Fighting Poverty Through Municipal Wage Ordinances

Progressive municipal governments in Canada should consider developing and implementing wage ordinances to boost campaigns for higher statutory minimum wages, and to help the working poor.

More than 130 municipal living wage ordinances have been passed in the US since 1994, including in many big cities such as New York, Chicago, Boston, Detroit, Cleveland, Los Angeles, San Francisco, Oakland, San Jose and Miami. In fact, close to one half of the US urban population now live in cities covered by some kind of municipal living wage ordinance.

The basic concept of a living wage is that wages should provide a sufficient income to meet basic needs. These ordinances have been the result of joint campaigns by community groups and labour organizations to help raise the wages of the working poor.

A key goal of municipal campaigns has been to help push for higher minimum wages at the state and, especially, the federal level. The US federal minimum wage was frozen under Bush at just $5.15 per hour, though it will be raised to $7.25 per hour by 2008 as a result of the new Democratic majority in Congress. Local living wage campaigns have helped build momentum for higher statutory minimum wages at the state and federal level.

Another goal of municipal ordinances has sometimes been to set wages above the statutory state minimum wage so as to take account of local living costs, which can be much higher than average in big cities with high housing costs.

Also, municipal “fair wage” ordinances have sometimes been set for specific occupations and trades to stop union wages and those of municipal workers from being under-cut by low wage, low quality contractors.

In the US, living wage ordinances have always applied a wage standard significantly higher than the ($5.15) US national hourly minimum wage. Often running as high as $9 or even more per hour, the actual level varies a lot in line with the local cost-of-living and other factors. Many US ordinances also mandate employer health insurance coverage and minimum paid days off the job. Enforcement varies widely, and is greatest where community and labour organizations have been most closely involved.

US living wage ordinances usually apply to companies and non-commercial enterprises working on service contracts with the city and city agencies in areas such as security, building services, food services, and some social services such as home care. They usually apply to contracts of more than $25,000 and exempt very small suppliers.

Living wage ordinances also often apply to companies receiving financial support from a city, including not just grants but also tax abatements and write-downs and incentives to real estate developers. Using this tool, living wage ordinances have sometimes been extended to large commercial developments actively supported by a city government.

Some cities have extended ordinances to companies based on city-owned land. San Francisco boosted the wages of many security and other workers by applying its living wage ordinance to all workers at the city-owned airport. Some cities have covered attendants at parking lots on city-owned land.

While they have been passed by many US cities, ordinances generally apply to a small but not insignificant portion of low-wage workers in a city, in the range of 3-5%. However, they also set a local benchmark which other employers can follow. Some universities and hospitals, for example, have resolved to respect municipal wage ordinances. Moreover, a few cities, notably Santa Fe, New Mexico and San Francisco have begun to apply their municipal living wage to all employers in the city. Some have begun to mandate all large private sector employers, notably Wal-Mart, to provide health coverage to all employees.

Studies show that ordinances usually raise wages in low-wage jobs. The cost impacts for city governments have been found to be small, in part because relatively few workers are directly impacted, and because many employers respond by making covered jobs full-time, which reduces worker turnover and lowers recruitment and training costs.

Recently, the Greater London Authority in Britain also began to support a major living wage campaign. The Council now calculates an appropriate minimum or Living Wage for London – which has very high housing and transportation costs – and ensures that all of its direct employees are paid above Living Wage rates. The Living Wage rates are now also being required in some contracts, and some London employers have also agreed to respect the new London Living Wage. (For example, this now applies to some hospital cleaning contracts).

In Canada, the City of Toronto has led the way. The long-standing fair wage schedule which was applied to City construction contracts has now been extended to include City contracts for security services, building cleaning and maintenance contracts, and landscaping contracts.

Progressive municipal governments in Canada should actively consider how municipal wage ordinances might promote campaigns for higher provincial minimum wages, assist specific groups of low-wage workers, like building services and security workers, and stop private contractors from under-cutting the wages of unionized private sector workers as well as direct municipal employees.

References

• A typical detailed US living wage ordinance – that of Oakland, California – can be found here.

• The journal, Industrial Relations published a special edition on Living Wages in January, 2005.

• See also a major article by Jon Gertner in the New York Times, January 15, 2006.