Index:

Living-wage movement takes root across nation

2000 CENSUS:

• Total US population: 281,421,906
  
• Total US Civilian Work Force: 137,668,798
• There are 10,067,027 households (individuals and families) earning less than $10,000/year (minimum wage).
• 9.5% of the total US households (individuals) are minimum wage workers.
• There are 4,155,386 families earning less than $10,000/year (at or below minimum wage.)
  

Paying a Living Wage--Consider the Costs

Word spread across the nation quickly among members of the "activist" community.

"Have you heard about Pinkerton's?" they asked when the hoopla was reaching its peak a little more than a year ago. "Have you seen what they wrote?"

Chicago-based Pinkerton's Inc., the oldest security company in the United States, with $2.5 billion in annual revenue and 125,000 employees, had stated unequivocally in its company magazine, "Solutions", that it was committed to paying security officers a living wage.

It was a seminal development in a growing national movement to raise the wages of very low-income families by establishing wage standards high enough to place them above the federal poverty level. While a true living wage varies city by city because of regional variations in the cost of living, the federal poverty level in 2001 was $17,650 for a family of four, equating to about $8.50 an hour for a full-time, year-round worker. The current federally mandated minimum wage is $5.15 an hour.

Pinkerton's statement was not motivated by legislation - living-wage legislation usually pertains to companies that receive public subsidies or tax breaks - but by its corporate philosophy that a living wage attracts better employees and decreases turnover, and that "the ability to earn enough to pay your way ... [is] basic to the American way of life," according to the "Solutions" article.

Nevertheless, it clearly gave a boost in credibility and support to the growing grassroots movement pushing for living-wage legislation.

Clearly, the dominant voice of American business has opposed living-wage legislation. Just as it does every time an increase in the federal minimum wage is proposed, it predicts rampant inflation, a decrease in economic growth and mass layoffs.

"Living wage ordinances lessen job opportunities for those at the bottom of the economic ladder while increasing costs for all citizens," says Stephan Bokat, executive vice president of the National Chamber Litigation Center, the legal arm of the U.S. Chamber of Commerce. The US Chamber was recently joined by the New Orleans Regional Chamber of Commerce, the Chamber of Greater Baton Rouge, the Natchitoches Area Chamber of Commerce and the Thibodaux Chamber to oppose a new New Orleans municipal living wage law.

In a brief filed in the Supreme Court of Louisiana, the chambers argued that wage mandates ignore the principles of free-market economics; they prevent businesses from making profits, growing and hiring more workers, and they base wages on what the worker wants instead of on the value of work performed.

"The negative consequences of mandated wage increases will fall disproportionately on those with the fewest skills and the least experience, and will hit small businesses the hardest," says Giovanni Coratolo, US Chamber director of small business policy. When labor costs rise, new entry-level jobs that would have been created never materialize, and employer-provided benefits are scaled back to absorb the increase in labor costs, he says.

But according to Boston-based Responsible Wealth, a national network of businesspeople, investors and affluent Americans who favor living-wage legislation, this is not necessarily so.

"Three studies on existing living-wage ordinances found early evidence that relatively little of the extra cost in labor has been passed on to consumers or the cities with whom they contract," says Karen Kraut, Responsible Wealth program coordinator. "The studies suggest that companies are absorbing the higher wages or finding ways to offset them.

"Higher wages may actually help firms reduce turnover and fill vacancies ... and can also lead to greater worker productivity by improving morale and overall job satisfaction," she says. Although human resource departments are not involved in the negotiating or administrating process, living-wage laws can indirectly improve their operations as well by boosting recruitment and retention.

In fact, both sides are right, according to the most exhaustive study of living wage legislation to date. Released in March, the study by David Neumark, an economics professor at Michigan State University, commissioned by the Public Policy Institute of California, concludes that the net effect of living- wage laws was positive because even though they increased unemployment among low-wage workers to a small extent, they also helped to reduce urban poverty.

A Look at the Law

The first living-wage ordinance was passed in Baltimore in 1994. It required businesses with city contracts to pay their workers a minimum of $7.70 an hour by 1999-about 50 percent higher than the federally mandated minimum wage. Since then, more than 50 other ordinances have been passed across the nation.

According to the most recent figures provided by ACORN, the Association of Community Organizations for Reform Now based in Boston and the nation's largest community organization of low- and moderate-income families, there are 46 city ordinances, 10 county ordinances, one township ordinance (in Ypsilanti, Mich.) and one school board ordinance (in Milwaukee, Wis.).

Wages range from $6.25 an hour (in Milwaukee) to $12 an hour (in Santa Cruz, Calif.), although the laws reflect a variety of provisions. For instance, Baltimore's living-wage law covers all companies that have service contracts with the city. Denver's, passed in 2000, covers those with service contracts in certain, covered categories such as parking-lot attendants, security guards and childcare workers. In Kankakee, Ill., legislation passed in 1999 covers only firms getting local Enterprise Zone tax breaks. In Durham, NC, the living-wage legislation applies not only to companies with service contracts but to city employees as well.

