Policy & Tools: Living Wage

What Is a Living Wage Policy?

A living wage policy requires employers to pay a wage at or above the federal or state poverty line. Living wages are generally set as the wage a full time worker would need to support a family of four above the federal poverty line. Wage rates vary from city to city, based on the local cost of living, wage scale, and political reality. For example, the living wage set by the 1995 Milwaukee County Service Contract Wage Requirements is $6.05, while the 1999 City of San Jose Living Wage Policy is $9.50. Living wage policies can come in several forms. They can be laws or ordinances enacted by a state, city or county; they can be project- or area-specific policies that are a part of a CBA; or a policy can target a specific industry. It is important to remember that living wage policies usually apply to a very specific set of workers, such as employees performing work under a city contract. Ultimately, it is important that a coalition seeks to clearly define who is covered by a living wage policy. In the end all living wage policies have the same objective: to ensure that the jobs created by subsidized projects or government contracts do not increase the ranks of the working poor.

Beyond Wage Requirements

Many living wage policies account for the cost of health care by calculating the wage to reflect whether an employer will provide healthcare or if the worker will have to purchase an individual plan. Either way, community groups may seek to expand job quality standards by including the following additional provisions. 

Health Care 

For the majority of low-wage workers healthcare is far out of reach for themselves and their families. In most cases employers do not provide healthcare options for low-wage workers. In many cases where an employer does provide healthcare benefits, the employee’s contribution is so high and wages are so low that many will opt-out of coverage. Living wage policies can address this issue. In many cases the cost of healthcare is calculated into living wages. For example, the living wage provisions in the Staples CBA requires employers to pay employees no less than $7.72 per hour if healthcare coverage is provided and $8.97 per hour if health insurance is not offered. This approach is preferable to a simple requirement that covered employers actually provide healthcare coverage to employees, which might lead to legal complications. 

Paid Sick Leave and Vacation 

Not only do low-wage workers have to worry about making ends meet, many have to choose between taking a sick child to the doctor and losing their job. A good job not only pays a living wage, it also provides paid sick leave. The Ballpark Village CBA in San Diego is a good example of a policy that provides a living wage and paid time off. The CBA requires covered employers to provide full-time employees with a minimum of ten compensated days off per year for sick leave or vacation. Part-time employees accrue time off at a rate proportional to that of full-time employees.

The Scope of Living Wage Policies

Nearly all living wage policies apply to businesses receiving government contracts, for example businesses that are performing privatized government services. There are also policies that require companies that receive economic development subsidies to pay living wages. Prior to adding a living wage policy to a CBA, your coalition should determine whether there are any existing policies that apply to your jurisdiction. Regardless of whether or not there is a living wage policy that applies to your area there are still a great deal of living wage “asks” that can be included in a CBA. In cities that have living wage ordinances, coalitions could seek to expand the scope of existing policies. For example, if only the developer is required to pay living wages, a coalition could request that service contractors and tenants be held to the same requirement. In cities that do not have living wage ordinances, CBAs are a way of implementing job standards on a particular development project even though the city does not have a living wage policy. 

Policies that cover a developer’s service contractors, but do not cover tenants in the development 

Most living wage policies that cover subsidy recipients cover only the entity that actually receives the subsidy and that entity’s service contractors. This usually means that the living wage requirements only apply to the developer and the developer’s contractors, such as janitorial, security, and parking companies. Tenants – like large stores that lease space from a developer – are considered “indirect beneficiaries,” and are not covered. While coverage of the developer and its contractors can create a substantial number of living wage jobs, in the typical development project most of the employees will work for the tenants of the developer. (Examples: Ballpark Village CBA, Gates Cherokee CBA

Policies that cover the tenants of developers receiving public funds 

Some living wage policies that cover all employees on land that is owned by the city. Policies like this are often in place for arenas, convention centers, and other facilities in which private employment occurs on city-owned land. In such cases, most or all of the jobs in a proposed development project will be covered by the city’s living wage provisions. But if there is a CBA or planning document, living wage applicability should be clearly indicated in order to avoid litigation or implementation breakdowns based on real or perceived conflicts among different official documents. (Examples: LAX CBA, Staples CBA

Policies that cover a percentage of workers in a given jurisdiction or project 

Even if a developer will not guarantee that all jobs at a development will be living wage jobs, they may commit to making efforts to maximize the number of living wage jobs. The developer might be required to “make all reasonable efforts to maximize the number of living wage jobs in the project,” or to consider whether a business pays living wages as a “substantial factor” in choosing tenants. Several CBAs require that at least 70% of all employees at a given site be paid a living wage. Whether a project has attained the living wage goal can be monitored through required reports and meetings. (Examples: Hollywood and Vine CBA, NoHo Commons CBA)

Living Wage Policies and CBAs

Living wage policies are a concrete way of lifting working families out of poverty. While every living wage policy is unique and specific to its locality, they are all based on the same premise: publicly-funded or subsidized projects and government contracts should not create jobs that pay poverty wages. It is this premise that makes living wage campaigns a perfect addition to many community benefits agreements (CBAs). Among many other things, CBAs seek to create quality jobs that pay a family-sustaining wage, and living wages are an effective policy tool for accomplishing this goal. 

