Thus, although there may be some outlying perspectives, economists’ views of the effects of the minimum wage are centered in the range of the earlier and many of the more recent estimates of the disemployment effects of minimum wages. While the research on disemployment effects appears to settle (for many, at least) a question regarding the labor demand effects of mandated wage floors, it does not answer the question of whether minimum wages raise incomes of low-wage workers, or more importantly of poor or lowincome families. It is often argued that an employment elasticity as small as ⫺0.1 or ⫺0.2 implies that minimum wage increases must raise incomes of low-wage workers, because the elasticity is much smaller (in absolute value) than ⫺1 (e.g. Freeman 1996). However, these elasticity estimates do not necessarily capture the relevant parameter, which is the elasticity of the demand for minimum wage labor with respect to the minimum, ignoring the possibility that the employment effects are sharpest for those at the minimum wage. In addition, these estimates pay no regard to possible hours effects, and use the legislated minimum wage change – rather than the typically smaller actual wage change induced by a minimum wage increase – in the denominator. In the other direction, this calculation also ignores possible wage increases for workers above the minimum wage. While these considerations suggest that the elasticity is closer to ⫺1, they do not necessarily imply that the elasticity is actually that large, although in principle it could be even larger. The critical point, though, is that the effects of minimum wages on low-wage workers must be studied directly. Back-of-the-envelope calculations based on employment elasticities estimated for different purposes cannot pin down these effects. Turning first to low-wage workers, I have recently examined the effects of minimum wages on employment, hours, wages, and ultimately labor income of workers at different points in the wage distribution (Neumark et al. forthcoming). This research indicates that workers initially earning near the minimum wage are on net adversely affected by minimum wage increases, while, not surprisingly, higher-wage workers are little affected. While wages of low-wage workers increase, their hours and employment decline, and the combined effect of these changes is a decline in earned income. For minimum wage workers, the hours elasticities are in the range of ⫺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 the evidence does not support the conclusion that minimum wage increases raise the earnings of minimum wage workers.

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Finally, in turning to the key distributional question – the effects of minimum wages on low-income families – we must keep in mind the imperfect mapping between low-wage workers and low-income families. Specifically, while there are few poor or low-income families with highwage workers, there are many high-income families with low-wage workers. Table 12.1 illustrates this point. Table 12.1 looks at family income-to-needs ratios and the presence of low-wage workers in families in 1989 (based on March 1990 Current Population Survey data), and how these would be affected by the April 1990 increase in the federal minimum wage; poverty is defined as income-to-needs less than one. The calculations simply ask where workers likely to have their wages raised by the 1990 minimum are in the distribution of family income-to-needs, and hence effectively assume a “best-case” scenario of no disemployment effects. Table 12.1 reveals that, not surprisingly, minimum wage workers are over-represented at the bottom of the income distribution. For example, 22 percent of potentially affected workers (defined as those between the previous minimum and the 1990 minimum) are in poor families. At the same time, many of the affected workers are in families with higher income-to-needs – e.g., nearly one-third of affected workers are in families with income-to-needs greater than three. Reflecting the weak link between low-wage workers and low-income families, even Card and Krueger acknowledge that minimum wages target the intended beneficiaries 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 minimum wages help poor or low-income families is to look at the evidence directly. While the literature on minimum wages has emphasized employment effects, very recent research has turned to the distributional question (Neumark et al. 2002). Evidence based on very flexible estimates of changes in the income-to-needs distribution associated with minimum wage increases 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 1 to 1.25 1.25 to 1.5 1.5 to 2 2 to 3 >3

6.1 2.8 3.3 8.2 17.9 61.7

22.0 6.1 6.9 11.9 20.3 32.8

Source: Burkhauser et al. (1996: Table 2). Note Calculations based on 1990 March CPS file covering family income in 1989, and 1990 federal minimum wage increase.

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Table 12.2 Percentage change in proportions of families in ranges of income-toneeds 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 Unemployment controls Fixed state and year effects

4.5** 4.2**

4.1** 3.5**

–3.4** –3.2**

3.8*

3.3**

–4.1**

Source: Neumark et al. (2002: Table 3). Notes The data set covers 1986–1995. Reported estimates are percent change in proportion of families 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 proportional shifts from income-to-needs distribution prior to estimation.

suggest that the proportions of families in poverty or near-poverty (income-to-needs less than 1.5) tend to rise following minimum wage increases, offset by declines in the proportion of families above the poverty line, in the 1.5 to 3 income-to-needs range. These results provide no basis for concluding that minimum wages reduce the proportion of families living in poverty or near-poverty, and if anything indicate that minimum wages increase poverty. Thus, the combined evidence indicates that minimum wages do not appear to accomplish their principal policy goal of raising incomes of low-wage workers or of poor or low-income families. One qualification to keep in mind is that this research tends to focus on the short-run effects of minimum wages, typically looking at effects at most a year after minimum wage increases. I am presently working on estimating the longer-run effects of minimum wages. But two sets of existing findings point 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, at least where these enrollments are not constrained by compulsory schooling laws (Neumark and Wascher 2003; Chaplin et al. 2003). Second, extending earlier research on the relationship between minimum wages and on-thejob training, a recent study I completed finds that minimum wages reduce training that is intended to improve skills on the current job (Neumark and Wascher 2001a). Thus, minimum wages may reduce the human capital accumulation that leads to higher wages and incomes.

Living wages The newest “front” in efforts to raise incomes of low-wage workers is the living wage campaigns that have brought living wage laws to nearly ninety cities since the first such law passed in Baltimore in 1994, with campaigns

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under way in many more cities. I have recently completed two studies (Neumark and Adams forthcoming (a) and (b)) that analyze the effects of living wage laws on low-wage workers and low-income families (see also Neumark 2002). The research begins by asking whether there is evidence that living wage laws lead to detectable increases in wages at the lower end of the wage or skill distribution. While such effects are readily detectable with respect to minimum wages, the question arises with respect to living wages because of the low fraction of workers covered, and because of questions about enforcement.7 To estimate the impact on wages, the effects of living wages are identified from comparing changes in labor market outcomes in cities passing living wages with cities that do not pass such laws, paralleling the second-generation minimum wage research that identifies the effects of minimum wages by comparing changes in the same time period in states that did and did not increase the minimum wage. The same strategy is used 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 to sizable effects of living wage laws on the wages of low-wage workers in the cities in which these laws are enacted. In fact, the magnitude of the estimated wage effect (an elasticity of approximately 0.07 for workers in the bottom tenth of the wage distribution) is much larger than would be expected based on the apparently limited coverage of city contractors by most living wage laws. Additional analyses reported in Table 12.3, which help to reconcile this large effect, indicate that the effects are driven by cities in which the coverage of living wage laws is broader – namely cities that impose living wages on employers receiving business assistance from the city. For these business assistance living wage laws, the estimated elasticity of wages in the bottom tenth of the wage distribution with respect to living wages is approximately 0.1, while for contractor-only living wage laws the estimated elasticity is indistinguishable from zero. While the 0.1 elasticity may suggest a small impact, it is an average wage increase experienced by low-wage workers, whereas the actual consequence would most likely be a much larger increase concentrated on a smaller number of workers directly affected by the living wage law. As with minimum wages, the potential gains from higher wages may be offset by reduced employment opportunities. The evidence reported in the second column of Table 12.3 indicates that living wages do entail disemployment effects. The point estimate of ⫺0.056 reported there implies an employment elasticity of about ⫺0.14. More importantly, the estimated disemployment effect is a bit bigger and statistically significant precisely for the type of living wage law that generates positive wage effects – in particular, for low-skill workers covered by the broader laws that apply to employers receiving business assistance. Thus, as economic theory would lead us to expect, living wage laws present a trade-off between wages and employment.

0.005

0.105**

Contractor-only living wage laws: Log living wage, lagged 12 months

Business assistance living wage laws: Log living wage, lagged 12 months ⫺0.059*

⫺0.053

⫺0.056**

Employment, lowest decile of predicted wage distribution

–

–

⫺0.048**

⫺0.054**

⫺0.026

⫺0.033**

Probability that family Probability that family earnings below poverty income below poverty

Notes The data for the first two columns cover 1996–2000, and for the latter two columns cover 1995–99. The control group is other urban workers; the regressions include controls for city, year, month, minimum wages, and other individual-level controls in the wage and employment specifications. Each entry is an estimate from a separate specification. ** (*) indicate estimate is statistically significant at 5 percent (10 percent) level.

Sources: Neumark and Adams (forthcoming (a) and (b)), various tables.

0.070**

Log wages, lowest decile of wage distribution

All living wage laws: Log living wage, lagged 12 months

Dependent variable

Table 12.3 Effects of living wage laws

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This sets the stage for weighing these competing effects, in particular examining the effect of living wage laws on poverty in the urban areas in which they are implemented. Overall, the evidence in the third and fourth columns of Table 12.3 suggests that living wages may be successful at reducing urban poverty in the cities that have adopted such legislation. The estimate in the third column indicates that living wages significantly reduce the probability that family earnings fall below the poverty line, and the estimate in the fourth column indicates that they significantly reduce the probability that total family income falls below the poverty line. Paralleling the findings for wage and employment effects, the impact on poverty arises only for the broader living wage laws that cover employers receiving business assistance from cities. The overall estimate in the fourth column implies an elasticity of the proportion of poor families with respect to the living wage of about ⫺0.19. This seems like a large effect, given a wage elasticity for low-wage workers of less than 0.1. Of course no one is claiming that living wages lift a family from well below the poverty line to well above 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 manifested as larger gains concentrated on a possibly quite small number of workers and families. Thus, even coupled with some employment reductions, 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 floors will lead to some employment reductions, it makes no predictions whatsoever regarding the effects of living wages on the distribution of family incomes, or on poverty specifically. The distributional effects depend on both the magnitudes of the wage and employment effects (and other effects), and on their incidence throughout the family income distribution. Second, and following from this same point, there is no contradiction between the evidence that living wages reduce poverty and that minimum wages increase poverty. The gains and losses from living wages may be of quite different magnitudes, and fall at different points in the distribution of family income, than do the gains and losses from minimum wages; this depends in part on the types of workers who are affected by these alternative mandated wage floors. Obviously, though, an important area for future research is to parse out the wage and employment effects of minimum wages and living wages at different points in the distribution of family incomes. Of course, a finding that living wage laws reduce poverty does not necessarily imply that these laws increase economic welfare overall (or vice versa). Living wage laws, like all tax and transfer schemes, generally entail some inefficiencies that may reduce welfare relative to the most efficient such scheme. Finally, there is another reason to adopt a cautious view regarding living wages. As already noted, the effects of living wages appear only for broader living wage laws covering employers receiving

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business assistance. The narrower contractor-only laws tend to have no detectable effects. This raises a puzzle. Why, despite the anti-poverty rhetoric of living wage campaigns, do they often result in passage of narrow contractor-only laws that cover a very small share of the workforce and do not benefit low-wage workers and low-income families? One hypothesis I have explored (Neumark 2001) is that municipal unions work to pass living wage laws as a form of rent-seeking. Specifically, by forcing up the wage for contractor labor, they reduce or eliminate the incentive of cities to contract out work done by their members, and in so doing increase the bargaining power of municipal unions and raise wages of their members. There is ample indirect evidence consistent with this, as municipal unions are strong supporters of living wage campaigns; for example, the American Federation of State, County, and Municipal Employees was one of the major organizers of the Baltimore living wage campaign (Osterman et al. 2001). As further evidence, I explored the impact of living wage laws on the wages of lower-wage unionized municipal workers (excluding teachers, police, and firefighters, who do not face competition from contractor labor). The results are summarized in Table 12.4. The estimate in the first column indicates that these workers’ wages are indeed boosted by living wages, with an elasticity of 0.16. The other columns, in contrast, show estimated effects of living wages on groups for which, under the rent-seeking hypothesis, no effects should appear (such as other city workers, or teachers, police, and firefighters), whereas under other scenarios such as living wage increases being associated with rising city wages generally, such effects might appear. The fact that there are no significant positive estimates for other groups of workers bolsters the likelihood that living wages boost wages of unionized municipal workers by increasing rents. While there are other explanations of why unionized municipal workers might support living wage laws, or why these laws are so often narrowly circumscribed, direct gains to unionized municipal workers would appear to be rather telling evidence of rent-seeking behavior. In sum, even if living wage laws have some beneficial effects on the poor, this last evidence suggests that they may well be driven by motivations other than most effectively reducing urban poverty. This does not imply that living wages cannot be an effective anti-poverty policy. But it certainly suggests that living wages deserve closer scrutiny before choosing to implement them to combat poverty.

Conclusion Where do all of these estimates leave us regarding the use mandated wage floors to help poor or low-income families in a modern economy like that of the United States? I suppose the most apt stance to take based on the evidence is “skeptical.” Minimum wages deliver no net benefits to poor or

⫺0.106

⫺0.022

⫺0.037

0.164**

0.005

Unionized, municipal

Non-unionized, municipal

Unionized, non-municipal

Unionized, municipal

Non-unionized, non-municipal

Non-contractor living wage laws

Contractor living wage laws

Notes See notes to Table 12.3. Data are aggregated to city-by-quarter level. ** (*) indicate estimate is statistically significant at 5 percent (10 percent) level. Estimates are weighted by the number of observations in the cell used to construct the wage measure. Teachers, police, and fire are excluded from the first and fifth columns.

