Next Steps

For the Living-Wage Movement

Chris Tilly

This article is from the September/October 2001 issue of Dollars and Sense: The Magazine of Economic Justice available at http://www.dollarsandsense.org/archives/2001/0901tilly.html

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This article is from the September/October 2001 issue of Dollars & Sense magazine.

This past May, Harvard University students made national headlines by occupying a university building for three weeks to demand that Harvard and its contractors pay employees a living wage. While Harvard refused to grant the $10.25 wage that the students demanded, they did agree to form a study committee with ample student and union representation. In the days that followed, Harvard also ended a contract negotiation deadlock with food service workers by offering an unprecedented wage increase of over $1 per hour—a surprise move that many attributed to the feisty labor-student alliance built through the living-wage push.

Harvard's living-wage activists represent the tip of a much larger national iceberg, most of which has taken the form of attempts to pass local living-wage ordinances. Over 60 local governments have passed living-wage laws—almost all since a ground-breaking Baltimore ordinance passed in 1994—with more coming on board each month. Such ordinances typically require the local government, along with any businesses that supply it, to pay a wage well above the current federal minimum of $5.15. Living-wage coalitions originally set wage floors at the amount needed by a full-time, year-round worker to keep a family of four above the poverty line (currently about $8.40 per hour), but like the Harvard students, they are increasingly campaigning for higher figures based on area living costs. The community organization ACORN (Alliance of Community Organizations for Reform Now) has spearheaded many of the coalitions, and an up-to-date living-wage scorecard can be found on its web site . At the heart of the campaigns are low-wage workers like Celia Talavera, who joined Santa Monica's successful living-wage campaign last May. Referring to her job as a hotel housekeeper, she said, "I am fighting for a living wage because I want to work there for a long time."

The spread of living-wage laws reflects deep public concern about the unfairness of today's economy to those at the bottom of the paid workforce. A recent USA Today poll rated "lack of livable wage jobs" as Americans' top worry, even ahead of such perennial favorites as "decline of moral values." This sentiment makes living-wage laws eminently winnable. But it is worth pausing to ask: What, exactly, has the living-wage movement won? And how can we adapt this strategy to win more?

LIMITED VICTORIES

Opponents of living-wage laws argue that they will increase costs to local taxpayers, and drive business away from the locality. Living-wage boosters have two responses. First, fairness is worth the cost. And second, studies have shown that such ordinances have not escalated costs, nor repelled businesses. But why not? After all, economic theory suggests that companies compelled to pay higher costs will either seek to pass them on, or move on to greener pastures.

One reason is that living-wage ordinances typically affect very few workers. At passage, an average of only about 1,000 per locality actually have their wages boosted (in part because many of those covered already earn the mandated wage or more). This number is stunningly small, given that living-wage adopters include Los Angeles, New York, Chicago, and numerous other large cities and counties.

But smallness cannot be the entire explanation. Johns Hopkins University economist Erica Schoenberger and others followed specific contracts to the City of Baltimore, looking at changes from before that city's living-wage law went into effect to two years after. They found that contract costs increased only about 1%, far less than inflation. One possibility, of course, is that the wage floor spurred contractors to find new ways to increase true efficiency—getting the same amount of work done with less labor and less effort. For instance, this can happen if higher wages allow employers to hold on to the same employees longer, shrinking employer expenditures on recruitment, hiring, and training. Or perhaps the businesses have simply accepted lower profit margins.

But there are three less pleasant possibilities as well. Contractors may have sped up their workers, extracting more work in return for the higher pay. They may have reduced the quality of goods or services they delivered. Or, they may simply have failed to comply with the law. The poor track record of many laws that declare labor rights without adequate enforcement mechanisms suggests that this last possibility may be quite real. Even the federal minimum wage is ignored by growing numbers of employers, says economist Howard Wial of the AFL-CIO's Working for America Institute.

EXTEND THE LAWS?

