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Study of 15 Cities Sees No Harm in 'Living Wage' Laws
Crain's New York
Daniel Massey

November 30, 2010
View the Original Article


NYC pols point to key finding in research as reason to demand wage floors of $10 an hour plus benefits to businesses that draw on the city's development subsidies.

Living wage mandates on businesses that receive government subsidies do not have a negative impact on job and business creation, according to a new study of 15 cities by the Center for American Progress Action Fund.

Worker advocates and elected officials in New York City immediately seized on the report by the Washington, D.C.-based liberal think tank to argue for two controversial pieces of legislation being considered by the City Council that tie subsidies to wage standards. One of the proposals calls for prevailing wages of up to $24 an hour for building-service workers at city-subsidized projects, and the other seeks a living wage of $10 an hour, plus benefits, for all jobs that directly result from projects receiving economic development benefits.

“The report debunks the theory that these bills would hurt our city's competitiveness and confirms that, if enacted, both prevailing wage and living wage would provide thousands of New Yorkers access to the well-paying jobs they need and deserve,” said Councilwoman Annabel Palma, D-Bronx.

The study argues that 15 cities with living wage laws tied to subsidies—Ann Arbor, Mich.; Cambridge, Mass.; Cleveland; Duluth, Minn.; Hartford, Conn.; Los Angeles; Minneapolis; Oakland, Calif.; Philadelphia; Richmond, Va.; San Antonio; San Francisco; San Jose, Calif.; and Santa Fe, N.M.—had the same levels of employment and business growth as a comparable group of 16 control cities that did not have such laws.

“Wage standards are not job killers,” said John Podesta, president of Center for American Progress, and a former chief of staff to Bill Clinton. “You can encourage investment in good jobs without affecting the business climate.”

Authors of the study called it the most comprehensive to date on what are called business-assistance living wage mandates and said that its conclusions differed from a major 2005 study on the issue because it measured impact down to the city level, as opposed to just a regional one, and because it focused on cities where the living wage policies were actually being enforced. The latest study broke out different employment areas, including retail, restaurants, hotels and wholesale, and found that none of them were negatively affected by the wage laws.

The study focused on living wage laws tied to subsidies because they are the type of mandate likely to have the most widespread impact on employment. The authors argue that prevailing wage laws are more closely tied to market wages and are thus less likely to have an impact on employment.

Unlike the previous study, which was conducted for the nonpartisan National Bureau of Economic Research by economists David Neumark of the University of California-Irvine and Scott Adams of the University of Wisconsin-Milwaukee, the Center for American Progress research found that the laws do not harm low-wage workers. Mssrs. Adams and Neumark argued in their study that living wage laws raise the wages of low-wage workers, but reduce employment among the least skilled.

Mr. Neumark said in an e-mail message that he had not had time to digest the Center for American Progress report and therefore did not yet have a critique. But he said the source of the report had to be taken into account.

“You have to recognize that this report and the co-authors they cite in support of their work make little secret of their advocacy role in favor of living wages and minimum wages,” he wrote. “Like their opponents who advocate against these same policies, their conclusions are often biased and don't reflect the more complicated reality of both the policy question and the research findings.”

Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce, said living wage laws are not a good move in a time when the nation's focus should be on creating jobs.

“It would seem to me that the thrust of this study is largely that flat is the new up,” he said. “Making employees more expensive is not a strategy for spurring economic activity.”

The Center for American Progress report comes as the city's Economic Development Corp. has commissioned its own study on the impact of living wage ordinances. That initiative has drawn fire from labor groups and members of the Council's Progressive Caucus, who argue that the team chosen to conduct the study—which includes Mr. Neumark—is predisposed to a viewpoint that the mandates are detrimental to local economies.

An EDC spokeswoman declined to comment on the Center for American Progress report.