Source: Neumark (2001).

Living wage effect over 12-month period

Workers

Table 12.4 Estimates of effects of contractor living wages on wages of below-median wage workers

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low-income families, and if anything make them worse off. Living wages have a more salutary effect, reducing urban poverty. But while there is, therefore, a more compelling case for living wages, this evidence does not imply they are the most effective means of reducing poverty. Furthermore, the adverse employment effects of living wages on low-skill individuals suggest that living wages may reduce poverty without necessarily helping the lowest-wage workers, a conclusion reinforced by new evidence in Adams and Neumark (2003). It may simply be an uncomfortable fact that trying to help low-income families through mandating higher wage floors tends to have negative consequences for the least-skilled workers, since such wage floors amount to a tax on the employment of these workers. In this case, even if wage floors deliver some benefits to low-income families – as appears to be the case for living wages, but not minimum wages – additional policies may be needed to help the most disadvantaged workers and families. These could take the form of a sufficient safety net to protect families with inadequate incomes, strategies to enhance skills that would make individuals in poor families more employable and employable at higher wages, and policies such as earned income tax credits that encourage employment by supplementing income. A sufficient safety net is easy to defend, in particular in the case of children who suffer consequences of low parental income, yet obviously have in no way chosen to have to live a life supported by government assistance. Unfortunately, in the United States at least, political support for a sufficient safety net for families with non-working adults is weak. Enhancing skills is a no-brainer in principle, but difficult and expensive to do in practice (Heckman 1993). Based on the broader research record (see also Hoffman and Seidman 2003; Neumark and Wascher 2001b), while I am skeptical regarding mandated wage floors, I am more supportive of earned income tax credits, which by subsidizing employment are very much the opposite of a tax on the use of low-skill labor, and which effectively target low-income families rather than low-wage workers.

Acknowledgments I am grateful to William Wascher, Mark Schweitzer, and Scott Adams for research collaboration. Any views expressed are my own, and not those of the Public Policy Institute of California.

Notes 1 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 Employment Policies Institute, for up-to-date details on living wages.

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3 See http://www.epinet.org/Issueguides/livingwage/livingwagefaq.html 4 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 effects are reported in Wellington (1991). A more recent time-series study using data through 1993 and employing more sophisticated tools of time-series analysis finds stronger disemployment effects (Williams and Mills 2001). 5 See also the exchange on the evidence in this chapter in Card et al. (1994) and Neumark 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 Improved Evidence,” unpublished. Brown, C., Gilroy, C., and Kohen, A. (1982) “The Effect of the Minimum Wage on Employment 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 Distributional Analysis in Myth and Measurement: The New Economics of the Minimum Wage,” Industrial and Labor Relations Review 49 (3): 547–52. Burkhauser, RV., Couch, K.A., and Wittenburg, D.C. (2000) “A Reassessment of the New Economics of the Minimum Wage Literature with Monthly Data from the Current Population Survey,” Journal of Labor Economics 18 (4): 653–80. Card, D. (1992a) “Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage,” Industrial and Labor Relations Review 46 (1): 22–37. Card, D. (1992b) “Do Minimum Wages Reduce Employment? A Case Study of California, 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 and William Wascher, ‘Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws,’ ” Industrial and Labor Relations Review 47 (3): 487–96. Card, D. and Krueger, A.B. (1994) “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review 84 (4): 772–93. Card, D. and Krueger, A.B. (1995) Myth and Measurement: The New Economics of the Minimum Wage, Princeton, NJ: Princeton University Press. Card D. and Krueger, A.B. (2000) “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply,” American Economic Review 90 (5): 1397–420. Carrington, W.J. and Fallick, B.D. (2001) “Do Some Workers Have Minimum Wage Careers?” Monthly Labor Review May: 17–27. Chaplin, D.D., Turner, M.D., and Pape, A.D. (2003) “Minimum Wages and School Enrollment of Teenagers: A Look at the 1990s,” Economics of Education Review 22 (1): 11–21. Clymer, A. (1999) Edward M. Kennedy: A Biography, New York, NY: William Morrow & Co.

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Freeman, R.B. (1996) “The Minimum Wage as a Redistributive Tool,” The Economic Journal 106 (436): 639–49. Fuchs, V.R., Krueger, A.B., and Poterba, J.M. (1998) “Economists’ Views About Parameters, Values, and Policies: Survey Results in Labor and Public Economics,” Journal of Economic Literature 36 (3): 1387–425. Heckman, J. (1993) Assessing Clinton’s Program on Job Training, Workfare, and Education in the Workplace, NBER Working Paper No. 4428, Cambridge, MA: NBER. Hoffman, S.D. and Seidman, L.S. (2003) Helping Working Families: The Earned Income Tax Credit, Kalamazoo: W.E. Upjohn Institute for Employment Research. Lang, K. (1987) “Pareto Improving Minimum Wage Laws,” Economic Inquiry 25 (1): 145–58. Manning, A. (2003) Monopsony in Motion: Imperfect Competition in Labor Markets, Princeton, NJ: Princeton University Press. Neumark, D. (2001) Living Wages: Protection For or Protection From Low-Wage Workers? NBER Working Paper No. 8393, Cambridge, MA: NBER. Neumark, D. (2002) How Living Wages Affect Low-Wage Workers and LowIncome Families, San Francisco: Public Policy Institute of California. Neumark, D. and Adams, S. (forthcoming, a) “Do Living Wage Ordinances Reduce Urban Poverty?” Journal of Human Resources. Neumark, D. and Adams, S. (forthcoming, b) “Detecting Effects of Living Wage Laws,” Industrial Relations. Neumark, D., Schweitzer, M., and Wascher, W. (2002) “The Effects of Minimum Wages on the Distribution of Family Incomes: A Non-Parametric Analysis,” unpublished. Neumark, D., Schweitzer, M., and Wascher, W. (forthcoming) “Minimum Wage Effects Throughout the Wage Distribution,” Journal of Human Resources. Neumark, D. and Wascher, W. (1992) “Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws,” Industrial and Labor Relations Review 46 (1): 55–81. Neumark, D. and Wascher, W. (1994) “Employment Effects of Minimum and Subminimum Wages: Reply to Card, Katz, and Krueger,” Industrial and Labor Relations Review 47 (3): 497–512. Neumark, D. and Wascher, W. (1996) “The Effects of Minimum Wages on Teenage 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: A Case 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 Tax Journal 54 (2): 281–317. Neumark, D. and Wascher, W. (2002) “State-Level Estimates of Minimum Wage Effects: 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:

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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 in America: A Blueprint for the New Labor Market, Cambridge, MA: The MIT Press. Sander, R. and Lokey, S. (1998) “The Los Angeles Living Wage: The First Eighteen Months,” unpublished. Stigler, G.J. (1946) “The Economics of Minimum Wage Legislation,” American Economic Review 36 (3): 358–65. Wellington, A.J. (1991) “Effects of the Minimum Wage on the Employment Status of 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 Employment,” Applied Economics 25 (12): 1517–28. Williams, N. and Mills, J.A. (2001) “The Minimum Wage and Teenage Employment: Evidence from Time Series,” Applied Economics 33 (3): 285–300. Zavodny, M. (2000) “The Effect of the Minimum Wage on Employment and Hours.” Labour Economics 7 (6): 729–50.

13 The economic impact of living wage ordinances Mark D. Brenner

Opponents of living wage measures consistently warn that these initiatives will 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 consequences which, because of the way wage floors are theorized to operate in market settings, will lower the welfare of their intended beneficiaries. Two sets of effects are of concern. The first involves the firms covered by living wage requirements, where it is feared that higher wage floors will cause employers to shed low-wage labor through means such as workplace reorganization, substitution of new machinery or equipment, or replacement with higher-skilled (and already higher-paid) workers. In the extreme, firms could respond by relocating out of the area in an effort to avoid the living wage mandate. The second set of effects involves the cities that pass living wage ordinances. Adjusting to higher wage floors will impose costs on some businesses, and, at least in the case of city service contractors, much of this could be passed back to cities in the form of higher contract costs. Such costs to local government could be significant, and carry with them the risk of reducing the level of existing city services or creating the need for additional taxes. These are matters of serious concern, given the precarious economic position of the lowest-paid segment of the US workforce, the fragile condition of local government finances, and the rapid proliferation of living wage measures throughout the country. This chapter will address these basic issues, providing an overview of available evidence concerning the economic effects of living wage ordinances on the local governments that pass such measures and the firms they cover. Because of their recent emergence and rapid proliferation, there is far less research available on the economic impact of living wage laws when compared to state and federal minimum wages. We are fortunate, however, that this body of research has already produced some important insights into the dynamics of local wage mandates and that it is expanding at a considerable pace. Before turning to this empirical evidence, the next section examines some of the theoretical and methodological issues involved in studying the

Economic impact of living wage policies 189 economic effects of living wage ordinances. This is followed by two sections that review different sets of empirical evidence as to the effects of these measures: prospective and retrospective studies. Prospective (or ex ante) studies are conducted prior to passage of a living wage measure and evaluate what is likely to occur following implementation. While this evidence has been important to our understanding of living wage dynamics, we now have a broad range of retrospective (or ex post) evidence that draws on the actual experiences of cities that have passed such measures. The final section concludes by drawing together the prospective and retrospective evidence to assess how firms are likely to respond to living wage mandates.

Examining living wage effects: theoretical and methodological issues The relationship between wages and employment has been an issue of long-standing and frequently intense controversy. The reasons for this are straightforward, as David Neumark outlined in the previous chapter. Standard competitive models of the labor market are unambiguous as to the consequences of a binding wage floor. Firms are expected to utilize less low-wage labor, all else constant, which reduces the economy-wide employment prospects for workers in the lowest tier of the labor market. However, as the previous chapter also made clear, the predictions of the competitive model are just that, predictions, which must be evaluated against available empirical evidence. Recent work in this area, now known as the “new economics of the minimum wage” literature, has cast serious doubt on the robustness of earlier findings linking minimum wage increases with lower employment in the aggregate (e.g. Card et al. 1994; Card and Krueger 1994; Neumark and Wascher 1994; Card and Krueger 1995). This research has also produced substantial new evidence that firms faced with higher minimum wage mandates do not behave in the manner predicted by competitive models: most notably that average firm employment does not decline but may in fact increase slightly following minimum wage increases (e.g. Katz and Krueger 1992; Spriggs 1993; Card and Krueger 1994; Card and Krueger 2000). The larger issue has been well summarized by Richard Freeman: “The debate is over whether modest minimum wage increases have ‘no’ employment effect, modest positive effects, or small negative effects. It is not about whether or not there are large negative effects” (1995: 833; emphasis in original). There is also individual-specific evidence that low-wage workers do not face lower employment prospects following minimum wage increases (e.g. Card and Krueger’s 1995 re-analysis of Linneman 1982 and Currie and Fallick 1994; Zavodny 2000). As we will discuss further when we take up the issue of firm adjustments to living wage ordinances, there are many possible explanations

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why individual and firm-level analyses consistently fail to find negative employment effects following minimum wage increases. On a theoretical level, one explanation, discussed in the previous chapter, may be that alternatives to the competitive model are in fact a better description of labor market dynamics. Two important alternatives are those models that emphasize monopsonistic competition (e.g. Card and Krueger 1995; Bhaksar et al. 2002; Manning 2003) and those positing efficiency wage effects (e.g. Akerlof and Yellin 1986; Stiglitz 1987). While these theoretical interpretations of recent minimum wage research are a significant advancement in our understanding of labor market dynamics, they unfortunately ignore many “older” explanations of firm adjustments to higher mandated wages, such as those advanced by the post-war institutionalists over fifty years ago. One important commonality among these earlier scholars was an acknowledgment of what Richard Lester called “a range of indeterminacy,” not just in wage determination, but also in other areas of firm operations. This approach implicitly recognizes that it is very difficult to identify a real-world situation in which all else will be held constant when the minimum wage increases, as the standard competitive model requires. By allowing firms some discretion in areas such as purchasing other inputs and setting output prices, these researchers in practice found themselves considering the range of methods by which firms might adjust to higher wage mandates, including such channels as raising prices, increasing sales, changing production techniques, or raising productivity. Changing the level of employment, in this context, becomes only one of many ways in which firms may respond to higher wage mandates. Lester’s (1946) survey of Southern manufacturers is a prime example of this method of approaching the minimum wage. Interestingly, more recent evidence indicates that it is precisely these alternative adjustment channels that firms prioritize in the face of higher minimum wages. For example, a little appreciated aspect of Card and Krueger’s fast food study in New Jersey and Pennsylvania is that “pretax prices rose 4 percent faster as a result of the minimum-wage increase in New Jersey – slightly more than the increase required to fully cover the cost increase caused by the minimum-wage hike” (Card and Krueger 1995: 54). Similar evidence is presented in Aaronson (2001), who finds that restaurant prices in the United States and Canada generally rise with changes in the wage bill, and that these changes are typically concentrated in the first quarter following a minimum wage increase. Understanding how firms use these alternative adjustment channels to cope with increased labor costs following the imposition of binding wage floors may provide the key to reconciling both the recent findings from the new economics of the minimum wage literature as well as those from the prospective and retrospective living wage research reviewed here. While these alternative theoretical and empirical perspectives may

