While Congress is deadlocked over raising the $5.15 federal minimum wage by $1 an hour, grass-roots organizers are convincing local officials around the country to set minimum wages for government contractors, which sometimes are twice the federal rate.
Over the last six years, such so-called living-wage ordinances have been passed in at least 44 localities, including Los Angeles, San Jose, New York, Chicago, Boston and Milwaukee. Similar campaigns are under way in at least 69 more. Living wages -- ranging from $6.25 to $11 an hour -- are calculated to ensure that a worker can bring home enough money to support a family above the poverty level without having to work two jobs. Currently, a family of three with one full-time worker earning $5.15 has 30 percent less income than the official federal poverty level for a family that size.
Living-wage campaigns are gaining momentum during these robust economic times, aided by community, church, student and labor groups, says Jen Kern, director of the National Living Wage Resource Center in Washington, D.C.
“It's more shameful to argue against modest wage increases and health benefits when the economy is doing so well,” she says.
Kern says several other economic factors are making this an opportune time to press for a living wage:
Low-end wages have stagnated during most of the 1990s, so even if Congress does raise the minimum wage by $1, it will still be worth 15 percent less than its real value was in 1979.
Welfare reform has sent thousands of low-skilled mothers into the work force, potentially depressing the wages of other low-paid workers.
The fastest-growing job sector, the service industry, typically is among the lowest-paid.
Many city and county governments have begun contracting out services once provided by unionized city employees to non-union contractors.
Companies have been reaping billions of dollars in tax breaks and economic-development subsidies over the last two decades as cities and counties have stepped up competition with each other to attract what often turn out to be only minimum wage jobs.
The movement for what Kern calls “economic justice” is also gaining popularity because people are frustrated when they see Congress squabbling over whether to phase in the $1 increase over two years or three years, “as they propose giving businesses $120 billion in tax breaks.”
When Baltimore passed the nation's first living wage in 1994, it required certain city contractors to pay workers at least $7.70 per hour by 1999. But more recent ordinances also require them to provide benefits and incentives to unionize. Now supporters are demanding that any company receiving a tax exemption or government subsidy be covered by the living-wage requirements.
“Taxpayers see companies double-dipping -- negotiating huge economic-development tax breaks and subsidies that exempt them from paying for good schools or revitalizing their communities,” says Nathan Smith, an organizer with the Association of Community Organizations for Reform Now (ACORN), which supports living-wage campaigns across the country. “Then those companies turn around and pay such low wages that taxpayers must shell out even more money for food stamps and Medicaid to bring those workers' incomes up to the poverty line.”
ACORN says studies of the impact of living-wage ordinances in Baltimore and Los Angeles show that they do not adversely affect business, the local economy or city spending. In Los Angeles, for instance, the ordinance caused a 1 - 1.5 percent increase in total expenses for affected companies, according to one study. Another study, by researchers at Johns Hopkins University, found that Baltimore's living-wage ordinance resulted in a 1.2 percent increase in the cost of city contracts, less than the rate of inflation.
But business groups, once relatively indifferent to the ordinances because they covered so few workers, are vigorously opposing them now that they are affecting more companies. They oppose living-wage laws on the same grounds that they oppose federal minimum wage legislation. They contend they hurt the intended beneficiaries by forcing businesses to employ fewer workers, especially fewer unskilled workers, or to relocate to avoid living-wage cities.
The laws also will damage local governments' competitiveness, they say, because some firms will refuse to bid on city contracts. “If local governments attract fewer bidders, it could mean they have fewer choices and possibly be forced to pay higher prices,” says Ronald Bird, chief economist for the Economic Policy Foundation, a think tank funded in part by major corporations.
Bird admits that the impact of living-wage ordinances has been minor so far, but that's because until now fewer than 50,000 workers nationwide have been covered by them. “But if these ordinances were adopted on a national or statewide level, which is the ultimate objective,” Bird says, “it could have a really bad impact.”
However, advocates point out that in 1997, the last time the federal minimum wage was raised, business predicted they would have to lay off workers, but the robust economy sent unemployment to historic lows instead.
Higher wages also boost productivity because they lower absenteeism and turnover, economist Robert Pollin wrote last April.
Business groups also complain that the ordinances are tools for union organizing, which appeared to be borne out by a comment from Los Angeles labor organizer Miguel Contreras. A union complaint about wage inequity is likely to be dismissed as self-serving, he said, “but if it has the cloak of religious leaders and community activists, then it becomes a community issue.”
Bird also says supplementary aid programs, like food stamps, Medicaid or the earned-income tax credit, are more effective at targeting the working poor than minimum and living-wage ordinances. Most people who make minimum wage, he says, are teenagers.
But Jared Bernstein, a labor economist at the liberal Economic Policy Institute, says raising the minimum wage targets not only those making $5.15 an hour but also anyone making a wage that falls between $5.15 and whatever the new “livable” wage is -- a group that includes many low-wage breadwinners.
ACORN's Smith argues that relying on government handouts “just shifts the burden back to the taxpayers, who end up indirectly subsidizing the companies to pay below-poverty wages.”
Kern says the living-wage debate is part of a larger controversy over what kind of economic development public officials are buying with their tax breaks. “Do we really need to subsidize another shopping mall that provides only minimum wage jobs?” she asks.
Bird contends that when public officials grant businesses tax abatements to attract jobs, they believe the new jobs will generate enough additional sales and income taxes to offset the lost business taxes -- an assumption that is increasingly being challenged.
“Now that we have record low unemployment in much of the country, the time to stop this bidding war between the states is long past,” Bernstein says. “Often, these corporate subsidies are being granted for business growth that would have happened anyway.”