HomeMy WebLinkAboutAgenda - 05-21-1997 - 10b t ORANGE COUNTY
BOARD OF COMNIISSIONERS
ACTION AGENDA ITEM ABSTRACT
MEETING DATE: May 21, 1997
Action Agenda
Item# /0-6
SUBJECT: Living Wage Ordinance
DEPARTMENT: EDC PUBLIC HEARING: Yes No_X
BUDGET AMENDMENT NEEDED: Yes No:X
ATTACHMENT(S): INFORMATION CONTACT:
Ted Abernathy(ext. 2325)
A Report Examining a Living
Wage Ordinance for Orange
County (54 pages includes appendices) TELEPHONE NUMBERS:
Hillsborough - 732-8181
Durham - 699-7331
Mebane - (910) 227-2031
Chapel Hill - 967-9251/968-4501
Purpose: To present a report examining a living wage ordinance for Orange County.
Background: In February 1997, the Orange County Greens requested that the Orange County
Commissioners develop a living wage ordinance for the County. The Board of County
Commissioners directed the County Manager and the Economic Development Commission to
develop a report on the appropriate nature, scope and practical implementation of a living wage
ordinance.
This report provides a brief history of living wage ordinances in the United States. It then
discusses options for application of the ordinance and poses seven clarifying questions that the
Board of County Commissioners may wish to address. Next, four methods for establishing a
specific living wage level are provided. Finally, management, enforcement, and impact are
examined.
Recommendation: The Manager recommends that the Board of Commissioners receive the
report and provide direction to staff.
2 'z
A Report Examining a Living Wage Ordinance
for
Orange County, North Carolina
Prepared May 1997
�► 3
A Resort Examining a Living Wage Ordinance for Orange County, North Carolina
Background and Report
In February 1997, the Orange County Greens requested that the Orange County Commissioners
develop a living wage ordinance for the County. The Board of County Commissioners directed
the County Manager and the Economic Development Commission to develop a report on the
appropriate nature, scope and practical implementation of a living wage ordinance.
This report provides a brief history of living wage ordinances. It then discusses options for
application of the ordinance and poses seven clarifying questions that the Board of County
Commissioners must address. Next, four methods for establishing a specific living wage level are
provided. Finally, management, enforcement, and impact are examined.
History
In 1906 Catholic priest Father John A. Ryan, in his book A Living Wage,first articulated the
concept of a"living wage". The current movement began in the early 1990's with Father San
Lupico of Baltimore, who began noticing increasing numbers of working poor at his soup kitchen.
He and others formed a coalition of church-based organizations called Baltimoreans United in
Leadership Development (BUILD). Together with the American Federation of State, County,
and Municipal Employees and an organization of low-wage workers called the Solidarity
Sponsoring Committee, they began work toward Baltimore's adoption of the nation's first living
wage ordinance in 1994. Appendix 1 is a copy of the Baltimore living wage ordinance.
Religious organizations, labor unions, and community activists have continued to promote the
concept in many other cities and states. In most cases, the local push to enact a living wage
ordinance has been prompted by local government downsizing and, more specifically, the growing
trend toward privatization. As cities attempt to control costs, many have contracted with private
businesses to perform work previously completed by local government employees. Workers in
privatized jobs usually receive lower wages and benefits, are temporary employees, and are not
unionized.
The national trend that has most contributed to the living wage movement is the declining buying
power of the Federal Minimum Wage. In 1970, the federally defined poverty level for a family of
three was $3100, and the minimum wage worker's annual earnings were $3200. As can be seen
in Chart 1, the minimum wage has failed to keep up with inflation. A full-time worker in a family
of three, earning minimum wage, now earns well below the Federal poverty level. The current
minimum wage is $4.75 per hour. Beginning September 1, 1997, the Federal Minimum Wage will
increase an additional 8.4 percent to $5.15 per hour.
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Chart 1
EARNINGS AT MINIMUM WAGE vs. POVERTY LEVEL
$14,000
$
1 000
$10,000
i
I
$8,000 000
$
6 000
$4,000
$2,000 >;
I
f
$0
•-♦- ANNUAL EARNNGSAT MINIM UM WAGE
i` FEOEML POVERTY LEVEL (FAMILY OF 3)
Since Baltimore first adopted its ordinance in 1994, several local governments have passed similar
measures, including Jersey City,New Jersey;Milwaukee, Wisconsin;New York,New York; and
Portland, Oregon. Other cities such as Boston, Los Angeles, Madison, St. Paul, and New Haven
are considering some action. Each city has passed unique legislation with key provisions which
differ. Some of the campaigns have been local. Others have been attempts to pass state-wide
legislation. Appendix 2 is a complete summary of local legislative efforts.
Application Of Living Wage Ordinance
How a living wage is applied locally varies from city to city. In all cases to date, the living wage
ordinance has applied to companies contracting with or receiving money from the local
government.
• Baltimore's ordinance requires"service and professional service
contractors to pay the prevailing wage as locally established."
• Jersey City adopted a more narrow ordinance that only applies to
businesses contracting with the city to provide"clerical, food service,
janitorial, and unarmed security services."
• � 5
• New York's code applies to "security, temporary office service, cleaning
and food services."
• Portland's ordinance applies to contractors supplying"janitors, security
guards, parking attendants, and temporary clerical assistance."
In other cities considering a living wage ordinance, the new minimum would apply to businesses
receiving local subsidies or tax abatement. For instance, in Minneapolis, where the proposal has
passed the City Council but is not yet enacted, businesses receiving more than $100,000 in
economic development incentives would be required to pay the locally established minimum wage
to all their workers. Several cities also are considering action which would require businesses
receiving tax abatement above a specified level to comply with a locally adopted living wage.
Another requirement that is usually part of a local effort is to ensure that all of the local
government's permanent and temporary employees earn in excess of whatever minimum living
wage is established. The action is viewed as a declaration of commitment by the local
jurisdictions.
Some questions that should be discussed and agreed upon by Board of County Commissioners
before arriving at any decision on implementation include the following:
1. What is a contract? Does a purchase of goods qualify as a contract, and if so, at what level
should purchases be considered? Orange County processes 3,000 purchase orders annually,
ranging from $100 to millions of dollars each.
2. To what We of contracts should the ordinance be applied?
• Construction: To date, living wage efforts have focused on service
contracts and have not applied to construction contracts.
• Legal and Accounting: Should the ordinance apply to legal or accounting
contracts, two of the largest service contracts which Orange County
currently has?
• Non-Profits: Should contracts with non-profit agencies be included?
Many non-profit agencies traditionally pay lower wages. Others, such as
the Triangle Residential Options for Substance Abusers program, use
unpaid or partially paid client labor. Still other non-profits, such as The
University of North Carolina, have little local control over their wage
structure. Most governments, if not all, have excluded non-profits from
living wage ordinances.
• Employee Benefits: Should an ordinance be applied to employee benefit
contracts such as health or life insurance? To date, no community has
included employee benefit contracts.
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3. At what financial level should a contract be covered? Some communities considering living
wage ordinances have proposed considering only those contracts above a certain level such as
$25,000 or$50,000. Orange County executes hundreds of small contracts annually.
Appendix 3 is a list of current Orange County contracts above $5,000.
4. Should any local ordinance apply to companies receiving local subsidies? Although Orange
County may not supply tax abatements, it has participated in two water and sewer expansions
for specific companies over the past 10 years. Orange County's current policy requires that
the company's average wage be above the local average wage, but does not set minimums.
Appendix 4, the Minneapolis-St. Paul Living Wage Policy, is an example of an ordinance that
addresses requirements for companies receiving local subsidies.
5. Which contract employees should be affected? If a large company has only a few employees
working on an Orange County contract, should all of that company's employees be subject to
the Orange County's local minimum?
6. Should the residence of employees affected be considered? It is likely that many of the
employees affected will not be residents of Orange County.
7. Should any local ordinance cooly to Orange County's permanent and temporary=Iovees?
If the Board of County Commissioners were to adopt an ordinance, its impact on Orange
County employees would depend on the level at which the living wage was established.
Charts 2, 3, and 4 show preliminary estimates of the number of employees affected at specific
wage levels. Some of the temporary employees are high school students employed as library
pages, work-study students, and athletic assistants. Others are mostly clerical staff and
maintenance workers. For many temporary employees, the hours worked are very limited.
Chart 2
Orange County Temporary Employees
Hourly Rate Less Than $7.50
Department Number Of Employees
Aging 2
Board of County Commissioners 1
Budget 1
Cooperative Extension 1
Department of Social Services 1
Economic Development 1
Emergency Management Services 1
Finance 1
Health 1
Library 7
Personnel 1
Public Works 3
Recreation 16
Soil and Water 1
Sheriff s Department 1
TOTAL 39
Chart 3
Temporary Employees
Hourly Rate Greater Than 5 7.50 But Less Than 5 8.50
Department Number Of Employees—
Aging 6
Department of Social Services 3
Emergency ement Services 4
Health 1
Information Systems 1
Land Records 1
Planning 5
Public Works 4
Register of Deeds 1
Revenue 1
Sheriffs Department 1
TOTAL 28
8 $
Chart 4
Orange County Permanent Employees
With Annual Salary Less Than $8.50/Hour All Earn Above$7.50
Department Classification Total
Agin CAT Driver 5
Health Community Health Assistant 2
Public Works Custodian 7
Public Works Solid Waste Center Operator 7
Recreation Recreation Program Assistant 1
Sheriffs Department Custodian 1
Sheriff s Department Jail Cook 1
TOTAL 24
At What Level Should A Living Wage Be Established?
Establishment of a specific monetary value for a living wage can be approached in many ways.
Each community which has enacted"or tried to enact legislation has established a formula, picked
a number, or empowered a local commission- and each has arrived at a unique"living wage,"
ranging from $6.10 per hour to $11.25 per hour. Some calculations have included:
• The amount needed to keep a family of 2, 3, or 4 above the federal poverty
level
• The amount needed to keep a family at a certain percentage(such as 10
percent or 20 percent) above the Federal poverty level
• Prevailing wages, similar to the Davis-Bacon requirements
• Historical Federal Minimum Wage inflation-adjusted to reflect today's
dollar value
• Budgeting actual local costs to try to determine the actual salary needed to
live locally, including factors for local housing costs
Orange County could develop a living wage amount using many different methods. Four different
methods are outlined below.
Method 1 - Federal Poverty Level
One method would be based on the federal poverty level. The 1997 Health and Human Services
Poverty Guidelines established the annual earnings needed for a family of specific size to meet the
threshold. Chart 5 provides the hourly rate for various size families using 2080 working hours
annually, assuming there is a single wage earner.
9
Chart 5
1997 Health And Human Services Poverty Guidelines
Number Of People In Family Minimum Hourly Wage
1 $ 3.79
2 $ 5.10
3 $6.41
4 $ 7.71
5 $ 9.02
Method 2 - Federal Poverty Level Adiusted for Local Cost of Living
A second method would be to index the federal poverty level using the American Chamber of
Commerce Research Association's cost of living index. The index provides an estimate of the
local cost of living compared to the national average. The latest figures available show Chapel
Hill's cost of living at 114.5 percent of the national average, or 14.5 percent more expensive. The
Raleigh-Durham region is indexed at 103.0 percent, or 3 percent more expensive. Chart 6 shows
federal poverty levels, adjusted for the cost of living.
CHART 6
1997 Health And Human Services Poverty Guidelines
Adjusted For Local Cost Of Living age Per Hour
Number in Family Adjusted For Chapel Hill Adjusted For Raleigh-
Durham Region
1 $4.33 $ 3.90
2 $5.84 $ 5.25
3 $7.33 $ 6.60
4 $8.83 $ 7.94
5 $10.33 $ 9.29
In the first two methods, the minimum income needed to meet poverty guidelines varies greatly,
depending on family size. In the March 1997 Welfare Reform Update, the Orange County
Department of Social Services provided the information in Chart 7, which shows the size of
families currently needing temporary assistance.
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Chart 7
TEMPORARY ASSISTANCE For NEEDY FAMILIES
y 300
D
J
O
25
.:..::.::. :::::,::::::::::::::::::::::::::
s
0 .
W
N
200 -:.
O
s
150
O
100
oc
W
m
50
Z
0
1 2 3 4 5 6
NUMBER OF PEOPLE IN BUDGET
Method 3 - Federal Minimum Wage Adiusted
A third method would be to apply the minimum wage. The historical minimum wage, adjusted to
today's dollars, totals $6.56. Adjusted to the cost of living for Chapel 11ill, it equals $7.51.
Adjusted for the region, it equals $6.76.
Method 4 - Local Wages
A fourth method would be to examine local median family incomes or percentages of income.
Chart 8 provides that information. These measures are sometimes used by local governments to
qualify families for subsidized housing.
