New York City is playing catch-up on a legislative phenomenon that has swept through Boston, Chicago, Los Angeles and dozens of other cities.
Nationwide, 83 communities have enacted laws raising wages for thousands of low-paid workers employed by city contractors. Now the New York City Council is considering such a law.
Many advocates for the poor hail these so-called living-wage laws, saying they help lift workers out of poverty, usually by increasing pay by $2 to $3 an hour. Opponents say they end up punishing the poor by causing layoffs of some low-paid workers.
They are both right, according to the most exhaustive study of these laws.
The study, released in March, concluded that the laws help the low-paid workers they are intended to aid, often janitors or security guards, but push up the unemployment rate for low-wage workers in general.
"These things are often sold as free lunches or win-win situations, but that's simply not the case," said David Neumark, an economics professor at Michigan State University whose study, commissioned by the Public Policy Institute of California, examined living-wage laws in 36 cities. "There is some employment loss, though it's not huge. And some people are earning higher wages, and in some parts of the country they are earning much higher wages."
Professor Neumark pointed to several California cities that require city contractors to pay more than $10 an hour, considerably higher than the $8.10 an hour with health benefits (or $9.60 an hour without) that the New York bill would require. The New York proposal would raise the floor to $10 an hour after five years and would apply to employees of city contractors and companies that get large tax breaks from the city.
Professor Neumark found that the net effect of these laws was positive because, even while increasing unemployment, they help reduce poverty.
"The evidence points to a moderate reduction in urban poverty," he said. "If you love living-wage laws, that probably makes you jump up and down. If you hate living-wage laws, it puts you in a bind."
Conservatives have criticized his study for not focusing more on increased unemployment, while liberals have complained that it exaggerates the growth in joblessness. Professor Neumark has clashed with liberals in the past over minimum-wage increases after conducting studies that found that raising the minimum wage pushes up unemployment and often helps middle-class teenagers instead of the poor. Professor Neumark praised living-wage laws for focusing more narrowly on helping poor workers than minimum-wage laws do.
Living-wage laws have had mixed effects, helping some people and hurting others. These laws have certainly helped people like Marlene Mendoza, a waitress at a restaurant in the Los Angeles International Airport. When Los Angeles enacted its law in 1998, her pay, then $5.75 an hour, jumped by more than $2 an hour. The law requires city contractors to pay at least $7.99 an hour with health benefits or $9.24 an hour without.
"The big difference because of the law is, now I can spend more time with my kids," said Ms. Mendoza, a single mother who juggles two jobs and has a 7-year-old daughter and a 10-year-old son with cerebral palsy. "Before, I had to work 75 hours a week to make ends meet, but now I only have to work 55."
She added that she now had time to help her children with their homework and enough money to afford her first-ever vacation to her native El Salvador.
Many conservatives say these laws are not the best way to reduce poverty. Richard Toikka, chief economist for the Employment Policies Institute, a business-backed research group, praised the earned-income tax credit, saying it did not push up unemployment. But many city officials say tax credits cost a lot of money, while wage laws have less visible, hard-to-measure effects on budgets.
Officials in several cities said their wage laws had had little impact on their budgets. Mimi Turchinetz, the living-wage administrator for Boston, said the cost to the city was minimal, partly because the hourly wage of $9.11 was not much higher than the wages many companies were already paying.
"For the most part, the cost of the contracts was absorbed by the vendors," she said.
In Oakland, Calif., city officials estimate that their law has raised the cost of city contracts by 2 percent a year. Last year, Oakland's law, which requires $9.13 an hour with health benefits and $10.50 without, raised the wages of 230 workers employed by city contractors by a total of $74,500.
In New York City, Mayor Michael R. Bloomberg opposes the bill because it could increase the city's projected $5 billion deficit. His administration says the bill would cost the city $150 million a year, while supporters say it would cost $10 million. In New York, the bill, supported by 45 of the 51 City Council members, would cover 70,000 workers, by some estimates more than all workers covered by the nation's other living-wage laws combined.
Many business executives call these laws an unfair assault on their profits, while other executives give the laws unexpected praise. The loudest cries come from companies in Santa Monica, Calif., where the City Council approved a living-wage law that faces a citywide referendum in November. The proposal would set a wage floor of $10.50 an hour with benefits or $12.25 an hour without for city contractors and hotels and restaurants in the prime coastal zone.
Rick Federico, chairman of a restaurant chain, P. F. Chang's China Bistro, said he might lay off 40 of the 125 employees at his upscale restaurant in Santa Monica if he is forced to give $3-an-hour raises to the many workers who now earn $8. He said he might eliminate several dozen assistant waiters' jobs.
"I estimate that it will cost us $600,000 a year, which would pretty much wipe out our profit margin," Mr. Federico said. "And we won't be able to pass it along through a price increase."
Lynn Kastella, whose firm manages buildings for Tucson, voiced a common criticism of these laws Â? it required her firm to hire a full-time contract compliance officer.
Tom Cheske, vice president of Mr. Janitor in Tucson, faulted the law on another ground: it was causing tension at his firm. His employees who earn $6 an hour cleaning private-sector buildings resent co-workers who earn $8.58 an hour cleaning municipal buildings.
"People are under the impression that if you give somebody more money, they're automatically going to be a better employee," Mr. Cheske said. "That's not the case. They might be happier employees, but we haven't seen any change in performance."
But some have a more positive view. At Pedus Services, a security and janitorial firm in Tucson that has more than 100 people doing work for the city, employee turnover has plunged from 16 percent every two weeks to just 1 percent since the law took effect in 2000, raising hourly pay to $8.58 from $5.25. In addition, overtime costs have dropped sharply.
"You have less people not showing up," said Orlando Duran, Pedus's operations manager. "Before, a lot of people didn't show up some days because they were looking for higher-paying work."
Professor Neumark's study also found that living-wage laws were a boon to municipal labor unions, which have lobbied for these laws. By raising the wage that contractors must pay, he found, these laws make it less tempting for cities to seek to save money by privatizing services.
"These laws really undermine that threat," Professor Neumark said. "As a result, unions representing city workers have greater bargaining power."