Many Wal-Mart opponents want Wal-Mart to start paying a "living wage". However, empirical evidence contrasting areas with "living wage" laws with those that rejected them shows that when wages go up, opportunities for the least skilled go down:
Living wage campaigns have succeeded in about 100 jurisdictions in the United States but have also been unsuccessful in numerous cities. These unsuccessful campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a law, and also permit the separate estimation of the effects of living wage laws and living wage campaigns. We find that living wage laws raise wages of low-wage workers but reduce employment among the least-skilled, especially when the laws cover business assistance recipients or are accompanied by similar laws in nearby cities.LW campaigns have little effect; LW laws to have effects. Here are two snippets from the paper, taken from the results of putting data into a complicated model:
1) The passage of a living wage, on average, increases wages of the bottom decile of the wage distribution by 1.68 percent 21 when compared with all other cities, 1.52 percent when compared to set of cities with failed and derailed living wage campaigns, and 1.34 percent when compared only to the set of cities with derailed
campaigns. (pp. 20-1).
2) [W]hen compared with all cities, a living wage law lowers the employment rate of the less-skilled by 2.34 percentage points, which implies an elasticity of about −0.09.23 The employment results using the alternative control group of cities with failed and derailed (or
just derailed) living wage campaigns are similar. (p. 21).
Here's an earlier, free version of the paper.
Here are two other papers by David Neumark on the living wage.
Posted by Kevin on June, 3 2005 at 03:34 PM
