Living Wage Effects: New and Improved Evidence

Abstract

This article explores the effects of living wages on low-wage workers and low-income families. First, earlier analyses are updated using data for 1996 through 2002, and a number of criticisms of those analyses are addressed. This article confirms earlier findings that business-assistance living wage laws boost wages of the lowest wage workers at the cost of some disemployment, ultimately reducing net urban poverty. Second, this article expands the analysis of distributional effects beyond the poverty threshold. It was not found that living wage laws increase the depth of poverty among families that remain poor; on the other hand, families somewhat below and somewhat above the poverty line are helped. Finally, this article suggests that the poverty reductions generated by living wages may stem from income gains for individuals with higher wages or skills who are nonetheless in poor families rather than for individuals with the lowest wages or skills.