Do Living Wage Ordinances Reduce Urban Poverty?

Abstract

Many cities in the United States have recently passed living wage ordinances.These ordinances typically mandate that businesses under contract with the city or, in some cases, receiving assistance from the city, must pay their workers a wage sufficient to support a family financially.To date, there has been no empirical analysis of the actual effects of living wages on the expected beneficiaries-low-wage workers and their families.In this paper, we estimate the effects of city living wage ordinances on the wages and hours of workers in cities that have adopted such legislation.We also look at the effects of the ordinances on employment and poverty rates in these cities.Our findings indicate that living wage ordinances boost wages of low-wage workers.The estimated elasticities are small, however, which seems consistent with the fact that living wages have limited coverage, and may also have limited compliance and enforcement.In addition to the wage effects, we find weak negative hours effects of living wage ordinances on low-wage workers, and strong negative employment effects.Finally, our estimates of the effects of living wages on poverty rates indicate that living wage ordinances may help to achieve modest reductions in urban poverty.

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