Labor Events and Resources Blog

Institute of Industrial Relations Library

Examining the Evidence: The Impact of the Los Angeles Living Wage Ordinance on Workers and Businesses
[2 June 2005]

David Fairris, David Runsten, Carolina Briones, Jessica Goodheart
http://www.losangeleslivingwagestudy.org/

-The study is the first living wage research in the country to use rigorous random sample surveys of workers and employers affected by a living wage law.

Executive Summary
full-text, 11 pages

[excerpt]
WHAT IS THE IMPACT OF THE LIVING WAGE ON EMPLOYERS AND THE WORKPLACE?

Employers have cut costs by making small reductions in employment and fringe benefits. Employment reductions total an estimated 112 jobs, representing one percent of all living wage employment in affected firms.

Employers cut fringe benefits for less than five percent of living wage jobs in affected firms, including cuts in health benefits, merit pay and bonuses.Use of overtime has declined, representing a further reduction in labor costs. Training for new hires stayed the same at living wage firms, while non-living wage firms have increasedtheir training, representing a relative decrease for living wage firms.

Labor turnover has declined as a result of the ordinance. Current rates of turnover at living wage firms average 32 percent, compared to 49 percent at comparable non-living wage firms.

These turnover reductions represent a cost savings for the average firm that is 16 percent of the cost of the wage increase, based on various estimates of the cost of replacing a low-wage worker.

The ordinance has had no impact on the use of part-time workers, the intensity of supervision, the tendency to fill vacancies from within or the use of equipment and machinery.

Firms have not actively displaced workers in order to hire workers who are better qualified, and most firms have not changed hiring standards as a result of the ordinance.Compared to the original workforce, workers hired after the living wage have similar levels of education, are of similar age, and are no less likely to be members of racial or ethnicminority groups.New hires are more likely to be male and to have higher levels of formal training. Fifty-six percent of new hires are male, compared to 45 percent of workers hired before the living wage. Twenty-two percent of new hires had formal training before being hired, while only 12 percent of workers hired before the law had such training.

These changes occurred primarily through normal attrition at the firms. They suggest somewhat diminished job opportunities in city contract work for women and for workers with less formal training, as compared to before the ordinance.

Summary Report
http://www.losangeleslivingwagestudy.org/Examining_the_Evidence.pdf[
SUMMARY REPORT -- full-text, 78 pages]

Background on This StudyKey Findings and Information About This Study
http://www.losangeleslivingwagestudy.org/About_This_Study-Key_Findings.pdf

About the Authors of the Study
http://www.losangeleslivingwagestudy.org/About_the_Authors.pdf