Living wage policies enable coalitions to target specific industries that are known for paying low wages, like the hospitality industry. As a part of CBA campaigns, coalitions are able to attach labor standards in the form of living wages to development projects that are benefiting from subsidies and public contracts. 

By the end of 2008, at least 140 jurisdictions across the country had enacted living wage policies. Over the past decade, living wage policies have been developed to address the job quality issue in a more comprehensive way by including requirements beyond wages. For example, many living wage policies account for healthcare costs by including two wages, one for employers that provide healthcare and one for employers that do not provide healthcare (Staples CBA). Other policies include provisions that require paid sick leave (Ballpark Village CBA) or establish worker retention programs that make sure workers do not lose their jobs when public contracts change vendors (LAX CBA).

The Truth about Living Wages

Living wages have no real impact on the number of jobs available to low wage workers.

Opponents to living wage policies argue that raising wages will result in fewer jobs for low wage workers. If employers are forced to pay higher wages then they will decrease the number of jobs to avoid cutting into their profits. The result would be fewer workers with an increased workload. However, the evidence indicates that this is not the case. The Economic Policy Institute’s extensive research on living wage policies shows that living wage ordinances have no real impact on the number of jobs. Living wage policies also produce the following employer benefits:

  • Employers find that paying a living wage results in increased efficiency and productivity.
  • By paying higher wages employers are able to hire skilled workers that would otherwise be deterred by low wages.
  • Living wage policies result in decreased employee turnover.

Living wage policies create a more desirable marketplace for current and new businesses.

Local officials worry that a living wage policy will scare off current and new businesses. It’s important to remember that there are many factors that businesses consider when choosing a location. While wage standards are an important factor, the condition of the marketplace and the welfare of the local population are far more important. Businesses avoid moving into blighted and poverty-stricken neighborhoods. Policies that deliver living wages directly address poverty and underemployment issues and create a more desirable business environment. 

Workers’ wages should reflect decades of increased productivity. 

Since the 1970s wages for nonsupervisory workers have been on a steady decline. Meanwhile, current worker productivity is approximately 80% higher than it was during the 1970s. All employers benefit from a more productive workforce because efficient workers cut production costs, and increase profits. So if employers’ profits have increased and worker wages have decreased, where is the money going? Instead of compensating workers for their increased productivity, companies are spreading the profits among shareholders and executives. No one is arguing that a janitor should go from an $8 per hour wage to making $100,000 a year. However, if you work full-time, you should not find yourself unable to put food on the table and pay your rent. In the end it’s not about whether a low-wage job is worth a higher wage, it’s about working people being able to make ends meet, which benefits everyone.

Most low-wage workers are adults with families. 

Of the 13 million workers who receive minimum wages, 79% are adults over the age of 20. Among these workers, over half are women and nearly 40% are African-American or Hispanic. While it is true that some teenagers would benefit from a living wage policy, the vast majority of the beneficiaries would be adults with families.

Top Three Reasons Living Wage Policies Are Good for Business

#1. Businesses will see a decrease in employee turnover. 

Employees that are paid a living wage feel that their work is valued and are less likely to leave that position. When employees are paid low wages, the cost of not showing up for work is much less than if they were earning higher wages. A decrease in employee turnover benefits employers by cutting recruitment costs. The cost of constantly recruiting, hiring and training new employees exceeds the cost of paying current employees a living wage. United for a Fair Economy’s report on businesses and living wages estimates that turnover costs an employer at least 150% of the employee’s base salary. For example, it costs $28,500 to replace an employee that earns $15,000 a year, when a $2 wage increase would only cost the employer $4,160 per year.

#2. Higher wages attract more qualified and productive workers.

By offering a living wage, employers will be able to recruit more qualified employees. In the end this will result in increased productivity and efficiency.

#3. Business productivity will benefit from improved employee morale.

If employees feel that they are valued and fairly compensated for their work then everyone benefits. Businesses will benefit from increased productivity from employees that show up and work hard.

Other Living Wage Resources

The Living Wage Movement: Pointing the Way Toward the High Road. Jared Bernstein. Economic Policy Institute, 2008.

Choosing the High Road: Businesses That Pay a Living Wage and Prosper. Karen Kraut, Scott Klinger, and Chuck Collins. Responsible Wealth, 2000.

The Policy Shift to Good Jobs: Cities, States and Counties Attaching Job Quality Standards to Development Subsidies. Anna Purinton. Good Jobs First, 2003.

Living Wage Campaigns: An Activists' Guide to Organizing a Movement for Economic Justice. David Reynolds and Jen Kern. ACORN Living Wage Resource Center, 2003.

Economic Policy Institute

Examples of CBAs with Living Wage Policies