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APPENDIX 5. <br /> 53 <br /> that increased labor costs can be passed on to the city government, there would be no need for <br /> contractors to reduce employment. Of course,this could mean additional taxes for city residents. The <br /> other possibility—where there are more competitive markets and bidding practices—also cuts both <br /> ways. That is, if contractors are forced by the higher labor costs to increase productivity and therefore <br /> reduce employment, the taxpayers gain from the increased productivity. <br /> In the case of Baltimore, there have been no additional costs nor measurable effects on <br /> employment. The results, however unexpected, are consistent with the most recent research in labor <br /> economics, in which competitive pressures, efficiency gains, or other responses can produce a labor <br /> market outcome with neither price nor employment changes following a minimum wage increase. <br /> Conclusion <br /> The predicted negative effects of raising wages for workers employed on city contracts <br /> have not materialized in Baltimore. The cost of the affected city contracts did not increase, and <br /> in fact decreased. Most payroll employment data for the relevant city contractors is not yet <br /> available, but interviews with contractors indicate that they did not reduce their workforce in <br /> response to the higher wage. The.number of bidders for the contracts in our sample declined, but <br /> this change was not statistically significant. And finally, there is no evidence that the ordinance <br /> discouraged investment generally in Baltimore. <br /> It will take more time, as well as further research, to determine exactly how contractors are <br /> responding to the ordinance, and how their responses affect employment, productivity, and costs to <br /> the city government. As the living wage continues to rise to $7.70 per hour over the next two years, <br /> there will be greater potential for cost increases and other effects. But for now, it is clear that in the <br /> 21 months since it was enacted by the city, the stated fears of those who oppose living wage <br /> legislation have found no basis in this case. <br /> It also must be noted that the present analysis includes no assessment of the significant <br /> potential benefits of the living wage ordinance—substantially higher income for low-wage workers <br /> and their families, with attendant increases in their quality of life and cost savings as the demands <br /> these individuals place on federal, state and local government programs is reduced. The full extent <br /> of these benefits awaits analysis.But any fimm costs to the city of Baltimore that may arise from the <br /> living wage ordinance must be weighed against these benefits. <br /> 14 <br />