Besides variations according to who is covered and regional differences in the cost of living, the living-wage legislation reflects a variety of methods for setting rates. The law in Tucson, Ariz., for instance, sets a minimum hourly rate ($8 with health benefits, $9 without), while St. Paul, Minn., sets the required living wage at 100 percent of the poverty level for a family of four with benefits, or 110 percent without benefits.

At Pinkerton, living wages vary widely, from $10.80 an hour in Boston, $9.77 in Rochester, NY, and $9.69 in Baltimore to $9.13 in Charlotte, NC, $10.02 in Chicago and $10.81 in Los Angeles. Yet whatever the specific differences among the various laws, the impetus is the same: Because the federally mandated minimum wage does not keep working families above the poverty line, and because differing regional living costs make it difficult to set a national minimum wage that would put everyone in the country on equal footing, locally instituted living-wage initiatives seem to be the solution.

"The minimum wage, nationally, is far below poverty level and is not indexed for inflation," says Barry Hermanson, co-chair of the living-wage campaign in San Francisco. San Francisco passed a living-wage law in 2000 covering service contracts of $25,000, leases at the San Francisco International Airport and home-care workers.

It set a minimum of $9 per hour, rising to $10 by 2001, with 2.5 percent cost-of-living increases in each of the following three years. Health-care benefits were provided through a separate ordinance.

In explaining the effect of the legislation, Hermanson, owner of Hermanson's Employment Services in San Francisco, a temp agency with 200 people on the payroll and several million dollars in annual billing, points to the effect of recent raises for security guards in San Francisco.

"Prior to these raises, they were getting about $6.80 an hour and many were having to work two jobs, so they were tired all the time," he says. "Then the rate got raised to $9, and then $10, and they have proof that the quality of work increased and the turnover rate dropped below 25 percent. In Boston, at Logan Airport, the turnover rate for security guards was over 200 percent at the time of the terrorist attacks.

"That's proof to me that [paying a living wage] does have a [positive] effect," he says. "I've always believed that if you are going to expect people to do a good job you have to pay them properly to do it. It's just common sense that if people are treated well, they will perform well."

Because most living-wage laws are so new, there is little quantitative research on their effects, but several economists have made projections.

Perhaps the foremost proponent of living-wage legislation among researchers in the field is Robert Pollin, head of the Political Economy Research Institute at the University of Massachusetts, Amherst.

"I've done 70 percent of all the research work to date," he says, "and in general, I have found that, basically, the cost increases businesses would face would not be large enough" to affect them adversely.

"We are starting to form pretty broad foundations showing not that there are zero negative effects in terms of business," he says, "but that those effects are relatively small and mild.

"And on the other hand, there are large, positive benefits to workers and their families."

According to ACORN, a study on the effects of Baltimore's living-wage law performed by the Economic Policy Institute - a nonprofit, nonpartisan think tank that provides research and education to promote a sustainable economy - showed "companies ... that held contracts before and after passage of the ordinance did not report reducing staff levels in response to the higher wage requirement."

In fact, the EPI study reports that, "Some contractors praised the ordinance for 'leveling the playing field' by relieving pressure on employers to squeeze labor costs in order to win low-bid contracts," an ACORN release states.

EPI also reported that the real cost of city contracts decreased since the ordinance went into effect, business investments in the city increased substantially and the cost to taxpayers has been "minimal." Responsible Wealth echoes these findings on Baltimore's living-wage law.

On the other hand, opponents of living-wage legislation also provide research-based predictions - including some dire predictions of high costs to businesses and governments, increases in taxes, and widespread layoffs that would hurt the very people the law is supposed to help.

When Chicago City Council first began considering a living-wage law in 1996, for instance, a study by George Tolley at the University of Chicago projected that the proposed ordinance would cost the city nearly $20 million a year, would require a permanent tax increase on the citizens of Chicago, would cause labor costs among affected firms to increase by some $37 million and would cost 1,300 jobs - while a full-time affected worker would see a raise of less than $1,900 a year. The Chicago ordinance was passed the following year.

Another survey of economists conducted by University of New Hampshire Survey Center for EPI concluded that while a national living-wage policy would cause employers to hire better skilled applicants than they hired before the increase, employment losses would result.

The opponents and proponents are, not surprisingly, split over how the current economic downturn will affect living-wage policies. Opponents say that as job growth slows and unemployment grows, there will simply be fewer dollars in the public coffers, which will stymie the enactment of living-wage laws in the future by legislators loath to pass any measures at the expense of commerce or taxpayers.

But Pollin says that kind of thinking simply doesn't make sense. "That kind of logic says businesses in a recession should cut wages and lay off people," he says, "but that only makes the recession worse. In terms of logic, if you are trying to counteract a recession you should not cut wages. That's why raising the minimum wage is good.

"It's also true that these living-wage ordinances, from the start of the movement to the day of the raises, is a matter of years. So by the time the ordinance passes, hopefully, the recession won't be part of the picture.