Economic impact of living wage policies 191 indeed prove useful in explaining recent research on the minimum wage, the findings themselves can provide limited guidance as to the economic impact of living wage ordinances. This is first of all because most living wage laws do not produce the modest wage increases that the “new economics of the minimum wage” literature has traditionally examined. More important, however, is the fact that living wage laws have dramatically more limited coverage than traditional minimum wage mandates. Although each ordinance varies substantially, these measures typically cover far less than 1 percent of a city’s labor force. As one example, Pollin and Luce (2000) estimated that by 1999 the Los Angeles (LA), California, living wage ordinance would apply to no more than 7,600 workers in the LA labor market. If their calculations are accurate, this means that these covered workers would have comprised a tiny segment of the 4.4 million individuals in the LA area workforce at that time, approximately 0.17 percent. This implies that whatever employment changes may have occurred in the tiny covered sector, their effect is not discernible in the labor market as a whole due to the much larger size of the uncovered segment. These substantial differences in coverage between minimum and living wage laws make it impossible to utilize the data sets and statistical techniques that are the mainstay of modern labor economics. This conclusion is particularly important, as it calls into question recent research by Neumark and Adams, discussed in the previous chapter (Neumark and Adams forthcoming (a) and (b)). The authors apply the popular “difference-in-difference” statistical technique to data from the Current Population Survey (CPS) in an effort to detect the effects of living wage laws on the wages, employment, and poverty status of individuals in the bottom decile of wage-earners. Unfortunately, their research design suffers from a host of methodological and empirical problems that ultimately invalidates their findings. To begin, the CPS does not allow researchers to identify a respondent’s place of employment. Such information is not necessary when studying minimum wage laws, where relatively few labor force participants are exempt from the law and those that are can be readily identified by sector of employment. However, employer information is crucial for researchers interested in utilizing publicly available data such as the CPS to study living wage ordinances, since the overwhelming majority of low-wage workers are not covered by living wage laws, even in those sectors where covered firms are heavily concentrated. However, even if it were possible to identify with precision whether individual respondents in the CPS worked for employers covered by a particular living wage law, this survey does not sample a sufficient number of covered workers at the local level for statistically reliable estimation. For example, Brenner et al. (2002) calculated that in Los Angeles, with one of the broadest living wage ordinances in the country,

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there were likely to be only about eight covered workers contained in an annual CPS sample of approximately 5,000 labor force participants. This causes particularly acute identification problems for the “difference-indifference” statistical technique employed by Neumark and Adams. In their work, the authors propose to “identify” the effects of living wage laws by comparing changes in wages and employment for workers in cities with living wage laws to those in cities without such measures, controlling for other sources of variation. Any difference in the trend between workers in the two different types of cities is attributed to the living wage policy. However, as the authors readily acknowledge, living wage ordinances typically cover far less than 1 percent of the workforce in the cities that adopt them (Neumark and Adams forthcoming (a)). This implies, almost mechanically, that any changes taking place within living wage cities must themselves be driven by the workers unaffected by living wage laws. On methodological grounds alone, such a degree of mismeasurement in the key policy variable calls Neumark and Adams’s recent findings into question. However, as my colleagues and I have also demonstrated (Brenner et al. 2002), there are substantial empirical problems with the authors’ approach to identifying the effects of living wage laws. As one example, Neumark and Adams find that the statistically significant wage and employment effects are concentrated in cities where living wage ordinances cover business assistance recipients. They conclude that perhaps the business assistance provisions have had much broader effects that commonly assumed. Unfortunately, this explanation does not correspond to actual experience. After interviewing living wage administrators in all the relevant cities, Brenner et al. (2002) found that, with the exception of one city, there have been no economic development projects to which living wage requirements have been applied.1 This of course does not explain Neumark and Adams’s statistical results, it merely invalidates the interpretation of their findings that they advance. Other, more serious, empirical problems appear to explain why Neumark and Adams find statistically significant wage and employment effects in living wage cities. Of particular note is the close correspondence between living wage implementation and changes in the minimum wage. Indeed, upon examining their data more closely, more than half of the living wage observations come from cities where, approximately one year after the living wage ordinance was adopted, the state or federal minimum wage was increased. Because Neumark and Adams find statistically significant living wage effects only with a one year lag, this creates a severe problem. Indeed, one of the great weaknesses of the “differencein-difference” methodology is that it is unable to accurately separate the effects of different policy interventions if their timing coincides. As Brenner et al. (2002) have argued, increases in the minimum wage are a much more plausible source of the effects which Neumark and Adams

Economic impact of living wage policies 193 have attributed to living wage laws, particularly given the large number of workers earning exactly the minimum wage in their sub-sample of the CPS. Ultimately, the combination of these methodological and empirical problems makes it impossible to draw any policy conclusions, either positive or negative, from Neumark and Adams’s research. Their work, however, reinforces the methodological imperative to examine the effects of living wage ordinances at the local level, using data more suited to the task. Fortunately, this has been the approach adopted in virtually every other treatment of living wage effects, which we review in the next two sections.

The economic impact of living wages: prospective evidence As noted earlier, the relatively recent emergence of living wage ordinances initially necessitated impact analysis using prospective means. The various prospective studies reviewed in this section draw on a range of data sources, including city data on the number and size of affected contracts, surveys of potentially covered firms and workers, and government data on workers and firms including the Census, Current Population Survey, County Business Patterns, and local-area unemployment insurance (ES-202) data. The entire range of prospective work that touches on the cost of living wage laws (including internal city reports, consultant studies, and other material) is not reviewed. Instead, the analysis is limited to a subset of this work that meets two criteria: (1) studies that present an estimate of the number of workers likely to be affected by a local living wage law; and (2) studies that provide some sense of the relative cost of each proposal. The former point precludes discussion of many of the internal analyses conducted by city staff or other public officials while the latter limits the consideration of several other consultant reports such as the analysis of Los Angeles by Williams and Sander (1997) and that of Chicago by Tolley et al. (1999). Table 13.1 summarizes the ten prospective studies that meet these two criteria. Scope of ordinances In the past decade, the living wage rubric has come to encompass a variety of discrete policy initiatives throughout the country (Luce 2002), and the measures represented in Table 13.1 are no exception. In total, these ten ordinances comprise five distinct types of coverage. First is the most prevalent form of living wage policy, which places wage requirements on city service contracts. This is a component of the living wage measures in Los Angeles, Miami-Dade County, San Jose, Detroit, and San Francisco. Both the San Francisco and New York2 measures also cover workers in the second category of social service provision, particularly homecare and childcare, while Los Angeles, San Jose, and Detroit also cover workers in

87 57

Santa Monica, California (Pollin and Brenner 2000)

New York City, New York (Sonn et al. 2002)

Notes a Percentages for city service contracts only. b Calculations include direct costs only. c Figure is for the Real Estate Division at the Port of Oakland only. d Figure is for New York City subsidy recipients only.

19 44

71 66 117 91 62 91

Los Angeles, California (Pollin and Luce 2000) Miami-Dade, Florida (Nissen 1998) San Jose, California (Benner and Rosner 1998) San Francisco, California (Reich et al. 1999a) Detroit, Michigan (Reynolds 1999) San Francisco Airport and Port (Reich et al. 1999b)

New Orleans, Louisiana (Pollin et al. 2002) Oakland, California Airport and Port (Zabin et al. 1999)

Wage increase as a percentage of the minimum wage

City (source)

62,000

2,078

47,050 3,111

7,626 1,956 1,561 12,380 2,300 14,190

Workers covered

Table 13.1 Economic impact of various living wage ordinances: prospective evidence

1.5 1.8a,b 3.0a,b 3.9a,b 2.5b 2.7 (airport) 4.6 (port) 0.9 1.5 (airport) 4.31(port)c 3.9 (all) 10.4(hotel) 9.6 (restaurant) 0.3b,d

Total cost relative to economic activity (%)

Firm revenue

Firm revenue

Operating costs Firm revenue

Firm output Contract value Firm revenue Contract value Contract value Operating costs

Relative measure

Economic impact of living wage policies 195 the third category of economic development assistance. The living wage ordinances in Los Angeles, San Francisco, Oakland, and New York extend living wage coverage to the fourth category of lessees and other tenants on city property, while the Santa Monica and New Orleans living wage measures comprise the fifth category of geographically-based wage policies. Each of these measures also differs in terms of the provision of other benefits, with all the laws except the New Orleans city-wide minimum wage proposal offering some sort of health benefits coverage. In addition, the living wage ordinances in Los Angeles, San Jose, Oakland, and Santa Monica also make provisions for a minimum number of paid days off. Turning to the mandated wage increases, as can be seen from the second column of Table 13.1, these measures vary widely in this regard as well. The range spans the relatively modest 19 percent increase represented by the $6.15 per hour minimum wage proposed for the city of New Orleans, to the 117 percent increase over the California minimum wage which the $12.50 per hour proposal for the city of San Jose represents. Taken together, the ordinances stipulate, on average, a 71 percent increase over the prevailing minimum wage. The third column of Table 13.1 reports the number of workers likely to benefit from each living wage measure. Here, too, there is wide variation among the different types of living wage measures, with the number of estimated beneficiaries ranging from as low as 1,561 in San Jose, to as high as 62,000 in New York City. By and large the number of workers covered by each ordinance corresponds to the breadth of coverage in each case. For example, the city-wide minimum wage proposal in New Orleans was expected to cover close to 47,000 individuals – more than 10 percent of the city’s population. The San Jose living wage measure, when applied to the 235 firms holding eligible city service contracts, is projected to cover only 1,561 individuals – a mere 0.2 percent of the San Jose population.3 One anomaly appears to be the case of New York, where approximately 62,000 individuals are expected to gain from the proposed living wage law. While this figure is much higher, in absolute terms, than any of the other cities under consideration, upon closer inspection it appears to be roughly in line with the scope of the most comparable ordinance under consideration here, 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 ten studies presented in the fourth column of Table 13.1, the estimate of total expected costs relative to some measure of firm economic activity. Because of the range of data and methods employed in these studies, the measure of economic activity varies across the cases listed in the table. For San Jose, Oakland, Santa Monica, and New York, the total cost of the living wage ordinance was measured against firm revenue, with Los

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Angeles differing only slightly in that firm output (the value of sales plus inventory) was used for relative calculations. For the estimates in MiamiDade County, the city of San Francisco, and Detroit, the total cost of covered contracts was used as the metric for measuring living wage costs, while studies in New Orleans and the Port and Airport of San Francisco compared total costs to firm operating costs (production costs net capital costs). 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, to 10.4 percent of gross receipts for luxury hotels in Santa Monica. Several factors influence the magnitude of these relative costs. The first is obviously the size of the mandated wage increase, with more modest wage increases generating correspondingly modest average cost increases. The most prominent example of this is New Orleans, where the 19 percent increase in the minimum wage was found likely to elicit a 0.9 percent increase in operating costs on average. At the other extreme is the case of San Jose, where the living wage level initially proposed was a full 117 percent above the California minimum wage. This relatively high living wage level helps explain why the average cost increase for San Jose city contractors was approximately 3 percent, as compared to the 1.5 percent average cost increase anticipated for Los Angeles city contractors, who faced a 71 percent increase over the operative minimum wage. A second factor that influences the magnitude of the relative cost estimates in Table 13.1 is the incorporation of a host of indirect costs, incorporated into the estimates for Los Angeles, New Orleans, Santa Monica, and the Port and Airport of San Francisco and Oakland. Commonly referred to as “ripple effects,” these non-mandated wage and benefit increases are a well-established empirical phenomenon, despite some ambiguity as to their precise magnitude. In the context of the minimum wage, research indicates that ripple effects are typically much smaller in proportional terms than mandated increases, and they do not reach very far up the wage distribution, perhaps no more than $1 to $2 above the newly mandated minimum wage (e.g. Spriggs 1993; Card and Krueger 1995; Lim 2002). Of course, establishing the magnitude of any ripple effects that may result from a living wage is necessarily a more speculative exercise than the estimation of its direct costs. However, in the five cases where ripple effects are estimated, they display a strong degree of consistency, ranging from 11 percent to 26 percent of total costs. Clearly effects of this size are large enough to influence estimates of total relative cost, and any estimates which include these non-mandated costs will be correspondingly larger than those focused only on direct costs alone. Finally, a third major factor influencing the magnitude of relative costs is the degree to which living wage coverage is concentrated in relatively low-wage industries. When such concentrations occur, relative cost figures will be slightly higher on average, in the range of 4 percent of revenues or

Economic impact of living wage policies 197 operating costs. This can be seen in cost estimates for the ports of Oakland and San Francisco, where the living wage ordinance falls most heavily on the restaurant and retail sectors. There may also be sectors, such as the case of Santa Monica’s hotels and restaurants, where the relative costs exceed even these figures. What is equally important to note, however, is that many, if not most, firms covered by living wage ordinances will face much smaller cost increases. One example of this is the case of New York City subsidy recipients – large firms concentrated in high wage industries such as financial services, media, and manufacturing – where cost increases are much more modest than the figures discussed above, on the order of 0.3 percent of firm revenue. Indeed, research in Los Angeles has demonstrated that, in fact, the vast majority of firms covered by that city’s living wage law fall into this “low impact” category. According to Pollin and Luce (2000), a full 86 percent of covered businesses were anticipated to have cost increases of 1 percent or less. Thus, while it is important to acknowledge the much larger impact that living wage laws will have on a small subset of covered firms, the experience of these firms appears to be the exception and not the rule. To summarize, despite the vastly different scope of each living wage measure, coupled with the range of methodologies and data utilized to estimate the economic impact in each case, there is a striking degree of consistency in the projected cost figures for each city. Most cost estimates fall into the range of 1–2 percent of firm revenue, or 2–4 percent of covered contract value. There are notable exceptions to these averages, such as the hotels and restaurants of Santa Monica, expected to face cost increases of approximately 10 percent of revenue. However, even in the Santa Monica case, if we calculate the average cost increase for affected firms other than hotels and restaurants we find that these businesses are likely to face a cost increase of approximately 2.2 percent. Establishing the magnitude of likely cost increases is crucial if we are to accurately gauge how firms will respond to living wage mandates. Before turning to these questions, however, I turn to evidence that draws on the actual experiences of cities that have passed living wage measures in recent years.