CHARTS
1997 Income Limits for Raleigh- urham: MSA i 7Wage Per Hour
Family Size 1 2 3 4 5
50%Median $ 8.80 $ 10.05 $ 11.32 $ 12.57 $ 13.58
60%Median $ 10.56 $ 12.06 $ 13.59 $ 15.09 $ 16.30
80%Median $ 14.09 $ 16.08 $ 18.10 $20.12 $21.73
Median $ 17.60 $ 20.10 $ 22.64 $25.14 1 $ 27.16
Regardless of the method used, a consideration is that some ordinances also require fringe
benefits or an addition to hourly wages in lieu of benefits. Jersey City requires vacation and
health benefits for full-time workers. Los Angeles adds$1.25 per hour to the minimum if health
benefits are not included.
Many other methods could be examined. To establish a local living wage, the Board of County
Commissioners would need to determine its objectives, decide on a specific living wage amount,
and plan for how that amount might be adjusted annually.
Management And Enforcement
The ordinances that have been adopted detail the management, enforcement, and penalties for
each community. If Orange County decides to adopt living wage rules, the County Attorney
would craft a local ordinance that specifically addresses the processes and ramifications for failure
to comply. Each local government that has adopted a policy has placed the responsibility for
management and enforcement on departments or staff that do not correspond to Orange County's
current administrative structure.
In Orange County, the management of contracts and internal audit functions is contained in the
Purchasing and Finance Departments. Various other county staff are involved, including the
County Attorney, and the departments where contracts originate.
Managing a living wage ordinance includes the following components:
• Establishing and adjusting the specific wage
• Informing potential contractors of the new rules
• Gathering information about compliance
• Auditing information to ensure compliance
• Following-up on contractors deemed non-compliant
How Orange County would organize and staff these functions would, in part, be dependent on the
scope and nature of the ordinance adopted. A narrow interpretation of which contracts would be
affected might allow the function to be absorbed by existing departments, with some additional
resources or a re-prioritization of goals. A more broad interpretation applied to many contracts
would necessitate examination of a new function area as well as additional staff and resources.
Impact On Orange County
The impact on local government is impossible to assess completely until the scope of a potential
ordinance is determined. The Preamble Center for Public Policy, an independent research and
public education organization based in Washington, D.C., has completed an analysis of the fiscal
and economic costs of Baltimore's ordinance in the first year. Baltimore's Bureau of
Management and Budget Research determined the total value of contracts affected by the
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ordinance to be $26.8 million of Baltimore's $2 billion budget. The Preamble Center analyzed 23
contracts totaling$19.3 million dollars that had been bid before and after the living wage
ordinance took effect. There was no significant rise in the costs of the contracts. The largest
single contract was for Public Pupil Bus Transportation in the amount of$14.5 million. With the
living wage ordinance, it rose 2.6 percent. Baltimore provided $121,000 for enforcement in the
first year. Appendix 5 is "An Analysis of the Fiscal and Economic Costs of Baltimore City
Ordinance 442", prepared by the Preamble Center for Public Policy.
Due to the preliminary nature, narrow scope, and the type of contracts considered in Baltimore,
little can be gained by using this model to predict how such an ordinance would affect contracts in
Orange County. In addition to the difference in the type of contracts which we have locally, our
economic situation is very different. Less unionization, low unemployment and a very strong
local economy could result in different responses than have been seen in Northeastern urban areas.
In Charts 9 and 10, the Personnel Department estimates the potential monetary impact if a local
ordinance were applied to Orange County temporary and/or permanent employees. For the
purposes of this example, living wage requirements are assumed at $7.50 or$8.50.
Chart 9
Living Wage Cost Estimate
Orange County Temporary Em to ees
At S 7.50 At$8.50
Estimated County Cost to Implement $22,500 $45,000
Employees Affected 39 67
Departments Affected 15 20
Chart 10
Orange Coun Permanent Employees
At S 7.50 At$8.50
Estimated County Cost to Implement -0- $ 20,000*
Employees Affected -0- 24
Departments Affected -0- 5
*Salary adjustment to employees earning below$8.55 only. Does not take into account other salary adjustments
which may be necessary to respond to salary compression arising from realigning the pay plan.
The overall budget impact will depend on how narrowly or broadly the ordinance is applied. In
any case, some staff resources and attorney will need to be budgeted. A more complete analysis
of costs can be developed when the scope and level of a living wage are agreed upon.
13
Summary
If the Board of County Commissioners decides to continue exploration of a living wage
ordinance, the following decisions need to be made.
• What kinds of activities should be covered by an ordinance?
• Should activities covered by an ordinance have a minimum monetary
value?
• Should an ordinance apply to companies receiving subsidies?
• Should an ordinance apply to County temporary and permanent staff?
• What is the appropriate amount of a living wage for Orange County?
Once these answers are agreed upon, the County Manager can develop a structure to administer
the ordinance and provide the Commissioners with an estimate of the budgetary and personnel
impacts.
APPENDIX 1..
14,
14
CITY OF BALTIMORE
•' ORDINANCE NO.
(Council Bill No. 716)
AN ORDINANCE concerning
PRrJAILING WAGE
FOR the purpose of requiring contracts for se=rvices,
including professional services, to o-_:� e k!
=s provide for the payment of a
rrevailinc wave.
'EY repealing and reordaining wa::th without amendments
r_-icle 1 - Mayor, City Cou.^cil, and Municipal Agencies
S;zb:.i-le - Ccn:.racts - Hours and wages to be under the ne•«
headine "Con.str-,iction Contracts"
Sec=ion _9 (F1.rst paraaraph)
Baltirore City Code (1-a3 Replacement Volume, as a--,ended)
BY add;na
Favor , City Council , and Municipal Agencies. -
Su'c-i-1e - Ccn-racts - Fours and Wages to be under the 'new
heading "Service Cont=acts!'_
Section 26A.
Baltimore Cite Code f_982 P.emiacement Volume . as amender
Lv aut c=i-v of
r.-tide _I
Sec-ion (4)
Ba .-imore Citr Cha=-.er (1964 Revision, as aaended)
pq^}MULr
WFS'7M S . It is the- muroose of this -Ordinance to rrovide for
a mr=_vailinc minimum hourlv wave rate for workers emrloved by
venders who are awarded service contracts for certain services :
and .
Reuerate--A-- 5 . ;; _ Txa; • _e:ee; te eg -=_
ee-
WF?S'7E=.S . It is the intent- of this Ordinance to require
vendors who are awarded professional contracts to ray their non-
professional emmlovees the preva=line minimum hourly wage rate_
grov' ded `or under this Ordinance and
CM-40ATWHt LAMAU QI r—M AD=TO E X:rMG UM.
M&AO M mmc .Mw a*.i bma mmoAft ate. /`
APPENDIX 1. 15
w7;Z7E S . This Ordinance will also orovide_ for enforcement
�h-ouch the Wace Commission and the Board Of Estimates in the
same manner that the preygilina wane for const-rvction contracts
are enforced *, now , therefore ,
SECTION 1. BE IT ORDAINED BY THE MAYOR AND CITY COUNCIL OF
BALTIMORE, That Section(s) of the Baltimore City Code (1983
Replacement Volume, as amended) be added, repealed, or amended,
5 to read as follows:
KRTICLE 1 - Mayor, City Council, and Municipal Agencies
p - Contracts - Hours and Wages
CONSTRUCTION CONTRACTS
2 19 . Requirement-s for certain contracts with the City.
3 Each and every contract in excess of five thousand dollars
($5 , 000, 00) (hereinafter referred to [thel AS "the contract")
made by the Mayor and City Council of Baltimore (hereinafter
ref erred to as "the City") , or on its behalf, with any person,
fig or corporation for: (1) the construction, reconstruction,
erection, conversion, installation, alteration, repair,
maintenance, renovation, razing, demolition, moving, removing,
. .grading, paving, . repaving, curbing, filling, excavation or . any
other operation or work to be done •or performed in, on, upon or
in connection with any building, bridge, viaduct, tuzrmel, tower,
stack or other st-ructure, airport, land, highway, pier, wham,
sewer, . drain, main, conduit, machinery -or mechanical,' electrical
or other equipment for said municipality;
contain t_'�.e f o flowing provisions:
SERVICE CONTRACTS
•26A. SERVICE CONTRACTS WITH THE CITY.
(A) AS USED IN TF.TS HEADING THE FOLLOWING TERMS HAVE THE
MEANINGS INDICATED UNLESS THE CONTEXT CLEARLY REQUIRES A
DIFFERENT MEANING:
(11 "INDEX" FANS TH'-r MOST RECENT AVAILABLE FIGURE
S'T'ATED IN THE PnLTCATION "POVER'T'Y IN THE UNITED STA'T'ES"
PUBLIS T-0 BY THE BUREAU OF THE CENSUS AND UPDATED ON A.N ANNUAL
,5, ASIS WFICH DEFINES THE NA'T'IONAL POVERTY LEVEL FOR A FAMILY OF
4 .
(2) "PERSON" MEANS ANY INDIV?DUAL, BUSINESS ENTITY ,
CORDORATION PARTNERSHIP, JOINT VENTURE.
(3) "PREVAILING MTNTMUM HOURLY WAGE RATE" MEANS THE
P-A.TE ESTABLISHED BY THE BOARD OF ESTIMATE'S AS THE MINIMUM HOURLY
WAGE PLATE THAT SHALL BE PAID A WORKER EMPLOYED BY A SERVICE
CONTRACTOR AND PROFESSIONAL SERVICES CONTRACTOR PURSUANT TO THE
FORMULA SET FORTH IN SUBSECTION (H) OF THIS SECTION.
APPENDix 1.
16 16
(4 1 "SERVICE CONTRAC,"" MEANS A. CONTRACT' D SZGNA'^ED By '
THE EOARD OF ESTIMATES 014 THE RECOMIJENDA.TION OF THE CITY
PURCHASING AGENT_ AS A SERVICE CONTRACT 'I"TTAT IS AWARD O TO A
SERVICE CONTRACTOR.
(5) "SERVICE CONTRACTOR" MEANS THE' PERSON AWARDED A
CTTY SERVICE CONTRACT AND INCLUDES ALL SUBCONTRACTORS OF SERVICE
CONTRACTORS .
(61 "SERVICE WORKER" MEANS ANY NON-PROFESSIONAL
E? PLOYEE OF A SERVICE CON'T'RACTOR AS DEFINED BY THE BOARD OF
ESTIMATES.
(B1 8 HOURS SHALL CONSTITUTE A REGU'LAF, WORA DAY FOR I=v
Ry
INDIVIDUAL WORKING DIRECTLY FOR ANY SERVICE CONTRACTOR OR
SUBCONTRACTOR ENGAGED IN THE PERFORMANCE OF A SERVICE CONT?,AC^
(C) ETXPLOYEES OF SERVICE CONTRACTORS SHALL BE CLASSIFIED AS
S=RViCE WORKERS OR NON-SZRVIC-z 'WORKERS AS SPECIFICALLY SET FORTH
19 THE CONTRACT, PrJ?.SUA-NT TO THE CLASS17:CATION SCHEDULE
ESTABLISHED BY THE BOARD OF ESTIMA.TES.
(1)1 (1) EVERY SERVICE WORKER MALL BE PAID NOT LESS OFTEN .
THAN BI-VEEKLY, AND WITHOUT SLMSEQUENT DEDUCTION OR REBATE ON ANY
.A.CCOUNT (EXCEPT SUCH PAYROLL DEDUCTIONS AS ARE DIRECTED OR
PERMITTED BY LAW. BY A COLLECTIVE BA.RGAINING AGREM4-r.NT , OR BY
SPECIFIC WRITTEN AUTHORIZATION FROM AN ENPLOYEB) , THE FULL AMOUNT
DUE AT THE TIME OF PAYMENT COMPUTED AT WAGE RATES NOT LESS TRAY
THE PREVAILING MZNIMUM HOURLY WAGE RATE ESTABLISHED BY THE B0A_R+D
OF ESA?+-KATES AND SET FORTH IN THE SERVICE CONTRACT.
(I1 A SERVICE 'WORKER SHALL NOT BE PAID LESS THAN
T:--,E AMOUNT ESTABLISHED BY TF:E BOARD OF ESTIXATES FOR THE
PREVAILING IKINTmUY HOURLY WAGE RATE FOR A. SERVICE CONTRACT.
(II) A COPY OF THE PREVAILING MINIMUM HOURLY _WAGE
RATE FOR THE SERVICE CONTRACT SHALL BE KEPT POSTED BY THE SERVICE
CONTRACTOR AT THE SITE OF THE WORK IN A PROMINENT PLACE WHERE IT
CkN BE: EASILY SEEN AND READ BY THE SERVICE WOR-KERS AND IT SHALL
BE SUPPLIED TO THE SERVICE WORKER AT THE REQUEST OF THE SERVICE
WOPK'ER WITHIN A REASONABLE PERIOD OF TIME AFTER THE REQUEST.
