Evaluating Living Wage Laws in the United States: Good Intentions and Economic Reality in Conflict?

Abstract

This article first examines the question, “What is a living wage?” and provides a range of specific dollar amounts derived through a conceptual assessment of the term. It then provides a series of cost estimates of living wage laws in various cities. Based on these cost estimates, the article examines a set of alternative adjustments that covered firms could make to absorb these costs, including raising prices and productivity, redistributing the firm’s income more equally, laying off employees, and relocating out of the area covered by the law. Prospective and retrospective evidence is used to reach an overall assessment of the benefits of living wage laws relative to their costs.