The economic impact of living wages: retrospective evidence This section analyzes the impact that living wage laws have had on city contract costs and bidding patterns. As noted earlier, one of the principal fears voiced by opponents to living wage laws is that these measures will negatively affect city budgets. It is argued that if living wage laws generate substantial costs, particularly for city service contractors, these costs will ultimately be passed back to city governments. Such costs could leave cities with the unpleasant choice of either reducing the level of existing city services or raising additional revenue through higher taxes. A second

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concern is that living wage laws may cause some bidders to reconsider the desirability of city contracting, adversely affecting the competitiveness of the bidding process. The evidence considered with regard to these questions comes from two sources: information reported by cities themselves in official documents or in interviews with scholars; and evaluations of city records conducted by independent researchers.5 In terms of the independent assessment of the effects of living wage laws, there are three major evaluations. Two analyze Baltimore, MD, one of the first cities in the USA to pass a living wage law. These reports compare approximately two dozen contracts before and after the law went into effect (Weisbrot and Sforza Roderick 1996; Niedt et al. 1999). The third study considers similar evidence on changes in contract costs following living wage implementation in three New England cities: Hartford, CT, New Haven, CT, and Boston, MA (Brenner and Luce 2003). Table 13.2 also provides several estimates from local officials concerning the changes in contract costs following living wage implementation. These include information on several social service contracts in Dane County, WI, and San Francisco, CA (Elmore 2003) and the thirty-one covered contracts in Corvallis, OR (Brewer 2001). Turning to the evidence, the most important point is that cities have had a wide variety of experiences with living wage laws. For example, in the Baltimore case, both studies found only modest increases in nominal contract costs (in the aggregate) after the implementation of the living wage law. Weisbrot and Sforza-Roderick (1996) reported a nominal increase of less than a quarter of a percent in the total cost for all nineteen contracts in their study following living wage implementation, while Niedt et al. (1999), incorporating an additional year’s worth of data and several additional contracts, found a nominal increase of 1.2 percent for the twenty-six contracts they analyzed. In both cases, these nominal increases were lower than the rate of inflation, implying that, in real terms, city contract costs decreased in Baltimore following the implementation of that city’s living wage law. This experience of declining real contract costs is not unique to Baltimore. As is evident from Table 13.2, both Boston and New Haven also witnessed a decline in the real value of covered contracts, and the nominal increase in contract costs for covered social services in Dane County and San Francisco was below the rate of inflation in each locality. Although aggregate costs declined in real terms in each of these cases, it is important to note that many of these studies documented substantial variation across individual contracts. For instance, one small janitorial contract in Baltimore increased in nominal terms by 47.1 percent while the contract for summer food services declined by 11.6 percent. Meanwhile, the contract for bus services, by far the largest covered contract in Baltimore, rose by only 2.1 percent (Niedt et al. 1999). Given this wide range of

FY 1996–97 FY 1996–97 FY 1997–98 FY 1999–2000 FY 1999–2000 FY 2000–01 FY 2000–01 FY 2000–01

Baltimore, Maryland (Weisbrot and Sforza-Roderick 1996) Baltimore, Maryland (Niedt et al. 1999) New Haven, Connecticut (Brenner and Luce 2003) Boston, Massachusetts (Brenner and Luce 2003) Dane County, Wisconsin (Elmore 2003) Corvallis, Oregon (Brewer 2001) San Francisco, California (Elmore 2003)

Hartford, Connecticut (Brenner and Luce 2003)

44 44 56 57 54 38 57 (with health) 78 (without) 43 (with health) 71 (without)

Wage increase as a percentage of the minimum wage

Notes a These percentages are weighted by contract value. b Contract cost increases are measured in nominal terms. c These figures are for the human services contracts covered by the living wage law in each locality.

Fiscal year living wage implemented

City (source)

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

2

19 26 9 29 12 31 –

⫺1.9 ⫺1.2b ⫺10.9 ⫺7.3 ⫺2.8b,c ⫺9.1 ⫺1.0b,c 33.4

Number of contracts reviewed

Average annual increase in real contract costs (%)a

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experience within cities, it is not surprising that there are also substantially different experiences between cities, with several reporting rising aggregate contract costs following living wage implementation. In Corvallis, the Finance Director reported a 9.1 percent increase in costs for contracts under the living wage mandate. These increases were sharpest for bus repair and maintenance (34 percent), for custodial services (21 percent), and for the humane society contract (17 percent) (Brewer 2001). Brenner and Luce (2003) also report cost increases of this magnitude for the city of Hartford, where the cost of security guard services and temporary office help together rose 33.4 percent following living wage implementation. One important characteristic of Hartford’s covered services is that they are bid on 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 is causally linked to the higher contract cost increases witnessed in Hartford. They conclude that this method of bidding blunts the very forces of competition that have held down cost pass-throughs in other cities. Elmore (2003) also records a wide range of experience in his review of living wage implementation in thirteen cities. He notes first that in each case he considered, city officials reported higher service contract costs in absolute dollar terms, although these increases range from very slight (approximately $9,000 in Ypsilanti, MI) to quite substantial (over $3.7 million for all human service contracts in San Francisco, CA). Elmore also documents the enormous variation in cost increases among individual contracts. He describes cases where contract costs rose by a substantial amount, such as a janitorial contract covered by Warren MI’s living wage law which rose by 22 percent, as well as cases where contract costs declined in absolute terms, as with three human service contracts in Dane County, WI. This variation only serves to underscore our earlier observation that many factors influence city contract costs, with the living wage ordinance 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 fourteen contracts that were re-bid (as opposed to renewed) following living wage implementation, only three displayed an increase in the number of bidders, while eight saw a decrease. In total, there were ninety-three bids tendered for these fourteen contracts prior to the living wage, and only seventy-six bids tendered following the law (Weisbrot and SforzaRoderick 1996). These figures suggest that Baltimore’s living wage law may have had an impact on the number of bidders willing to compete for city contracts following living wage implementation. On the other hand, Brenner and Luce (2003) suggest that the effect of living wage laws on bidding patterns can sometimes have the opposite effect. They find, for example, that covered contracts in Hartford saw a 20 percent increase in the number of bids tendered following living wage implementation, while

Economic impact of living wage policies 201 competitively bid contracts in Boston saw no change in the number of bids tendered. By contrast, New Haven saw the total number of bids tendered for all contracts decline by three, from thirty-two to twenty-nine. Regardless of the precise quantitative effect of living wage laws on bidding patterns, results from Elmore’s study, elaborated upon in the following chapter, indicate that many city officials view living wage laws as at least compatible with, if not conducive of, a more competitive bidding process. Although fewer cities have examined this issue directly, there is some evidence that bidding has not been adversely affected by living wage legislation. The Corvallis Finance Director reported that although several firms indicated they would not bid on city business because of the living wage, in fact, every vendor contacted has submitted a bid, “and the bids have continued to be competitive” (Brewer 2001: 1). Similarly, in Hayward, CA, the Acting Finance Director reported that all contracts have remained competitively bid, and that it was the “staff’s opinion that productivity and service quality has not been adversely affected” (Finance Director’s Office 2000: 3). Upon reflection, it is not surprising that living wage laws have had a relatively benign effect on the bidding process for city service contracts. Available evidence indicates that when savings accrue from the contracting out services, the majority of these savings are the result of providing lower wages and benefits to workers performing the newly privatized services (Kettl 1993; López-de-Silanes et al. 1997). In such a context, living wage ordinances can reduce the ability of some bidders to undercut their competition by lowering wage and benefit levels. Thus, a living wage law has the effect of “leveling the playing field,” forcing contractors to compete with one another along other dimensions such as service quality. Similar sentiments among city officials in New England are documented by 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 are unlikely to cause large increases in city contract costs. There are, of course, specific contracts or types of services for which cost increases will occur, but even in these cases the bidding terms and the competitiveness of the bidding process can modulate cost pass-throughs to the city. With regard to the bidding process itself, here, too, the effects of living wage laws 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 appear to have strengthened the bidding process. Available evidence indicates that city officials do not see these measures as an impediment to competitive bidding, and may, in fact, consider them an inducement. This heterogeneity in bidding experiences also serves to underscore the fact that the living wage ordinance is only one of many factors influencing the

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competitiveness of city procurement. It also reinforces the conclusion drawn earlier that firm behavior in the face of higher wage mandates is not nearly 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 businesses are likely to experience when faced with living wage mandates as well as a sense of how city service contract costs and bidding practices have been affected by living wage laws. I will now try to draw out the links between these two elements, turning our attention to the various means by which firms can confront higher wage mandates. The assessment is based on the relative magnitude of these costs, the range of outcomes observed at the city-level, and, where possible, direct evidence on firm behavior following living wage implementation. When reviewing how firms respond to wage floors, two types of adjustments – layoffs and relocations – are the most frequently discussed. Yet these are not the only options firms have at their disposal, nor do they appear to be the most likely means by which firms address the higher labor costs associated with living wage laws. Indeed, there are three other adjustment channels that firms can employ: raising prices; increasing firm productivity; and increasing the share of firm income going to low-wage workers. Available evidence indicates that adjustment is more likely to occur through some combination of these three mechanisms, as they can be accomplished more readily and at lower costs than either layoffs or firm relocation. Raising prices For most firms covered by living wage laws, the process that would be least costly and disruptive would be to raise prices to reflect increased costs. But a firm’s ability to raise prices depends on the competitiveness of the market in which they operate as well as how price-sensitive their customers are (i.e. on the elasticity of product demand). If we first consider city service contractors, it is important to recognize that these firms will typically face at least one serious competitor during the bidding process (Rehfuss 1989). If living wage costs are modest, on the order of 1–2 percent, bid prices from covered vendors may not be affected, as these firms are unlikely to sacrifice the reliable income stream and healthy margins associated with government contracts over such modest changes in operating costs. This helps explain why so many cities have not witnessed rising contract costs following living wage implementation, since most covered vendors fall into this category. If living wage costs are more substantial, however, it is likely that firms will press the city to absorb some or all of these costs. The absolute

Economic impact of living wage policies 203 number of these “high impact” firms appears to be small. For example, Pollin and Luce (2000) estimate that roughly 7 percent of covered contractors in Los Angeles faced cost increases greater than 10 percent. It is important to recognize that a significant portion of the higher costs can be absorbed by the firm through other means, obviating the need to pass them back to city governments. However, it is nonetheless true that even full 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 also use competition (or the threat of it) to inhibit full cost pass-through, as illustrated by the experience in the city of Pasadena, CA. There, covered vendors agreed to absorb between 40 to 55 percent of the higher costs associated with living wage if the city extended their current service agreements rather than put them out for competitive bidding. There are also ways in which cities can modulate cost pass-throughs by changing the structure of contracting. One example of this includes Multnomah County, OR, where the living wage policy increased service delivery costs by 27 percent. However, the county was able to limit their contract cost increase to only 5 percent by consolidating three formerly separate janitorial services (Facilities and Property Management Division, n.d.). Brenner and Luce (2003) have also shown that pass-throughs are highest for contracts bid on a unit-cost basis (sometimes known as “cost-plus” bidding), indicating that cities can also limit cost pass-throughs by changing the terms on which bidding occurs.6 What about those firms not directly contracting with city governments? The largest set of these firms operate concessions on city property, selling goods and services to the public in airports, ports, and other public facilities. While their ability to pass along higher costs will ultimately be governed by their demand elasticities, it is important to stress that these firms operate in highly circumscribed markets.7 These contained environments strengthen firms’ ability to pass costs on to consumers in the form of higher prices. Available evidence also indicates that price increases on the order 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 premise that covered firms are experiencing productivity gains on the order of 1 percent per year prior to living wage implementation, roughly half the annual average for all US businesses over the last full business cycle. This implies that for most covered firms a large portion – if not the entirety – of living wage costs can be absorbed with productivity increases that are the normal course of business development. However, firm productivity is likely to grow faster following living wage implementation for at least two reasons. First, firms are likely to be more attentive to potential cost-saving