X21 THE SERVICE CONTRACTOR SHALL PAY THE SERVICE WORKER
COM?'ENSA'TION AT THE OVERTIME RATES £STABLISriEO BY THE BOARD OF
ESTIMATES WHICH SHALL NOT BE LESS THAN ONE AND ONE-HALF TIMES
THE REGULAR HOURLY RATE OF PAY FOR ALL FOURS WORKED IN EXCESS OF
EIGHT HOURS IN ANY WORK DAY OR FORTY HOURS IN ANY WORK WEEK.
(T) OVERTIME HOURS, HOWEVER, SHALL NOT BE
COMPENSATED FOR MORE THAN ONCE AND OVERTIME SHALL BE PAID ONLY ON
TT�L' REGULAR HOURLY RATE OF PAY AND NOT ON THE FRINGE BENEFITS-.
OTHER PERSONNEL COSTS . OR THEIR CASH EQUIVALENTS.
..._ (3) IN THE EVENT THAT ANY SERVICE WORKER IS PAID LESS
T"HA.N TT{E COMPENSATION TO WHICH THE SERVICE WORKER IS ENTITLED TO
APPENDIX 1.
17
S S�'CTTON THE SERVICE C'Jrll.'I2l_C,'C;f2_�itAT,L MAKE R??ST_'^L^^Tntr
S AMOUff . 7f1 ' APD SHALL FOR!—=
ART){r F?VTCf WORYF � FOR ^I{E
3 PAY TO__'I'ifT C1,'I'f A Pf-14ALTY IN THE A1�!OtJt1')'__OF SSO PER DA.Y FOR EACH
F'�PLOYrE SO UN1?F,RPATD. PROVIDED , lig—LI V12— T11AT THE PENALTY SHALT.
NOT BE ASSESSED FOR WAGE VIOLATIONS TO ANY I14 1VIDUAL WHICH
AMOUNT TO A TOTAL OF LESS TIjAN $1 T14 ANY PAYROLL PERIOD . EACH
7 DAY ' S VIOLATION SHALT, CONSTITUTE A SEPARATE OFFENSE.
g (4 ) ON RECOMMENDATION OF THE WAGE COMMISSION WHEN A
9 S RVTCE CONTRACTOR HAS PAID FINES ON MORE THAN 3 SERVICE — .
10 CONTRACTS IN A 2 YEAR PERIOD. THE BOARD OF ESTIMATES MAY PROHIBIT
Ii A SERVICE CONTRACT VENDOR FROM PARTICIPAT114G IN THE BID PROCESS -
_2 FOR UP TO 3 YEARS .----
--3 (S) ANY SERVICE WORKER MAY WITHIN 1 YEAR FROM THE DATE
14 OF TsrE INCIDENT FILE A PROTEST IN WRITING WITH THE WAGE
.5 COMMISSION OBJECTING TO THE AMOUNT OF WAGES PAID FOR SERVSCES
.5 PERFORIXED BY TFE SERVICE WORKER ON A SERVICE CON'T'RACT AS BEING
-7 LEES TFDN THE PREVAILING MINIMUM HOURLY WAGE RATE FOP. SUCH
-3 SERVICES .
9 (I) A SERVICE CONTRACTOR SELL NOT DISCHARGE.
0 Z DUCE THE COMPENSATION OR OTHERWISE DISCRIMINATE AGAINST MY
SUCH SERVICE WORKER FOR M--KING A COMPLAINT TO THE WAGE
2 COM34ISSION . PA.RTICIPA.TING IN ANY OF ITS PROCEEDINGS OR USING OF
3 ANY CIVIL REMEDIES IN SUCH A CASE THE WAGE COMMISSION MAY,
PURSUANT TO SIMILAR PROCEDURES AS PROVIDED IN ARTICLE 19 , SECT ION
70 OF THE BALTIMORE CITY CODE (198 3 _REPLACE4ENT VOLUME. AS
AMENDED) ORDER APPROPRIATE RESTITUTION AND THE REINSTATEMENT OF
SUCH EMPLOYEE WITH BACK PAY TO THE DATE OF VIOLATION.
(E) (1 ) TF SERVICE CONTRACTOR MALL Ma INTA N PA YROLLS AND
B S'C RECORDS RELATING Tz=R=,O DURING THE COURSE OF THE WORK AND
SFALL PRESERVE TH 4 FOR A PERIOD OF THREE YEARS THEREAFTER FOR
ALL SERVICE WORKERS WORKING DIRECTLY UPON TEE SERVICE CONTRACT.
THE RECORDS STALL CONTAIN TH=' NAME AND ADDRESS OF EACH SERVICE
WORKER, THE SERVICE WORKER'S CLASSIFICATION IN %CCORDaNCE WITH
THS CLA SSI Fl CATIONS FIXED IN IRE CONTRACT THE NUMBER OF HOURS
WORKED EACH DAY, THE PREVAILING MINIMUM HOURLY WAGE RATE. THE
GROSS WAGES DEDUCTIONS MADE ACTUAL WAGES PAID A COPY OF THE
SOCIAL SECURITY RETURNS AND EVIDENCE OF PAYMENT THEREOF A RECORD
OF FRINGE BENEFIT PAYMENTS INCLUDING CONTRIBUT ONS TO APPROVED
PLANS FUNDS R PROGRAMS ANDIOR ADDITIONAL CASH PAYMENTS AND
SUCH OT'--.ER DATA AS MAY BE REQUIRED BY THE BOARD OF ESTIMATES FROM
TIME TO TTYE.
j 2) THE SERVICE CONTRACTOR SHALL SJBMIT 2 COMPLETE
COPIES OF THE PROJECT PAYROLLS AND TF'E PROJECT PAYROLLS 0 EACH -.
SJBCONTRACTOR CONSECUTIVELY NUMBERED NOT LATER THAN 14 DAYS
FROM THE END OF THEIR RESPECTIVE PAYROLL PERIODS ONE COPY TOE
SENT TO THE CONTRACTING AGENCY T14E OTHER TO THE WAGE COMMISSION
WHERE T14E SAFE WILL BE AVAILABLE FOR PUBLIC INSPECTION DURING
REGULAR BUSINESS HOURS THE PROJECT PAYROLLS SHALL CONTAIN THE
NAME OF THE PRIME SERVICE CONTRACTOR AND ANY SUBCONTRACTOR , IF
ANY , A DESIGNATION OF THE PROJECT AND LOCATION THE NAME SOCIAL
SECURITY NUMBER AND OCCUPATION OF EACH EMPLOYEE. TH—F
APPENDIX 1..
18
r:!\c-�• r-_ . " ,�J11 IN J+.'"..Jf2DANC? WT7,lf 7fr
COt=AC"' THE NUMPF.1� Or HOURS 4JORKf?� DA.iT YvT?Y T?', SF^VICE
wOR.ui,? AT `'TFZAIGIIT TIMT' ACID A7 0VT'7 MT L. I 11:' H0UPT,Y WAGE RATE
FOR I-ACH= __TN7 GROSS WAGES PAID TO THE' ci?RVTC7, WOP.KER PCR PAY
Pii?IOn .
AND SUCH OTfiER DATA AS MAY P,,c, REOUIRT'D 13Y THE BOARD OF
ESTIMATES FROM TIME TO TIME. THE PRIME SERVICE CONTRACTOR SHALL
BE RESPONSIBLE FOR THE SUBMISSION OF ALL SUBCONTRACTORS ' PAYROLLS
COVERING WORK PERFORMED . EACH COPY OF THE PAYROLL SHALL BE
ACCOMPANIED BY A STATEMENT SIGLIED BY THE CONTRACTOR OR T,
SUBCONTRACTOR , AS THE CASE MAY BE, INDICATING THAT THE PAYROLL IS
CORRECT THAT THE WAGE RATES CONTAINED THEREIN ARE NOT LESS THAN
2 THOSE ESTABLISHED BY THE BOARD OF ESTIMATES AS SET FORTH TN THE
3 CONTRACT . TIAT THE CLASSIFICATION SET FORTH FOR EACH SERVICE
i WORYER CONFORMS WITH THE WORK THAT THE SERVICE WORKER PERFORMED-
3 AND THAT THE SERVICE CONTRACTOR HAS COMPLIED wTTS: THE PROVISIONS
5 OF TH=S LEADING.
(3 ) IF THE SERVICE CONTRACTOP. IS DELINOLr'NT IN
SLT?1�I'"^'TNG ANY PAYROLLS PROCESSING OF PARTIAL P Y-MENT ^cT7YE TES
MAY BE H=LD IN ABEYMCE PENDING RECc_PT OF-THE PAYROLLS IN
AQC T ON , IF THE CONTRa.CTOP IS DELINQUENT IN SLTBM TTING PAYROLLS .
THE S='RV=C^ CONTRACTOR SFALi FORFEIT AND PAY TO THE-C_TY A
PENALTY I N rTHE A 4OUNT OF S i 0 FOP. EA.CF CALENDAR DAY r'TFAT THE
PAYROLL IS LATE A PAYRCLL SHALLrMEA14 THE COMB=NED PAY70LLS Or
THE CONTRACTOR AND ALL SUBCONTRACTORS IN A-NY ONE PAY PERIOD .
(F) TFS CITY MAY WITHHOLD OR C=.USE TO BE WITR4ELD rROM TH
S VICE CONTRACTOP. SO MUCH OF THE ACCRUED PAYMENTS AS MAY 'BE
CONSIDERED NECESSA-By (1) TO PAY Y TFE S'DVIC=' WORKERS MIAMLOYED By
THE e RV I CE CONTRACTOR THE FULL AMOUNT OF WAG-ES ?EOUIREJ =Y TF'
=0V'cION�
OF THIS F;E,A.DING ' AND (2) TO SATISFY A.NY LI=.BILITY OF
p*tY CJNTRaC"CR FOP. ANY PENALTIES AS PROVIDED HEREIN. THI CITY
MAY ALSO WIT'—FOLD PAYMENTS FROM ANY SERVICE CONTRACTOR VHO HAS
FA7:,^D TO DOS`" AKO K=E? POSTED A COPY OLTHE PRE-JAILING MINT_MUM
i:nrrar y wac:. P TE AS REQUIRED HE7ZEIN UNTIL SUCH DEFA.ULT SHALL
HAVE BEEN CORRECTED.
(i ) IT SHALL BE THE RESPONSIBILITY OF TFE CONTRACTING
AGE'NCY TO DROI 'PTLY EXAMINE ALL WEEKLY PROJECT PAYROLLS SJBM_"_'TE'D
BY cc771- CE CONTR.aCTORS WORKING ON A SERVICE CONTRACT FOR
CSMar,'p NCE WITH THE PROVISIONS .OF THIS HEADING A_NO TFE
"G LA.T ONS PROMULGATED IN PURSUANCE T_ 'HEREOF _F,N_0 TO REPORT ANY
?`R;EZU-i%RIT'ES TO THE WAGE COMMISSION.
f21 TFE WAGE COMMISSION SHALL CAUSE INVESTIGATIONS TO
BE M.AOE AS MAY BE NECESSARY TO DETERMINE WHE'T'HER THERE HA.S BE N -
COM?LTANCE WITH THE PROVISIONS OF THIS HEADING AND THE
REGULATIONS PROMULGATED THEREUNDER AND CONTAINED IN THE
CONTRACT THE_ SERVICE CONTRACTOR SHALT, PERMIT REPRESENTATIVES OP
TFE CITY TO OCSERVF WORK BEING ?E7F0RM::D UPON THE WORK SITE_ TO
:NTERVIEW SERVICE WORKERS AND To FXA.MINE THE BOOKS AND RECORDS
TO THE PAYROLLS ON THE PROJECT BEING INVESTIGATED TO
:TERM:N^ TliZ CO RFCTNESS OF CI.ASSIETCATIONS AND ANY PAYMENT OF
?ROnER REGUt.r R ANO .OVERTIME RATES AS RF.'�(; RFD COMPLAINTS CF
Ar - 1 VTCr tl':ONS SHAT 'NVL r.T ".,.., PR ,PT, v AND S7'-A ,t.Nf" %J"rc
�irE�..� _ ., � .t.L T3F .S C.. .� Ot'.
APPENDIX 1.
19
WR�,�TT^,l OP OR".i..,/� M^1�,Dr. c)v/�p nc_R`1T�" WOR}K� "? Si!A ,L BE '^7ZAT12 AS
CJNt" "'^�ti�TV `•� AN.0 SI(ALL -110T T,31•. DTSL.IJO`;Y.7 "10 Tli„ S:RV_CT' CONTRA.0-o-z
T14E CONSENT OF THE SF.PVICZ 41CRKF R NECESSARY FOR TT
F'�''ORC^*� -NT OF TiiIS Ti F.+DING, '."HE WAGE COMMISSION MAY ISSUE
St13POENAS COMPEL THE A".`TENOANCE AND TT:S'I'IMONY OF WITNESSES AND
6 1:11JE PRODUCTION OF BOOKS , PAPERS, RECORDS , AND DOCM41-:?4TS RELATING ..
