Last fall, Martha Jernegons got a raise. By the standards of the new dot-com economy, it wasn't much--just $2.15 per hour. But for Jernegons, a 56-year-old home health care aide in Chicago, working for a private agency that is reimbursed by the city, it was a 40 percent increase, to $7.60 an hour. Though she still lives below the poverty line--and still lacks health insurance--with a daughter and six grandchildren, that $2.15 an hour made a big difference. She's finally paying off an old $600 medical bill that had been hanging over her for years. "The raise gave me a different outlook on life," she said. "I feel better about myself. Now I can go to Payless and buy a pair of shoes."
Jernegons's shoes are courtesy of Chicago's "living wage" ordinance, which required certain contractors for the city to pay a minimum of $7.60 an hour to its employees. Mayor Richard Daley had resisted the local living-wage coalition of unions, community groups, homeless advocates, and religious organizations, claiming their proposal would break the city budget and drive jobs out of the city. But when he tried to raise salaries for himself and the city council, the coalition effectively seized the moment to demand pay increases as well for low-wage contract workers.
The living-wage movement is one of the nation's strongest grass-roots political reactions to more than a quarter-century of rising economic inequality. Over the past six years, 41 local governments have passed some form of living-wage legislation. Although the laws vary greatly, most require at least some taxpayer-subsidized employers--mainly service contractors, but also businesses that receive government subsidies and tax breaks or lease public land--to pay substantially more than minimum wages, usually around or somewhat above $8.20 an hour, indexed to keep up with inflation ($8.20 an hour is the amount that enables a full-time worker to earn the poverty level for a family of four). More than half the ordinances also require or encourage health insurance, and a few create a favorable climate for unionization. Since the first living-wage victory, in Baltimore in 1994, the idea has captured the imagination of organizers across the country. There are ongoing campaigns to enforce and expand existing ordinances as well as efforts to enact a living wage in another 75 cities.
Despite the energy unleashed across the country by the living-wage idea, the movement has so far directly benefited only a tiny portion of the low-wage work force--perhaps as few as 46,000 people. (To put this in some perspective, more than 28 million Americans earn less than $8 an hour.) These numbers, however, understate the potential of the movement. For example, San Francisco's proposed ordinance alone would cover 30,000 workers. And as the number of beneficiaries grow, spillover pressure to raise wages could help some workers not directly covered by the laws. Also, even though early proposals typically pushed pay only up to around $7.50 (what the federal minimum wage would be if its value had not been eroded by inflation over the past three decades), the movement is now setting its sights higher, seeking wage floors as high as $12 an hour, or close to what the federal minimum wage would be today if it had also been adjusted for increases in productivity since the late 1960s.
Yet even beyond the wage hikes, living-wage movements are already influencing political debates, electing local candidates, recasting local economic development strategies, slowing privatization, and fostering unionization. The demand for a living wage is even beginning to spread to state and federal governments and, beyond the public sector, to employees of universities and religious bodies. It is also strengthening bonds among labor, church, and community groups. In fact, the living-wage strategy's greatest achievement may be the creation of a grass-roots movement to challenge the still-growing inequality in American society.
The Story So Far
The living wage rejects the notion that the dictates of the market should dominate workers' lives and livelihoods. The demand for a living wage first emerged in the 1870s, as an alternative to the labor movement's goal of abolishing "wage slavery" and creating a society of independent producers and cooperatives. The idea was that wage labor could be acceptable if it supported a family and provided a standard of living that reflected American cultural expectations. Early on, the idea of a living wage was contained in labor union contracts and was partially embodied in laws requiring minimum wages or "prevailing wages" for some government contractors as well as in Social Security, Medicare, and other components of a "social wage." But after rising steadily through the 1960s, the buying power of the minimum wage stagnated in the 1970s and plummeted in the 1980s, contributing to the dramatic rise in inequality. High unemployment, global competition, and the rise of free market ideology further undercut the living-wage ideal.
The contemporary living-wage movement sprang from several sources. In Baltimore in 1994, food bank operators at churches in Baltimoreans United in Leadership Development (BUILD), an Industrial Areas Foundation affiliate, noticed that many people they served worked full time in privatized city jobs that were once decently paid. BUILD and the American Federation of State, County and Municipal Employees (AFSCME) thus focused on raising wages for city contractors, partly to discourage privatization based on wage-cutting. In Minnesota in 1995, critics of welfare reform linked up with plant-closing opponents to force "corporate welfare" recipients to deliver on promises of good jobs. In Los Angeles, a nonprofit group funded by the Hotel Employees and Restaurant Employees (HERE) union defended unionized airport employees who lost their jobs when new minimum wage firms won the contracts. And after securing a mandate that city-subsidized businesses turn first to hiring halls in low-income Boston neighborhoods, the Association of Community Organizations for Reform Now (ACORN) then turned its attention to winning a living wage from both city contractors and recipients of government subsidies or tax abatements.