"Even if the recession is severe," Pollin adds, "it will be over in 18 months. That's the period of time you need to pass these ordinances. So by ... the next economic expansion, legislation will be in place that will benefit more people."

Sensible Approach

"You've got to remember," he says with a chuckle, "I'm a fairly conservative person. But I sound like I'm a labor leader when I talk about the living wage." (Not surprisingly, labor unions, in general, favor living-wage legislation because it reduces the difference between union wages and nonunion - i.e., market - wages, increasing the unions' ability to compete for city contracts. Some suggest it is also a way to halt privatization of public services.)

Walker's no left-winger, to be sure. He simply believes paying a living wage is a sensible thing to do. Although Pinkerton's has philosophically touted improved wages and benefits for security officers — "I've always felt you get what you pay for," says Walker — its in-earnest campaign to pay them living wages began in 2000. "Everything starts with recruiting the best available people from the labor market," says Walker. "If you pay security officers the same wages you would pay for a janitorial person or someone who works in the kitchen, then you are not going to attract the level of person who is going to be able to grow in the company and use initiative and stay with you. And that means you have to pay them accordingly."

Pinkerton's uses data from the Economic Policy Institute to demonstrate to its customers and prospective customers what a sustainable or self-sufficiency standard for security officers should be in their particular markets.

"Then we encourage the customer to pay more than the sustainable or self-sufficiency rate," says Walker. "And we have had a number of clients who have said, 'Yes, I want to pay $1 or $2 an hour more - whatever it takes to get the right kind of person.

"Others say, 'I don't want to pay that,' " he says, "and unfortunately, that gets back to 'You get what you pay for.' "

Especially in light of the increased demand for quality security officers since the Sept. 11 terrorist attacks, Walker says, "it is not very far-sighted for any company to pay low wages to security officers.

"Even a $5-an-hour spread in wages means an awful lot," he says. "You can recruit from a different labor pool."

Paying higher wages does not necessarily mean a company's costs will increase, he says.

"There are prospective customers who say they want 10 guards and they want to pay X dollars per hour for those 10," he says. "We try to explain that maybe they don't need 10 guards. Maybe they can use five guards and some technology enhancements. Those five are going to make quite a bit more money than they were willing to pay the 10, but they might pay less for five well-trained, experienced officers who can use technology and combine their security functions with other functions and save that company money.

"But you have to find an open-minded customer who is not thinking in old, conventional ways," he says. "Most HR executives, when they receive objective data, will act on it. But it's a whole different way of thinking. The subject is really security, not cost."

Nevertheless, if companies contract with Pinkerton's for fewer security officers, doesn't that mean fewer Pinkerton's security officers will be placed? Not necessarily, says Walker.

"One of the benefits of contracting out to a company like ours," he says, "is that we have the flexibility to move people to where they're needed. Some places don't need as highly skilled or technologically minded people, so we can place those people there. It's a kind of domino effect."

Siemens Information and Communications Network, headquartered in Boca Raton, Fla., is a Pinkerton's client that has benefited from paying its contracted security officers living wages.

"I've noticed in the two years since we've been involved in this program the turnover rate has not been nearly as high as it was and we don't have to expend money for additional training," says Neal Gallaher, Siemens' facilities services manager. "We are getting the caliber of employee we need."

Siemens had been paying security officers about $8 an hour. Now it pays $10.50. "Our retention rate has increased and our turnover rate is a lot lower," he says. "We're paying what we need to pay to get the people we need - and we're not paying a lot for turnover.

"It's not rocket science," he says. "It's better to pay a bit higher to get better people."

Building Economy with Higher Wages

It is time to end homelessness and stabilize the base of America’s work force. The problem of Homelessness can be broken down into three major categories: affordable housing, health care, and livable incomes.

Part of the livable income picture includes 42% of America’s homeless population that the federal government says is working. The problem is that the federal minimum wage is $5.15 per hour.

According to the last several U.S. Conference of Mayors’ reports, $5.15 per hour or $9,880 per year is an insufficient wage for anyone to get and keep housing throughout the United States. While some employers are paying $6.00, $7.00 or even $8.00 per hour, the wage is still not enough to get or keep most folks in housing.

Senator Ted Kennedy has a bill to raise the federal minimum wage by $1.50 over the next two years. The problem is that the day that bill gets passed, not one minimum wage worker can then work themselves off the streets in the very city where it is passed.

Others wonder about the approach of paying a flat national minimum wage of say $10.00 per hour. Again, that would not afford any minimum wage worker an efficiency apartment in cities such as Washington DC , Santa Cruz, California or even Austin, Texas. At the same time, that flat wage would swamp small businesses all across America in cities like Biloxi, Mississippi or Harlingen, Texas. In fact, this is Congress’s biggest problem; one wage size no longer fits all.