7 TO Pa,YROLL RECORDS NECESSARY FOR HEARINGS , INVESTIGATIONS, AND
3 PROCEEDINGS ANY SUCH SUBPOE14A SHALL BE SERVED BY THE SHERIFF OF
9 BALTIMORE CITY . IN CASE OF DISOBEDIENCE TO SUBPOENA THE _WAGE
.0 CO?�MISSION MAY APPLY TO P. COURT OF A.PPROPP.IA.TE JURISDICTION FOR
AN ORDER REOUIRING THE ATTENDANCE AND TESTIMONY OF WITNESSES AND
12 THE PRODUCTION OF BOOKS , PAPERS , RECORDS MD DOCUMENTS . SAID
.3 COUR'^ IN CASE OF CONTUM_2.CY OR REFUSAL TO OBEY ANY SUCH SJBPOENA.
F ET+Ca NOTICE TO THE PERSON SUBPOENAED . AND UPON FINDING THAT TTTZ '
_S A^T'ENDnNCE OR TESTIMONY OF SUCH WITNESSES OF THE PRODUCTION OF--
.; SUCH BCOKS PAPERS RECORD AND DOCUME?-7TS AS THE CASE MAY BE :S
7 REI,iJDN ^ OP NECESSA-?Y FOP. SUCH HEARINGS . 1 V°_STIGA.'TIONS OR
_3 PROC "2.`S OF TF- WAGE COMN'cSION MAY TcSUE AN ORDER REOU, G
TF;.. ATTr!;0A.NC=' OR TESTIMONY OF SUCH WITNISSISLOR TFE PRODUCTION
. 0 OF SUCH ORDER OF COURT M3Y BE BUN=SriABL BYTFT- COUP^_' AS CON'Tz'W'"'
IN THE EVENT THE BOARD OF EST K TES Sr.A LL
3 DE'^='?N=NE L'?ON RECOM 'NDA^'_ON FKOM TF:C WAGE COMMISS=ON AFTER.
NOT:ICE AND 'r.EAR TNG ..pT AN" SERV=CE CONTRACTOR HAS FA.:LED TO PAY
I Ty= M'NTMUM WAGE RATE OR F.Ac OTFERW:SE. VIOLA.= Tt:- PROVISIONS 0_F
THIS '=D"NG AND THAT SUCH LURE WAS INTENTIONAL, NO CONTRACT
SHALL BE AWARDED TO SUCH SERVICE CONT?ACTOR , OR TO ANY PERSON__iN
ivr:ICH SUC=' SERVICE CONTRACTOR HAS AY INTEREST UNTIL 1 YEAR HAS
ELAPSED FROM THE DATE OF SUCH DE'"E=�T_NA"'ION AND PROVIDED .
v7RTH Ent: AN" SUCH TNTENT:ONAL• V=0 ATION OF TF PROVISTONS C=
Sr=.:lL BE •A ?�=S1E�:.ANOR PTJ-+TSF-A=—LE UPON' CONVICT ON
zY A =NE OF NOT MORE T?_=.?+ S=00 . PROCEEDINGS BEFORE THE WAGE
CC?•"V=SSION SHALL- NOT BE CONS=DERED P. PR=.-CONDITION TO CRIMINAL
i PROSS: '''=0N LENDER THIS TENDING.
('r.l ( 1) EFFECTIVE JULY 1 1095 ,, HS TN TIAL PREVAILING
Y=N':-u'M HOL?.LY WAGE RATE Si-ALL BE ESTABLISHED BY
RE'SOLU'T_ON OF THE BOARD OF ESTIMATES.
f 21 BY 0ECy BE"a IS 1995 , AND EACv YSA-p Ev
'^F a^' CAT THE WAGE COMMISSION SHALL RECOi-MEND TO TF;E_BOA4D OF
-'STL :MA.TES 'r REVISED PREVAILING M-NIMUM HOURLY W AGE RATE FOR THE
N-XT FISCAL Y'=AR. THIS RATE SHALL BE BASED UPON TF;E :NDEX AND
C"'�F= SUCT•= FACTORS AS T'r= CC"ISSION TS AU'PFiCR:ZED TO CONSIDER.
f 3 1 TFE ONGOING GOAL IS TO ACFTv-TE A RA.TS S Wr.ICH EXCEEDS
mOV'=="^Y LEVEL AS DEFINED !N THE INDEX FOR THE FIRST FOUR
YEARS 0= T"=- EFFECTIVE DATE OF THIS ORDINANCE 'T'F•tE CITY'S GOAL IS
TO P�-JAS=' -n AN HOURLY WAGE RTE OF S7 . 70 By FISCAL YEAR 1999 .
USING '^-E =FOLLOWING TIMETABLE'
FISCAL YEAR WAGE RATZ
1996 $5 . 10
1997 c . 60
- :.E APPENDIX 1.
zo
20
; oog 7 . 10
, 000 7 . 70
(T) AS A MATTER OF POLICY IT IS A CONTINUING GOAL TO S M74TT
BIDS BASED ON A 40 HOUR WORK WEEK FOR SERVICE WOVERS
(J) THE BOARD OF ESTIMATES AND THE WAGE COMMISSION SHALL
ADMINISTER AND ENFORCE THE PROVISIONS OF THIS HEADING IN THE Spj
MANNER THAT THE BOARD OF ESTIMATES AND THE WAGE COMMISSION
ADMINISTER AND ENFORCE THE PROVISIONS OF THE CONSTRUCTION
CONTRACTS HEADING OF THIS SUBTITLE.
-(R) TF.E PROVTSTONS OF THIS HEADING SrIA.LL APPLY
r"XCLtJSTV7LY TO SERVICE CONTRACTS AND SHALL NOT BE CONSTRUSO TO
CONFLICT WITH THE HEADING ON CONSTRUCTION CONTRACTS OR ANY
PROVISIONS ON CONSTRUCTION CONTRACTS AS PROVTDED IN THIS
SUBTITLE.
SEC. 2 . AND BE IT ORDAZNZO, That this ordinance
shall take effect on the 30th day after the date of its
enact=ent.
Ce--tified as duly passed this day
rn i'v
1
Of (�- 19
1
President altimore City Council'
Certi-fied as duly delivered to His Honor, the Mayor,
this DEC 0 g 1994 day of 19_
C Clerk
Approved this ���(�. day of
Oe
2t ZZI-,"4
Maya i Baltimore City
APPENDIX 1.
21
R°SOLITTION OF THE BOARD OF ESTIMUTES
OF TFIE CITY OF BALTIMORE
,W,nR S, The mayor and City Council of Baltimore, acting by and through the
Board of Estimates, pursuant to Article VI, Section Z(a) and Section 4 of the
Charter of 3altimore City, 1964 Revision, as amended, has authority for foraulatiag,
deterniniz& and executing the fiscal policy of the City and over the Ava=ding and
supervision of contracts; and
WEZZW, the Baltimore City Council has passed City Council Bill No. 716,
requiring that City contracts for services provide for the pay-tent of a prevailing
wage; and
W*czR.r S, City Council 8111 No. 716 provides that the 'Board of Estimates shall,
by Resolution, establish a zim!= wage progr= with the min! goal of an hourly
wage rate of $7.70 to be phased in over a four-year period begi.::ng in Fiscal Teas
1996; and
WEE3.AS, The Board of Estimates intends to provide for the enforcement of City
Council Bill No. 716 through the Wage Cc=ission in the same manner as vith the
prevailing Wags provisions for eoastruction eontractr;
NOW, Mit-7FOR-2. Be it resolved by the Board of Estimates of the City of Baltimor
that, beginning with Fiscal Year 1996, the prevailing miaimam hourly wage rate of
46.10 shall apply to all professional and service contracts lot by the Board.
DEC ..i
• � VIA
l-
APPENDIX 1..
22 22
RESOLU':-WON OF THE BOARD OF FST:%.k—,ES
OF THE CT-TY OF BAL._-MORE
WHEREAS, the Mayor and City Council of Baltimore, act:.jc by
and tr=ough the Board of Estimates pursuant to Article v2, Section
4 of the Charter of Baltimore City, 1964 Revision, as amended, is
responsible for awarding contracts and supervising all pug c:.as:ac
by the City; and
WZZRE2�S, the Board of Estimates wishes to insur,: that al'
C?:y c-:tractc:s, subcontractors and their agents and e::.c:eyees
conduct themselves in accordance with established federal, state
and local
laws .
NOW, T=....R FOUZ, BE C R=-SOLV= BY mm=- BOeLvX OF ES:M.e►: S OF
BA`.TIMO?E C'"" , that the fo:.lowi:zc policy, which has always been
E-plicale to City contracts, be formally adopted by this Board to
1 a=;ly to all City _ r .. --
coat ac�c_s , sr.:c,,at_ac mac_a and their agents and
e rlcyees:
1. Contractors, subcontractors, and their agents and
e=. Ioyees may not engage in unfair labor practices as defined
under The Rational Labor Relations Act and applicable federal
reFalations and state laws
2 . Contractors, subcontractors , and their agents may not
threaten, harass, intimidate or.in any way.impede persons elmployed
by them who on their own time exercise their rights to- associate,
speak, organize, or petition governmental officials witr. their
grievances .
APPENDIX 1. 23
euccortractor, Cr cn e:r acents have v:oi
24 =24
APPENDIX 2.
LIVING WAGE UPDATE
PREPARED BY WORKER OPTIONS RESOURCE CENTER
MARCH 1997
LIVING WAGE LEGISLATIVE CAMPAIGNS
State of Maryland Living Wage Pilot Contract for cleaning state- Announced 7/25/96.
Program owned World Trade Center Possible future expansion
requires payment of living to other state contracts,
wage of S6.60/hr. to depending on results of
employees providing pilot.
contracted service; rate
rises to $7.10 in 1997 and
$7.70 in 1998.
Baltimore, MD City Living Wage Requires service&prof. Enacted December 1994.
Ordinance(enacted) service contractors to pay $6.10 rate took effect July
min. rates of 1995, $6.60, July 1996.
$6.10, FY 1996 Bike to $6.10 approved by
$6.60, FY 1997 Board of Estimates, 12/96,
S7.10, FY 1998 to take effect July 1997.
$7.70, FY 1999, subject to
Bd. of Estimates approval.
Includes record keeping,
reporting, enforcement,&
remedial 2rovisions.
Boston, MA Living Wage Requires city service Ordinance not yet
Ordinance(proposed) contractors& subsidized introduced;has majority
businesses to pay living council support&tentative
wage of$7.49/hr. mayoral support. Awaiting
results of impact study,
rumored to be favorable.
Rally scheduled for 2/8/97,
with likely introduction
shortly there after.
Chicago, IL Chicago Jobs&Living Requires covered service Introduced before City
Wage Ordinance contractors& publicly Council in May 1996.
(introduced) subsidized businesses to Mayor's opposition cost
pay workers min. of some support on Council.
$7.60/hr. Includes Ongoing organizing has
community hiring, record increase community&
keeping, reporting& political support.
enforcement provisions.
25
APPENDIX 2.
Jersey City, NJ City Ordinance No. Requires businesses Enacted June 1996
96-063 (enacted contracting with City for
clerical, food service,
janitorial, & unarmed
security to pay workers
min. rate of$7.50/hr; and
vacation&health benefits
for full-time workers
performing contract
services.
City of Los Angeles, Los Angeles Living Requires certain Introduced to City Council
CA Wage Proposal concessionaires& service in July 1997. Passed
(introduced) contractors(> $25K)& Council (12-0, 2 members
recipients of certain not voting) on 3/18/97.
subsidies (>$100K)to pay Mayor has said he will
$7.25/hr. & health bens., or veto; veto required by end
$8.50 without. Provides of March.
for paid holidays, annual&
sick leave. Employers
required to promote EITC
among low wage workers.
Includes enforcement&
remedial provisions
Los Angeles County, Living Wage Study& County to study policy Motion passed by County
CA Policy Options options for raising wages& Council, Fall 1996
(passed) benefits of employees of
county contractors
Madison, WI Living Wage Require city contractors to Campaign initiated
Campaign(developing pay workers 110% of
proposal) federal poverty level for
family of four&provide
health insurance.
Milwaukee, WI (City) Living Wage Requires certain city Enacted Nov. 1995. Initial
Ordinance(enacted) service contractors(?$5K) rate set at $6.05/hr. Rate
to pay workers performing indexed on March 1 of each
contract services hourly year; now set at $6.25.
wages based on poverty
level for family of 3.
