Governing Magazine/December 1998 FEATURE: LIVING WAGE THE LIVING-WAGE WARS Increasingly, governments are requiring contractors to raise their workers' pay. Businesses are responding with rearguard resistance. By Christopher Swope Just over a year ago, the prospects for passing a "living wage" law in Chicago appeared dead. Mayor Richard M. Daley opposed the idea, and most of the city's aldermen agreed with him. The plan, which would have required city contractors to pay their employees at least $7.60 an hour, was bad for business, they said. When it came to a vote, they killed the living wage proposal overwhelmingly, 31 to 17. As things turned out, however, that wasn't the final word. In the ensuing months, a grassroots coalition of boosters for the working poor rallied thousands of supporters and conducted petition drives in low-income districts whose aldermen had voted down the living-wage measure. Altogether, more than 50 organizations--including the local service employees union, an association of community groups known nationally as ACORN, churches, the Chicago Coalition for the Homeless, and a group of political reformers known as the New Party--had jumped on the living-wage bandwagon since the issue first emerged there three years earlier. While their long-running effort was based on the notion of economic justice and the moral argument that governments should not be funding poverty-level jobs, it was shrewd politics that ultimately carried them to victory. This past summer, when lawmakers proposed giving themselves a pay raise, living-wage supporters linked the two issues. It would be political suicide, they reasoned, for aldermen to raise their own pay while denying a raise for the working poor. The tactic worked, and when it came to a vote again this July, the living wage prevailed--unanimously. The dramatic turnaround in Chicago reflects the resilience of a nationwide living-wage movement that is gathering more and more steam. Since 1994, when Baltimore became the first municipality to adopt a living-wage law, nearly two dozen others from Boston to Los Angeles have followed suit. At the same time, the magnitude of the measures is increasing: In mid-November, the San Jose city council passed the nation's highest living-wage rate: $10.75 an hour (or $9.50 with benefits). At the core of these campaigns is the idea that the federal minimum wage of $5.15 an hour (around $10,700 a year for a full-time employee) still leaves many working families in poverty. The "living" wage, as the name suggests, is meant to be a higher rate that would raise their standard of living. In truth, however, the term is something of a misnomer; the higher rate that most localities have set--typically between $7.50 and $8.50--barely brings a family up to the poverty line. In most living-wage cities, the higher wage requirement applies only to vendors who contract with the city. Workers who get the pay hike are usually low-paid service employees--janitors, cashiers or security guards, for example. As employees of government contractors, living- wage supporters point out, these workers are only one step removed from the relative comforts of civil service. Yet they are relegated to the ranks of the working poor. The living-wage movement has another dimension in cities such as Oakland, San Antonio and Minneapolis, which target businesses that benefit from tax abatements, subsidies or other forms of economic development assistance. Although subsidies are often touted as necessary to lure jobs, living-wage supporters say there is no guarantee that those jobs pay well. "Economic development dollars are being used poorly," says Jen Kern, a national organizer at ACORN, which is spearheading most of the living-wage campaigns. "We should expect a return on that money. Low-wage jobs will always be there. Why are we paying for more of them?" Not surprisingly, the business community disagrees. Vendors view the living wage as yet another unwelcome cost of doing business with government. Some--especially those in labor-intensive businesses--say the added expense could be enough to drive them away. Others say they'll stay, but will either have to lay off workers or pass along their higher labor costs in the form of higher bids. And luring a company with a tax abatement while simultaneously raising its labor costs strikes opponents as an incongruous and misguided economic development strategy. In Boston, that requirement stood to put long- sought development in neighborhood business districts at risk. "It's difficult to attract developers to these areas, even with financial support from the city," says Sam Tyler, president of the pro-business Boston Municipal Research Bureau. "Boston has one of the highest tax rates in Massachusetts. We don't need any more disincentives." While business interests, such as local chambers of commerce, clearly oppose living-wage ordinances, they have shown real difficulty marshaling their forces to actively fight against enactment in various cities. This seems particularly surprising coming on the heels of major triumphs only a few years ago, when grassroots activists were trying to pass broad minimum-wage laws on the local level. In both Houston and Denver, where proposals for a $6.50 citywide minimum wage made it onto the ballot, business counter-attacked with fistfuls of cash and a media campaign. The initiatives were crushed by a 3-to-1 margin in each of the two cities. Veterans of the campaigns, such as ACORN organizer Brian Kettenring, learned a key lesson. "Politically, the business community will raise more money and fight more on a minimum wage than on a living wage," he says. "We don't have the strength yet to win a minimum wage on a local level in a lot of places." So higher-pay proponents have adopted something of a divide-and- conquer strategy. Because the living-wage proposals are so narrowly targeted, not all businesses are in the same boat. Their limited scope affects only those companies that contract with the government or receive subsidies. Opposition, therefore, is diluted. And even in a large city like Chicago, the pay of only 3,000 or so workers stands to be raised--hardly enough to warrant the intervention of big guns such as the National Federation of Independent Business. Another problem for business is the sheer complexity of the proposals. In a system where contractors often subcontract, and even the subcontractors contract out, it is anything but clear exactly who would have to pay the