How should the living-wage movement respond to this evidence of limited impact? One possibility is to widen and sharpen living-wage laws' bite. Recent living-wage ordinances have set minimums as high as $12 per hour (in Santa Cruz, California). In Santa Monica, California, campaigners extended coverage to tourist-district businesses that had received city subsidies for redevelopment, and elsewhere coalitions aim to expand the law to include any business that receives substantial subsidies or tax abatements from the local government. Activists are also setting their sights on living-wage agreements with large private businesses—starting with those most vulnerable to political and public relations pressure, especially nonprofits such as Harvard. Even more ambitious are the advocates proposing state and federal living-wage laws; legislative proposals are pending in Hawaii, Vermont, and at the federal level. (See sidebar, "Vermont's Livable Income Law," p. 39)

Others are pursuing area-wide minimum wages set at levels closer to a living wage. Washington, D.C., has long had a minimum wage $1 above the federal minimum. Similar referenda were defeated in Houston and Denver, but New Orleans citizens will vote on a local minimum wage this coming February.

These initiatives are important, because there is certainly room for significant wage increases before we can expect negative effects on employment. When adjusted for inflation, hourly wages for the lowest-paid tenth of the workforce jumped by 9% between 1995 and 1999, in large part due to living-wage laws and federal minimum-wage increases. Yet the unemployment rate at the end of the 1990s fell to its lowest level in 30 years. More fine-grained studies of state and federal minimum-wage increases yield the same result: Such increases have caused little or no worker displacement over the last ten years. One reason is that wages for the bottom tenth were beaten so far down over the 1980s and early 1990s—even after the recent wage surge, inflation-adjusted 1999 wages remained 10% below their 1979 level.

But if the movement succeeds in extending and increasing living wages, at some point economic theory is bound to be proven right: costs to taxpayers will climb, employment will decrease, or both. Even in the most positive scenario—that businesses find ways to increase productivity—remember that rising productivity typically means doing the same work with fewer workers. This was the experience of the Congress of Industrial Organizations (now part of the AFL-CIO), which unionized core manufacturing industries in the 1930s and 1940s. The CIO succeeded in hiking pay, and in the decades that followed, U.S. manufacturers avidly hunted for ways to boost productivity. The good news is that U.S. manufacturing became the most productive in the world for several decades. The bad news is that heightened efficiency shrank labor requirements dramatically. In fact, this is the main reason for declining U.S. manufacturing jobs, far overshadowing shifts in the global division of labor. Manufacturing is a slightly larger share of U.S. domestic output today than it was in 1960, but factory employment has dropped from 31% to 14% of the workforce.

If extending the living wage's impact will eventually either raise costs to taxpayers or diminish employment, it may be tempting to adopt the other major argument advocates use: fairness is worth the cost. And this answer makes a great deal of sense. Think for a moment about the federal minimum wage's effect. The average person who eats at McDonald's earns more than the average person who works at McDonald's, so if bumping up the minimum wage raises the cost of burgers, cash is shifting in more or less the right direction. By the same token, over the 1980s and 1990s, local and state privatization and tax cuts redistributed income from low-income workers to taxpayers who have higher incomes on average—so if living wages help to reverse this flow, that's a plus for equality.

What about job losses? Few would object to shutting down companies that rely on slavery or child labor. The same logic extends to exploitatively low wages. As with child labor laws, laws that bar low wages will put some workers out of a job. So it is important to view living-wage laws as part of a broader program that includes job creation, training, and income support for those unable to work. To achieve this broader program, we need a powerful movement. And the red-hot living-wage movement offers one of the strongest potential building blocks for such a broader movement.

BUILD THE MOVEMENT?

That brings us to another response to the limited impact of living-wage laws to date: using the living wage as a movement-building tool. The living-wage issue encourages labor, community, and religious organizations to coalesce around genuine shared interests, creating an opportunity to open an even broader dialogue on wage fairness and inequality.

