A living wage is the level of earnings that equals or exceeds the cost of a family’s basic needs for food, clothing, shelter, child care, health care, and transportation. Living-wage jobs provide opportunities for work that enable people to meet their families’ financial needs, supporting both economic success and feelings of autonomy.

Evidence of the Relationship between Predictor and Related Outcomes

• Although many different attributes of a job can contribute to mobility, jobs that offer higher earnings tend to also offer employer benefits such as paid time off and health and pension benefits, and workers in better-paying jobs tend to have more stable employment (Boushey 2008).
• Literature reveals that a parent’s wage and employment status can affect the development trajectories of their children. Children in families with higher-earning parents tend to be in better health and on better developmental trajectories than children with lower-earning parents (Ruhm 2000). Further, low income exacerbates poor health, family conflict, and social isolation (Kahneman and Deaton 2010).
• Living wages can have important psychological benefits. In fact, wages are one of the key indicators of job satisfaction. Literature suggests that living wages might enable a sense of empowerment instead of oppressive subordination (Alkire 2007; Carr, McAuliffe and MacLachlan 2014).
• A study predicting the health impacts of adopting a living wage in San Francisco found that doing so could lead to improvements in subjectively rated health, reductions in the number of days people missed work because of sickness, and reductions in depressive symptoms, but it also predicated an increase in daily alcohol consumption. Further, it predicted positive outcomes for the offspring of living-wage earners, including an extra 0.25 years of education completed, increased odds of completing high school, and a reduced risk of early childbirth (Bhatia and Katz 2001). Another study found increasing wages through an increase in the minimum wage resulted in improved birth outcomes, potentially through an increase in the use of prenatal care and a decrease in prenatal smoking (Wehby, Dave, and Kasetner 2016).
• Brenner and Luce (2005) found that living-wage laws can have positive effects on earnings and benefits and lead to more full-time jobs. A study about Boston’s living-wage ordinance finds that it led to qualitative improvements in jobs themselves. Benefits included reduced debt, bank account openings, ability to take classes and vacations, disposable income, and reduced work hours. Other benefits included health insurance, paid vacation days, retirement benefits, formal job training, or sick pay. But the ordinance did not leave workers feeling more financially secure (only one-quarter indicated a greater sense of financial security). In other words, it did not permit them to get ahead; rather it just helped them avoid falling behind (Brenner and Luce 2005).

How Investments Can Influence the Predictor at State or Local Levels

Communities can pass living-wage laws, but the evidence on how effective they are at actually raising wages is mixed. Neumark and Adams (2003) point out that a variety of living wage laws exist, including contractor-only laws, business assistance provisions, and provisions for community hiring.

The scale and scope of the laws impacts their effectiveness. A 2003 study found that living-wage laws covering businesses that receive government assistance from cities led to higher wages, lower employment, and net poverty reductions, though living wage laws that covered only city contractors had no detectable impact (Neumark and Adams, 2003). On the other hand, a study using longitudinal data from 1995 to 2009 found that the adoption of living-wage ordinances was not associated with any significant changes in poverty, unemployment, or wages at the city level (Sosnaud 2016). A 2001–02 in-depth telephone survey of workers in Boston covered by the city’s living-wage law showed that on average, the living wage raised earnings by $6,950 per year (or 32 percent) for covered workers who stayed with the same employer before and after the ordinance. Those who had income below the federal poverty level in 1998 gained $2.10 an hour by 2001 in real terms (Brenner and Luce 2005).

If it is within their authority given state laws, communities could raise wages by increasing their minimum wages. Although minimum wages fall far below living wages in most places, workers in low-wage jobs could see their wages and perhaps earnings rise as a result and enjoy the salutary benefits associated with higher wages. Communities should calibrate any minimum wage increases to moderate any involuntary reductions in work and hours.

References

The primary reference is marked with an asterisk.

Alkire, Sabina. 2007. “The Missing Dimensions of Poverty Data: Introduction to the Special Issue.” Oxford Development Studies 35 (4): 347–59.

Bhatia, Rajiv, and Michael Katz. 2001. “Estimation of Health Benefits from a Local Living Wage Ordinance.” American Journal of Public Health 91 (9): 1398–1402.

Boushey, Heather. 2008. “Opting out? The Effect of Children on Women's Employment in the United States.” Feminist Economics 14 (1): 1–36.

*Brenner, Mark D., and Stephanie Luce. 2005. “Living Wage Laws in Practice: The Boston, New Haven and Hartford Experiences.”

Carr, Stuart C., Eilish McAuliffe, and Malcolm MacLachlan. 2014. “Servants of Empowerment.” In Industrial and Organizational Psychology Help the Vulnerable, edited by Walter Reichman, 143–63. London: Palgrave Macmillan.

Kahneman, Daniel, and Angus Deaton. 2010. “High Income Improves Evaluation of Life but Not Emotional Well-Being.” Proceedings of the National Academy of Sciences of the United States of America 107 (38): 16489–93.

Neumark, David, and Scott Adams. 2003. “Do Living Wage Ordinances Reduce Urban Poverty?” Journal of Human Resources 38 (3): 490–521.

Ruhm, Christopher J. 2000. “Are Recessions Good for Your Health?” Quarterly Journal of Economics 115 (2): 617–50.

Sosnaud, Benjamin. 2016. “Living Wage Ordinance and Wages, Poverty, and Unemployment in US Cities.” Social Service Review 90 (1).

Wehby, George L., Dhaval M. Dave, and Robert Kaestner. 2016. “Effects of the Minimum Wage on Infant Health.” Working paper 22373. Cambridge, MA: National Bureau of Economic Research.