higher rate. Some don't realize that a proposed ordinance targets them until after it has been enacted. "It would be difficult to know you're covered without reading the fine print," says John Doyle, spokesman for the Employment Policies Institute, an opposition think tank. "They don't realize it until after the fact, when they get a letter from some city wage commission saying that they have to pay the higher rate." That would explain the more spirited fight that business is putting up against implementation of these laws. In Boston, for example, it was only after the living wage passed last August that business mounted a serious counterattack--managing to delay the law and investigate its impact. Business leaders were particularly upset with the law's open- book reporting requirements, which they feared could be exploited by their competitors or by living-wage supporters themselves. After negotiations this summer, both sides agreed to a revised law that dropped the reporting requirements. The rewrite also ditched the living-wage requirement for companies that get tax abatements and the like, but kept the mandate for city contractors. Likewise, business and its allies are gumming up implementation of Los Angeles' year-old living-wage law. At L.A.'s two airports, airlines are refusing to pay the $8.50 living wage to about 3,000 baggage handlers, wheelchair runners and security officers. Although they hold leases with the city, the airlines argue, the jobs are contracted out. The airlines won backing from Mayor Richard Riordan, who opposes the living-wage policy and whose administration has been less than diligent about enforcing the law. A study conducted recently found fewer than 10 percent of L.A.'s contractors in compliance with the law. Rearguard resistance may in fact be business' best strategy, suggests Robert Pollin, a University of Massachusetts economics professor and co-author of a new book entitled "The Living Wage." They may be content to let supporters claim what is still a limited victory, and then get to work in further minimizing it. "They're saying, `We'll hang around, and when the more complicated part of implementing this comes along, we can hire lawyers to re-interpret the law.'" Even if implementation had gone smoothly in L.A., the living wage was only expected to apply to about 8,000 workers in a city of more than 3.5 million people. Supporters, of course, are quick to point out that the pay raises do have a very real impact on individual lives. But given their narrow focus, these laws aren't a panacea for the problem of the working poor. Yet by all accounts, the living-wage battle has been a tremendous success for the groups behind it. Of perhaps wider significance, however, is the issue's role as an organizing tool. The simple message--that working people should not live in poverty--has an appeal that is a magnet for all kinds of groups looking to energize their members. In city after city, labor unions, community organizations, religious groups and others are forming coalitions and rallying under the living-wage banner. ACORN hopes they'll become permanent fixtures of its grassroots efforts, ready to move on other issues such as low-income housing or bank lending. "There's more to these living-wage campaigns than policy," says ACORN's Kern. "We're about raising issues, building alliances and having strength in numbers. In Boston, the mayor's office wouldn't return our calls last year, and now we're in regular meetings." For labor, the living wage is acting as a catalyst for union organizing. By rallying home-care workers for the living-wage effort in Chicago, for example, the Service Employees International Union Local 880 discovered new home-care companies that it has now set out to organize. In Los Angeles, unions jumped on the controversy over the airport workers to launch an organizing drive. And for the public employee unions involved in some cities, the living wage is becoming a tool to battle privatization. By increasing the private sector's labor costs, the living wage can level the playing field. Gerald McEntee, president of the American Federation of State, County and Municipal Employees, says, "We fight for these people, to bring up their wages, benefits and health care, first because it's good for them, but also so they're not in direct competition with folks in the public sector." The living-wage movement, however, is more than various groups acting out of self-interest. Although their immediate focus is the microcosm of government subsidies and contracting, supporters clearly have the big picture in mind. They see the living wage as a step, if a small one, toward narrowing the gap between the rich and poor. And they hope that some businesses that pay the minimum wage will follow the example of government and its contractors and give their workers a raise. That may be a quixotic dream. But then again, it might not. After four years of championing on this issue, living wage activists have embedded the phrase "living wage" into both the public consciousness and the political lexicon. Increasingly, Americans are coming to understand the difference between a minimum-wage job and a living-wage job--and are expressing their desire for more of the latter. "The term `living wage' is a new way of conceptualizing an old idea--that people must make enough to live on," says Kettenring. "This political organizing around the term has given it currency. It is a label that people can relate to." STRETCHING PAYCHECKS Hourly rate in localities with a living-wage requirement, as of October 1998 Santa Clara Co., Calif. $10.00 San Antonio, Texas $9.27 Oakland, Calif. $9.25* Des Moines, Iowa $9.00 St. Paul, Minn. $8.69* Los Angeles, Calif. $8.50* Pasadena, Calif. $8.50* Minneapolis, Minn. $8.49* Boston, Mass. $8.23 New Haven, Conn. $7.88 Baltimore, Md. $7.70 Chicago, Ill. $7.60 Cook Co., Ill. $7.60 Durham, N.C. $7.55 Orange Co., N.C. $7.55 Portland, Ore. $7.50 Jersey City, N.J. $7.50 Duluth, Minn. $7.25* Dayton, Ohio $7.00 Milwaukee, Wis. $6.43 Milwaukee Co., Wis. $6.25 Federal minimum wage $5.15 * indicates a lower wage applies for employees who receive health benefits Note: New York City has a "prevailing-wage" law that sets varying hourly rates for different service-sector jobs. Sources: ACORN and Employment Policies Institute ---------------------------------------------------------------------- Copyright 1998, Congressional Quarterly, Inc. 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