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44 APPENDIX 5. 44 <br /> wages. Less competition will lead to further cost increases. A Chicago Sun-Times editorial asserted <br /> that although "proponents argue that [Chicago's proposed living wage] ordinance would make the <br /> bidding process more equitable for companies already paying a living wage, it is likely that the higher <br /> cost of doing business would instead reduce the number of companies bidding."' And the Boston <br /> Herald claims that"for a business in a competitive industry (and most are), increasing the cost base <br /> with [a living wage] requirement could simply lead it to drop the city as a customer."9 <br /> Creation of a Hostile Business Climate. One of the most prominent arguments of critics is <br /> that businesses in general, not just those bidding on city contracts, will interpret the passage of a <br /> living wage law as a"bad signal" in terms of the city's overall business climate, leading to capital <br /> flight from the city. At a time of bitter competition for job-creating investment, the argument goes, <br /> a municipality would be placing itself at a grave disadvantage by passing a law that implies a lack of <br /> commitment to keeping costs for businesses under control. According to a Boston Herald editorial, <br /> "the [Boston ] proposal couldn't be better calculated to drive business out of the city."10 The Los <br /> Angeles Business Journal opined, "Simply put, the living wage threatens to derail the economic <br /> revival that the City of L.A. has been enjoying," referring to the proposal as, "[a]nother bad, job- <br /> killing idea."" The Minnesota Retail Merchants Association claims that"mandating wages like this <br /> will have a chilling effect on business development.`2 Concerning Denver's ballot initiative to raise <br /> the city's minimum wage, a City Councilman called it "retail suicide. . . . What we're going to do is <br /> watch a lot of our economic base walk out of the city to the suburbs."" <br /> These arguments, and their variants, have been raised wherever living wage legislation is <br /> under consideration. If they are correct, the case for this legislation would be severely weakened. <br /> The purpose of this study is to determine, based on the experience of one of the first cities to <br /> pass a living wage requirement for municipal contractors, whether the stated concerns of critics about <br /> negative economic and fiscal consequences are or are not well-founded. We assessed the impact of <br /> Baltimore City Ordinance 442, which went into effect on July 1 of 1995, in the following areas: the <br /> cost of city contracts, the numbers of bidders seeking city contracts, the number of workers employed <br /> by city contractors, administrative costs, and the overall business climate of the city of Baltimore. <br /> It is our hope that the results of this analysis will be of use not only to the citizens of Baltimore, but <br /> to elected officials and members of the public in other locales as they evaluate present and future <br /> proposals for living wage requirements. <br /> =June 23, 19%. <br /> 9September 5, 1996. <br /> 16Ibid. <br /> t t "Another bad,job killing idea,"Los Angeles Business Journal,September 30, 19% <br /> 12Judy Cook,Main Retail Merchants Association,quoted in"Can Government Ensure a"Living Wage,"' <br /> Irrnstor's Business Daily,April 3, 1 996, in reference to proposed state-wide Minnesota living wage law <br /> 13Bartels,Lynn."Voters Will Decide on Wages,"Rocky Mountain News,August 6, 1996,p. 1. <br /> 5 <br />