If there is a common theme to these efforts, it is the idea that public money should not be used, directly or indirectly, to create jobs that leave workers and their families in poverty. Partly this is a moral argument. But it's also an argument for economic fairness: When businesses pay workers poorly, local taxpayers are forced to pick up the slack. Taxpayers end up subsidizing the companies by paying for what the companies will not: workers' unreimbursed medical care, public-hospital visits, food stamps, tax credits, and the social costs of poverty and inequality. Why should businesses be allowed to slough off these costs onto taxpayers? And if taxpayers are ultimately paying the wages of contract employees anyway, why not simply pay the employees a living wage directly?
By focusing criticism on how government is often responsible for the poverty of working people, living-wage campaigns gain moral urgency and strong public support, especially in cities with labor and liberal traditions. But mayors (including many Democrats) and local businesses (especially restaurant owners and other low-wage employers) have put up fights that range from half-hearted to ham-fisted, raising the usual charges against the minimum wage--that it will kill jobs the poor need and benefit workers whose families aren't poor. In many cases, mayors have divided potential allies by using nonprofit human-service contractors--who worry they won't get reimbursed fast enough for the higher wages--as a cover when attacking the living wage.
Most living-wage studies have been prospective estimates of impacts, but the few follow-up studies, such as two in Baltimore and one in progress in San Jose, suggest minimal impact on city budgets. For example, although a few contracts--such as some janitor services--rose sharply, the overall cost of contracted services after the Baltimore ordinance rose less than the rate of inflation. Partly the laws have had modest budget impacts because so few workers have been affected--only about 1,500 in Baltimore, a result exacerbated in many places by poor enforcement and lags in rebidding of contracts. But researchers also conclude that as worker turnover declined and morale improved in response to the wage increase, productivity probably increased. Contractor profit margins may also have been trimmed.
Such results have left living-wage advocates in the peculiar position of arguing that their proposals won't break city budgets because relatively few workers are helped. But advocates now seem more willing to argue that big living-wage increases for more workers are legitimate, even if the city must pay more. For example, the San Francisco coalition admits that its broad coverage of workers in businesses with city contracts could raise annual expenses by $42 million--an amount that the coalition points out is less than the city's budget surplus. After starting with living-wage standards that couldn't even lift a family out of poverty, the movement has increasingly tried to take a bigger bite. "The biggest mistake we made in Los Angeles was that we pegged [the living-wage rate] too low," concludes Jackie Goldberg, who leads the living-wage movement on the L.A. city council.
The Case for Living Wage
Conventional economists typically say that minimum wage hikes reduce employment, hurting the poor who lose jobs. But in 1994, economists David Card and Alan B. Krueger, after comparing what happened to fast-food businesses in New Jersey and Pennsylvania when New Jersey increased its minimum wage, determined that employment actually went up slightly in New Jersey after the wage hike, in part because employers could fill vacancies more quickly. In a recent paper, Card and Krueger analyzed new data from both the original time period and beyond, including effects of the 1996 federal minimum wage increase, and re-analyzed the data of critics who claimed New Jersey suffered job losses. They confirmed their original results, concluding that "modest changes in the minimum wage have little systematic effect on employment." Employers compensate for higher wages by managing better, reducing other costs, saving on turnover and recruitment expenses, and gaining productivity from a more motivated work force. Sometimes these improvements even boost output and employment.
Living-wage laws are in fact even less likely than a minimum wage increase to lead to unemployment: The city's demand for services is relatively fixed, and some increased costs can be passed from businesses to the municipal government. (For example, Los Angeles law fully compensates any day care increases to encourage better child care.) Also, contractors can't flee, and businesses leasing city lands are likely stuck in those locations. Businesses, of course, object to having their subsidies tied to living-wage requirements. But ACORN National Living Wage Director Jen Kern has a simple response: "It's not a free market when you're using tax dollars. There's an easy way out: Don't ask for tax dollars."
Contrary to critics' assertions, beneficiaries of broad-based minimum wage hikes are more likely to be women from poor families--contributing half or more of their family income--than they are to be teenagers from middle-class families working to pay for concert tickets. And living-wage ordinances target poverty even more effectively. Even Michigan State University economist David Neumark, a critic of Card and Krueger who claims that minimum wage increases reduce employment and increase poverty, concedes that "living-wage increases are associated with small reductions in poverty."
