Living wage policy

The Problem

Federal and state minimum wage hasn’t kept up with the cost of living since the 1960s. A full-time minimum-wage worker with a family of four earns well below the poverty line. Low wages are associated with increased stress, low self-esteem and other negative health outcomes. Without a living wage, individuals are subject to instability characterized by: 

  • Lack of sufficient funds to meet basic needs

  • Lack of access to or significant gaps in basic insurance coverage

  • No option for growth or professional development

  • Limited or no control over scheduling

  • Exclusion and lack of voice, influence or power

  • Individuals bearing the weight of systemic inequities, historical racism and broken systems

Why This Matters

The primary mechanism to advance living wage ordinances are mandates for employees and contractors through local and state government procurement and purchasing departments, also known as Living Wage Ordinances (LWO). Studies find the following benefits:

  • Improved quality of life: Earning a living wage provides income to cover modest living expenses and can reduce financial stress. This can lead to improved health, improved morale at work, increased support for healthy child growth and development, reduced barriers to social inclusion, and an overall improvement in the quality of life for the worker and their family. (see The Costs and Benefits of the London Living Wage).

  • Increased community involvement & economic growth: A living wage can enable workers to be more engaged members of society and increases their consumer buying power which helps grow the local economy (see the post on the World Economic Forum).

  • Increased profitability: Businesses benefit by minimizing employee turnover and maximizing employee productivity, commitment, and loyalty. Reputational benefits to companies paying the living wage are often significant, including helping to attract new business/customers and in recruiting staff to professional roles. This can lead to increased profitability over the long term as increased costs associated with retention are generally a fraction of the cost of replacing an employee. For example, the Society of Human Resources found that “replacing an employee can cost between 50% and 60% of the employee’s salary” (see the post on the Enrich Financial Wellness Blog).

The Solution

To compensate for a lack of federal action, many states and cities have created living wage policies, which mandate or incentivize wages that are high enough to allow workers to meet their basic needs. This job quality intervention will outline how your agency can support the development or implementation of a living wage ordinance in your jurisdiction. This intervention is for agencies that:

  • Do not have an existing living wage ordinance that applies to their procurement and purchasing practices

  • Want to promote job quality through an agency-wide living wave ordinance for their own purchasing and procurement

Specific details about living wage requirements for subsidized wage programs can be found here.

Recommended actions can help workforce and economic development agencies advance strategies to finance their job quality strategy for the long term.