The social cost of low wages

Introduction: Living wage ordinances require city-contracted firms to pay their workers a wage that is set above the state's minimum wage. The first ordinance was implemented in Baltimore in 1994, in recognition that workers earning close to the minimum wage do not earn enough to be able to meet their basic needs and support their families. Community leaders in Baltimore began a living wage campaign to place pressure on firms to pay higher wages. They focused their efforts on city-contracted firms as they believed that firms receiving taxpayer dollars should be held accountable to the public. Since the enactment of Baltimore's Living Wage ordinance, over 120 municipalities across the United States have also implemented ordinances with the goal of reducing poverty levels. The economic impact of living wage laws is still not completely understood which has lead to the emergence of a field of living wage research. Living wage studies have primarily focused on the affects of living wage laws on economic indicators such as employment levels, wages, poverty rates, prices and business growth. To capture the affects of ordinances, researchers typically examine how firms and workers affected by living wage laws have faired compared to those who are unaffected. Other studies attempt to contrast the experiences of workers and employers within a city before and after an ordinance is implemented. However, there has been limited research on how low wages impact workers and have ripple affects on the economy. Although it is generally accepted that low wages can lead to higher poverty rates and can have adverse impacts on families and communities, these affects are not often measured in substantive ways. Developing research methods that lead to more concrete measurements of how families and communities are affected by low wages, can strengthen the living wage movement and help policymakers design more effective anti-poverty and living wage laws. Additionally, measuring the cost of supporting poor working families through the use of public subsidies can serve to measure the magnitude of externalities. The purpose of this thesis is to expand the analytical scope of living wage research by illustrating the importance of analyzing the effects of low wages on families and taxpayers. To accomplish this, I conduct a qualitative study of two poor working families to depict how their lives are impacted by low wages. I then discuss how data on working families using public subsidies can be collected and reported for the purposes of living wage research. It is important to note that the research presented in this report is not necessarily intended to advocate for living wage laws but to strengthen and expand the scope of living wage research so that living wage laws can be more accurately evaluated. Overview of Chapters: -- In chapter one, I first explain the Boston Living Wage Ordinance in order to provide an example of the policy structure of living wage ordinances. Additionally, I discuss the scope of living wage studies and discuss the importance of measuring externalities. -- The second chapter explains the methodological approach that was used to select participants and conduct interviews. -- The third chapter describes who are Boston's low wage workers and the role they play in the economy and the occupations and industries that are most affected by low wages. -- Chapter four provides a summary of the qualitative study conducted with two low wage workers and how they manage to support their families on a limited income. -- In chapter five, an in-depth analysis of their budget is conducted to determine the costs of the public subsidies they use and how they manage to reduce their household expenditures. -- The sixth chapter discusses how researchers and administer of public subsidies can better track and report data that demonstrates the magnitude of worker dependency on public subsidies and its implication for tax payers. -- The final chapter focuses on key findings of this study and recommendations for the future.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Urban Studies and Planning.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2011

Author dc:creator

• Campbell, Cassandria (Carla Cassandria)

Advisor dc:contributor.advisor

• Frank Levy.

• Urban Studies and Planning.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/66876

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/66876