Living Wage Policies and Campaigns: Lessons from the United States

By Luce, Stephanie | International Journal of Labour Research, January 1, 2012 | Go to article overview

Living Wage Policies and Campaigns: Lessons from the United States


Luce, Stephanie, International Journal of Labour Research


With the expansion of global labour markets, more countries are looking for policy tools to address growing low-wage work and working poverty. Does the "living wage" movement offer a path to reducing poverty and inequality? The term "living wage" was first used in the 1800s, as scholars and activists argued that the spread of wage labour should come with a mandate for employers to pay employees wages high enough to support themselves. (Many assumed a male breadwinner, so called for a living wage high enough for a worker to support themselves and a family). There was never a consensus on how to define a living wage, although several governments and administrative bodies took up the task of developing complex formulas.

In recent times, the term "living wage" has resurfaced in the United States. In the early 1990s, there was much attention on the growth of lowwage jobs. Activists in Baltimore, Maryland pushed their city government to find a policy tool to address the problem. The city passed a "living wage ordinance" that required any firm holding a contract for service work to pay their workers a living wage. The idea spread quickly around the country and today, some 17 years later, there are living wage ordinances in over 140 cities, counties and universities. The campaigns and ordinances vary in terms of how to define a living wage, who they cover, and their impact, but the general "living wage" concept has strong public support.

This paper will review the US living wage movement, including the details of the ordinances and the definition of a living wage. Then, I will review the existing research on the economics and political outcomes of the living wage movement. I will then attempt to draw some lessons from the living wage movement for the United States, and internationally.

Defining a living wage

There are several approaches used to define a living wage. In the United States there are a few formulas that are used to measure the basic cost of living for different-sized families (e.g., two adults, two children), and by region. The most common are the Basic Family Budget Calculator developed by the Economic Policy Institute, and the Self-Sufficiency Standard, developed by Diana Pierce and the Wider Opportunities for Women. The formulas are similar, and use government data to estimate the minimum costs for housing, food, shelter, transportation, health care, taxes and childcare.

Both formulas come up with annual total income needed to cover basic costs. These can be divided by the number of workers and hours worked for an average hourly wage. For most cases, the result is an hourly wage significantly higher than the federal or state minimum wage.

Living wage activists knew that it would be very difficult to win ordinances with these wage levels. Instead, they chose to campaign for an hourly wage that would allow a worker working full time to meet the federal poverty line for a family of three or four. The United States began setting a poverty threshold in the 1960s, based on a formula centred around the caloric needs for different family types. The formula is simple and outdated, and does not vary by region. However, it is adjusted annually for inflation so the level has gone up steadily over the past few decades.

Meanwhile, the US federal minimum wage has not been regularly increased. There is no formula underlying the minimum wage, and it is only raised by an Act of Congress. This happened more frequently in the past, but less so in recent years. By the early 1990s, the value of the minimum wage was significantly below the poverty line (see figure 1). Activists knew that the poverty line was not a real "living wage" and in fact was even an underestimate of poverty. Yet since the poverty level was significantly above the minimum wage, it seemed a reasonable target for living wage campaigns.

Most US living wage ordinances have set the living wage to the federal poverty line for a full-time worker with a family of three or four, although a few are set at 110 per cent or 120 per cent ofthat level. …

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