Reviving Living Wage Policies
A Tool for Tackling Poverty in Today's Economy
Whitney Afonso (UNC Chapel Hill) & Emily Roscoe (UNC Chapel Hill)
As local leaders grapple with soaring housing costs, persistent inflation, and a tight labor market, living wage ordinances offer a targeted way to support low-income workers without waiting for federal action. With the federal minimum wage remaining at $7.25 since 2009, cities and towns have stepped up, but adoption remains spotty. A recent research note highlights that only 14% of the largest U.S. municipalities have enacted such policies, yet they could play a bigger role in reducing poverty and boosting local economies. Amid ongoing recovery from the COVID-19 pandemic and recent labor shortages — where state and local governments still face 700,000 fewer workers than pre-2020 levels — this is a moment for policymakers to reconsider living wages as a practical solution.
The big takeaway? Living wage laws aren't just about higher pay; they're a localized response to real costs like food, childcare, and rent. Unlike flat minimum wages, living wages are calculated based on a family's basic needs in a specific area—for instance, $24.72 per hour in Massachusetts for a family of three, versus $17.92 in Alabama. These ordinances typically apply to government employees, contractors, or businesses receiving public funds, making them narrower than broad minimum wage hikes but potentially more feasible in budget-conscious environments.
The study examined the 10 most populous cities in each state (plus D.C.), totaling 501 municipalities. Key findings: Just 61 have any local wage ordinance above state or federal levels, with 41 qualifying as true living wages. Adoption clusters in progressive states like California and New York, but surprises emerge elsewhere—think Portland, Maine, extending coverage to seasonal hospitality workers to offset costs through tourism. Eight states boast more than two such policies among their top cities, showing momentum in places like Illinois and Washington.
However, barriers to living wage adoptions abound. Over half of states have preemption laws blocking local wage increases, yet these aren't always ironclad. Cities in Florida and Arizona have pushed back with ballot initiatives or creative interpretations, like exempting municipal employees. This legal gray area means policymakers in preempted states might still have room to act, especially for internal staff, but it underscores the need for careful navigation to avoid court challenges.
Real-world impacts? Past research, though dated, shows modest poverty reductions and minimal job losses, with costs to cities often under 1% of budgets. Take San Francisco's airport policy: It cost just under than 1% to revenues but that was still $58 million annually. Today, with inflation hitting 40-year highs in 2022 and ongoing staffing crises, these effects could be amplified. Recent examples illustrate this: In 2023, St. Petersburg, Florida, raised wages for 211 city employees at a cost of $495,000, while San Diego hiked pay for 6,500 workers, adding $83 million but aiding retention amid shortages. Austin, Texas, similarly boosted wages for 4,100 employees in 2022 to compete in a hot job market.
These policies also tie into broader trends. The Fight for $15 movement, which sparked strikes in cities like Los Angeles and Seattle, has evolved into economic justice coalitions pushing for equity. In 2023, 27 states and at least 27 localities raised minimum wages, but living wages offer more precision for high-cost urban areas. For government officials, this may translate to better recruitment outcomes—many jurisdictions cite talent attraction as a key driver. Plus, by covering contractors, cities can ensure public dollars support fair pay, reducing reliance on social services.
Yet, the research flags gaps. Enforcement varies, with some ordinances more symbolic than binding, potentially explaining why earlier studies found limited poverty drops. Internal policies (not formal laws) in places like Chapel Hill, North Carolina, also provide living wages but fly under the radar, complicating comparisons. And while politics once drove adoption in "progressive" cities, today's motivations include practical needs like filling vacancies post-COVID.
Ultimately, as costs rise and inequality persists—affecting 38 million in poverty—living wages deserve fresh scrutiny. They won't solve everything but may be an additional tool in ensuring that local governments are best meeting the needs of their communities. Renewed research, using modern tools like difference-in-differences analysis, could clarify impacts on budgets, workers, and regional economies. Local leaders: This is a potential tool for your toolkit for building resilient communities. Let's update the playbook.
Whitney Afonso is a professor of public administration and government at the University of North Carolina at Chapel Hill's School of Government. Her research focuses primarily on state and local public finance and budgeting, including state income taxes, local sales taxes, and citizen engagement. Her work has recently appeared in journals such as the National Tax Journal and Public Administration Review.
Emily Roscoe is an instructor at the University of North Carolina at Chapel Hill's School of Information and Library Science. She holds a PhD and JD from the University of North Carolina at Chapel Hill.