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Do Living Wage Ordinances Reduce Urban Poverty?

  • David Neumark
  • Scott Adams

Many cities in the United States have recently passed living wage ordinances. These ordinances typically mandate that businesses under contract with the city or, in some cases, receiving assistance from the city, must pay their workers a wage sufficient to support a family financially. To date, there has been no empirical analysis of the actual effects of living wages on the expected beneficiaries low-wage workers and their families. In this paper, we estimate the effects of city living wage ordinances on the wages and hours of workers in cities that have adopted such legislation. We also look at the effects of the ordinances on employment and poverty rates in these cities. Our findings indicate that living wage ordinances boost wages of low-wage workers. The estimated elasticities are small, however, which seems consistent with the fact that living wages have limited coverage, and may also have limited compliance and enforcement. In addition to the wage effects, we find weak negative hours effects of living wage ordinances on low-wage workers, and strong negative employment effects. Finally, our estimates of the effects of living wages on poverty rates indicate that living wage ordinances may help to achieve modest reductions in urban poverty.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7606.

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Date of creation: Mar 2000
Date of revision:
Publication status: published as Neumark, David and Scott Adams. "Do Living Wage Ordinances Reduce Urban Poverty?," Journal of Human Resources, 2003, v38(3,Summer), 490-521.
Handle: RePEc:nbr:nberwo:7606
Note: LS
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  1. David Neumark & William Wascher, 1997. "Do Minimum Wages Fight Poverty?," NBER Working Papers 6127, National Bureau of Economic Research, Inc.
  2. Victor R. Fuchs & Alan B. Krueger & James M. Poterba, 1998. "Economists' Views about Parameters, Values, and Policies: Survey Results in Labor and Public Economics," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1387-1425, September.
  3. David Card & Alan Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," Working Papers 694, Princeton University, Department of Economics, Industrial Relations Section..
  4. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-50, April.
  5. 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.
  6. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  7. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
  8. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, June.
  9. Charles Brown & Curtis Gilroy & Andrew Kohen, 1983. "Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment," Journal of Human Resources, University of Wisconsin Press, vol. 18(1), pages 3-31.
  10. Jacob Mincer, 1974. "Unemployment Effects of Minimum Wages," NBER Working Papers 0039, National Bureau of Economic Research, Inc.
  11. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
  12. Richard V. Burkhauser & Kenneth A. Couch & David C. Wittenburg, 1996. "Who gets what from minimum wage hikes: A re-estimation of Card and Krueger's distributional analysis in "Myth and Measurement: The New Economics of the Minimum Wage."," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(3), pages 547-552, April.
  13. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
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