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Living Wage Laws: How Much Do (Can) They Matter?

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  • Holzer, Harry J.

    () (Georgetown University)

Abstract

In this paper I review what we have learned about living wage laws and their impacts on the wages, employment and poverty rates of low-wage workers. I review the characteristics of these laws and where they have been implemented to date, and what economic theory tells us about their likely effects in more and less competitive labor markets. I then review two bodies of empirical evidence: 1) Studies across cities or metropolitan areas that have and have not implemented these laws, using data from the Current Population Survey pooled over many years; and 2) Studies within particular cities, based on comparisons of covered and uncovered workers before and after the laws are passed. I conclude that living wage laws have modestly raised wage levels of low wage workers and have reduced their employment at covered firms, but that the magnitudes of both effects are likely quite small, given how few workers are usually covered by these ordinances.

Suggested Citation

  • Holzer, Harry J., 2008. "Living Wage Laws: How Much Do (Can) They Matter?," IZA Discussion Papers 3781, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3781
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    References listed on IDEAS

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    1. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027.
    2. Harry G. Johnson & Peter Mieszkowski, 1970. "The Effects of Unionization on the Distribution of Income: A General Equilibrium Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 84(4), pages 539-561.
    3. Scott Adams & David Neumark, 2005. "Living Wage Effects: New and Improved Evidence," Economic Development Quarterly, , vol. 19(1), pages 80-102, February.
    4. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 87-104, August.
    5. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 235-290 National Bureau of Economic Research, Inc.
    6. Scott Adams & David Neumark, 2004. "The Economic Effects of Living Wage Laws: A Provisional Review," PPIC Working Papers 2004.10, Public Policy Institute of California.
    7. Robert Pollin & Jeannette Wicks-Lim & Mark D. Brenner, 2002. "Measuring the Impact of Living Wage Laws: A Critical Appraisal of David Neumark's How Living Wage Laws Affect Low-Wage Workers and Low-Income Families," Working Papers wp43, Political Economy Research Institute, University of Massachusetts at Amherst.
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    More about this item

    Keywords

    living wages;

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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