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measures, as well as more open to changes in work organization that could compensate for the slightly higher labor costs they now face. Second, the higher wages associated with living wage laws are also likely to have a salutary effect on employee performance. For example, as the efficiency wage literature has made clear, paying higher wages is likely to increase individual effort and motivation among covered workers. These higher wages are also likely to reduce other less appreciated labor costs such as turnover and absenteeism. While difficult to quantify, the available evidence is clear that living wage laws can dramatically reduce both turnover and absenteeism. The most striking example of these effects is from the San Francisco airport, where Reich et al. (2003) have shown that turnover fell by up to 80 percent for several low wage occupations following living wage implementation. Similarly, Howes (2002) estimates that the San Francisco living wage law contributed to a 20 percent decline in turnover for covered homecare workers. Turnover reductions of this magnitude may not generate savings sufficient to fully offset living wage costs. However, they will no doubt ease the financial pressure which otherwise would spur firms to pass such costs back to the city. Of course, channeling productivity increases into higher wages for lowpaid employees entails a redistribution of income within covered firms. By the same token, for most firms this adjustment would occur only once, in the first year of living wage implementation. Subsequent productivity increases could be absorbed by the firm in whatever manner they deem appropriate, 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 or other negative employment consequences. This is sensible given the modest costs for most firms covered by living wage laws. However, even for “high impact” firms, there are many reasons to believe that some combination of prices, productivity, and redistribution will prevent firms from shedding labor to comply with living wage laws. Recent empirical evidence also supports these conclusions. Three examples stand out. At the San Francisco airport, Reich et al. (2003) report that total employment in covered firms increased by 15 percent following living wage implementation. Brenner and Luce (2003) report that firms covered by the Boston living wage ordinance also saw employment increase by 15 percent over pre-living wage levels. Howes (2002) estimates that the number of homecare workers covered by San Francisco’s living wage law increased by 54 percent. In the Boston case, another particularly important finding is that employment grew faster for those firms who were forced to raise wages to comply with the living wage law than for those firms who did not (Brenner and Luce 2003). On a full-time equivalent basis, employment growth was estimated to be nearly 50 percent higher for firms raising wages than for

Economic impact of living wage policies 205 those who did not, with the bulk of this increase resulting from firms shifting part-time workers to full-time schedules. While this does not suggest that higher wage floors “caused” higher employment, it does demonstrate that the two are at least compatible, particularly in a context of rapid economic growth. It also bolsters the contention that other macroeconomic factors are decisive in determining the precise level of employment. When considering relocation, there are few reasons to believe that living wage laws will create substantial incentives for firms to move out of their current geographic area. First, as noted many times before, the magnitude of living wage costs are very modest for most covered firms, making relocation infeasible on a purely cost basis. Of even greater consequence is the fact that most living wage laws regulating city service contracting apply their wage mandates to firms regardless of their location, so firms are unable to avoid compliance by relocating out of a given locality. Relocation incentives pose a more serious issue for some geographically-based living wage measures such as the Santa Monica and New Orleans living wage proposals. However, even in these two cases, the available evidence indicates that the most heavily impacted businesses – hotels and restaurants that comprise the core of both cities’ tourism industry – are also heavily tied to their current locations (Pollin and Brenner 2000; Pollin et al. 2002). Relocation would no longer allow firms to compete in the tourist market, which is the core of their current operations. Thus, on balance, the evidence indicates that due to the specific manner in which living wage laws function, firms under their mandate will find adjustments through some combination of prices, productivity, and redistribution preferable to the more disruptive options of layoffs and relocation.

Conclusion This chapter has reviewed the economic effects of local living wage ordinances, drawing on a range of prospective and retrospective research. We have seen that these laws are highly individualized local measures, which precludes using the national data sets and statistical techniques that are the mainstay of modern labor economics to examine living wage dynamics. We have also seen that, much like recent research on more conventional minimum wage measures, the evidence suggests that firms respond to living wage laws in ways not readily anticipated by competitive models of the labor market. There appear to be several explanations for this empirical regularity. First, most firms covered by living wage laws experience only modest costs – on the order of 1–2 percent of total economic activity – which carries with it the implication that layoffs or firm relocation are likely to be far more disruptive and costly than other channels of adjustment. For some firms, the costs associated with living wage compliance are much greater, 10 percent or more of economic activity; however, even for this set of firms, the evidence suggests that some combination of price

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increases, productivity enhancements, and internal redistribution are the primary means by which they adjust to these measures. While these alternative adjustment measures make it unlikely that firms will shed workers or move from their existing base of operations, they nonetheless have potentially serious implications for city budgets. While there is clearly evidence that living wage laws raise the price of certain city service contracts, there is also significant evidence that this is not a generalized phenomenon. Indeed, both internal adjustments such as productivity increases or redistribution, as well as the external force of competition, appear to preclude the full pass-through of living wage-related costs to city budgets. While it is important to realize that even full cost pass-through by high impact firms is a negligible percentage of city finances – less than 0.2 percent for our example of Los Angeles – it is also important to acknowledge that cities can affect the degree to which firms pass along living wage costs by both altering the terms for certain services as well as changing bidding procedures for others. Thus, the weight of the accumulated evidence indicates that living wage laws have an important impact on the living standards of a modest number of beneficiaries, while diffusing the costs broadly among city service contractors and the general public. This analysis reinforces the imperative to evaluate economic policies on the basis of available empirical evidence, highlighting the fact that theory often serves as a poor guide in the process of policy evaluation. If the US case is an accurate guide, available evidence suggests that living wage initiatives are a concrete, but small-scale, mechanism at the disposal of local governments in other countries, that can help reverse the stagnating living standards of the lowest-paid workers in their community.

Notes 1 It is important to distinguish between monitoring or enforcing living wage laws and actually applying them to business assistance recipients. All business assistance cities were indeed enforcing their laws in the sense that they were monitoring economic development projects to see if any fell under the strictures of the 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 law was applied to an actual business assistance recipient. 2 New York City passed a very limited living wage measure in 1996. This study considers the substantial expansion of this law adopted in November 2002. 3 Population figures, from 1999, are drawn from the most recent Census Bureau estimates: http:www.//eire.census.gov/popest/archives/place/SC100K-T1.txt 4 In fact, the San Francisco ordinance, with a city-wide population of approximately 747,000 in 1999, actually covers a proportionally greater share of the city population than does New York, with a city-wide population of 7.4 million, 1.7 percent versus 0.8 percent respectively. 5 As in the previous section, information is included only if it provides some sense of the relative magnitude of cost increases or decreases following living wage implementation. This excludes several of the internal city reports discussed in Elmore (2003).

Economic impact of living wage policies 207 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 of bidding is most prevalent when cities are unsure of the exact level of services required in the future, and want to maintain the contractual flexibility to increase or decrease their usage as concrete needs are identified. 7 It is also true that most firms highly impacted by geographically-based measures also have very localized product markets. This was the case for firms covered by living wage proposals in Santa Monica, California, and New Orleans, Louisiana (Pollin and Brenner 2000; Pollin et al. 2002).

References Aaronson, D. (2001) “Price Pass-Through and the Minimum Wage,” Review of Economics and Statistics 83 (1): 158–69. Akerlof, G. and Yellen, J. (1986) Efficiency Wage Models of the Labor Market, Cambridge: Cambridge University Press. Bhaskar, V., Manning, A., and To, T. (2002) “Oligopsony and Monopsonistic Competition in Labor Markets,” Journal of Economic Perspectives 16 (2): 155–74. Benner, C. and Rosner, R. (1998) Living Wage: An Opportunity for San Jose, August, San Jose, CA: Working Partnerships. Brenner, M.D. and Luce, S. (2003) The Effect of Living Wage Laws in New England, Amherst, MA: Political Economy Research Institute Research Report, University of Massachusetts. Brenner, M.D., Wicks-Lim, J., and Pollin, R. (2002) Measuring the Impact of Living Wage Laws: A Critical Appraisal of David Neumark’s “How Living Wage Laws Affect Low-Wage Workers and Low-Income Families,” Amherst, MA: Political Economy Research Institute, University of Massachusetts, Working Paper # 43. Brewer, N. (2001) CMC 1.25 Living Wage Ordinance Review, Corvallis, OR: Finance Director’s Office. Card, D., Katz, L., and Krueger, A.B. (1994) “Comment on David Neumark and William Wascher, ‘Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws,’ ” Industrial and Labor Relations Review 48 (3): 487–96. Card, D. and Krueger, A.B. (1994) “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” American Economic Review 84 (4): 772–93. Card, D. and Krueger, A.B. (1995) Myth and Measurement: The New Economics of the Minimum Wage, Princeton, NJ: Princeton University Press. Card, D. and Krueger, A.B. (2000) “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply,” American Economic Review 90 (5): 1397–420. Currie, J. and Fallick, B.C. (1996) “The Minimum Wage and the Employment of Youth: Evidence from the NLSY,” Journal of Human Resources, Spring, 31 (2): 404–28. Elmore, A. (2003) Contract Costs and Economic Development in Living Wage Localities: A Report from Cities and Counties on the Impact of Living Wage Laws on Local Programs, New York, NY: Brennan Center for Justice.

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Facilities and Property Management Division (1996) “Report on Living Wage and Benefit Project,” unpublished, Multnomah County, OR. Finance Director’s Office (2000) Living Wage Ordinance Report, Hayward, CA. Freeman, R. (1995) “What Will a 10% . . . 50% . . . 100% Increase in the Minimum Wage Do?” Industrial and Labor Relations Review 48 (4): 830–4. Howes, C. (2002) The Impact of a Large Wage Increase on the Workforce Stability of IHSS Home Care Workers in San Francisco County, New London, CT: Connecticut College Department of Economics. Katz, L. and Krueger, A.B. (1992) “The Effects of the Minimum Wage on the Fast Food Industry,” Industrial and Labor Relations Review 46 (1): 6–21. Kettl, D.F. (1993) Sharing Power: Public Governance and Private Markets, Washington, DC: The Brookings Institution. Lester, R. (1946) “Shortcomings of Marginal Analysis for Wage-Employment Problems,” American Economic Review 36 (1): 63–82. Lim, J. (2002) “How Big Are Ripple Effects from Minimum Wage and Living Wage Increases?” Paper presented at the Allied Social Sciences Association, Atlanta, GA. Linneman, P. (1982) “The Economic Impacts of Minimum Wage Laws: A New Look at an Old Question,” Journal of Political Economy 90 (3): 443–69. López-de-Silanes, F., Shleifer, A., and Vishny, R.W. (1997) “Privatization in the United States,” Rand Journal of Economics 28 (3): 447–71. Luce, S. (2002) “ ‘The Full Fruits of our Labor’: The Rebirth of the Living Wage Movement,” Labor History 43 (4): 401–9. Manning, A. (2003) Monopsony in Motion, Cambridge: Cambridge University Press. Neumark, D. and Adams, S. (forthcoming, a) “Detecting Effects of Living Wage Laws,” Industrial Relations. Neumark, D. and Adams, S. (forthcoming, b) “Do Living Wage Ordinances Reduce Urban Poverty?” Journal of Human Resources. Neumark, D. and Wascher, W. (1994) “Employment Effects of Minimum and Subminimum Wages: Reply to Card, Katz, and Krueger,” Industrial and Labor Relations Review 47 (3): 497–512. Neumark, D. and Wascher, W. (2000) “Minimum Wages and Employment: A Case Study of the Fast-Food Industry: Comment,” American Economic Review 90 (5): 1362–96. Niedt, C., Ruiters, G., Wise, D., and Schoenberger, E. (1999) The Effects of the Living Wage in Baltimore, Washington, DC: Economic Policy Institute. Nissen, B. (1998) The Impact of a Living Wage Ordinance on Miami-Dade County, October, Miami, FL: Florida International University Center for Labor Research and Studies. Pollin, R. and Brenner, M.D. (2000) Economic Analysis of Santa Monica Living Wage Proposal, Amherst, MA: Political Economy Research Institute Research Report # 2. Pollin, R., Brenner, M., and Luce, S. (2002) “Intended versus Unintended Consequences: Evaluating the New Orleans Living Wage Ordinance,” Journal of Economic Issues 36 (4): 843–75. Pollin, R. and Luce. S. (2000) The Living Wage: Building a Fair Economy, New York, NY: The New Press. Rehfuss, J.A. (1989) Contracting Out in Government, San Francisco, CA: Jossey-Bass.

