How Much Is A Living Wage?

Jerome Gibbons works about 60 hours a week, just as he did five years ago--but with one difference. In 1997 Gibbons held two demanding jobs--as a wheelchair attendant at Los Angeles International Airport and a security guard in an office tower. He still works 40 hours a week at the airport, but thanks to the city's five-year-old "living wage" ordinance, which raised the minimum wage for firms that contract with the city, his hourly pay has jumped from $5.75 to $9.54. He has been able to drop his second job and now studies at a local college for what he hopes will be a better job, as a counselor to substance abusers. Gibbons, 31, who is unmarried, says of the city-mandated pay raise: "It makes paying bills easier and going to school easier."

More and more low-wage workers like Gibbons are finding hope for a better life as the living-wage movement gains momentum. Devoted to the principle that people who work full time should not live in poverty, the living-wage campaign won its first success in Baltimore, Md., in 1994, and has since spread to 81 other cities and counties--including Boston and Santa Fe, N.M.--as well as such institutions as universities and school boards. Living-wage proposals are pending in dozens of other localities, from Santa Monica, Calif., to New York City.

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Driving the movement is new evidence that may dispel early fears that the social benefit from higher wages would be wiped out by job cutbacks among businesses subject to the living-wage laws. Last month a study of 36 cities with living-wage laws--conducted by David Neumark, a Michigan State University economics professor and an early skeptic of such laws--found that the slight job losses caused by the higher wages are more than offset by the decrease in poverty among working families. "The impact on businesses and governments is very small," says Robert Pollin, an economics professor at the University of Massachusetts at Amherst. "If there were any evidence otherwise, it would have shut down the living-wage movement a long time ago."

These laws generally require that contractors who work for local governments--and in some places, businesses that receive subsidies and tax breaks--must pay employees enough to raise their income above the federal poverty level of $18,100 for a family of four. That works out to more than $8 an hour--though some cities with high living costs like Santa Cruz, Calif., require hourly wages as high as $12.55. (The federal minimum wage is $5.15.)

Some cities are attempting more sweeping reforms. In February, New Orleans voters approved by 2-1 a referendum that would require every private employer in the city to pay at least $6.15 an hour. Activists went to court the next day to ask a judge to strike down a 1997 state law banning local minimum wages. Last week the judge ruled that ban unconstitutional (five other states have similar laws), so New Orleans will be free to force higher wages May 3, pending an expected review this week by the Louisiana Supreme Court.

The Santa Monica city council passed an ordinance last July that would impose a living wage not only on its contractors but also on hotels and other major businesses located in a 1.5-sq.-mi. "coastal zone," adjacent to its famous beach. Hotel owners got enough signatures to suspend imposition of the law, and are challenging it in a referendum that will be on the city ballot in November.

The living-wage movement is generating organized resistance, notably among hotel and restaurant owners and other employers of low-wage workers. "I feel every minimum wage, even at the federal level, costs jobs," says Jerome Fein, 51, owner of the venerable Court of Two Sisters restaurant in New Orleans. "I think it's a business decision, not a government decision." New Orleans' new law, Fein says, will cost jobs at his restaurant and elsewhere in the city. But a large majority of the city's voters--including many of the 47,000 who work in service jobs--believe that their bosses' warnings are overblown.

Are such laws fair to employers? The debate often centers on whether local businesses owe something to the community for the favors they get. Private hotels, restaurants and shops do not usually get city service contracts. But they often receive indirect support from local governments through tax abatements and other subsidies, and living-wage advocates say they should give something back. That argument is heard not only in New Orleans but also in Santa Monica, where the city council wants to impose a $12.25 living wage for employers who don't provide health insurance and a $10.50 wage for those who do. The wage would apply to city employees, contractors who do business with the city and businesses with more than $5 million in annual revenues within its coastal zone--a tourist haven that city taxpayers spent more than $180 million redeveloping in the 1980s and '90s.

"They say they want to pay this high wage so people can afford to live in Santa Monica," says Selwyn Wyosslowitz, who co-owns a chain of six Southern California restaurants. "No one can afford to live in Santa Monica. Get real. How are you going to put the burden on restaurants for $13 an hour?" Some restaurateurs say they might move to neighboring towns if the Santa Monica law goes into effect--but for now they are fighting for their referendum.