Still, living-wage increases are imperfect solutions to poverty because as wages go up, government subsidies like food stamps and the Earned Income Tax Credit go down. Thus, the net gain in disposable income for workers could be well under half of the apparent living-wage increase, according to an analysis by Robert Pollin and Stephanie Luce, co-authors of The Living Wage: Building a Fair Economy. Also, a living-wage ordinance of course doesn't benefit people who don't have jobs. Even when living-wage laws do cover part-time workers, a living wage covering limited work hours does not yield a living income.
But while the living-wage movement offers something narrower--and thus politically more viable--than a substantial minimum wage increase across the board, in some ways it is much more ambitious. Rhetorically it establishes a new rationale for a wage floor--the minimum a family needs in order to live reasonably well--that can inspire political and union demands. But it also sets a new standard for economic development--good jobs, not just any jobs--and corporate accountability. Many living-wage ordinances are designed both to discourage wage-cutting and labor degradation and to encourage unionization and "high road" business strategies. Ultimately the movement aims to win greater power for workers--especially low-income workers, on the job and in politics--not just a wage hike.
Living Success Stories
The most ambitious ordinances protect workers' rights in various ways. For example, some ordinances--such as in Los Angeles and San Jose--require any business that wins a new contract to retain previous employees for at least a few months, protecting workers from churning of contractors. Others prohibit retaliation against workers who demand a living wage, giving local government a tool to protect workers who are organizing a union from being fired. Several cities give preference to developers or "responsible contractors" who will be neutral in organizing drives, and recognize unions simply by checking signed union cards. Pittsburgh and Berkeley organizers hope to prohibit use of city funds for anti-union activity.
The Los Angeles campaign has from the beginning tried to strengthen the hand of workers by using the living-wage ordinance as leverage over businesses bidding for contracts and subsidies. The coalition used the ordinance as an entry point for negotiations with developers of a commercial complex that will be home to the Academy Awards, ultimately winning commitment to union neutrality and a card check, and giving HERE its first new Los Angeles hotel victory in many years. The ordinance has boosted unionization at the Staples Center and the Los Angeles Airport, and the movement has created a new religious coalition, Clergy and Laity United for Economic Justice, which has played a key role in support of organizing drives and contract fights.
The Los Angeles living-wage coalition, working with unions and community allies, has used the living-wage ordinance in these cases to intervene in public decisions about contracts and concessions, supporting businesses that will be less antagonistic toward unions. The openings for unionization are won through political mobilization, but the living-wage law gives the community an opportunity to apply pressure. For example, when a concessionaire at the Los Angeles Airport aggressively opposed unionization, the coalition trained workers about the living-wage ordinance. The workers, in turn, went on to file more than three dozen complaints, prompting a city investigation and potential loss of the concession. The business resolved the problems, and the union won representation. "If we just cared about raising wages, we'd concentrate on raising the minimum wage," says Madeline Janis-Aparicio, director of the living-wage coalition and the Los Angeles Alliance for a New Economy. "But we want to build a movement from the ground up that empowers working people. So the best way to do that is build their unions. Living-wage legislation is a great tool with a really serious program for doing that."
Now the coalition, working with HERE and Santa Monicans for Responsible Tourism (SMART), which helped successfully fight decertification of the union at a local hotel, is promoting one of the most innovative living-wage ordinances. Santa Monica's "coastal zone," near the ocean, is flush with extremely lucrative hotels that pay very low wages, and has benefited from city beachfront and downtown investments. The coalition wants to require businesses in this zone to pay a living wage and refrain from retaliating against workers who organize to win it. At the same time, HERE is counting on support from SMART in its new drive to organize the hotels. The hotels, deceitfully calling themselves Santa Monicans for a Living Wage, have fought back with an initiative that would cover only about 250 city contract workers and would nullify any other living-wage ordinance passed by the city council. Although a few state legislatures have tried to prohibit cities from adopting living-wage ordinances, the Santa Monica hotels' novel strategy acknowledges the popular appeal of the living-wage idea. "The living-wage campaign has developed a whole consciousness about the status of low-wage workers that hadn't existed before," says HERE organizer and SMART activist Vivian Rothstein.
