Living Wage Effects: New and Improved Evidence

Abstract

This paper explores the effects of living wages on low-wage workers and low-income families. Using data for 1996-2002, it updates an earlier analysis, addresses criticisms of it, and confirms the finding that business assistance living-wage laws reduce overall urban poverty at the cost of some disemployment. It also expands the analysis to examine other distributional effects, finding that living wages help families slightly below and above the poverty line without increasing the depth of poverty among families that remain poor. Finally, the paper suggests that the poverty reductions generated by living wages stem from income gains for those with higher wages or skills who are initially in poor families rather than for those at the very bottom of the wage and skill distribution.

Keywords: Living wages, poverty

JEL Classification: J2, J3, I3