It is recognized that the single most expensive item in everyone’s budget is housing. In response, we’ve devised a single national formula that is related to the local cost of housing across the U.S. The Universal Living Wage Formula (ULW) ensures that anyone working a 40 hour week will be able to afford basic rental housing throughout the U.S. Using a single formula, each city and Fair Market Rent (FMR) designated area, has a wage relative to the local cost of living based on housing.

The formula is based on existing government guidelines:

• spend no more than 30% of income on housing,


• HUD Fair Market Rents (FMR),


• a 40 hour week.

The Department of Housing and Urban Development (HUD) under its Section 8 housing rental program, annually determines what a person can reasonably expect to spend on rental housing across the U.S. for an efficiency, one, two, three, and four bedroom apartment. These amounts are referred to as Fair Market Rents.

Over the past five years, due to the Herculean efforts of local initiatives, the concept of a “living wage” has swept America. However, even with 90 local campaigns, less than 100,000 workers are represented. Between monied opposition and unorganized rural America, this won’t bring wage equity to all 11.8 million minimum wage workers for about 3000 years. In the 1930’s, the Unions answered this question by creating the Federal Minimum Wage . Our goal today is to fix it... to everyone's benefit.

The Universal Living Wage Formula is based on the moral premise that anyone working 40 hours should be able to afford basic rental housing. To this end, we have launched a national campaign that has garnered wide spread support across the United States. 595 organizations have endorsed. The campaign has captured the imagination of unions (i.e. the Communication Workers of America International boasting 650,000 members), religious organizations and businesses alike.

Enactment of the Universal Living Wage will create a true Economic Stimulus Package. The local construction industry all across America will respond to the need of millions of minimum wage workers’ new ability to rent non-existing efficiency apartments. “If we build it, they will come.”

Based on government statistics, it is estimated that, with implementation; over one million homeless people will be able to work themselves off the streets of America while offering businesses stable workers. . . thus avoiding costly turnover and repetitive retraining costs.

Finally, the plan will prevent economic based homelessness for all 11.8 million minimum wage workers. That’s true Homeland Security. For additional information visit www.UniversalLivingWage.org.

Richard R. Troxell
Universal Living Wage Campaign
National Chairman
P.O. Box 2312
Austin, TX 78768

Living-wage movement takes root across nation

Controversial effort aids lower-income workers

— Stephanie Armour
USA TODAY

Life used to be very hard for Marlene Mendoza. The single mother worked as a waitress at Los Angeles International Airport. At $5.50 an hour, she says she had no choice but to put in 80 hours a week.

Today, life is still hard. But under a 1997 city law that provided wage increases for certain employees, Mendoza now works 50 to 60 hours a week. She is paid more than $7 an hour, which allows her to cut back and spend time helping her son, Frankie, 10, and her daughter, Valerie, 8, with their homework.

''I work a lot less,'' she says. ''I can be with my children much more.''

Mendoza has benefited from the living-wage movement, a grass-roots effort by activists, labor unions, religious leaders and other groups to provide lower-income workers with better pay.

The concept has been around since at least the early 1990s, but never before has it affected so many workers in so many cities and counties across the USA. Even though some economists estimate that fewer than 1% of employees in living-wage communities are covered, those on both sides of the issue agree that tens of thousands of workers are receiving higher pay because of the initiative.

The once-fledgling movement is making major inroads. More than 80 communities, including Boston, Baltimore, Detroit and Chicago, have laws requiring government contractors and some other employers to pay workers more.

The patchwork of legislation is circumventing the $5.15 federal minimum wage, and supporters are setting their sights on statewide wage hikes, as well.

The drive for a living wage is arguably the most successful organizing tool and rallying point for labor unions in decades. The cause is helping revitalize the labor movement, which for years has struggled just to hold onto membership and benefit gains.

The living wage is bringing new supporters into the fold and harkening back to labor's original goal of championing workers and bringing about lasting gains.

But that concerns opponents, who suspect the movement could mark the first thrust in a threatening, anti-business organizing push.

Wage laws are a costly burden for business, they say, that ultimately hurts workers by forcing companies to rein in hiring.

''This is an organizing movement that had exceeded . . . supporters' dream, and they've now become emboldened to go for more,'' says John Doyle at the Employment Policies Institute, a research group based in Washington. ''But there will be businesses that can't pay it or will have to go out of business. It will hurt workers and displace them from jobs.''

The stakes are high. Living-wage debates are spurring petition drives and court cases and packing city council meetings around the country. Though ordinances vary, the overall ground rules are the same:

• Living-wage ordinances, passed by referendums or legislation, require certain employers to pay wages higher than federal or state minimum wages.
• Often, the employer must pay those higher wages to employees only during the lifetime of the government contract.
• Typically, the wage rate set is what it would take to bring a family out of poverty (which is about $18,000 for a family of four, according to the Department of Health and Human Services.) That means covered workers would generally receive more than $8 an hour. The federal minimum wage was last raised in 1997.

Sen. Edward Kennedy, D-Mass., is spearheading an effort in Congress to raise the minimum wage by $1.50 by 2004.