Economic impact of living wage policies 209 Reich, M., Hall, P., and Hsu, F. (1999a) Living Wages and the San Francisco Economy: The Benefits and the Costs, Berkeley, CA: University of California, Institute of Industrial Relations. Reich, M., Hall, P., and Hsu, F. (1999b) Living Wages at the Airport and Port of San Francisco: The Benefits and Costs, Berkeley, CA: University of California, Institute of Industrial Relations. Reich, M., Hall, P., and Jacobs, K. (2003) Living Wages and Economic Performance: 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. Sonn, P., Bernhardt, A., and Parrott, J. (2002) The New York City Living Wage Law, New York, NY: Brennan Center for Justice and Fiscal Policy Institute. Spriggs, W.E. (1993) “Changes in the Federal Minimum Wage: A Test of Wage Norms,” Journal of Post-Keynesian Economics 16 (2): 221–39. Stiglitz, J. (1987) “The Causes and Consequences of the Dependence of Quality on Price,” Journal of Economic Literature 25 (1): 1–48. Tolley, G., Bernstein, P., and Lesage, M.D. (1999) Economic Analysis of a Living Wage Ordinance, Chicago, IL: RCF Consulting. Weisbrot, M. and Sforza-Roderick, M. (1996) Baltimore’s Living Wage Law: An Analysis 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 Los Angeles Living Wage Ordinance, Los Angeles, CA: University of California, Los Angeles School of Law. Zabin, C., Reich, M., and Hall, P. (1999) Living Wages at the Port of Oakland, Berkeley, CA: University of California: Institute of Industrial Relations. Zavodny, M. (2000) “The Effect of the Minimum Wage on Employment and Hours,” Labour Economics 7 (6): 729–50.

14 Living wages in US communities An analysis of costs of services and economic development Andrew J. Elmore

Living wage laws requiring businesses receiving city contracts or subsidies to pay a wage standard above the poverty level flow from a public recognition that hard work should be rewarded with adequate pay and benefits and that taxpayer dollars should not support the creation of substandard wage jobs. While the policy goals driving these initiatives have found broad support among local lawmakers and the public, local lawmakers and communities are justifiably concerned about the degree to which living wage requirements applied to city contracts will result in higher costs for cities, and whether living wage requirements applied to business subsidy programs will prevent cities from using subsidies to attract and retain desired employers. This chapter summarizes an examination of the effects of living wage laws 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 to assemble and share with us cost impact estimates, formal internal evaluations, and/or other observations of the effects of their laws. Combining larger cities like San Francisco, California, and San Antonio, Texas, with medium-sized cities like Oakland, California, and smaller cities like Madison, Wisconsin, and Warren, Michigan, the study reflects the experiences 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 government contract costs and business subsidy programs, we contacted city and county officials and collected information on their communities’ experiences. After preliminary contacts with twenty-nine cities and counties,2 a total of fourteen informed us that they were able to provide us with assessments of the impact of their living wage laws on local government contract costs. Ten localities were able to assess the impact of living wage laws on their business subsidy programs. Some cities were able to provide assessments for one category but not the other. The end result is that the group of communities covered in this chapter equals twenty.

Living wages in US communities 211 For the research methodology, we conducted structured interviews with government administrators and lawmakers and analyzed studies done by the localities themselves. In all of the communities, some sort of centralized authority possessed information on the locality’s experience with its living wage law. In some local governments, this took the form of an administrator charged with overseeing implementation. In a number of the communities, the locality had conducted a formal review of the law’s impact that examined the degree to which the law had increased costs for or otherwise impacted their programs. We focused our questioning on the living wage laws’ effects on the local governments’ contract costs and business subsidy programs. In an effort to limit the possible effects of biases by lawmakers and administrators – biases either in favor of or against the living wage policy – we attempted wherever possible to draw data from several sources, including interviews with different city officials and written city reports or analyses. This chapter summarizes research that is among the first presenting an overview of the direct experiences of a group of cities and counties with living wage laws. It thereby adds new experiential insight to studies that have examined city contract costs in an individual city after the adoption of a living wage law (for example, Weisbrot and Sforza-Roderick 1996; Sander and Lokey 1998; Niedt et al. 1999; Brenner and Luce 2003; Reich et al. 2003), as well as to prospective analyses that have projected cost impacts prior to the adoption of living wage laws (for example, Williams and Sander 1997; Nissen 1998; Reynolds 1999; Pollin and Luce 2000). To date, there have been few attempts to examine the impact of living wage laws on city business subsidy programs or to examine the effects of living wage laws across a group of cities. One recent study (Neumark 2002) attempted to assess indirectly the impact of living wage laws on local economies by looking for trends in overall poverty and employment data in cities with living wage laws. However, its approach and findings have been questioned by other researchers (Brenner et al. 2002). While the examination of the direct experiences of a group of cities and counties with living wage laws does not reveal every aspect of the costs of these laws, the experiences and analyses of local officials with first-hand knowledge 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 city service contracts, we interviewed administrators and lawmakers from a total of fourteen cities and counties. One would expect that requiring higher wages would result in some increase in the cost of service contracts. However, as summarized in Table 14.1, the reported increases in service contract prices were consistently very small, generally ranging between 0.003 percent and 0.079 percent of the localities’ budgets.

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

City budget ($)

Contract cost increase ($)

Increase as a % of city budget

Alexandria, Virginia Berkeley, California Cambridge, Massachusetts Hartford, Connecticut Hayward, California Madison, Wisconsin New Haven, Connecticut Pasadena, California San Jose, California Warren, Michigan Ypsilanti, Michigan Ypsilanti Township, Michigan

395,636,000 289,546,000 296,467,000 422,667,000 135,400,000 159,000,000 511,071,000 493,596,000 645,000,000 136,490,000 13,000,000 24,745,000

265,000 229,000 150,000–200,000 160,000 9,000 29,000 20,000 240,000 40,000 60,000 6,000 6,000

0.067 0.079 0.067 0.038 0.006 0.018 0.003 0.049 0.006 0.040 0.044 0.0

As expected, contract costs did increase modestly. Increases for midsized cities ranged from $40,000 in San Jose, California, to $265,000 in Alexandria, Virginia. Smaller cities (Hayward, California, Madison, Wisconsin, Warren, Michigan, and Ypsilanti, Michigan) reported a minor cost increase of between $6,000 and $60,000. As shown in the last column of Table 14.1, these service contract cost increases represent a very small proportion of the city operating budgets – in all cases less than 0.08 percent. This relatively modest impact led most administrators to report that service contract costs as a whole did not significantly increase after passage 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 been negligible.”3 However, administrators did note significant increases in costs for specific contracts in sectors involving labor-intensive work performed by large numbers of low-wage workers. In some localities, several such contracts increased substantially in cost. In Hartford, Connecticut, a contract for security 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-three contracts covered by the Alexandria, Virginia, living wage law increased an average of 10.6 percent, and two of these increased by over 20 percent. Similarly, the city of Warren, Michigan, reported a contract price increase of $61,848, or 22 percent from the previous year following the re-bidding of its janitorial contract. Implementation of Berkeley’s (California) living wage 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,

Living wages in US communities 213 groundskeeping, and janitorial services to increase. Such contracts usually employ a large low-wage workforce. The living wage laws in the above cities generally did not cover contracts for social services such as home health care or day care, which typically involve large concentrations of low-wage workers. Human and social services contracts were not covered by many cities, either, because such services tend to be provided by counties rather than cities, or because many of the earlier living wage laws exempted non-profit human services providers from coverage. However, three of the localities studied did have substantial contracting programs in the human services area that were covered 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 the increase in contract costs as a percentage of the annual human services contracting budget rather than as a percentage of the overall municipal budget. We report the costs of these programs relative to the human services budget in Table 14.2. Note, however, that as a percentage of the overall municipal budget, these living wage effects would be substantially smaller. These human services contracts led to the largest increases as a result of a mandated living wage. Berkeley saw a cost increase in its human services budget by $170,000 to meet its living wage requirement of $9.75 an hour. Dane County increased its human services budget by $676,000 between 2001 and 2002 ($338,000 each year) in order to raise the minimum wages of approximately 645 full-time human services personnel to $8.53 an hour. San Francisco increased its human services contracts by $3,714,000, in order meet its living wage requirement of a $9.00 minimum wage. As the final column of Table 14.2 illustrates, although these increases were the largest experienced by the localities reviewed in this report, they still represent a modest proportion of these local governments’ human services budgets. The largest proportional increase occurred in Berkeley, where the human services contracts totaling $6,099,000 increased by 2.79 percent as a result of the living wage law. In San Francisco, where the human services contract budget is $312 million, the living wage resulted in Table 14.2 Human services contract cost increases after passage of living wage laws, 2001 Locality

Budget for human services contracts ($)

Cost increases for human services contracts ($)

Increase as % of human services budget

Berkeley, California Dane County, Wisconsin San Francisco, California

6,099,000 112,000,000 312,000,000

,170,000 ,338,000 3,714,000

2.79 0.30 1.01

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Table 14.3 Projected versus actual increases in contract costs Locality

Total budget ($)

Projected increase ($)

Actual increase ($)

Difference (%)

Alexandria, Virginia Berkeley, California Cambridge, Massachusetts Pasadena, California

395,636,353 289,546,000 296,466,580

500,000 479,425 300,000

⫺47 ⫺52 ⫺33–50

493,596,335

340,000

265,988 228,800 150,000– 200,000 240,000

⫺30

a cost increase of approximately 1 percent. The increase in Dane County represents a 0.3 percent increase in the locality’s current $112 million human services budget. These experiences suggest that local governments that extend living wage laws to non-profit human services programs can anticipate somewhat larger, but overall still quite modest, increases in the costs of such contracts. In anticipation of expected cost increases, several cities made budget impact projections based on the assumption that contractors would pass through the entire cost of increased wages to the city. All cities that projected a cost increase greatly overestimated the actual impact that living wage laws had on local contract programs. Table 14.3 contrasts actual costs increases with projected cost increases. As shown in the last column of Table 14.3, actual cost increases were 30 percent to 50 percent lower than projections. Other reports from local governments suggest that many localities experienced smaller contract price increases than they anticipated. In Dane County, Wisconsin, an analysis of four contracts involving low-wage work projected to increase in cost revealed that only one contract increased in cost (by 10.2 percent) from 2001 to 2002, while the other three contracts actually decreased in cost. The New Haven, Connecticut, Controller reported that “we originally thought [that the living wage law would have] a significant impact [on agency budgets].” However, reports from agencies after the first year of implementation show that New Haven contracts have never exceeded their line in the budget, despite the law’s increased coverage as more contracts are re-bid with the living wage requirement. Factors that may have limited the impact on contract costs The modest increases in contract costs resulting from living wage laws have surprised some observers and have led to an examination of why this is the case. The experiences reported to us by the cities and counties in the sample suggest that two factors contribute to this result: the small number of covered service contracts in most cities and counties that involve large

Living wages in US communities 215 concentrations of low-wage workers; and an evident capacity of many contractors to absorb a portion of the higher labor costs. In most localities, relatively few of the covered service contracts involve large concentrations of low-wage workers. To begin with, most living wage laws incorporate minimum size thresholds that exclude from coverage employees of small contractors and businesses with small city contracts. Among those service contracts that are covered, many involve relatively few workers whose pay must be raised to meet the living wage standard. In most cities, it is only a handful of contracts, typically those for janitorial and security guard services in which substantial numbers of workers must be given raises in order to meet the living wage. This is particularly true for city-level living wage laws; they seldom cover non-profit human services programs, the service contracting area generally involving the largest concentrations of lowwage staff. However, the limited number of covered service contracts involving large concentrations of low-wage workers does not fully explain the relatively small contract cost increases that cities have experienced. As explained earlier, several cities found that contract cost increases were substantially lower than projected – projections that generally took into account the 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 contractors absorbing some of the new labor costs rather than fully passing them on to the localities through higher contract prices. Reports suggest that contractors absorbed some portion of the increased costs where implementation of the living wage was combined with steps to increase competition for city contracts, and where the living wage generated employer benefits that offset some of the increased wage costs, such as decreased staff turnover and increased worker productivity. Specifically, the enactment of living wage laws led several local governments to open for competitive bidding some contracts that had not been subject to this process for some time. Many administrators believe that this newly competitive contracting environment led contractors to be more willing to absorb some of the increased costs associated with the living wage law in order to remain competitive and secure the highly valued contracts. A policymaker in Ypsilanti Township, Michigan, remarked that the Township’s major contracts had “more bidders than ever before, at even better rates.” She attributed the lower bids to the living wage law, which subjected contracts to a competitive bidding process with fixed wage and benefit requirements. In order to remain competitive, bidders had to “be tighter and provide less of a profit margin.” In fact, an administrator from Alexandria, Virginia, found that “[t]here have been some competitive advantages to rebidding. We have seen some incumbents who lost on the second go-round, and it may be due to the bidding process.” Contractors continued to see the contracts as desirable despite costs associated with the living wage laws.

