NS ORD-1997-013 Living Wage Ordinance

Browse Search

APPENDIX 5. 39 Executive Summary "Living wage" laws are under consideration in states and cities across the country. These proposals are designed to raise the wages of very low-income workers by requiring state or municipal contractors, recipients of public subsidies or tax breaks, or, in some cases, all businesses, to pay employees wages significantly above the Federal minimum. Wherever they have been proposed, living wage laws have been met with vigorous opposition, primarily from business interests and some local political leaders. Opponents claim that a living wage law will cause large increases in the costs of public contracts, lead to increased unemployment, cause companies to drop out of bidding for public contracts, impose significant administrative costs, and cause businesses in general to shun the locale in response to the law's ostensibly unfavorable impact on the local business climate. The Preamble Center for Public Policy conducted the present study of Baltimore's living wage law in order to determine, based on the actual experience of one of the first cities to pass such a law, whether the stated concerns of critics are or are not well-founded. Baltimore City Ordinance 442 was passed in December of 1994. This ordinance mandated a minimum hourly wage of$6.10 for anyone working on a city service contract, effective July 1, 1995; this minimum increased to$6.60 per hour for contracts signed after July 1, 1996. The study involved a review of the costs o4 and bidding for, city service contracts, interviews with city contractors, and analysis of tax data relating to levels of business investment in Baltimore. Among this study's main findings: • The real cost of city contracts has actually decreased since the ordinance went into effect. For the average contract (weighted by its share in the sample), this decline was statistically significant. • Of companies interviewed that held contracts before and after enactment of the law, none reported reducing staffing levels in response to the higher wage requirements. • The cost to taxpayers of compliance has been minimal,with the City allocating about 17 cents per person annually for this purpose. • The average number of bids per contract declined from 1994 to 1995, but this decline was not statistically significant, nor did it affect the competitiveness of the bidding process as manifested in actual contract costs. • There is no evidence that businesses have responded negatively to the passage of the ordinance. In fact, the value of business investment in the City of Baltimore actually increased substantially in the year after passage of the law. Based on these findings, it is clear that opponents' claims of large-scale negative economic and fiscal impacts from living wage legislation have not held true for the case of Baltimore.