Includes reporting,
enforcement&remedial
provisions.
Milwaukee, WI Living Wage Current proposal requires Council action deferred
(County) Resolution indexed$6.25/hr. wage until April. Several
(introduced) floor for employees of competing proposals likely
certain county contractors before final action.
2
26 :26
APPENDIX 2.
Milwaukee, WI Livable Wage Requires that all MPS Enacted Jan. 1996
(school board) Resolution employees and employees
of MPS contractors be paid
min. of$7.70/hr.
Minneapolis, MN Recommendations of Recommendations of task Proposal passed City
the Joint Minneapolis- force include: Council 12-0 (1 member
St. Paul Living Wage 1)businesses receiving> not voting)March 7, 1997.
Jobs Task Force $100K in city econ. dev. Also provides for coverage
(enacted, St. Paul; assistance must pay wages of city service contractors,
pending, Minneapolis) set at 110% of fed. pov. to the extent possible,
level for family of four, within four years.
with annual indexing; 2) Authorizes study of
60%of jobs created to be whether pay rate should be
held by city residents; 3) 100% of poverty level if
cities to accord preference employer provides health
in assistance to business insurance. Sets goal of
engaging in enumerated 60% of new jobs set-aside
responsible labor relations; for city residents. Requires
&4)cities barred from development of
contracting out existing administrative guidelines to
public sector work unless implement Living Wage
contractors paid living Policy.
wage or current city wage.
St. Paul, MN Same as Minneapolis Same as Minneapolis Modified set of
recommendations passed
unanimously in St. Paul of
1/2/97; requires 110%rate
where no health insurance
provided, & 100%rate for
businesses providing health
insurance; deleted
restriction on contracting
out and enumeration of
responsible labor practices.
Mandates 60%hiring
preference for city
residents.
New Haven, CT Ordinance Establishing Would require city Initial City Council hearing
A living Wage for contractors(food on 3/5/97. Measure
Service Workers preparation, clerical, referred to committee,
(proposed) custodial, & security)to committee slated to take up
pay employees"living again on 3/24/97. Subsidy
wage", consisting of amendment also proposed
"contract wage" (120%of but its fate is uncertain.
poverty level for family of Mayor is opposed to
3
27
APPENDIX 2.
4) plus medical benefits overall proposal in current
(group health insurance form, but open to
coverage or payment negotiation.
equaling 125% of annual
premium cost); requires
contractors to agree to
remain neutral in event of
union organizing campaign.
New York, NY City Code Amendment Requires businesses with NYC Council passed
Establishing Prevailing certain City contracts for ordinance 7/11/96; Mayor
Wage requirement for security, temporary office Guiliani vetoed 8/7/96;
Certain Service service, cleaning and food Council overrode veto
Contracts(enacted) services to pay workers 9/11/96. Comptroller
under the contracts developing prevailing wage
prevailing wages for list for affected
affected occupations, with occupations.
occupational rates
determined annually by city
comptroller& estimated to
range from $7.25 to
$11.25/hr. Covers
reporting, record keeping,
enforcement& sanctions.
Portland, OR 1996-98 Fair Wage Requires city contractors Enacted May 1996.
Policy for Formal supplying janitors, security Implementation for existing
Service Contracts guards, parking attendants, contracts commenced on
(enacted) and temporary clerical 7/1/96, with any required
workers to pay employees: contract amendments
$6.75, FY 96-97; $7.00, completed no later than
FY 97/98. Directs city 8/1/96. Implementation for
agencies to consider new contracts immediate
additional wage&benefit upon enactment.
criteria, e.g., leave&
retirement, benefits, child
care, in future RFPs. City
Office of Finance&Admin.
to recommend Community
Benefit Factors Package,
include. health ins. & other
bens., for possible inclusion
in future contracts.
Santa Clara County, Manufacturing Measure provides for tax Passed by County Council
CA Personal Property Tax rebate of property tax levy September 19, 1996.
Rebate; Santa Clara on manufacturing
County Growth& Job equipment for businesses
4
e ?8
28
APPENDIX 2. -
Creation Policy locating or expanding
(enacted) within county if certain
conditions are met, include.
company pays wages at or
above competitive industry
wages (at least $10/hr.),
provides health care to all
permanent employees, has
history of fair labor
practices& other corporate
good citizen practices.
San Jose, CA Prevailing Wage Amendment to city's little Enacted 1991
Ordinance(enacted) Davis-Bacon prevailing
wage ordinance requires
service contractors with
contracts of$1000 or more
to pay prevailing wages for
work under the contract
Many other living wage& minimum wage campaigns have emerged in communities around the nation.
Living Wage proposals have been introduced in Burbank and West Hollywood, CA, and are in the works
in numerous other communities including Buffalo, Cincinnati,Dallas, Detroit Nfissoula, Oakland,
Pittsburgh, San Jose, St. Louis and the states of Pennsylvania, Rhode Island, Vermont, and Wisconsin.
5
APPENDIX 3
Values of Contracts Executed by County During FY 1996 29
Contractor Name $5,000-$9,999 $10,000 -24,999 $25,000-49,999 over$50,000
UNC: Health contracts
School of Dentistry X
Family Medicine X
Pediatrics X
OB-Gyn X
Central Services:
David M. Griffin Indirect Cost X
Deloitte Touche; audit X
Coleman Gledhill Hargrave; legal services X
DSS:
Raymond Spangler III; X
DOA
Vendor agreements for in-home care X
Tarheel Taxi X
Sarah E Carter(Taxi) X
Jail:
Orange Family Medicine; Jail med X
Public Works:
Cleggs Pest Control X
ASK Elevator Service(maint contracts) X
Criminal Justice Partnership Act:
TROSA(drug rehab) X
OPC Mental Health X
Alternative Sentencing X
Hearth Foundation (Smart Start) X
Kellogg Grant:
JOCCA X
Piedmont Health Services X
Planning:
Jaeger Company; Preservation study X
Land Records/GIS:
Kimball; mapping
Personnel Benefits:
EAP X
Health Insurance:
NCACC/BCBS X
HealthSource X
Dental X
Life Insurance
Tucker Administrators X
Pagel
APPENDIX A. '
30 J0
Comm of the Whole - Your Committee rises and reports that it has had under
consideration the recommendations of the Joint Minneapolis Saint Paul Living Wage
Jobs Task Force; and that the Community Development Committee has held a public
hearing thereon; and the Committee of the Whole now recommends passage of the
accompanying resolution adopting a Living Wage Policy. (Pear, No 2c2544)
:4i nn ccved to substi:L;=: fcr ,hc &cccr_an.yi r.; reso'uti cn the �,ci nt
i';innec'Ci1S'$t �au'i Liking C=s Task FCrCc . .i icy neCC en„ati0rs
.T..^� as
sew Pe-,n „ _,; e ?` ��� in .Y•2 Cf I IC: CI :'1e Ci:y CiErk . �eCCnCeU.
�CS:. .,ecs, =; Nays, a as
`•eas Sc:,::, SChul s _ air, i i 1 e. C.
.'.G)�S 1 nuI re1"'.... _r= .dam^-n a.t.e i
�' ,
C..err. �c.—„rs .
RECORD OF COUNCIL VOTE (X INDICATES VOTE)
. r
• Ht50LUTION APPENDIX a.
of the
CITY OF
MINNEAPOLIS
By Niland Biernat. Campbell, Cherryhomes, Herron. McDonald, Mead and Thurber
Adopting a Living Wage Policy.
Resolved that The City Council of The City of Minneapolis adopt the following
Living Wage Policy:
Preamble: The following recommendations are made in order to assure that
whenever Minneapolis invests public funds in economic development projects, those
projects create the greatest number of living wage jobs possible for Minneapolis
residents. In addition to these specific recommendations, City policy makers must keep
the critical need for living wage jobs before them whenever they consider investing
public dollars in development projects.
1. City economic development assistance should require the creation or
retention of full time jobs with a living wage -
A) Except when any of the following conditions are met:
i) the cumulative assistance package totals less than
$100,000 in any one fiscal year, or
ii) the business receiving the assistance is a small business as
defined by Minnesota Statute 645.445; or
iii) the recipient is an intermediary, such as a community
development corporation or community bank, which serves
as a pass-through agency for the granting of assistance.
B) Assistance in excess of $100,000 in any one fiscal year will trigger
this provision. For the purpose of this provision, assistance should
be broadly defined as:
i) land sales at less than a fair market price when the amount
of the reduction in the sale price below the fair market price
exceeds the assistance trigger,
cx-3W7 w.,1/69
32
APPENDIX 4. , 32
ii) loans (staff will return with administrative guidelines on flow
loans will be treated under this policy);
iii) bonds excluding conduit bonds (which are subject to existing
job linkage requirements);
iv) grants; and
v) City tax incentives.
City economic development assistance relating to projects in which the primary
objective is job creation/retention will be more clearly defined in administrative
guidelines.
2. Projects whose only public assistance is site remediation, investigation,
and assembly will be reviewed according to Principle Number 6 of this resolution and
will be exempt from monitoring and sanctions requirements.
3. Assistance packages above $1001000 to non-exempted businesses will
have to create or retain a fixed ratio of jobs per 5100,000. Administrative guidelines will
provide suggested ratios by specific job creation or retention program.
4. A living wage will be defined and indexed as 110% of the federal poverty
level for a family of four. Staff are directed to return to the CounciVMinneapolis
Community Development Agency Board of Commissioners with recommendations on
whether the living wage should be defined as 100% of the federal poverty level for a
family of four for businesses that provide employer-paid basic health insurance
coverage that meets administrative guidelines.
S. The Minneapolis Community Development Agency (MCDA) and the
Minneapolis Employment and Training Program (METP) shall work with assisted
businesses to establish a goal that 60% of new jobs created will be held by City
residents. These jobs should be advertised to the entire community including low-
income people through community sponsored organizations and/or job linkage
programs.
6. The City of Minneapolis will focus its job creation and retention assistance
at businesses which demonstrate a clear and ongoing commitment to the community by
providing living wage jobs to their employees and to residents where applicable by
giving priority to these businesses over businesses which have not traditionally paid
living wages.
7. All other things being equal and to the extent legally possible, the City of
Minneapolis will give preferential status for job creation and retention assistance to
businesses that engage yn responsible labor relations. Responsible labor relations are
APPENDIX 4.
defined as neutrality on union organizing, providing a complete and accurate list of 33
names and addresses of employees, reasonable access to employees and facilities
during non-working periods, voluntary recognition based on a card check demonstrating
that a union represents a majority of employees in a bargaining unit, and binding
arbitration on the first contract.
8. The City of Minneapolis, working through the MCDA, will impose
sanctions for non-compliance with these requirements.
9. The MCDA and the METP will report on compliance with these
requirements, as a part of the annual job linkage report to the City Council.
10. Work presently being performed by City employees may not be contracted
out unless the contractors pay employees performing that work a living wage or the
current City wage and benefits, whichever is higher.
11. To the extent legally possible, City contracts awarded for service will,
within four years, beginning in 1997, be awarded to contractors who pay at a minimum
a living wage for employees performing that contract service.
12. The Minneapolis City Council shall direct their purchasing staff to develop
by August 1997 policies and practices for contracting and purchasing of goods and
services to encourage the creation of living wage jobs.
13. The City of Minneapolis acknowledges the need for job readiness services
for some City residents who face serious social and economic barriers to employability.
Many of these residents need to establish a stable work history before they are able to
move on to living wage jobs. The City of Minneapolis exempts organizations whose
primary mission is to provide job readiness and training services, and whose primary
purpose of requesting funding is to provide those services.
14. The City of Minneapolis will work with the Metropolitan Council and other
appropriate state and regional agencies and the legislature to promote common
standards consistent along these guidelines for job creation and retention assistance by
public development agencies throughout the region.
15. Although our primary focus is on the creation of living wage jobs where
public assistance is received, Minneapolis cannot achieve its economic development
goals without a trained and work-ready workforce and adequate day care. Minneapolis
will commit to assist area businesses to obtain trained and work-ready employees and
to facilitate access to child care.
16. Administrative guidelines should be developed by the MCDA staff and
brought before the MCDA Board of Commissioners for review and adoption. These
guidelines should explain in detail how each of the policy recommendations will be
implemented.
APPENDIX 4.
34
17. Because job readiness is a primary challenge to the success of any wage
initiative, and because it is of importance to the residents of Minneapolis as well as to
businesses that develop here, the Minneapolis City Council directs the METP to report
annually on current job readiness, training and apprenticeship activities.