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In addition, some contractors appear to have absorbed some of the living wage-related labor cost increases, even in the absence of a competitive bidding process. For example, an analysis by the San Jose (California) Contract Compliance office found that in San Jose’s contract with the city’s convention center, the living wage requirement increased labor costs by 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 were simply absorbed by the convention center. In Hayward, California, after examining the payroll records of all service contracts covered by the city’s living wage law, Hayward’s auditor concluded that service contractors changed their pay scales to comply with the living wage requirements without demanding an increase in the contract prices from the city. The auditor attributed the contractors’ willingness to absorb the increased labor costs to the modest size of the cost increases created by the living wage on most city contracts. The director of purchasing of San Francisco, California, remarked that the living wage law was a “non-event” among for-profit service contractors, and that contractors typically paid the living wage requirement without complaint or a request to modify in the contract. These reported experiences of cities and counties generally suggest that where service contracts reflect generous or above-market profit margins (as may be the case for contracts that have not been competitively bid for some time) and a living wage law increases labor costs modestly, contractors are likely to absorb a significant share of the increased labor costs. On the other hand, where contracts have small, defined profit margins and involve large concentrations of low-wage workers (as is often the case for non-profit human services contracts), the cost increases resulting from a living wage law will be larger and it may be necessary for the local government to bear a greater proportion of them. Finally, contractors may have absorbed some of the increased labor costs because they were offset by savings resulting from decreased turnover and higher productivity among the workers whose wages rose because of the living wage requirements. The Pasadena (California) Budget Administrator interviewed the majority of contractors affected by the living wage requirement, a number of which reported that the law had the benefit of reducing turnover in their workforces. This finding is consistent with research studies that have concluded that living wage laws can create other countervailing savings for employers that offset a portion of the increased labor costs. For example, a study of living wage costs at the San Francisco International Airport found that higher labor costs were partially offset by savings to the companies in the form of reduced employee turnover and increased productivity (Reich et al. 2003).

Living wages in US communities 217

Business subsidy programs: targeted and sustained economic development Our investigation also examined the experiences of cities and counties that have extended living wage requirements to their economic development programs. In order to assess whether living wage requirements have prevented cities from using business subsidies to attract or retain desired employers, we looked at ten cities with a living wage requirement for economic development projects: Duluth, Minnesota; Los Angeles, California; Minneapolis, Minnesota; Oakland, California; San Antonio, Texas; San Francisco, California; Toledo, Ohio; Warren, Michigan; Ypsilanti Township, Michigan; and Ypsilanti, Michigan. These ten represented all of those cities across the US that had had a living wage requirement for economic development projects in place by 2000, a year before the study began, and where we could identify a city administrator able to assess the impact of the living wage policy on the city program. We interviewed policymakers and economic development personnel in these cities, and examined reports prepared by the economic development departments of Duluth, Toledo, and Oakland, to determine whether businesses have continued to participate in economic development programs in localities where subsidized jobs must pay a living wage. As Table 14.4 shows, no adverse impact on economic development projects could be detected. 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 living wage conditions each year

# Projects cancelled

Duluth, Minnesota

Health Care, Technology Mixed Use Technology Mixed use Technology, Finance, Manufacturing Mixed use Industrial Industrial, Manufacturing

2

0

3 6–7 1 4

0 0 0 0

1 n/a 4–6

1 0 0

5

0

1

0

Los Angeles, California Minneapolis, Minnesota Oakland, California San Antonio, Texas San Francisco, California Toledo, Ohio Warren, Michigan

Ypsilanti Township, Michigan Technology, Industrial Ypsilanti, Michigan Industrial

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wage and health benefits to employees did not result in fewer applicants for business subsidies. In fact, a number of cities reported banner years for economic development in 2001, with correspondingly low local unemployment levels. Administrators who noted a decline in applications for their business subsidy programs since 2001 attributed this to general economic conditions rather than to business concerns about the living wage requirement. For instance, Minneapolis, Minnesota, which has had a living wage requirement in effect since 1998, has seen no drop in applications for its business subsidy program, and no complaints from businesses since it implemented its living wage policy. In San Antonio, Texas, which in 2002 expanded its living wage policy to incorporate a base living wage standard for all of a subsidy recipient’s employees, the Economic Development Department successfully recruited a grocery firm to locate its meat distribution plant in the city. The relocation is expected to create forty new jobs at the $8.75 rate. In negotiating the project, the company raised no objections to the wage requirement. In Toledo, Ohio, which did experience a drop in applications for subsidized loans for machinery and equipment in 2001, the economic development administrator attributed the decrease to current economic uncertainties and not the obligation to pay a living wage. Similarly, administrators in Los Angeles and Oakland, California, attributed 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 the creation or retention of jobs in low-wage sectors such as retail. Many localities do not see providing business subsidies to retailers, whose employees generally earn at or just above the minimum wage, as the best use of scarce economic development dollars. As Karen Lovejoy Roe, Supervisor of Ypsilanti Township, explained, “the Township Board . . . feels that if you 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 establishments. However, many communities do choose to subsidize mixed-use development projects, which may include some combination of office, housing, and retail space. The economic development departments in San Francisco, Oakland, and Los Angeles have mandated that developers of mixeduse development projects require that their retail tenants pay the living wage rate.4 In these instances, local governments have had mixed success with retail establishments. In Oakland, city officials reported that two retail development projects had been cancelled in recent years, but attributed the result to factors other than the living wage law. In Los Angeles, developers of two subsidized projects, including the Staples Center stadium development project, agreed without complaint to the living wage requirement, while a third project proceeded by exempting some retail and restaurant staff from the requirement. In San Francisco, a super-

Living wages in US communities 219 market, while claiming that it paid its employees a living wage, chose not to accept a subsidy package citing a desire not to be subject to the living wage reporting requirement. Cities reported that the overall economic climate and traditional economic development concerns were the dominant factors in decisions by developers whether to seek or accept public subsidies for economic development projects involving retail components. The city of Oakland, for instance, attributed developer decisions not to pursue subsidized retail development projects chiefly to traditional considerations, such as project location, availability of parking, and consumer spending, rather than the applicability of a living wage requirement. Finally, the experiences of these cities and counties suggest that living wage requirements may help cities in directing public funding away from retail projects that often bring fewer returns to their communities. In fact, Oakland’s experience suggests that the failure of its proposed retail projects to move forward may have been a blessing in disguise. Using the same property and fewer taxpayer resources, Oakland sold most of the city land originally slated for retail development to a telecommunications manufacturer that is expected to create 1,200 high-wage jobs without requiring city subsidies. The remainder of the property is being developed into an automotive facility by a unionized firm that pays its employees at or above the living wage standard. Thus, to the degree that a living wage requirement limits the feasibility of economic development strategies focused on low-wage sectors such as retail, this may help cities in directing economic development resources towards other sectors that more readily yield good jobs for the community. Factors that may account for little negative impact on economic development programs Administrators attributed the living wage laws’ limited impact on economic development programs to the fact that many business subsidy programs were already focused on recruiting businesses in sectors that offer higher wages and the greater public acceptance of economic development programs that incorporate living wage policies. Several administrators, in fact, commented that because their economic development programs already aimed to recruit firms paying better-than-average wages, the living wage law did not change their way of operating but rather formalized a pre-existing policy preference. As a consequence, only two cities identified businesses that they sought to recruit with taxpayer subsidies where the employer had to raise some workers’ pay in order to meet the living wage standard. Duluth, Minnesota, reported that in 2000, a health maintenance organization recruited with a public subsidy package raised wages for ninety-five workers in order to meet the city’s living wage standard. Secondly, Toledo, Ohio, reported that in 2000, a telephone answering

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company seeking a public subsidy raised pay for twenty-five employees in order to meet the city’s living wage standard. However, Minneapolis, Minnesota, San Antonio, Texas, and the Michigan municipalities of Warren, Ypsilanti Township, and Ypsilanti reported that jobs at businesses typically targeted by their economic development programs – chiefly firms in the industrial and technology sectors – already paid a living wage and thus no wage adjustments were required by firms recruited with subsidy awards. For the majority of the localities, living wage laws did not require changes in the operation of their economic development programs because the programs already targeted for recruitment firms that paid living wages. Some cities indicated that their living wage policies actually boosted public acceptance of local economic development programs. They found that residents who questioned the value of providing taxpayer subsidies to business were less hostile to an economic development program that guarantees that the jobs created pay at least a living wage. According to a San Antonio, Texas, economic development agent, the living wage law has “helped eliminate the controversy associated with [the economic development] program [because] . . . groups hostile to incentives in the past aren’t as hostile with the living wage component.” A Los Angeles, California, administrator who negotiated with the developer of the Staples Stadium development project echoed this sentiment by noting that project’s acceptance of the living wage requirement “aided the developer in getting community support.” Administrators also report that living wage laws can help focus economic development programs by prioritizing high-wage job creation. For example, the economic development director of Duluth, Minnesota, recounted that in the 1970s, when Duluth had one of the highest unemployment rates in the country, the city used tax dollars to attract any jobs it could, regardless of the wage level. However, with a more moderate unemployment rate in the 1990s, the city adopted a living wage law to “formalize a strategy of [promoting] living wage jobs.” As a result, Duluth now provides subsidies only to firms such as software and health care companies that expand the city’s base of better-paying jobs. The manager concluded that the living wage law “sends a strong signal to policymakers that they need to seek higher wage jobs.” Seeking to maximize the number of better-paying jobs supported by their programs, some economic development agencies have extended living wage requirements to subsidy projects not actually covered by their local ordinances. The Los Angeles community development agency has applied a living wage requirement for developers seeking public subsidies for retail projects that were not formally covered under the city’s living wage law. According to a community development officer, as a result of these 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.

Living wages in US communities 221 And even if the [living wage law] doesn’t cover retail, it gets put on the table.” San Antonio’s living wage law not only provided the city with an incentive to focus on attracting high-wage jobs, but also encouraged its economic development department to think strategically about how to prepare local residents for these positions. Its living wage law helped the city focus its tax abatement pool on recruiting high-wage firms such as Boeing, Chase Bank, and a commercial airline overhaul company. Turning then to the task of equipping as many residents as possible with the skills necessary to be hired and advance in these jobs, San Antonio designed a workforce development program that combined worker training, financial assistance for students attending college and technical schools, and apprenticeship placements.

Conclusion The experiences of an initial group of twenty cities and counties demonstrate that living wage requirements have not significantly increased contracting costs or adversely affected the operation of economic development programs. The overall cost increases were quite low and less than anticipated, generally ranging from 0.003 percent to 0.079 percent of the localities’ total budgets. In some communities, a few service contracts involving large concentrations of low-wage workers increased in cost more substantially, but cost increases were still quite modest overall. The municipalities that extended living wage laws to their local business subsidy programs found that these policies did not prevent them from attracting new businesses to their communities. Several cities found that applying a living wage standard to these programs focused their economic development agencies on recruiting higher wage employers, and in some cases generated public support for the use of taxpayer dollars to support private businesses. These findings should allay fears of local governments and residents that living wage laws will result in large cost increases for local governments or prevent 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 for invaluable editorial assistance, and Stephanie Luce and Jen Kern for sharing their extensive knowledge about cities and counties with living wage laws, and for their insightful comments on earlier drafts. I would also like to thank the University of California Institute for Labor and Employment for generous funding and support. This chapter is based on a longer study I drafted for the Brenner Center for Justice at the New York University School of Law (Elmore 2003). See www.brennencenter.org

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Notes 1 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, formal internal evaluations, and/or other observations of the effects of their living wage laws. The following localities were contacted but could not offer any observations or reports on the impact of their living wage laws: Ann Arbor, Michigan; Boston, Massachusetts; Cleveland, Ohio; Cook County, Illinois; Detroit, Michigan; San Fernando, California; St. Paul, Minnesota; and Tucson, Arizona. While Milwaukee, Wisconsin, had available some information on the impact of its living wage law, we did not include it because the city was unable to provide an estimate of the increase in the cost of its contracts as a result of the wage requirement. 3 For specific sources of information from the interviews with administrators and lawmakers, refer to Elmore (2003), available at www.brennancenter.org. 4 In Los Angeles, economic development personnel only require developers to use “best efforts” to find retail vendors that pay their employees a living wage.

References Brenner, M.D. and Luce, S. (2003) The Effect of Living Wage Laws in New England, Amherst, MA: Political Economy Research Institute Research Report, University of Massachusetts. Brenner, M.D., Wicks-Lim, J., and Pollin, R. (2002) Measuring the Impact of Living Wage Laws: A Critical Appraisal of David Neumark’s How Living Wage Laws 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 LowIncome Families, San Francisco, CA: Public Policy Institute of California. Niedt, C., Ruiters, G., Wise, D., and Schoenberger, E. (1999) The Effects of the Living Wage in Baltimore, Washington, DC: Economic Policy Institute. Nissen, B. (1998) The Impact of a Living Wage Ordinance on Miami-Dade County, Miami, FL: Florida International University, Center for Labor Research and Studies. Pollin, R. and Luce. S. (2000) The Living Wage: Building a Fair Economy, New York, NY: The New Press. Reich, M., Hall, P., and Jacobs, K. (2003) Living Wages and Economic Performance: 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 Eighteen Months, Los Angeles, CA: University of California, Los Angeles School of Law.

Living wages in US communities 223 Weisbrot, M. and Sforza-Roderick, M. (1996) Baltimore’s Living Wage Law: An Analysis 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 Los Angeles Living Wage Ordinance, Los Angeles, CA: University of California, Los Angeles School of Law.

