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HR Magazine, March 2004 - Future Focus: Living Wages

By Jennifer Schramm  3/1/2004

HR Magazine, March 2004

Vol 49, No 3.

Local laws mandating a "living wage" could have influence that deserves HR's attention.

The decline in the number of localities that passed living wage laws last year may suggest that the push for such measures is losing momentum. But employers and HR professionals shouldn’t assume the movement is fading.

HR, which devotes much attention to wage-law compliance and calculates the business impact of potential changes in wage laws, should keep an eye on trends in living wage efforts.

A typical living wage ordinance mandates that local government and the companies that have contracts with the local government must pay employees at a wage level determined to be sufficient to meet the basic needs of a family. The living wage is not necessarily tied to the minimum wage enforceable within that jurisdiction. In some instances the mandate also extends to businesses that receive assistance from the city or county that has enacted the living wage law.

According to ACORN—the nationwide Association of Community Organizations for Reform Now, which is, among other things, an advocate for living wage ordinances—around a dozen cities or counties passed living wage laws in 2003, down from about 18 in 2002 and 26 in 2001.

Besides the slide in the number of localities adopting living wage mandates, a handful of jurisdictions repealed living wage laws during the recent economic downturn. Some economists and policy-makers welcome those developments. They question whether living wage laws work, and they argue that such mandates might crowd low-skilled workers out of the job market entirely, rather than help them to move up the job and income ladder as intended. Because living wage laws apply only to particular workers, some experts question whether such laws’ effects, even if positive, are sufficient to have a more widespread impact on poverty or unemployment rates.

Despite the doubts and the declining numbers, trends in jurisdictions that already have living wage ordinances indicate that the movement is far from spent. Living wage laws already in place are continuing to develop in two ways—through increases in wages and through the expansion of coverage beyond public employees and companies that receive publicly funded contracts or government assistance.

If these opposing trends—fewer new living wage ordinances enacted but an expansion of such ordinances already in force—become more firmly entrenched, both proponents and opponents of such laws may focus instead on the minimum wage, according to many policy and wage analysts.

During the economic downturn, many states stopped linking their minimum wage rate to their consumer price index. (All but seven states have their own minimum wage; in 12 states it’s higher than the federal minimum wage, in two states it’s lower, and in 29 states it’s the same.) But increases in the numbers of individuals and working family members slipping below the poverty level could bring about increased pressure on states to re-examine their minimum wage laws.

HR professionals will have to be aware of those pressures and calculate their effects.

For more information on emerging issues, visit www.shrm.org/trends

Jennifer Schramm is manager of the Workplace Trends and Forecasting program at SHRM.

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