The Employment Impact of a Comprehensive Living Wage Law, Evidence from Florida

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With financial support from trade unions, liberal foundations and social activist groups, the self-styled “living wage movement” has been pressing state and local governments to require employers to pay high entry-level wages regardless of skill or ability. The philosophy behind the living wage laws is that the government should require employers to pay workers according to their need, not according to their productivity. This is a radical departure from free market-based wages, which have been the norm in this country with a few exceptions. Currently, 82 local governments, including three in Florida, have passed such living wage laws. In addition, living wage campaigns are active in 125 jurisdictions, including five in Florida.

Initially, such laws were narrowly drawn to cover only employees of local governments or their contractors. However, increasingly, the living wage movement has been advocating high minimum wages that would apply to all private sector employers within a defined geographic area. An example is Santa Monica, which has passed a law requiring all employers in the “Coastal Zone” to pay at least $10.50 an hour if stipulated health benefits are provided, and at least $12.25 an hour if benefits are not provided. Another example is Berkeley, which covers all employers in the Berkeley Marina, city-owned public land. The movement is also pushing for a city-wide minimum wage in New Orleans that would be tied to the federal minimum wage.

The living wage movement has been active in Florida. In 1999, Miami-Dade County passed a living wage ordinance, which now requires the county and contractors to pay their employees $8.81 with benefits, or $10.09 without benefits. Other local governments in Florida have followed suit, including Gainesville (municipal employees) and Miami Beach. In addition, living wage campaigns are active in Broward County, Alachua County, Jacksonville, Orlando, and Tampa. Living wage advocate Bruce Nissen of Florida International University has recently urged the state to pass a $6.00 minimum wage applicable to all employers, and to require the state to pay even higher wages for state government employees and contractors.

In view of the startling successes and growing demands of the living wage movement, it is very timely and relevant to assess the likely economic effects of such laws on the Florida economy and its workers. This report examines the employment and income consequences of setting a minimum wage throughout Florida of $8.81 or $10.09, wage levels corresponding to the Miami-Dade County law for employers, with and without health benefits.

This study reaches three broad conclusions. First, such minimum wages would result in approximately 131,000 to 222,000 workers losing their jobs. Second, Florida employers would see their wage costs skyrocket in the range of $4.9 to $8.8 billion. Third, many of the projected wage gains would go to low-wage workers in higher income families rather than to those most in need. For example, about one-third of the wage gains would go to families with incomes over $40,000. Finally, compared with living wage mandates, targeted employment tax credits are a better policy to assist poor families because they reward work, do not cause workers to lose jobs, and also reduce costs by providing assistance only to those in need.