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The Effects of Living Wage Laws on Low-Wage Workers and Low-Income Families: What Do We Know Now?

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Listed:
  • Neumark, David

    (University of California, Irvine)

  • Thompson, Matthew

    (Charles River Associates)

  • Koyle, Leslie

    (Charles River Associates)

Abstract

We provide updated evidence on the effects of living wage laws in U.S. cities, relative to the earlier research covering only the first six or seven years of existence of these laws. There are some challenges to updating the evidence, as the CPS data on which it relies changed geographic coding systems in the mid-2000s. The updated evidence is broadly consistent with the conclusions reached by prior research, including Holzer's (2008) review of that earlier evidence. Living wage laws reduce employment among the least-skilled workers they are intended to help. But they also increase wages for many of them. This implies that living wage laws generate both winners and losers among those affected by them. For broader living wage laws that cover recipients of business or financial assistance from cities, the net effects point to modest reductions in urban poverty.

Suggested Citation

  • Neumark, David & Thompson, Matthew & Koyle, Leslie, 2012. "The Effects of Living Wage Laws on Low-Wage Workers and Low-Income Families: What Do We Know Now?," IZA Discussion Papers 7114, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7114
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    References listed on IDEAS

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    1. Ximing Wu & Jeffrey M. Perloff & Amos Golan, 2006. "Effects Of Government Policies On Urban And Rural Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(2), pages 213-235, June.
    2. David Neumark & Mark Schweitzer & William Wascher, 2005. "The Effects of Minimum Wages on the Distribution of Family Incomes: A Nonparametric Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 867-894.
    3. Scott Adams & David Neumark, 2005. "Living Wage Effects: New and Improved Evidence," Economic Development Quarterly, , vol. 19(1), pages 80-102, February.
    4. T. William Lester, 2011. "The Impact of Living Wage Laws on Urban Economic Development Patterns and the Local Business Climate: Evidence From California Cities," Economic Development Quarterly, , vol. 25(3), pages 237-254, August.
    5. Neumark, David & Salas, J.M. Ian & Wascher, William, 2013. "Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?," IZA Discussion Papers 7166, Institute of Labor Economics (IZA).
    6. Adams, Scott & Neumark, David, 2005. "The effects of living wage laws: Evidence from failed and derailed living wage campaigns," Journal of Urban Economics, Elsevier, vol. 58(2), pages 177-202, September.
    7. Holzer, Harry J., 2008. "Living Wage Laws: How Much Do (Can) They Matter?," IZA Discussion Papers 3781, Institute of Labor Economics (IZA).
    8. Bénédicte Vidaillet & V. d'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
    9. Neumark, David & Thompson, Matthew & Brindisi, Francesco & Koyle, Leslie & Reck, Clayton, 2012. "Simulating the Economic Impacts of Living Wage Mandates Using New Public and Administrative Data: Evidence for New York City," IZA Discussion Papers 7113, Institute of Labor Economics (IZA).
    10. 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.
    11. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
    12. Richard S. Toikka & Aaron Yelowitz & Andre Neveu, 2005. "The †Poverty Trap†and Living Wage Laws," Economic Development Quarterly, , vol. 19(1), pages 62-79, February.
    13. David Neumark & Scott Adams, 2003. "Do Living Wage Ordinances Reduce Urban Poverty?," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
    14. David Fairris & Leon Fernandez Bujanda, 2008. "The Dissipation of Minimum Wage Gains for Workers through Labor-Labor Substitution: Evidence from the Los Angeles Living Wage Ordinance," Southern Economic Journal, John Wiley & Sons, vol. 75(2), pages 473-496, October.
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    Cited by:

    1. David Neumark, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 293-329, August.
    2. Fone, Zachary S. & Sabia, Joseph J. & Cesur, Resul, 2023. "The unintended effects of minimum wage increases on crime," Journal of Public Economics, Elsevier, vol. 219(C).
    3. Aedin Doris & Donal O'Neill & Olive Sweetman, 2022. "The Introduction of a Living Wage in Ireland," Economics Department Working Paper Series n316-22.pdf, Department of Economics, National University of Ireland - Maynooth.
    4. Zachary S. Fone & Joseph J. Sabia & Resul Cesur, 2019. "Do Minimum Wage Increases Reduce Crime?," NBER Working Papers 25647, National Bureau of Economic Research, Inc.
    5. David Neumark, 2016. "Policy levers to increase jobs and increase income from work after the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-38, December.
    6. Datta, Nikhil & Machin, Stephen, 2024. "Government Contracting and Living Wages > Minimum Wages," IZA Discussion Papers 17117, Institute of Labor Economics (IZA).
    7. Janmaat, Johannus & Harris, Lindsay & Carlaw, Kenneth & Evans, Mike, 2019. "Action economics? working with citizen groups in Revelstoke, BC to evaluate the impact of a living wage," MPRA Paper 96740, University Library of Munich, Germany.
    8. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    9. Paul Schweinzer & Joanna K. Swaffield, 2014. "What’s in it for the firms? Living wage adoption as signal of ethical practice," Discussion Papers 14/21, Department of Economics, University of York.
    10. David Neumark, 2017. "The Employment Effects of Minimum Wages: Some Questions We Need to Answer," NBER Working Papers 23584, National Bureau of Economic Research, Inc.
    11. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    poverty; employment; wages; living wage;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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