The minimum wage has lost 10% of its buying power since it was last raised, according to the Economic Policy Institute. In 1997, the minimum wage stood at about half the median wage, but it had fallen to 40% of the median in 2001.

''This is about using public services to raise the standard of living,'' says Madeline Janis-Aparicio, executive director of the Los Angeles Alliance for a New Economy, which has worked to enact living-wage laws in areas of California. ''(Employees) are struggling to buy food and health care, even though they're working full time.''

Critics worry about trend

What really alarms opponents is that living-wage laws are getting bolder -- in some cases extending coverage to more employers than those who receive government dollars and mandating higher wages than $8 an hour.

An ordinance in Santa Cruz, Calif., mandates that city contractors pay up to about $12.

In New Orleans, a referendum approved by voters would make most companies in the city -- not just contractors -- pay $6.15 an hour. (The requirement is under review by the Louisiana Supreme Court and has not yet taken effect.)

In Santa Monica, Calif., a law would make hotels, restaurants and some other businesses in a geographical tourist zone with annual revenue topping $5 million pay at least $10.50 an hour. That law is on hold pending a referendum.

Opponents fear the broader laws are an ominous trend.

''My objection is the issue of fairness,'' says Tim Dubois, CEO of the Edward Thomas Companies, which owns hotels in the Santa Monica tourist zone. ''We have to pay a different wage level than anyone else. It violates every economic principle you can think of. If I can't compete, my employees will have fewer customers and be hurt in the long run.''

The concern is that higher wages will displace lower-skilled workers from the labor market because employers who pay more will demand more experienced hires.

In cities such as New York, critics fear that higher wages will prompt employers to flee. A bill under consideration by the New York City Council would require city contractors and companies that receive sizable tax breaks to pay $8.10 an hour to employees who get health benefits, increasing to a maximum of $10 after five years. An estimated 80,000 workers would be affected.

''We're trying to induce firms to stay in the city,'' says Kathryn Wylde, president and CEO of the New York City Partnership, which represents businesses. ''If New York needs the jobs, the idea is to make it as easy and streamlined for firms as possible. This is a mixed message.''

Don't tell that to Ayanna Williams, who works 30 hours a week providing child care in New York and earns about $7 an hour. It's hard work, she says, and pays barely enough to cover her $600-a-month rent, plus groceries and utility bills. Williams wants better wages, and she says she thinks it's up to the city to make sure workers get it.

''I live paycheck to paycheck and care for my mom. It's killing me,'' says Williams, 22. ''With a better wage, I'd put down something for savings. I want to go to school. To have a better wage, it would open the door for me to better myself.''

Dianne Guindon, a child-care worker in Santa Cruz, knows the benefits of higher pay. She used to make $9.25 an hour. Living-wage legislation pushed that to about $11, and a raise means she makes $12.25. ''The living wage means I can do this job that I love. Instead of working eight hours and getting exhausted, I work 4 1/2 hours a day,'' says Guindon, 34. ''It allows me to work in a field that is my first choice, and (employers) get quality employees.''

Does it hurt or help?

The crux of the debate comes down to fierce disagreement about whether a living wage hurts or helps. It doesn't help that research on the issue often results in contradictory findings.

Living-wage laws do cause job losses, according to a widely touted March report by Michigan State University economist David Neumark. But the research also found that living-wage laws lead to pay increases that can outweigh those losses, leading to a modest decrease in family poverty. One finding: A living wage that's 50% higher than the state's minimum wage will raise the average wage of low-income workers 3.5%.

Others researchers have found similar mixed results. Robert Pollin, an economics professor at the University of Massachusetts, found a living wage causes some lower-wage workers to lose their jobs.

''That is a legitimate concern,'' says Pollin, co-author of The Living Wage: Building a Fair Economy. ''But the overall effects of higher wages and benefits overcome that.''

Kebede Woldesenbet agrees with that finding. The 72-year-old parking attendant in Alexandria, Va., says a living-wage law there is lifting him out of poverty. Before, he earned $6.50 an hour; today, it's more than $10. ''The living here is very tough, I tell you. The prices, even food, are getting higher, but wages weren't increasing at all,'' Woldesenbet says. ''I can't tell you how much we were suffering, and now, we're getting better.''

Though the laws lead to higher costs for businesses, employers are also divided about the movement. Take Barry Hermanson, who runs Hermanson's Employment Services in San Francisco. He says the higher wages mean less turnover and more company loyalty, which ultimately helps retain clients.

''The business gets the benefits from better customer service,'' he says. ''And it's a good thing for business to pay people a wage they can live on without resorting to charity or public subsidy.''

But to many, a living wage is anti-business and a coup for unions.

''This is part of a union strategy to push non-union workers off the market,'' says Robert Lawson, an economics professor at Capital University in Columbus, Ohio. ''It's hard to tell how far this will go. The fear is what will happen if the idea takes off. That could be much more damaging.''

City governments have been getting away from using more costly union laborby hiring non-unionized contractors. Critics say living-wage laws prod municipalities back into hiring union workers because the playing field is more level.

