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Living wages: Protection for or protection from low-wage workers?

  • David Neumark

Living wage laws are touted as anti-poverty measures. Yet they apply to only a small fraction of workers, most commonly covering only employers with city contracts. The apparent contradiction between broad anti-poverty goals and narrow coverage suggests that goals other than poverty reduction may partly underlie living wage campaigns. This paper considers the hypothesis that living wage laws act to maintain or increase rents among unionized municipal workers. By raising the wages that city contractors would have to pay, living wage laws may reduce the incentives for cities to contract out work that would otherwise be done by unionized municipal employees, hence increasing the bargaining power of municipal unions and leading to higher wages for their members. The evidence presented here, from an analysis of CPS data for 1996-2000, indicates that the wages of unionized municipal workers are indeed increased as a result of living wages covering contractors. (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 58 (2004)
Issue (Month): 1 (October)
Pages: 27-51

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Handle: RePEc:ilr:articl:v:58:y:2004:i:1:p:27-51
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  1. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
  2. David Neumark & Scott Adams, 2000. "Do Living Wage Ordinances Reduce Urban Poverty?," NBER Working Papers 7606, National Bureau of Economic Research, Inc.
  3. Brock, William A & Magee, Stephen P, 1978. "The Economics of Special Interest Politics: The Case of the Tariff," American Economic Review, American Economic Association, vol. 68(2), pages 246-50, May.
  4. Daniel R. HOLLAS & Stanley R. STANSELL, 1994. "The Economic Efficiency Of Public Vs. Private Gas Distribution Utilities," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 65(2), pages 281-300, 04.
  5. Leibenstein, Harvey, 1978. "On the Basic Proposition of X-Efficiency Theory," American Economic Review, American Economic Association, vol. 68(2), pages 328-32, May.
  6. Arunava Bhattacharyya & Elliott Parker & Kambiz Raffiee, 1994. "An Examination of the Effect of Ownership on the Relative Efficiency of Public and Private Water Utilities," Land Economics, University of Wisconsin Press, vol. 70(2), pages 197-209.
  7. Daniel P. Kessler & Lawrence F. Katz, 2001. "Prevailing wage laws and construction labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(2), pages 259-274, January.
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