Archive for Thursday, March 14, 2002

lowers poverty

March 14, 2002

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— The "living wage" laws passed by many cities increase unemployment but ultimately benefit the working poor by reducing poverty, according to a national study released today.

Since 1994, more than 60 U.S. cities have adopted such laws, which mandate minimum wages well above the federal floor. But critics have argued that requiring firms to pay more than the federal $5.15-an-hour minimum leads to layoffs while benefiting only the fortunate workers who keep their jobs.

The new study by the Public Policy Institute of California, a private, nonprofit research group, will encourage living wage advocates.

"Living wages actually reduce poverty," said author David Neumark, an economics professor at Michigan State University. "If someone's getting up on a soapbox saying these are a disaster, they may believe it, but there's really no evidence."

Most living wage laws cover only city employees or private firms with significant government contracts. Neumark said the average pay raise equals around 3.5 percent, though it may be significantly higher for some workers.

Baltimore passed the first living wage law, with Boston, Chicago, Denver, Detroit, Milwaukee, Omaha, Neb., and San Antonio among the large cities that followed. According to the study, California has at least 10 living wage cities, including Los Angeles, Oakland, San Francisco and San Jose.

The study used census data from 1996 through 2000. During that time, urban poverty fell, but cities with living wage laws saw even greater decreases, Neumark said.

The study concludes that cities with a living wage 50 percent higher than federal or state minimums see poverty fall 1.8 percentage points. Meantime, the lowest 10 percent of wage earners in those cities would experience a 7 percent increase in unemployment.

But on balance, Neumark said, "it looks like the winners win more than the losers lose."

The federal government's poverty threshold for a family of two adults and one child is $15,020. San Francisco's living wage of $10 an hour is about 50 percent higher than the state's $6.75-an-hour floor. Based on an average work year, that means a $6,500 raise, to $20,000.

Home health care worker Claudia Arevalo said her life changed in 2000, when San Francisco enacted its living wage and her employer, who receives city funds, raised her pay.

In 1998 she earned $6 an hour and, to get by, rented out a room in her apartment and worked 300 hours a month, including night shifts as a janitor. Now Arevalo, 37, works a regular schedule.

"I have more time for my family, for myself. I have a better life," she said. "It's the living wage that made the changes come."

Critics counter there are better ways, such as the earned income tax credit, to help the poor.

Workers near the poverty line can lose federal benefits if they earn just a few thousand dollars more, according to Richard Toikka of the Washington-based Employment Policies Institute.

"It's not the best way to go," Toikka said. "The workers that are harmed are the ones that have the most serious skill deficits."

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