Union leaders say the living wage is vital to addressing what they see as a failure to boost the federal minimum wage.

Says AFL-CIO's public policy director Christine Owens: ''While it's not easy to mobilize people at the local levels, it's easier than to organize nationwide.''

Supporters vow to continue their efforts. They say this is laying the organizational framework to begin pushing for other social justice issues such as affordable housing.

The living wage is just the first salvo in what promises to be a long and intense battle.

''In 10 years, there's going to be some form of living-wage ordinance in every city in the country,'' says Wade Rathke, a chief organizer in New Orleans with the Association of Community Organizations for Reform Now (ACORN). ''As long as Congress defaults on the minimum wage, you'll continue to see community organizations and unions trying to figure out some solution.''

"What Do We Know About Shortages of Affordable Rental Housing?"

This document, presented by Kathryn P. Nelson of the office of Policy Development and Research, Housing and Urban Development (HUD) is now available on-line at http://financialservices.house.gov/media/pdf/050301ne.pdf. Ms. Nelson's testimony before the House Committee on Financial Services, a Subcommittee of HUD, reveals what the ULW Campaign has been saying all along--that the shortage of rental units "are worst and worsening at rents affordable to incomes below 30% AMI (area median income), well below typical HOME (a HUD program) and Low Income Housing Tax Credit (LIHTC) rents."

The "Extremely low income" folks cited here are our national minimum wage earners. In other words, those who would be positively affected with the creation of the Universal Living Wage. This document is only nine pages, so we hope you'll go take a look!

And--about Adobe®Reader®--this extremely useful program is offered free by Adobe for use by all individuals. We highly recommend you download the latest version of it! (If your library already has it, when you click on a .pdf link, you will see the screen for "Adobe®Reader®" flash across the monitor before the program starts downloading.) Yes, it does take about 20 minutes to download the Reader on a dial-up system. Download it at night, like we did, and learn to use all the great features while reading the many important living wage documents available on-line in the Acrobat format. Go here to download Adobe®Reader® .

A WAGE AND PRICE SURVEY OF AUSTIN AREA FAST FOOD RESTAURANTS

By MARA COLEMAN, summer intern for the AUSTIN LIVING WAGE COALITION under the Austin Peace and Justice Coalition umbrella

June, 1999

The wage and price survey outlined below was undertaken in response to the contention that any increase in wages paid to low-wage workers must be accompanied by a sharp increase in prices. Contrary to arguments frequently raised by opponents of a minimum wage increase in Austin, a survey of area fast food establishments indicates that wage levels and prices do not rise together.

Procedure

The wage and price survey focused on the fast food industry, a major employer of entry level low-wage workers. The survey was limited to large, national fast food restaurants in order to capitalize on the high degree of standardization that can be expected to govern these large chain establishments. Arguably, this standardization increases the probability that a fluctuation in wage would affect price in each franchise similarly, making it easier to identify any consistent formula that would describe the wage/price relationship.

The survey was conducted by telephone over a four week period beginning June 3, 1999 and targeted four national chains-McDonald's, Wendy's, Church's Chicken and Taco Bell-that operated franchises in Austin as well as surrounding Central Texas communities. The interviewer called all the franchises of the four selected national chains in the City of Austin as well as the surrounding communities of Round Rock, Cedar Park, Pflugerville and Bastrop.

At each restaurant, except Taco Bell and Church's Chicken, the interviewer asked the pretax price of three menu items: an order of large French fries, a large soft drink, and the chain's standard sandwich. At Taco Bell, the interviewer asked the pretax price of a Burrito Supreme and a large soft drink. At Church's Chicken, the interviewer asked the pretax price of a two-piece dark meat order with two sides (below, these combinations will be referred to as "meals"). In addition, the interviewer asked for the starting wage paid to non-management employees of each establishment.

One hundred percent of the franchises surveyed responded completely to both wage and pricing questions. The interviewer was able to complete surveys at twenty Church's franchises, thirty McDonald's franchises, twenty-five Taco Bell's franchises and sixteen Wendy's franchises.

Results

The survey produced two principal results. First, average starting wages were higher in communities outside Austin than within the City of Austin. Second, the assumption that higher prices necessarily accompany higher wages was not supported. Survey results indicated that higher starting salaries are coupled with only slightly higher, identical, and in many cases lower prices than those in stores that paid a lower starting wage.

Higher wages outside Austin

Overall, the average starting wage report in the fast food franchise outside Austin was thirty cents higher than the average starting wage reported in Austin ($6.00 versus $4.68). This pattern of higher suburban wages is born out in all of the restaurants surveyed except Church's Chicken.

At McDonald's, starting salaries in stores outside Austin average $.54 higher than those in Austin At Taco Bell the average suburban wages topped those in Austin by $.30. Even the smallest average disparity--$.04 among Wendy's restaurants inside and outside Austin-cannot be dismissed as insignificant when one considers in the context of an average hourly wage of $5.15.