RECORD Of COUNCIL VOTE INDICATES VOTM
1 COUNCIL NOT VOTE TO VOTE TO COUNCIL I NOT VOTE TO JOTS TO
MEMBER AYE I NAY VOTING ASSENT RPII SUSTAIN MEMSER AYE NAY VOTING I ASSENT FN` RIO l SUSTAIN
CZ10CZlC .� 1 I-
Cam_Da/l i C I 1 I McDonald I ( I
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{
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Charyhonlas , MAR Herron MAR 4a jg0�
PASSED MAR _ 7 1997 APPROVED NOT APPROVED — VETOED — OATS
DATE
t
PR EN
ESIDT 00spoNCII MAYOR
ATTEST r3 eA
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CK•3009 Rev.12193
Ae-,tnuiA J.
' 35
Bakimore s
L
. is
117 1 n Wal e
Law
An Analysis of the Fiscal and Economic Costs
of Baltimore City Ordinance 442
'lark Weishrot
Michelle Sforza-Roderick
The Preamble Center
for Public Policv
36 APPENDIX 5.,
'
36
THE
PREAMBLE CENTER Tine Preamble Center for Public Policy is a new,
FOR PUBLIC POLICY independent research and public education organization
based in Washington, D.C. Preamble works in partnership
BOARD OF D/RECTORS• with a broad network Of academics, policy professionals and
PATRICIA BAUMAN, CHAIR community leaders who share our concerns about the
BAUMAN FOUNDA7700V pressing social, economic and political challenges facing the
United States.
JOHN BROWN CHILDS The Preamble Center's mission is to expand the
UNIVERSITY OF CAumRNIA prospects for progressive, sustainable solutions to the serious
AT SANTA CRUZ economic and social problems confronting America's
GAVIO COHEN working families. Through research, analysis and policy
ADVOCACY/NST7TLrrr development work we seek to challenge outdated and
unproductive ideas and assumptions and develop new
SUSAN COWELL analytical and policy approaches for the long term.
UNrrEI Our uniqueness as an organization lies in our
commitment to bringing citizen organizations, community
THE NEw
NANCY w YORK DRRSINVILLE leaders and elected officials together with researchers to
WOMEN'S FOUNDA77ON hammer out practical solutions to our collective dilemmas.
The Preamble Center's work is geared toward putting tools
JUAN A. FIGUEROA in the hands of citizen leaders and policymakers — tools they
PUERM RICAN LEGAL DEFENSE can use to challenge old policy orthodoxies, carve out new
AND EDUCA770M FUND approaches, and communicate their ideas to a public
COLIN GREER increasingly eager for serious, workable alternatives to
NEW WORLD FOUNDATION present social and economic policies.
PAULA RAYMAN
RADCLIFFE PUBLIC Mark Weisbrot is Research Director at the
POLICY/NsTrrurE Preamble Center for Public Policy. He received his Ph.D. in
DIANE TAKVORIAN economics from the University of Michigan, with
ENV/RONMENTAL specialization III political economy and international
HrALrH CCALMON economics. He has written on these topics for both academic
and non-academic publications. He has taught at Eastern
-AP744& 0447Y0W 12 000 IAMDVMPYCA77OW ONLY Illinois University and The American University.
STAFF Michelle S{o=a-Roderick is Research Associate
at the Preamble Center for Public Policy. She received an
SCOTT NOVA MA from The George Washington University.
KALLE MAKALOU
MICHELLE SFORZA-RODERICK
MARK WEISBROT
STEPHANIE GRAY
NAOMI WALKER
APPENDIX 5.
37
Acknowledgments
The authors would like to thank Kalle Makalou, Dean Baker, Michael Ettlinger and John Schmitt
for their helpful comments. Scott Nova,as always,provided invaluable guidance and editorial
input.
38 APPENDIX 5., 3S
Baltimore 's Living Wage Law
An Analysis of the Fiscal and Economic Costs of
Baltimore City Ordinance 442
Mark Weisbrot
Michelle Sforza-Roderick
Research:
Nicole Woo
Stephanie Gray
Naomi Walker
Prepared for
The Preamble Center for Public Policy
October 1996
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 of 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.
0 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.
40 APPENDIX 5. ,'40
Introduction
Observers from across the political spectrum now acknowledge that real wages have declined
for the majority of American workers over the last two decades. Wages for the bottom three-fifths
of wage-earners have been falling since 1979, and for four-fifths of wage-earners since 1989.
The lowest wage workers have been the hardest hit. A worker at the 10th percentile (i.e.
earning less than 90%of wage earners and more than 10%) lost 17% of his or her real.income from
1979-95, an hourly wage drop from 56.10 to $5.06 in 1995 dollars. Women in this category fared
even worse, with wages falling from $5.82 to $4.84 per hour.'
The minimum wage itself fell behind inflation from 1979-1989, losing 31% of its real
purchasing power during that period. This in itself was a significant cause of declining incomes for
the poorest workers.
What to do about the problem of declining wages, or indeed whether to do anything at all,
is a matter of heated debate. Business interests and conservative political leaders generally oppose
any direct government action to raise workers' wages. The argument is that government's role
should be limited to measures designed to increase business investment. This, it is claimed, will
ultimately lead to gains for workers.
From the political center to the left, there is support for some form of government action to
address the problem. One obvious mechanism is the minimum wage. On August 2, 1996, Congress
passed legislation raising the federal minimum wage to $5.15 by September of 1997. However, the
real value of the minimum wage after it is fully in effect will be about 54.89 in 1995 dollars. This is
still 240/6 below its value in 1968. The income of someone working 40 hours a week, 52 weeks a year
at this wage will still remain approximately 19%below the official poverty level for a family of three.
Furthermore, the political forces necessary to bring the minimum wage closer to its past real
value are not in evidence. Congressional Republicans fought hard against the recent increase,
filibustering in the Senate and attempting to gut the bill with amendments that, for example, excluded
millions of small businesses. Only five Senate Republicans broke ranks to vote against the latter
amendment that would have doomed the bill.
On the Democratic side, neither President Clinton nor the Democratic Congressional
leadership made any serious effort to increase the minimum wage when they had control of both
Congress and the White House in 1993 and 1994. Further action to raise the minimum wage during
the next Congress seems unlflcely, regardless of who controls the House and Senate.
The Living Wage
The decline in wages for low-income workers and the failure of the federal government to
take stronger steps to address the problem have led to efforts to raise wages through legislation at
the state and local level. These efforts, commonly referred to as"living wage campaigns," have been
launched by grass-roots coalitions of community organizations, religious groups and labor unions—
led in many cases by the AFL-CIO's state labor federations and local central labor councils and the
tMishel,Lawrwm,Bernstein,Jared,and Schmitt,Doha.The Stare of Worlang America.- 1996-97. Washington,
D.C.:Economic Policy Institute, 1996.
APPENDIX 5. 41
Association of Community Organizations for Reform Now (ACORN).2 Living wage campaigns are
underway in more than a dozen states and municipalities.
In contrast to recent federal legislation, many state and local living wage campaigns make an
explicit effort to raise wages to the level necessary to keep the family of a full-time worker above the
poverty line. Some of the proposals would raise the minimum wage in a state or municipality to its
peak historical value under federal law ($6.47 per hour in 1995 dollars, achieved in 1968) and
thereafter index it to inflation. Others would mandate insurance benefits for low-wage workers. And
others would set wages according to local cost of living levels. The California Liveable Wage
Coalition, for example, took California's high cost of living into account when setting its minimum
wage goal above the federal level.
Many living wage campaigns do not seek to increase the minimum wage across the board in
a particular location. Instead they target only those employers who receive public money or public
contracts, requiring that these employers pay a certain wage as a condition of receiving these funds
or contracts. State and local programs that provide subsidies, tax abatements and other benefits to
private employers for the purpose of job creation and retention rarely distinguish between high and
low-wage employment. Nor do most cities and states that contract with private corporations for the
provision of public services impose any pay and benefits standards on contract recipients. As a result,
many companies receiving public subsidies and/or public contracts pay wages well below the poverty
level. The argument behind living wage laws is that governments should not be using tax dollars to
create or subsidize poverty-wage jobs, but rather should set a positive example by requiring
employers who receive public funds to pay a living wage.
Baltimore's living wage law is one of the first to compel contractors to pay employees enough
to keep a family of four above the poverty line. Other cities with such laws include San Jose, where
city contractors must pay employees union-scale wages. A Milwaukee ordinance requires city
contractors to pay employees $6.05 per hour, and increases yearly until the wage can raise a family
of three above the poverty line. Jersey City,New Jersey, requires a minimum wage of$7.50 per hour
be paid to employees of certain city contractors. And New York City recently established union-scale
wages and benefits requirements for some city service contractors.
Campaigns to ensure that beneficiaries of public funds pay employees a living wage are
underway in Los Angeles, Chicago, Boston and other locales. The Los Angeles Living Wage
Coalition drafted an ordinance that would require companies"that benefit from city taxpayer dollars"
(any business in receipt of a city contract, lease agreement, tax abatement or subsidy valued above
$25,000) to pay employees $7.50 per hour and provide them with health insurance benefits. The
estimated number of affected workers is over 14,000. A city council vote is expected this fall.
Chicago's Jobs and Living Wage Proposal, which would require a $7.60 per hour wage for
employees of city contractors or companies receiving city financial assistance, would affect 10,000
workers. The ordinance,introduced in the city council in May 1996, is now in the finance committee.
Community and labor groups in Boston plan to introduce a similar ordinance by the end of
the year. The Corporate Accountability and City Contracting proposal would tie financial assistance
and city contracts to business to community hiring requirements and a living wage of$7.49 per hour.
Table 1 lists living wage proposals under consideration around the country.
2ACORN is a national grass-roots community organization of low and moderate-income families.
2
42 APPENDIX 5. •42
Table 1: Examples of Proposed Living Wage Legislation .
City or State Route to Description of Measure Status
Enactment
Albuquerque Ballot Initiative Raise ntiaimuaa wage to Gathered required signatures;waiting to
S6.50/hour qualify for December special election
Bostort Legislative Require city contractors and Possible introduction of city council
subsidized businesses to pay ordinance by the and of the year.
S7.49Aww and hire from the
coraaauturf
Chicago Legislative Require city contractors and Ordinance introduced to city council in Ma-_
subsidized businesses to pay 1996
S7.60/hour and hire from the
community
Deaver Ballot Initiative Raise minimum wage to Supporters gathered required signatures to
S6.50/hour in 1997;S6.85/hour in qualify for the November 1996 ballot.
1998;S7.15/hour in 1999;indexed
to cost of living thereafter
Houston Ballot Initiative Raise minimum wage to Will begin gathering signatures is Fall for
$6.5OAxR r city wide January 1997 ballot.
Los Angeles Legislative Require city contractors and Possible council vote Fall 19%
subsidized businesses to pay
S7:50Awua plus family health
benefits or$9.50/hour without
benefits
Minneapolis/ LegisLtive Joint Twin Cities Task Force is Possible introduction of proposed ordinance
St.Paul drafting living wage policies for by the end of the year, public hearing
city contractors and subsidized expected in the fall.
businesses
New Orleans Ballot Initiative Set city-wide miaimtmm wage at Supporters have gathered 14,000
S 1.00/how above the federal level signatures; 1997 timeline to be determined
California Ballot Initiative Raise the star minimum wage to Supporters gathered required signatures to
$5.00/hout in 1997 and._. __ qualify for the November 1996 ballot
S5.75/haa in 1998
Minnesota Legislative Require state and city contractors Passed MN.House and Senate;vetoed by
and subsidized businesses to pry Governor
S7.2&1wur and hire from the
COC=umty
Montana Ballot Initiative Raise the state minimum wage to Supporters gathered required signatures to
S4.75/haua in 1997;S5.25/hour in qualify for the November 1996 ballot.
1998;S5.75Axw in 1999•,
S6.25/hour in 2000.
Missouri Ballot Initiative Raise the stag minimum wage to Supporters gathered required signatures to
$6.25/hour in 1997;$6.50/hour in qualify for the November 19%ballot.
1998;S6.75/hour in 1999;and
increase S.15 each year thereafter
Oregon Ballot Initiative Raise the state minimum wage Supporters gathered required signatures to
from S4.75 to S6.50/hour over qualify for the November 1996 ballot.
three Years.
3
.y
APPENDIX 5.