The goal should be to build movements that can address some of the weaknesses of current living-wage laws, including non-compliance and the potential for speed-up or job loss. Of course the U.S. institution that has been most effective in monitoring compliance with labor laws, curbing speed-up, and lobbying for job creation is the labor movement—and living-wage laws provide a golden opportunity for strengthening unions. Baltimore activists who won that city's 1994 living-wage ordinance, considered the spark of the current living-wage prairie fire, sought above all to slow down union-busting privatization. Living-wage laws close off low wages as a competitive strategy, dulling the edge of employer resistance to unions. Some coalitions have also won clauses requiring covered businesses to be neutral in union organizing campaigns or even to immediately recognize any union that signs up a majority of workers, foreclosing employers' usual anti-union tactics. A lower profile way to disarm anti-union employers is to ban retaliation against workers organizing for a living wage—which basically puts a local law against union-busting on the books to supplement weak federal laws.

In addition, living-wage advocates need to pay attention to winning laws that nurture the living-wage movement itself. For instance, some laws give living-wage coalition constituents the first crack at applying for jobs covered by the living wage, in some cases through coalition-controlled hiring halls. Patronage usually gets a bad name, but this kind of community control over hiring can help cement a living-wage movement's strength by giving it the ability to reward its members and supporters. Moreover, although advocates dream of short-cutting the process of passing hundreds of local laws by winning federal legislation, in reality the local mobilizations are the key to success with compliance. Any federal law is likely to remain a dead letter unless we have built those hundreds of robust place-based coalitions ready to monitor the law's implementation and use it as an organizing tool.

The biggest challenge in movement building is reaching beyond wages and jobs to the less obvious issues. For instance, how do we defend the quality of public services? Many nonprofits and community-based organization have been drawn into the game of privatizing social services. Sometimes these agencies enter unholy alliances with private businesses and city officials to oppose living-wage laws, because they fear it will threaten their job programs for disadvantaged workers. Organizations representing workers, communities, service providers, and clients must search for common ground based on high wages and adequate services. In Massachusetts, for example, unions and service providers have campaigned jointly for a state-funded living wage for human-service workers employed by hundreds of state contractors.

Another tough nut to crack is how to win adequate income for those who are unable to work for pay, or who end up working on a very part-time or part-year basis. Unfortunately, some of the same public attitudes that make it easy to build coalitions around living wages—equating work with virtue, for example—make it hard to defend welfare for people not working for wages. The principals from the living-wage movement—unions, churches, and ACORN itself—have also joined efforts to demand more adequate and less restrictive welfare benefits, but so far with much less success.

MORE THAN JUST A LIVING

The sixty local living-wage laws to date represent a tremendous victory for working people, but one that is, so far, narrow in scope. The challenge now is to extend the reach of the laws, while building and broadening the living-wage movement at the same time. Extending the laws' reach means bringing more cities on board, but even more importantly, boosting the numbers and types of workers covered within each city. To the extent that advocates succeed in passing stronger laws, they will engender fiercer resistance—both direct challenges to the legislation and more covert attempts to flout the laws or shift the costs. To successfully counter this resistance, movement-building efforts must go beyond the boundaries of the current living-wage movement. The end result will look less like a living-wage movement, more like a broad insurgent movement to redistribute income and other resources.

Chris Tilly is Professor of Regional Economic and Social Development at the University of Massachusetts and Lowell and a member of the Dollars & Sense collective. This article is adapted from a talk given at a conference on Global Labor Justice, University of Chicago, May 2001.

Resources: Robert Pollin and Stephanie Luce, The Living Wage: Building a Fair Economy (W.W. Norton, 1998); Lawrence Mishel, Jared Bernstein, and John Schmitt, The State of Working America 2000-2001 (Cornell University Press 2001); David Card and Alan B. Krueger, Myth and Measurement: The New Economics of the Minimum Wage (Princeton University Press 1995).