Baltimore's pioneering campaign spawned the Solidarity Sponsoring Committee, an unorthodox AFSCME local that has a reliable base of 500 members. The local has fought to expand living-wage coverage and regulate exploitative lending and currency exchange operations. It has established a workers' cooperative, which trains members and places them in temporary catering, construction, janitorial, and clerical jobs, and which can--unlike a commercial employment firm--share its profits with workers and therefore pay them more, typically $8 to $14 an hour. Living-wage campaigns elsewhere have also gone beyond support for union recognition campaigns to represent workfare recipients, organize part-timers, and press for reform of health care, unemployment insurance, and welfare policies, including a new national campaign to deal with the aftermath of federal welfare reform.
Living-wage advocates in Berkeley and Oakland, California, integrate union organizing and a high-wage economic development strategy into their campaign. After winning an ordinance covering about 300 workers for the city of Oakland, they now have their sights on legislation that would affect 3,000 low-wage workers under the jurisdiction of the Port of Oakland, including the airport and nearby tourist businesses. (Typically local campaigns have to fight for living-wage ordinances for each governmental unit or public authority separately.) HERE, backed by the East Bay Alliance for a Sustainable Economy (EBASE), an outgrowth of the living-wage campaign, pressured a new hotel in Oakland to comply with the ordinance, remain neutral, and abide by a card check in the current organizing drive. Jim DuPont, HERE's local president, thinks that the law will help the union organize not only prime employers, like hotels, but also their contractors, and that it will help raise the standard for other low-wage workers. "I view the living wage as a battle cry for what we need to do in our contracts," he says. "It creates a movement... . It's much more than a technical tool if we use it right."
Living-wage campaigns often merge with a parallel movement to make businesses that receive subsidies and tax breaks more publicly accountable. "We're trying to influence economic development and what kinds of business we encourage," says Amaha Kassa, lead organizer of EBASE. "The living-wage tool itself is a substantial lever in redevelopment policy." For example, Oakland abandoned a city-subsidized retail project because tenants wouldn't agree to pay a living wage; the city replaced it with a telecommunications company that would pay living wages and not require a subsidy. There are at least 67 local or state laws that link economic development aid to guarantees of good jobs, including 16 that specify a living wage, according to Greg Leroy, director of Good Jobs First. "Officials are tired of creating bad jobs," Leroy says. "They don't want to subsidize bottom feeders."
From its relatively narrow origin, the living-wage movement is expanding. Not only do victories in central cities typically inspire campaigns in surrounding municipalities, but the ideas are creeping into state and even federal politics, as demonstrated by the planned introduction this year of separate bills in the House and Senate requiring federal service contractors to pay $8.20 an hour, essentially raising the floor of the "prevailing wage" already required by law. (The impact would be much more dramatic if the federal government also required every human-service provider reimbursed by federal funds--including hospitals, schools, day care centers, and Head Start programs--to pay all their workers a living wage.)
The living-wage movement is also transforming local politics. Living-wage campaigns propelled movement leaders to the city council in Chicago and San Jose, and both unions and community groups have made support for a living wage a condition for endorsing candidates in several cities. In an unusual tactic, unions in Detroit put a living-wage referendum on the ballot to boost turnout for labor-endorsed candidates. As a result of such campaigns, "no candidate, national or local, can avoid talking about living wages or living-wage jobs," says Keith Kelleher, a Service Employees union organizer and Chicago campaign leader. "It's changed the political vernacular."
Despite its limitations, the movement has great potential to expand to thousands of new political jurisdictions and to set standards for any business that benefits from public spending. More important, the movement can create a political climate that raises expectations about jobs and incomes, and that supports unionization. Requiring a living wage is particularly important in our political culture, with its emphasis on people working to support themselves, says Pollin, because "it addresses the issue [of inequality] in a way that makes people feel comfortable, that is, giving people a chance to make a living when they show up at a job." The living-wage movement's impact is most likely to spread, however, if unemployment stays low: The tightened labor market of the 1990s has likely been critical to the success of the movement so far. Even under ideal economic circumstances, however, substantially reducing income inequality will require more than even the best current living-wage levels; it will also require universal health care, child care, earned income tax credits, housing subsidies, lifelong education, and other social wages.
The living-wage movement has succeeded so far because it is a broad coalition. But as the movement grows more ambitious, tackling state and federal policies, it will need more coherence. The labor movement can provide some of that organization. Thus far, however, the labor movement nationally has not made building living-wage campaigns a top priority, even though the movement reinforces labor's core messages and provides an opportunity to build broader alliances. If unions hope to organize low-wage workers, coalitions built around the living-wage movement will be invaluable.
Useful as the living-wage ordinances may be in their own right, most organizers see them as a tool for building a social-justice movement to challenge economic inequality and give workers more power. "As important as the policies we pass are the coalitions we build," says Oakland organizer Kassa. "The coalition will outlast any policy if we do our job right." ¤
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