Living Wage: What Business Groups Need to Know

Over the course of the past decade, the Association of Community Organizations for Reform Now (ACORN), in conjunction with labor organizations, has lobbied municipalities to enact mandated wage hikes—sometimes as high as 130% of the minimum wage—through local ordinances. ACORN refers to the wage hikes as "living wages," and its efforts have been described as the living wage movement. To date, there are more than 50 living wage ordinances around the country.

On February 20, 2004, the Chamber, in conjunction with the Coalition to Keep America Working and the National Restaurant Association, hosted a forum titled "Living Wage: What Business Groups Need to Know." Throughout the daylong event, participants heard from a variety of speakers on many different aspects of the living wage movement. Chamber staff opened the forum with a brief history of the living wage movement, beginning with the Baltimore city ordinance in 1994. Dr. David Neumark of the Public Policy Institute of California and Dr. Aaron Yelowitz of the University of Kentucky, as well as the Chamber's Chief Economist Martin Regalia, comprised a panel that discussed the various economic effects of mandated wage increases. Craig Garthwaite, director of research for the Employment Policies Institute, presented the alternatives to living wage mandates, focusing on the earned income tax credit. The forum also included a "tactics" presentation on how groups, such as ACORN, organize living wage movements on the local level. Jerry Easley of the Santa Fe Chamber of Commerce and Jim Funk of the Louisiana Restaurant Association concluded the day with a few anecdotes from their own fights against living wage mandates, adding a few more lessons to an already full day for participants.

As discussed at the forum, the stated goal behind the living wage movement is poverty reduction, and many of the ordinances mandate a wage that would lift a family of four above the poverty level. However, as with minimum wage increases, economic studies have shown that living wage mandates do more harm than good to those living in poverty through resulting job elimination and shifting entry-level jobs from lower-skilled workers to higher-skilled workers.

While living wage mandates are generally limited to public employees and to companies contracting with or receiving aid from the municipality, a growing number apply to private employers that have no financial ties to the city or town. Indeed, the Santa Monica, California, ordinance of 2001 applied to every business with more than 50 employees and $5 billion in revenue within the coastal tourist zone. This broad and expansive ordinance was ultimately defeated by a ballot initiative. Santa Fe's living wage ordinance, which has just recently gone into effect after an unsuccessful court challenge, applies to any private business with 25 or more employees, regardless of whether the business has any tie to the city. Other living wage ordinances may include union-friendly provisions, such as exclusions for employees covered by collective bargaining agreements and/or mandatory neutrality or card check recognition. Moreover, sanctions for noncompliance with a living wage mandate are growing increasingly strong and, in at least one case, include criminal penalties.

Based on recent developments, such as the Maryland General Assembly passing a statewide living wage law in the final hours of its 2004 session, thankfully vetoed by Gov. Ehrlich (R), the living wage issue seems certain to continue to expand and become even more politically difficult. The Chamber will continue to provide useful information to its members that are currently, or will be, faced with a living wage ordinance, and will continue to work as an active participant in the Coalition to Keep America Working.

View PowerPoint Presentations (PDF, 900KB)