The pattern of higher suburban wages suggested by the survey should be considered with respect to the argument, frequently raised by critics of minimum wage increases, that Austin's low wage employers will remove their establishments to neighboring communities if subject to such an increase. Data indicating that employers outside the city are already paying higher wages call into question the degree of "savings" that would result from such a move.

Comparison of Starting Wages Inside and Outside Austin

• At each of the four restaurants, the survey turned up examples of lower prices associated with higher wages.

Likewise at Wendy's, the survey found the highest-priced meal at a restaurant which paid its starting workers a full $1.85 less per hour than the highest-paying restaurant. A meal at the highest-paying Wendy's employer was offered for a price that fell below the average-priced meal for all Wendy's surveyed. In another example, the lowest-paid Wendy's employees ($5.15) were found at a franchise charging the highest price for a meal.

The highest starting wage paid at any of the Taco Bell franchises was $6.75 an hour. At the same time, this store priced a Burrito Supreme and a large soda at $3.12, the lowest price among the Taco Bell restaurants surveyed. On the other hand, the survey found the second highest-priced meal at the lowest-paying Taco Bell: a franchise paying the federal minimum wage of $5.15, nevertheless charges customers $3.18, $.20 more, for the same meal. Another store that pays $5.50 an hour also saw fit to price this same meal at $3.18, which is $.20 less than the same meal at a store that pays its new workers $6.50 an hour; that's a full $1.00 more each hour.

• The survey also uncovered many examples of identical wages attached to a range of prices.

Discussion and Conclusion

Think Again: A Wage and Price Survey of Denver Area Fast Food Restaurants

Because prices and wages are subject to change, the results of the study should be viewed as a snapshot of the wage/price standings in the franchises surveyed, reflecting conditions existing during the first two weeks of August, 1996.

Procedure

The wage and price survey focused on the fast food industry, a major employer of entry level low-wage workers. The survey was limited to large, national fast food restaurants in order to capitalize on the high degree of standardization that can be expected to govern these large chain establishments. Arguably, this standardization increases the probability that a fluctuation in wage would affect price in each franchise similarly, making it easier to identify any consistent formula that would describe the wage/price relationship.

Results

The survey produced two principal results. First, average starting wages were higher in communities outside Denver than within the city of Denver. Second, the assumption that higher prices necessarily accompany higher wages was not supported. Survey results indicated that higher starting salaries are coupled with only slightly higher, identical, and in many cases lower prices than those in stores that paid a lower starting wage.

Higher wages outside Denver

Overall, the average starting wage reported in the fast food franchises outside Denver was thirty cents higher than the average starting wage reported in Denver ($4.98 versus $4.68/hour). This pattern of higher suburban wages is borne out in each of the four restaurants surveyed.

Higher wages not tied to higher prices

The second indication of the survey is that there is no hard and fast correlation between higher wages and higher prices. In fact, no discernible pattern emerged between a change in wage and a change in price.

Discussion and Conclusion

The survey reported on here, while modest, is a reasonable and effective reality check on an argument that is continually restated as fact. The survey's two principal findings invite a rejection of the simplistic arguments of minimum wage opponents who would scare voters into believing that modest wage increases will usher in price inflation or cause business flight to surrounding communities. These arguments just do not hold true in the real world.

A Living Wage Makes Good Economic Sense for Local Communities

-- Peter Phillips
Associate Professor of Sociology at Sonoma State University, Santa Rosa, California USA

--Barbara Ehrenreich

(This essay reprinted by permission of the author. It appeared in August, 2001 in national newspapers.)

"The complacent assumption behind the tax cut we're now supposed to be enjoying was that there's nothing left for government to do - no pressing social problems or unmet human needs.

Welfare reform has been declared a universal success, with more than 60 percent of former recipients making their own way in the job market. The official poverty rate has reached a comfortingly low 12 percent. So let the federal government, or what's left of it, focus on Star Wars, was our president's happy thought: No one needs the federal largess more than the wealthy taxpayers.

But a report issued July 24 by the Washington, D.C.-based Economic Policy Institute should puncture these presidential delusions. Titled "Hardships in America,'' it shows that 29 percent of families with young children do not earn enough to live at any acceptable level of comfort and security.

The EPI researchers got to this appallingly high number by calculating the basic - make that very basic - budget a family needs to live on. This budget includes health insurance, child care costs and telephone, but no meals out, vacations, movies, cigarettes, beer or other indulgences. So for nearly one-third of American families, things the more affluent take for granted - such as Internet access, video rentals and occasional cab rides - are almost impossible luxuries.

But they get by, don't they? Not exactly. Of the families who earned less than the "basic" budget, which amounts to $33,511 for a family of four, more than 70 percent worried about food, sometimes missed rent payments and had to rely on an emergency room for their medical care. Nearly 30 percent reported facing far more dire hardships - having to miss meals, forgoing needed medical care, being evicted from their housing.