43
Proposals to require municipal contractors to pay a living wage have met with strong
opposition from business interests and some political leaders. Their most prominent arguments
include the following:
Higher Costs for Contracts. Critics argue that requiring city contractors to pay employees
wages substantially higher than the federal legal minimum will drive up the costs of city contracts,
imposing substantial new burdens on local taxpayers. The office of Los Angeles Mayor Richard
Riordan claims that the proposed Los Angeles living wage ordinance"will have a major impact on
the city's budget and may make it impossible to restructure the way the city delivers services."2 The
Chicago Chamber of Commerce has advanced the same argument during the debate on the Chicago
living wage ordinance. A spokeswoman claimed that "[t]he new ordinance will. . . hurt the city by
creating artificially high wage rates. . . and increasing city procurement costs."; In Baltimore, Mayor
Kurt Schmoke, contemplating a veto of the living wage ordinance passed by the City Council,
expressed fears that the contract cost increases would be so high the city would not have the funds
to pay for them.`
Fewer Workers Employed. Opponents also claim that because living wage laws will raise
labor costs, many contractors will seek to do the same work with fewer employees, thus costing
some low-wage workers their jobs. Economist Stephen J.K. Walters' arguments during the Baltimore
living wage campaign were fairly typical: "the big losers are all the states that have done the most to
make unionization easy and labor costly. . . . [The living wage would] price many of the workers right
out of their jobs."' According to the chief economist for the University of New Mexico Bureau of
Business and Economic Research,"the ones who are fortunate enough to keep their jobs will benefit
[from Albuquerque's proposed law], but we would see quite a few people at the minimum wage who
would lose their jobs."6
High Enforcement Costs. Critics claim that taxpayers will be further burdened by substantial
new costs to monitor and enforce employer compliance with the law. During the debate on the St.
Paul living wage proposal, a board member of the Chamber of Commerce stated, "The initiative
mandates that the city follow up on all projects after two years and impose fines and penalties for
noncompliance. Who do you think would end up paying to administer this ordinance" We would —
the taxpayers. . . . This new burden would be added at a time when taxpayers are demanding that we
reduce the price of government."'
Loss of Bidders. Opponents also claim that competition for city contracts will be reduced,
as fewer companies believe that they can place a competitive bid under the requirement of higher
2 7b"Living Wage"Isaac-Fact Sheet,Office of Mayor Richard Riordan
3F06,Rosa."Group Wants City Contractors to Pay 57.60`Living Wage,'"The Press,June 19, 1996.
"Wage Bill Depends on Schmoke,"Baltimore Sun,December 4, 1994
5Watters,Stephen J.K"Is BUII.D Trying to Tear Down?"The Baltimore Sun,June 22, 1994,p. 11 A.
6Dom=a1ski,Dennis.and Vukelicb,Dan."6.50 City Minimum Wage Advocated,"Albuquerque Tribune,
August 15, 1996,p. 1.
7Given,William"Should City Jobs Initiative Pass?"Saini Paul Pioneer Press,October I0, 1995,p. 7A.
4
APPENDIX 5. r. P+4
wages. Less competition will lead to further cost increases. A Chicago Sun-Times editorial asserted
that although"proponents argue that [Chicago's proposed living wage] ordinance would make the
bidding process more equitable for companies already paying a living wage, it is likely that the higher
cost of doing business would instead reduce the number of companies bidding."` And the Boston
Herald claims that"for a business in a competitive industry (and most are), increasing the cost base
with [a living wage] requirement could simply lead it to drop the city as a customer."9
Creation of a Hostile Business Climate. One of the most prominent arguments of critics is
that businesses in general, not just those bidding on city contracts, will interpret the passage of a
living wage law as a"bad signal" in terms of the city's overall business climate, leading to capital
flight from the city. At a time of bitter competition for job-creating investment, the argument goes,
a municipality would be placing itself at a grave disadvantage by passing a law that implies a lack of
commitment to keeping costs for businesses under control. According to a Boston Herald editorial,
"the (Boston ] proposal couldn't be better calculated to drive business out of the city."10 The Los
Angeles Business Journal opined, "Simply put, the living wage threatens to derail the economic
revival that the City of L.A. has been enjoying," referring to the proposal as, "[a]nother bad,job-
killing idea."" The Minnesota Retail Merchants Association claims that"mandating wages like this
will have a chilling effect on business development."12 Concerning Denver's ballot initiative to raise
the city's minimum wage, a City Councilman called it"retail suicide. . . . What we're going to do is
watch a lot of our economic base walk out of the city to the suburbs.""
These arguments, and their variants, have been raised wherever living wage legislation is
under consideration. If they are correct, the case for this legislation would be severely weakened.
The purpose of this study is to determine, based on the experience of one of the first cities to
pass a living wage requirement for municipal contractors,whether the stated concerns of critics about
negative economic and fiscal consequences are or are not well-founded. We assessed the impact of
Baltimore City Ordinance 442, which went into effect on July 1 of 1995, in the following areas: the
cost of city contracts, the numbers of bidders seeking city contracts,the number of workers employed
by city contractors, administrative costs, and the overall business climate of the city of Baltimore.
It is our hope that the results of this analysis will be of use not only to the citizens of Baltimore, but
to elected officials and members of the public in other locales as they evaluate present and future
proposals for living wage requirements.
=June 23, 1996.
9September 5, 19%.
16lbid.
" "Another bad,job killing idea,"Los Angeles Business Journal,September 30, 1996
12Judy Cook Main Retail Merchants Association,quoted in"Can Government Ensure a"Living Wage,.,,
Investor's Business Daily,April 3, 1996, is reference to proposed state-wide Minnesota 11VM9 wage law
"Bartels,Lynx."Voters Will Decide on Wages,"Rockv Mountain News,August 6, 1996,p. 1.
5
APPENDIX 5. 45
The Baltimore Living Wage Ordinance
In December 1994 the Solidarity Sponsoring Committee (SSC), a group of low-wage
service workers, successfully campaigned for a mandatory living wage for employees of city
service contractors. The committee was organized by BUILD (Baltimoreans United in Leadership
Development), a largely church-based community organization affiliated with the Industrial Areas
Foundation, and AFSCME (the American Federation of State, County and Municipal Employees).
The Baltimore Living Wage ordinance, which went into effect in July 1995 (fiscal year 1996),
established a minimum wage of$6.10 per hour for anyone working on a city service contract. In
July 1996, the wage was increased by Baltimore's Board of Estimates to $6.60. The living wage
ordinance stipulates that the wage be increased annually, upon approval by the Board of Estimates,
until it equals the amount required to raise a family of four above the poverty line. In subsequent
years, the wage is to be indexed to inflation in order to keep it above the poverty line. The
ordinance aims for a living wage of $7.70 (the projected poverty level income for a family of
four) for 1999 (see Figure 1).
The living wage ordinance establishes an enforcement mechanism and imposes significant
penalties on contractors who violate the wage requirement or fail to submit proof of compliance.
Contractors are required to submit payrolls on a biweekly basis to the Wage Commission for
enforcement purposes. They can be fined $10.00 per day for each day their payrolls are late. If
a service contractor is found to be noncompliant with the wage requirement, it must remit back
pay to the employees and pay fines to the city. Any violator of the ordinance can be made
ineligible for city contracts for a year. If a contractor is noncompliant on more than three contracts
in a two-year period, it can be barred from bidding on contracts for three years.
There is, however, an exception in the ordinance that exempts those companies awarded
contract cae?Wons from the living wage requirement. Extension options typically range from one
to four years and "grandfather" the wage requirement in force at the time the contract was
awarded.
The adoption of the living wage ordinance was a response to the deepening impoverishment
of low-wage earners in the city of Baltimore. Church leaders saw a sharp increase in the number
of working people relying on social service ministries for food and housing. An increasing number
of these poor families were headed by low-wage earners, rather than the unemployed or welfare
recipients. In Baltimore, B= argues, the proliferation of poverty-wage jobs was spawned by
the subsidized refurbishing of the downtown sector as well as the privatization of work by the city
government. The job growth brought by subsidized businesses was concentrated in low-wage, -
temporary occupations like janitors and lawn cutters. And government privatization often relegated
workers to contingent employment paying low wages and offering few, if any, benefits. In order
to reverse this trend, the SSC campaigned for a mandatory living wage for employees of city
contractors, arguing that taxpayers' money should not be used to promote the creation of poverty-
wage jobs. Workers benefitting from the living wage ordinance include janitors, food service
employees, laborers, machine cleaners and repairmen, stenographers, carpet cleaners and
repairmen, and bus drivers and aides hired by the city.
6
46 APPENDIX 5.' 46
Figure 1: Living Wage Earnings and the Poverty Level: How the Wages Compare
20,000
18,000
16,000
Federal Poverty Line for
14,000 a Family of Four
E 12,000
10,000
8,000
c
<` 6,000
4,000
2,000
0
$4.75 $5.15 56.10 $6.60 $7.10 $7.70
Houry Wages
Figure 1: This figure compares the current ($4.75) and future ($5.15) federal minimum wages and
Baltimore's living wage increments to the current poverty threshold for a family of four. The Baltimore Living
Wage ordinance projects the earnings of the lowest paid city service contract employees to increase to $7.70
per hour in 1998. This amount would raise a family of four above the current federal poverty line of
$15,569.00, but will lose some value duce to inflation. A city contractor working 40 hrs per week. 52 weeks
a year at Baltimore's current living wage of 56.60 per hour, cams a yearly salary of$13,728.00 or 22% less
than the federal poverty level for a family of four. The current hourly wage of poverty-line earners is $7.49
per hour (Source:Bureau of dw Cenw.)
The Costs,of the Living Wage Ordinance to the City
This study focuses on contracts whose labor costs have increased or are expected to
increase as a result of the living wage ordinance. The City's Bureau of Management and Budget
Research compiled a list of the types of contracts that are or will be affected by the ordinance, as
well as the dollar amount of all the contracts. The Bureau determined that the total value of
contacts falling under the wage requirement was $26,811,544 in December 1995. We obtained
full or partial information on 46 contracts involving 75 companies; others have yet to be rebid
under the living wage requirements. Those contacts for which information on pre- and post-
ordinance (rebid under the living wage law) costs were available are presented in Table 2. The
value of these contracts is $19,326,066.39, or 72% of the value of those contracts affected by the
ordinance.
7
APPENDIX 5. 47
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48 APPENDIX 5. 48
As can be seen from the totals, the nominal cost of the contracts covered by the ordinance
increased by only $42,242, or less than one-quarter of one percent. In real terms, adjusting for
inflation, there was an absolute decrease in costs. The fifth column of Table 2 shows the price of
the most recent contracts adjusted for inflation." In real terms, the total cost of these contracts
declined from $19,326,066 to $18,860,329, or 2.4%.
The average contract price, weighted by its share in the total cost of the sample, declined
by 1.92%. (This is shown in the last column of Table 2). This decline is statistically significant
at the .001 level.is
This is a surprising result, given that at least some of the contractors in this sample faced
an increase in their labor costs as a result of the living wage. The most likely explanation is that
other factors overwhelmed the impact of these cost increases. From interviews with contractors
it appears that it is a common practice to try to underbid the previous year's contract, and it may
be that the competitive pressures of the bidding process were enough that contractors were forced
to absorb the increased costs of the living wage. This is most likely true for the food and bus
contractors, who reported that they did not adjust their bids for the increased labor costs. Most
janitorial companies reported that they did in fact take the increased labor costs into account when
formulating their bids, but these increases did.not show up in the overall costs of the new
contracts.
We cannot, of course, conclude that the living wage ordinance actually contributed to
lowering the cost of the average contract. However it is worth noting that there are efficiency
gains at the higher wages, and these could have lowered total costs. In telephone interviews with
the contractors, many stressed the relationship between a higher wage and a lower rate of
turnover. One of the larger janitorial contractors who said he always paid more than the Federal
minimum states that at wages below $5.00 an hour, the problems of turnover and absenteeism
were too large. If turnover is actually lower under the new wage, and contractors insist that it is,
productivity increases could offset all or part of the increased labor costs. And since high rates of
turnover can make it more difficult for a contractor to fulfill the contract, the higher wage can
protect the city from having to award increases to contractors who cannot fulfill their obligations
in the agreed upon time and dollar amount.
The number of workers impacted is fairly small, so even if contract costs had increased
by the full amount of the potential increase in labor costs, the impact on Baltimore's $2 billion
budget would have been very slight. However, even these very small increases in the cost of city
contracts did not materialize. Furthermore, the results of this study indicate that even if the
contracts covered had comprised a much larger share of the City's budget, the predictions of
significant cost increases would not have been borne out.
In addition, the argument that the cost of monitoring and enforcing compliance with living
wage laws would impose significant new costs on taxpayers is not supported by the evidence from
Baltimore. According to Baltimore's Bureau of Management and Budget Research, the wage
ltle prices were adjusted by the Consumer Price Index for the time that elapsed between each pair of
contracts.
13 t,j -3.978.
9
► APPENDIX 5.
49
commission was awarded only $121,000 to enforce the living wage in 1996. This would amount to
an increased per capita tax burden of 17 cents a year. This figure does not include any money received
from fines levied on employers who fail to comply with the law, which would lower the net cost of
enforcement to the City.
