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Study Finds Significant Pay Raises, Minimal Employment Loss Under Living Wage

Groundbreaking Report by University of California Researchers Shows Most Benefits Go to Low-Income Workers

Los Angeles -- A new study by University of California economists finds that the Los Angeles living wage ordinance has raised pay for nearly 10,000 jobs -- with minimal employment loss.

Nearly 70 percent of workers affected by the law are low-income and only 4 percent are teenagers, according to the report, which was funded in part by the Ford Foundation.

Examining the Evidence: The Impact of the Los Angeles Living Wage Ordinance on Workers and Businesses offers the most definitive analysis of any living wage policy in the country. It is the first such study to use random sample surveys of affected workers and businesses - the only method that assures accurate results.

More than 125 cities and counties across the country have enacted living wage policies over the past 11 years, but little research has been done to assess the effectiveness of these laws.

"This study offers compelling evidence that living wage laws can improve the quality of life for low- income workers," said David Fairris, a Professor of Economics at the University of California Riverside and a co-author of the study.

In 1997, Los Angeles became one of the first major cities to pass a living wage law. The city's policy currently requires city contractors, among others, to pay workers $10.03 an hour, or $8.78 plus a $1.25 contribution to health benefits (the wage is adjusted annually). It also provides workers with 12 paid days off and ten unpaid days off per year.

The total of 10,000 jobs in Los Angeles where pay was increased due to the living wage is among the largest in the nation, after New York and San Francisco. The majority of jobs were at Los Angeles International Airport and Ontario International Airport. The average mandatory pay increase was $1.50 per hour, or $2,600 per year.

Critics of living wage laws argue that these policies will lead to large-scale employment reductions, hurting both business and workers. They also contend that living wage laws do not benefit low- income workers.

The findings of Examining the Evidence contradict these claims.

"Our research shows that the Los Angeles living wage ordinance has provided significant wage increases to mostly low-income workers with minimal job reductions," said co-author David Runsten, Associate Director of the North American Integration and Development Center at UCLA. Employment reductions amounted to one percent of all jobs affected by the living wage.

The study also finds that businesses have experienced some positive results, including declines in employee turnover and absenteeism. On average, affected firms recovered 16 percent of the increased cost of the mandatory wage increase through turnover reductions.

Employers have adapted to the remaining costs in a variety of ways. These include cutting fringe benefits and overtime, hiring more highly trained workers, cutting profits and passing on costs to the city or to the public.

One objective of the living wage policy was not achieved: the law has not prompted firms to set up health insurance plans for their workers, although some firms have improved their existing plans or extended coverage to more workers, affecting 2,200 jobs.

While Examining the Evidence finds that workers and their families experienced measurable gains from the living wage, it also shows that many workers still struggle to get by. Thirty-one percent of affected workers lack health benefits, and 44 percent rely on at least one government assistance program.

Living wage laws have proliferated around the nation, partly as a response to the stagnation of state and federal minimum wages, as well as to the increasing privatization of city services as a means to cut costs. These laws are designed to remove the incentive for government to contract out jobs to low- wage employers, thus leveling the playing field for city contractors.

More than a dozen cities, including Miami, Phoenix, Memphis, Little Rock and Richmond, are currently considering living wage legislation.

Examining the Evidence, which also received funding from the University of California and Los Angeles World Airports, was co-authored by two researchers from the nonprofit Los Angeles Alliance for a New Economy.

For more information on the report, please see www.losangeleslivingwagestudy.com or contact Celia Alario at 213-380-0451 or 310-721- 6517

Greg LeRoy
Executive Director
Good Jobs First

email: goodjobs@goodjobsfirst.org

phone: 202-626-3780 ext. 27

# posted by karlos @ 1:35 PM