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Thinking about Local Living Wage Requirements

This paper reviews what we currently know about the benefits and costs of different varieties of a "living wage": a local government requirement, now adopted by over 50 local governments, for wages above the federal minimum imposed on employers with some financial link to the local government. The review includes economic theory, empirical research on local labor markets, and empirical research on the living wage. The paper concludes that moderate living wage requirements applied to the local government's own employees, and contractors' and grantees' employees who are funded by the local government, may do more good than harm. Excessive living wages or living wages applied to non-city funded workers are more likely to have negative side-effects. The merits of living wages applied to economic development assistance depend on the local economy's strength and whether this assistance program is used by the city's competitors. In a weak local economy, living wages applied to commonly-used economic development programs may reduce the city's economic growth.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 02-76.

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Date of creation: Mar 2002
Date of revision:
Handle: RePEc:upj:weupjo:02-76
Note: A revised version of this paper appears in Urban Affairs Review, Vol. 40, No. 2 (November 2004), pp. 269-299.
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  1. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle.
  2. 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.
  3. David Neumark, 2001. "Living Wages: Protection For or Protection From Low-Wage Workers?," NBER Working Papers 8393, National Bureau of Economic Research, Inc.
  4. Susan N. Houseman, 1998. "The Effects of Employer Mandates," Book chapters authored by Upjohn Institute researchers, in: Richard B. Freeman & Peter Gottschalk (ed.), Generating Jobs: How to Increase Demand for Less-Skilled Workers, pages 154-191 W.E. Upjohn Institute for Employment Research.
  5. Timothy J. Bartik, 2001. "Jobs for the Poor: Can Labor Demand Policies Help?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number tjb2001.
  6. Grieson, Ronald E., 1980. "Theoretical analysis and empirical measurements of the effects of the Philadelphia income tax," Journal of Urban Economics, Elsevier, vol. 8(1), pages 123-137, July.
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