In a selfish way, I'm relieved by all this statistical bad news: At least it shows that the conditions I faced while researching my recent book were not due entirely to my own bad luck or incompetence. I spent a total of three months, in three different cities, attempting to support myself on the wages I could earn as an entry-level worker - as a waitress, a hotel housekeeper, a maid with a housecleaning service, a nursing-home aide and a WalMart floor clerk. I could not make ends meet, not with one job anyway. I averaged $7 an hour, an amount that fell tragically short of my bare-bones expenses - gas, food and, above all, rent.

My coworkers had various strategies for coping. Many of them, of course, shared expenses with another breadwinner - a husband, boyfriend or grown child. A surprisingly high number worked more than one job - typically an eight-hour shift followed by a six-hour one - an arrangement that is utterly destructive to family life as well as health and stamina. Most skipped the company's health insurance, simply because they couldn't afford to pay the employee contribution, which was often more than $100 a month. But some of my coworkers were clearly not coping. I worked alongside people who turned out to be homeless, although in the peculiar hierarchy of poverty, they didn't consider themselves homeless as long as they had a van or a car to sleep in. What my experience shows anecdotally, and the EPI's "Hardships in America" report shows far more systematically, is that we've been fooling ourselves with the official poverty level, now pegged at $17,463 for a family of four.

That number is still calculated by the archaic method of taking the bare-bones cost of food for a family of a given size and multiplying this number by three. Yet food is relatively inflation-proof, at least compared to housing costs: Rents, especially, have gone through the roof. I found a half-size trailer renting for $625 a month, a room in a genuinely creepy residential motel for $250 a week. But the government persists in believing that low rents are available for the poor.

Our leaders are unable to see the true extent of economic misery in America. They're used to thinking of poverty as a consequence of unemployment. Hence, for example, the optimistic assumption that welfare recipients would be lifted out of poverty once they were hustled into the work force. But the relatively high-paying, unionized blue-collar jobs that brought an earlier generation into the middle class have been deindustrialized out of existence. What's left are the service and retail jobs I found in my foray into the work force - and a new world of relentless toil, rewarded by poverty-level wages.

If the consequences of this economic shift are almost invisible from Pennsylvania Avenue, they are painfully evident to hard-pressed charities. According to the hunger-relief organization America's Second Harvest, food banks all over the country are seeing "a torrent of need which (they) cannot meet," and the US Conference of Mayors reports that 67 percent of the adults requesting emergency food aid are now working people.

Almost everyone -- 94 percent of Americans, according to a 2000 poll conducted by Jobs for the Future, a Boston-based employment research company agrees that, "People who work full-time should be able to earn enough to keep their families out of poverty." When that proposition no longer holds true, then the social contract, at least as I always understood it, is no longer in force. And it is hard to imagine a more serious abrogation of "America's core moral values."

We have a choice: Either raise all wages to a "living wage" level or greatly expand the government programs that make life a little easier for low-wage families-- food stamps, health insurance, child care subsidies, the Earned Income Tax Credit, and -- yes -- welfare for families whose breadwinners must stay home as caregivers for the very young, the elderly or the chronically ill. Ideally, we should do both. At 4.5 percent unemployment, most Americans who can work have jobs. Now, it's the system that isn't working."

Ehrenreich is the author of Nickel and Dimed: On (Not) Getting By in America.

"Choosing the High Road: Businesses that Pay a Living Wage and Prosper"
(Located at www.responsiblewealth.org)

'"The growth of my business is due to the high quality of my bread, which in turn is due to the skilled employees I attract and retain with good wages and benefits."

– Jim Amaral, CEO of Maine bakery chain Borealis Breads'

"Jim Amaral is one of the successful business owners featured in a myth-busting new report Choosing the High Road: Businesses that Pay a Living Wage and Prosper. Over 40 cities and counties—including Boston, Baltimore, Los Angeles, Chicago and San Antonio—have adopted living wage ordinances and over 120 living wage campaigns are underway. Choosing the High Road shows why living wages are good for business, as well as workers and communities. The report, published by Responsible Wealth, is available on the web in PDF format and in hard copy.

"Choosing the High Road, by Karen Kraut, Scott Klinger and Chuck Collins, debunks common arguments made by opponents of higher minimum wages and living wages. It presents research on the business benefits of higher wages: lower worker turnover and absenteeism, reduced training costs, higher morale and higher productivity, and a stronger consumer market."

(The complete report is available at this site, but it is 388k, and requires the free program Adobe®Reader® to open the file.)

Mayors' 16th Annual Survey on "Hunger and Homelessness in America's Cities
(Located at www.usmayors.org)

This survey was conducted in 25 cities, and examines the causes of hunger and homelessness, the demographic groups that make up this population, demand of emergency assistance, model programs that respond to these problems, and the projected impact of the economy on hunger and homelessness in America. Read the press release for more information.

(The complete report is available at this site, but is 125 pages/289k, and requires the free program Adobe®Reader® to open the file.)

In February, 2001, the Economic Policy Institute released a report on the proposed federal minimum wage increase. This report includes updated figures for the number of workers who would be affected by a minimum wage increase in each state.