Impact on Contractor Employment Levels
Have contractors responded to increased labor costs by laying off workers or by failing to
hire as many as they otherwise would have? The evidence here is not yet complete: (1) the
majority of contractors bound by the living wage ordinance have yet to rum in payroll information
to the Wage Commission and (2) pre-ordinance contractors were not required to submit payroll
information. To determine whether the increased labor costs resulted in reduced employment, we
interviewed those contractors who held a contract both before and after the ordinance went into
effect and whose labor costs increased as a result of the ordinance. This sample consisted of 31
companies, including providers of transportation, janitorial, food and administrative services.
None of the companies interviewed reported any reduction in staff levels to compensate
for the increased cost of labor resulting from the living wage requirement.
The school bus contract- actually a multiple contract with 26 companies that accounts for
$14,500,000 of the total -provides the clearest example of how it is often less common in practice
than in theory for employers to reduce staff in response to increased labor costs. Because the labor
force for bus contracts consists of bus drivers and aides (the latter are required on special needs
buses for senior citizens and the disabled), reducing staff levels would be difficult if not
impossible.
According to the Baltimore Bureau of Management and Budget Research's estimates, the
City's janitorial contracts have the highest percentage of costs attributable to labor. Of the two
janitorial companies holding pre- and post-ordinance contracts, neither reported reducing staff
levels to compensate for the increased costs. In addition, the large janitorial (school) contracts
have mandatory staff levels set by the city. Staff levels for these contracts, then, could not be
altered by contractors in response to the living wage requirements.
Impact on Bidding Practices
To determine whether the ordinance discouraged companies from bidding on contracts, we
examined those contracts where the labor costs would be immediately increased by the
ordinance.16 Of these, 43% either had more or the same amount of bidders as the previous year
and 57% had less. Although the average number of bids for these contracts declined from 6.64
to 5.42 (see Table 3), this difference was not statistically significant.
16Information on the number of bids made before and after the ordinance was available for 54% of the
contracts.
10
50 APPENDIX 5.' : ,SO
According to Ken Dahms, janitorial contract buyer for the City of Baltimore, there has not
been any decrease in bids outside of normal fluctuations in companies' bidding practices. It is
perhaps worth noting that the two contracts whose labor costs for its lowest-wage workers had the
highest rate of increase (55% — from $4.25 to $6.60 per hour) had an increase in the number of
bidders, and the contract with the largest decline in bidders already pays workers more than the
living wage.
Surprisingly, contractors interviewed about the living wage gave generally positive
responses. From bus companies to temporary agencies to janitorial services, the prevailing opinion
offered was that the living wage "levels the playing field" and relieves pressure on employers to
squeeze labor costs in order to win low-bid contracts.
"We feel more able to compete against businesses who were drastically reducing wages
in order to put in a low bid," said a manager of a bus company. In such cases, if more firms think
they have a chance to win city service contracts, the number of bidders could actually increase
over time as a result of the living wage hike.
Others notice a marked change in worker morale and productivity brought about by the
higher wage. "You get a better quality worker, which builds a better reputation for our company,"
said a human resources representative of a temporary agency. And according to another manager
at a bus company, "workers seem.happy [and) they come to work on time because they know that
at $6.10 per hour, somebody else wants the job if they don't."
Baltimore's Business Climate
The argument that businesses will leave a city as a result of the living wage ordinance is
based primarily on a somewhat intangible mechanism - the idea that such ordinances create the
perception that a locality is unfriendly to business, thus discouraging new or continued investment.
The direct effects of such ordinances on wages, since they affect such a small proportion of the
workforce, could not discourage investment by raising costs broadly in the local labor market.
However, claims of indirect effects are asserted with great frequency, find receptive audiences in
a time of intense state and local competition for investment, and therefore cannot be ignored.
In the case of Baltimore, there is no evidence that local businesses or potential investors
have responded negatively to the ordmaace. As noted above, even the city contractors interviewed
for this study, who are directly affected, had no complaints about the ordinance. As for businesses
in general, Table 3 shows the assessable base of personal property for businesses and corporations
in the city of Baltimore, for the years 1990-95. This measures the value of local businesses' assets,
other than real estate, for tax purposes.
As shown in the Table, the value of business property declined in real terms in the four
years preceding the passage of Baltimore City Ordinance 442. It then increased sharply from 1994
to 1995, after the passage of the ordinance."The experience of a single year since passage of the
1117he declines for 1991 and 1992 can be attributed to the national recession(though it is worth noting that
real declines continued until the 4.6% real jump in 1995).
11
►. APPENDIX 5. 51
ordinance provides a limited basis from which to assess the ordinance's impact. But it is clear that
claims that a living wage law will drive investment from a city have found no basis of support in
the actual experience of Baltimore.
Table 3: Total Assessable Personal Property Tax Base for Businesses in Baltimore City
From 1990-1995
Year Current $ Constant $
1990 $695,303,010 $695,303,010
1991 $705,676,100 $684,457,905
1992 $701.417,280 $661,153,059
1993 $697,686,606 $640,373,204
1994 $712,617,470 $636,834,200
1995 $764,257,220 $666,344,552
The Economic Debate Over Minimum Wages
The results here are consistent with a growing body of economic research that has
challenged some long held notions of how labor markets function, and has influenced, most
recently, the debate over raising the federal minimum wage.
According to traditional economic theory,wages are determined by an equilibrium of supply
and demand in the labor market. The demand for labor is derived from the productivity of workers
"at the margin," — that is, how much an additional unit of labor would contribute to the firm's
revenue. In this view, an attempt to raise wages beyond the market equih'brium rate will cause
increased unemployment. This results from both employers cutting back on hiring at the higher wage,
and from the incrmsed number of people who enter the labor force to seek work at the higher wage
(but cannot find it).
This analysis of the effect of the minimum wage has been a mainstay of undergraduate
economics textbooks for decades. However, in recent years a number of empirical studies have cast
considerable doubt on the conclusion that raising the minimum wage will necessarily increase
unemployment.
Most prominent among these is the study by Princeton economists David Card and Alan
12
52 APPENDIX 5.
Krueger,"which examined changes in employment at 410 fast-food restaurants in New Jersey and
Pennsylvania, before and after New Jersey raised its minimum wage in 1992. The New Jersey increase
was substantial — from $4.25 to $5.05 an hour, or 18.8%, and restaurants in neighboring eastern
Pennsylvania faced no such increase. Their study found no significant differences in employment
changes at these businesses across the border of the two states. Card and Krueger followed this study
with a more comprehensive book,Myth and Measurement, which drove a final nail into the coffin
of the textbook relationship between minimum wages and unemployment."An attempt to refute Card
and Krueger's results, although seized upon by opponents of increasing minimum wages,20 was found
lacking within the profession.21
The other part of the traditional economic theory of labor markets that has been part of the
public policy debate is more explicitly ideological. The "marginal productivity theory," described
above, says that workers are indeed paid according to their productivity. This has a normative
implication that is difficult to avoid — that is, the market rewards people according to what they
deserve, or contribute to the economy. This belief is not just the province of economists, but has been
part of the popular ideological scenery since the Industrial Revolution. Proponents of a higher
minimum wage have had to contend with this precept as well, but they seem to have made some
headway during the most recent debate over the federal minimum wage. This is partly due to their
success in challenging the conventional stereotype of minimum wage workers as teenagers from
middle class families earning some extra spending money in their spare time. The most recent increase
in the Federal minimum wage directly affects more than 11.8 million workers, some three-quarters
of whom are adults. About 40% of those affected are the sole breadwinners for their families.22 And
these figures do not include the-millions of workers earning more than$5.15 per hour whose wages
are part of the"minimum wage contour,"—that is, they tend to be pushed up when the minimum
wage rises.
There is of course some level of the minimum wage that would actually cause employers to
eliminate jobs; whether any of the living wage ordinances could reach this level remains to be seen.
One major difference between some of these ordinances and minimum wage laws is that to the extent
"Card and Krueger,"Mmimum Wages sod Employment:A Case Study of the Fast-Food Industry in New
Jersey end Pennsylvania,"Ameriean Economic Review,VoL 94,No.4,pp.772-93,1994.Other studies of different
regions in recent years reached similar caoclu dons:e.g.Katz and Krueger(1992),for fast-food restaurants in Texas,
Spriggs and Klein(1994),for food-service b in Jackson,Mississippi and Greensboro,North Carolina.
wCard ad KrueW.A,*and Measurement: The New Economics of the Minimum Wage.Princeton,N.J.:
Princeton University Press,0995).
20A m jm study prepared in opposition to the Chicago living wage ordinance relied on the Ne umark and
Wascher study (cited below)to assert that"the consensus among economists is that employment declines when the
minimum wage is raised."(Tolley,Bemucin,and L.esage,p.41)Sex also,e.g.,Richard Berman's op-ed against the
federal minimum wage increase(Wall Sava Journal,Mauch 29, 1996).
21Se:e Schmitt(1996)for a thorough review of Neurnark and Wawba's 0995)failed attempt to refute Card
and Krueger's research.
=See Mishel,Lawrence,Jared Bernstein,and Edith Rasell."Who Wins With a Higher Minimum Wage?'.
Briefing Paper. Washington,D.C.:Economic Policy Institute, 1995.
13
APPENDIX 5.
` 53
that increased labor costs can be passed on to the city government, there would be no need for
contractors to reduce employment. Of course,this could mean additional taxes for city residents. The
other possiN ity—where there are more competitive markets and bidding practices—also cuts both
ways. That is,if contractors are forced by the higher labor costs to increase productivity and therefore
reduce employment, the taxpayers gain from the increased productivity.
In the case of Baltimore, there have been no additional costs nor measurable effects on
employment. The results, however unexpected, are consistent with the most recent research in labor
economics, in which competitive pressures, efficiency gains, or other responses can produce a labor
market outcome with neither price nor employment changes following a minimum wage increase.
Conclusion
The predicted negative effects of raising wages for workers employed on city contracts
have not materialized in Baltimore. The cost of the affected city contracts did not increase, and
in fact decreased. Most payroll employment data for the relevant city contractors is not yet
available, but interviews with contractors indicate that they did not reduce their workforce in
response to the higher wage. The number of bidders for the contracts in our sample declined, but
this change was not statistically significant. And finally, there is no evidence that the ordinance
discouraged investment generally in Baltimore.
It will take more time, as well as further research, to determine exactly how contractors are
responding to the ordinance, and how their responses affect employment, productivity, and costs to
the city government. As the living wage continues to rise to $7.70 per hour over the next two years,
there will be greater potential for cost increases and other effects. But for now, it is clear that in the
21 months since it was enacted by the city, the stated fears of those who oppose living wage
legislation have found no basis in this case.
It also must be noted that the present analysis includes no assessment of the significant
potential benefits of the living wage ordinance—substantially higher income for low-wage workers
and their families, with attendant increases in their quality of life and cost savings as the demands
these individuals place on federal, state and local government programs is reduced. The full extent
of these benefits awaits analysis.But any finure costs to the city of Baltimore that may arise from the
living wage ordinance must be weighed against these benefits.
14
APPENDIX 5.
54.
References
Berman, Richard. 1995. "Dog Bites Man: Minimum Wage Hikes Still Hurt." Wall Street
Journal, March 29.
Card, David. 1992. "Do Minimum Wages Reduce Employment? A Case Study of California,
1987-1989." Industrial and Labor Relations Review, Vol. 46, No. 1, pp.38-54.
Card, David and Alan B. Krueger. 1994. "Mnimum Wages and Employment: A Case Study of
the Fast-Food Industry in New Jersey and Pennsylvania." American Economic Review.
Vol. 84, No. 4, pp.772-93.
Card, David and Alan B. Krueger. 1995. Myth and Measurement: The New Economics of the
Minimum Wage. Princeton, N.J.: Princeton University Press.
Katz, Lawrence and Alan Krueger. 1992. "The Effect of the Minimum Wage on the Fast-Food
Industry." Industrial and Labor Relations Review, Vol. 46, No. 1, pp.6-21.
Mishel, Lawrence, Jared Bernstein, and Edith Rasell. 1995. "Who Wins With a Higher Minimum
Wage?" Briefing Paper. Washington, D.C.: Economic Policy Institute.
Mishel, Lawrence, Jared Bernstein and John Schmitt. 1996. The State of Working America:
1996-97. Washington, D.C.: Economic Policy Institute.
Neumark, David and William Wascher. 1995. "The Effects of New Jersey's Minimum Wage
Increase of Fast Food Employment: A Re-evaluation Using Payroll Records." National
Bureau of Economic Research. Working Paper No. 5224 (August).
Schmitt, John. 1996."The Nrnimum Wage and Job Loss: Opponents of Wage Hike Find No
Effect." Washington, D.C.: Economic Policy Institute.
Spriggs, William and Bruce Klein. 1994. Raising the Floor: 77w Effects of the Minimum Wage
on Low-Wage Workers. Washington, D.C.: Economic Policy Institute.
Tolley, George, Peter Bernstein, and Nfichael Lesage. 1996. Economic Analysis of Living Wage
Ordinance. Nfimeo.