Index

absenteeism 162, 204 Adams, Scott 179, 180, 184, 191, 192–3 Alabama 69 Alaska 171 Albuquerque, New Mexico 49n Alexandria, Virginia 212, 214, 215 Alinsky, Saul 165, 169n Allen Park, Michigan 82 Alliance Party, New Zealand 142, 143, 148 Amalgamated Clothing and Textile Workers Union 97n American Federation of Labor (AFL) 31–2 American Federation of LaborCongress of Industrial Organizations (AFL-CIO) 70, 71, 78, 79, 80, 81, 82, 90 American Federation of State, County and Municipal Employees (AFSCME) 70, 72–3, 182 Ann Arbor, Michigan 222n Aquinas, Thomas 4 Association of Community Organizations for Reform Now (ACORN) 44, 45, 61, 70, 78, 79, 80, 83n, 164 Australia 2, 140 Australian Chamber of Commerce and Industry 134n, 135n Australian Council of Trade Unions (ACTU) 8, 122, 124, 125, 128–30, 134n, 135n Australian Industrial Relations Commission 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 Leadership Development (BUILD) 72–3, 169n bargaining power 5 basic wage, Australia 122–5 Basic Needs Budget 6, 45, 46, 54–5 Bergmann, Barbara 54 Berkeley, California 212, 213, 214 Beverly Hills, California 75 Blair, Tony 111, 113 Boston, 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, 94 Broward County, Florida 164, 166 Bush, Jeb 167, 168 California 83, 171, 196 Cambridge, Massachusetts 80, 212, 214 Canada 109 Canadian Union of Public Employees 95 Canso, Nova Scotia 98n Card, David 46, 108, 175, 177, 185n, 189, 203 casual employment 3, 114, 125, 127, 132 Chicago, Illinois 6, 46, 78–9, 83, 193 child care 58 children 15, 25; as workers 7, 25, 29, 30 class 21 Clergy and Laity United for Economic Justice (CLUE) 62, 75 Cleveland, Ohio 95, 222n coalitions and alliances 6, 7, 9, 38, 70–1, 81, 83, 94, 101, 158, 164 collective bargaining 8, 28, 91, 101, 138, 150 commutative justice 1, 4, 38

226

Index

comparable worth 110, 151 Confederation of British Industry 114, 118n Congress of Industrial Organizations (CIO) 35 contingent employment 3, 8, 58 Cook County, Illinois 222n Coral Gables, Florida 165 Corvallis, Oregon 10, 198, 199, 200, 201 costs, living wage 11

Equal Opportunities Commission, UK 107 equal pay 25, 102, 112, 132, 140 Equal Pay Act, New Zealand 140, 148 equal value see comparable worth European Federation of Public Service Unions 114 European Public Services Union 114 European Union 2, 101, 112, 114, 117, 119n

Daley, Richard 78, 79 Dane County, Wisconsin 10, 198, 199, 200, 213, 214 Davis-Bacon Act, US 44 decentralization 8 Denver, Colorado 49n deregulation 2; financial 125 Des Moines, Iowa 157 deskilling 35 Detroit, Michigan 4, 6, 9, 10, 80, 81, 171, 193, 194, 196, 222n dignity 4, 5, 22 discrimination; race 32; sex 32, 110, 116, 132 distributive justice 25 Duluth, Minnesota 217, 219, 220

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 140 family wage 28, 138, 139; see also breadwinners, male feminism 140 Ferndale, Michigan 81 Figart, Deborah M. 1, 2, 28, 30, 32, 34, 38, 62, 64, 65, 71, 116 Florida 69 Ft. Lauderdale, Florida 166 France 24 free trade 85 Freeman, Richard 189

Earned Income Tax Credit, US 47–9, 57 earnings inequality 2, 64, 116, 126, 138, 146, 149–50 East London Community Organisation 102–6 Eastpointe, Michigan 81, 82 economic liberalization 2, 38, 40, 132 Economic Policy Institute 44, 45, 46, 59–61, 172 economic theory classical 1; heterodox 1; institutional 190; neoclassical 1, 117, 149 Edmonton, Alberta 98n efficiency wage effects 190 elasticity, employment or labor 10, 46, 147, 167, 173, 175–6, 179; youth 147 elasticity, product demand 202, 203 Employment Contracts Act, New Zealand 141–2 Employment Policies Institute 72, 167 Employment Relations Act, New Zealand 142 Employment Standards Act, Canada 88–9 England see Great Britain

Gainesville, Florida 165, 166 Great Britain 2 Great Depression 29, 31, 34, 37 guaranteed annual wage 5, 29, 35–7 Guaranteed Minimum Family Income 148–9 garment industry 7, 28, 85–98 Gary, Indiana 157 General, Municipal and Boilermakers’ Union, UK 113 Gini Coefficient 149 Hall, Peter 62 Hamilton, Ontario Hartford, Connecticut 10, 43, 198, 199, 200, 212 Harvard University 80 Harvester Judgment 123–4, 132, 139 Hayward, California 201, 212, 216 Hazel Park, Michigan 82 Hollywood, Florida 166 homeworkers 7, 87–94

Index 227 Homeworkers Association, Canada 90–7 Hotel, Entertainment, and Restaurant Employees union (HERE) 70, 75, 83n household 27, 132 Houston, Texas 49n Howes, Candace 204 immigrants 5, 7, 30, 87, 88, 92,106, 164, 165; public benefits for 77 immigration 29; policy 124 income inequality see earnings inequality indigenous people 8, 123–4; see also Maori Industrial Areas Foundation, US 169n Industrial Conciliation and Arbitration Act, New Zealand 139 Industrial Relations Reform Act, Australia 124 industrialization 27 internal labor market 35, 37, 102 International Labour Office/Organisation 114, 119n International Ladies’ Garment Workers’ Union (ILGWU) 7, 88, 90, 97n Inverness, Nova Scotia 98n Ireland 2 Jacksonville, Florida 165, 166 Japan 109 Jobs with Justice 164–5 just price 2, 4, 17–19; critique of 19–22 just wage 2, 4, 12n justice, economic 6, 9, 18, 69, 70, 77, 83, 164 Kalamazoo, Michigan 82 Kennedy, Edward 171–2 Kentucky 69 Keynes, John Maynard see Keynesianism Keynesianism 31, 36, 37, 38 Kingston, Ontario 98n Korea 134n Krueger, Alan 46, 108, 175, 177, 185n, 189, 203 Kuttner, Robert 150 Labor Government, Australia see Labor Party, Australia

Labor Party, Australia 124, 128 Labor Relations Act, Canada 93 labor turnover 162, 204, 216 Labour Government, New Zealand see Labour Party, New Zealand Labour Government, UK see Labour Party, UK Labour Party, New Zealand 138, 139–40, 141, 142–3, 144–5 Labour Party, UK 7,108, 112, 115 Lester, Richard 190 living standard 6, 11, 45, 51 living wage, calculating 6, 18, 51, 62–64, 103–4 living wage claim, Australia 125–32 living wage ordinances or clauses 3, 5–6, 38, 69, 106, 122, 157–8; benefits 159, 161–3, 178–84, 192, 194, 195, 211, 220; costs 159–63, 188, 194, 195–7, 197–202, 205, 210–16; coverage 191–2; 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 economic impact 159, 161–3, 182, 202–4, 217–21; social movement effects 163–5 Livingstone, Ken 106 London, East 7, 102–6, 118n London, Ontario 98n Los 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 New Economy (LAANE) 75, 76, 78, 83, 222n Louisiana 69 Low Pay Commission, UK 7, 107, 108, 110, 111, 113, 116, 118n Macpherson, David 167 Madison, Wisconsin 210, 212 Maine 83 Manitoba, Canada 2, 94 Maori 147, 150 marginal productivity theory 1 Marine Workers’ Union 36 Marx, Karl 1, 4, 117 Massachusetts 83, 171 maximum hours regulations 30, 31 masculinity 27, 33, 36 McDonald’s 73

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Index

Memphis, Tennessee 4, 6, 56, 57, 58–9, 63 Menino, Tom 79–80 Mexico 89 Miami, Florida 4, 9, 10, 43, 46, 47, 62, 157, 193, 194, 196 Miami-Beach, Florida 165 Michigan 80–2 Milwaukee, Wisconsin 43, 222n minimum 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 of 34; youth rate 111, 135n Ministry of Women’s Affairs, New Zealand 147 Minneapolis, Minnesota 217, 218, 220 Minnesota 56, 57, 58–9, 83 Monroe County, Michigan 81 Mulgrave, Nova Scotia 98n Multnomah County, Oregon 203 Mutari, Ellen 28, 31, 38, 146 National Industrial Recovery Act, US 31–2 National Interfaith Committee for Worker Justice (NICWJ) 62, 70, 71 National Party, New Zealand 138, 142, 144–5 natural rights 4, 16 neoliberal economic policies see economic liberalization Netherlands 132–3 Neumark, David 46, 174, 175, 177, 178, 179, 180, 182, 183, 184, 185n, 189, 191, 192–3 New Deal 5, 31 New Democratic Party, Canada 89, 93 New Haven, Connecticut 10, 78, 198, 199, 201, 212, 214 New Jersey 190 New 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, 8 New Zealand Business Roundtable 146, 148 New Zealand Council of Trade Unions 142, 145–6, 147 Nissen, Bruce 45, 47, 62, 159, 164, 194 non-standard work see casual employment, part-time employment, temporary employment norms 1 North Carolina 56, 57, 58–9, 69 Oakland, California 10, 194, 195, 196, 210, 217, 218, 219 Oregon 83, 171 Orlando, Florida 165, 166 overtime 38, 105, 134n Palm Beach, Florida 166 Panelas, Alex 168 parental leave 11 part-time employment 3, 8, 38, 102, 125, 132, 150 parasitic industries argument 2; 3, 4, 6, 15–16, 31, 39, 40n, 116 Pasadena, California 203, 212, 214, 216 Pennsylvania 190 Pictou, Nova Scotia 98n Polanyi, Karl 115 Political Economy Research Institute 44 Pollin, Robert 12n, 45, 47, 62, 191, 194, 197, 203, 205, 207n, 211 Pompano Beach, Florida 166 Pope Leo XIII 1, 4, 12n, 22 Port Hawkesbury, Nova Scotia 98n Portland, Oregon 43 Portugal 109 poverty 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, 32 protective legislation 28, 29, 30, 32 provisioning 11, 27, 28, 38, 40, 140 Puerto Rico 29

Index 229 race-ethnicity 2, 3, 34, 40, 65, 81, 88, 96, 150, 167 regulation, wage 101; see also minimum wage Reich, Michael 45, 62, 194, 204, 216 Renwick, Trudi 54 Republican Party, US 167 Rerum Novarum 1–2, 4 Reynolds, David 45, 194 Richmond County, Nova Scotia 98n Riordon, Richard 75 Ryan, John A. 4, 5 Safety Net Adjustments 127–9 St. Paul, Minnesota 43, 222n San Antonio, Texas 206n, 210, 217, 218, 220, 221 San Diego, California 78 San Fernando, California 222n San 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 70 Santa Fe, New Mexico 43 Santa Monica, California 10, 43, 75, 194, 195, 196, 197, 205, 207n Schmid, Gunter 133 Schor, Juliet 134 scholastics 17 self-employment 132 self-sufficiency 6, 52, 55–9, 61, 163 Service Employees International Union (SEIU) 70, 78, 79, 83n Smith, Adam 1 Somerville, Massachusetts 80 social reproduction 11, 30 social security 117, 133 Social Security Act, US 36 South Carolina 69 South Miami, Florida 165 Southfield, Michigan 81 Southgate, Michigan 81 Spain 109 Stigler, G.J. 174 structural adjustment 138, 149 subsistence 1, 2, 16, 17, 30 Suffolk County, New York 43 supplemental unemployment benefit (SUB) 36–7 sweated trades see sweatshops

sweatshops 2, 4, 5, 16, 17, 21, 29, 30, 33, 37, 39, 71, 85, 95, 107 Sweeney, John 78 Tallahassee, Florida 165 Tampa, Florida 165, 166 Taylor, Michigan 80 Temporary Assistance to Needy Families, US 52, 56, 58 temporary employment 3, 77 Tennessee 69 Texas 69 Thatcher, Margaret 111, 119n Thunder Bay, Ontario 98n Toledo, Ohio 217, 218, 219 Toronto, Canada 6, 7, 87–98 Trades Union Congress, UK 107, 112, 115 Transport and General Workers’ Union, UK 113 Tucson, Arizona 49n, 222n two-tiered work force 111–15, 116 Union of Needletrades, Industrial and Textile Employees (UNITE) 7, 86, 95, 97n unions, labor 28 United Auto Workers (UAW) 35 United Steel Workers of America 36, 70 United States 2, 109, 110, 117, 134n University of Michigan 81 utility 16, 17, 21 Vancouver, British Columbia 98n Vermont 83 Virginia 69 wage gap, gender-based 8, 124, 130, 150 wage justice 126, 133 wage relativities 133 wage subsidies 6, 48–9 wage slavery 27 wages, as a living 64–5; as a price 64–5, as a social practice 64–5 Wages Act of 1986, UK 107 Warren, Michigan 81, 200, 210, 212, 217, 220 Washington, District of Columbia 29, 46 Washington State 83, 171 Washtenaw County, Michigan 81 Wear Fair Employment Project 92

230

Index

Webb, Sidney and Beatrice 1, 3, 4, 15 welfare reform 52 welfare state 11, 37, 138 Windsor, Ontario 98n women 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, Australia 124, 127 Yale University 78 youth, working 172; see also minimum wage, youth rate Ypsilanti, Michigan 200, 212, 217, 220 Ypsilanti Township, Michigan 212, 215, 217, 218, 220