Mustafa Hussein on the Broader Effects of Local Living Wage Ordinances

Dave Chancellor: Hello, and thanks for joining us for the Poverty Research and Policy podcast from the Institute for Research on Poverty at the University of Wisconsin–Madison. I’m Dave Chancellor for this episode. I talk to Mustafa Hussein, who is an assistant professor of health policy and economics at the City University of New York’s Graduate School of Public Health, and he’s also an IRP faculty affiliate. And we talked about living wage ordinances that were passed in the 1990s and 2000s in cities across the United States, and these ordinances were only directed at relatively small groups of lower wage workers in these cities. But Dr. Hussein and his team set out to see if these smaller ordinances would have larger impacts on these local labor markets. The work he’s talking about is still under peer review. But we think you’re going to find it really interesting. So let’s turn to the interview.

Chancellor: This paper that you’re working on right now, you’re looking at living wage ordinances that were there passed between 1996 and 2007, I think I’ve got that read in about 60 metropolitan areas here in the U.S. So can you tell me what you’re doing?

Dr. Mustafa Hussein: So this this project, really, our goal is to evaluate the effects of these living wage ordinances. And when people hear a living wage, they think, Oh, there are cities that have living wages in the U.S. and in fact, there are, you know, many cities. I think over 100 jurisdictions have passed these kinds of ordinances. But the catch is that they weren’t applicable to the entire low wage economy. They weren’t applicable to each and every person who’s earning at or around the minimum wage, but they were applicable to a smaller segment of that population. Essentially, those employees that worked for companies that contract with the city government, for example, to do certain say like public administration or janitorial or custodial services, these kinds of things, and also to companies that received economic development incentives or tax breaks. And then some counties in particular also opted to cover their own municipal employees with these kinds of ordinances as well. These ordinances started out of a vigorous living wage movement that, you know, started in the mid-1990s with a lot of community activism from very active alliances across the country in many cities, including well-known ones like Los Angeles, Baltimore, you know, including in Milwaukee, here as well in Chicago, in Denver, across the country, essentially. And so these movements were able to pass many of these ordinances across the country and get these workers covered. The level of coverage that has been recorded with these ordinances or mandated under these ordinances, it’s actually really, really exceptional for the time. And even by our current standards, it’s pretty. It’s pretty high. So to give you an example. So imagine in 1997, Los Angeles passed a minimum living wage ordinance with about eight point six dollars that year, right? So eight point six dollars as a minimum wage for workers employed by the contractors with the city government and also for economic developers as well at that age. This is pretty high. This is about one hundred and fifty percent of the prevailing minimum wage at the time. Also another example is Syracuse, most recently in 2005, passed an ordinance for about $12 an hour. But once again, this is about 15 years ago. So now we talk about fight for 15. These are in kind of real terms, inflation adjusted terms. These are much, much higher amounts than 15 minimum wage today. So in essence, these ordinances try to accomplish a couple of things. Number one, passing these living wage amounts, these substantial living wage amounts. Once again, they were much higher than the minimum wage at the time, and they continue to be and often those living wage floors, they were indexed or tied to the poverty line or inflation. So the city would not come and say, Oh, we just want this amount or we want to mandate this amount, they would come and say, Oh, what is the federal poverty line for a family of three? And then we’re going to kind of reverse engineer to work out a consistent hourly wage that would be mandated. And then it keeps updating with the federal poverty line or the CPI, the consumer price index for the urban area. And then the other thing, the also mandated benefits most of the time, particularly health insurance, often at a lower amount of living wage. So the city might require a $10 an hour living wage without health benefits. But then that might go down to like eight point five an hour with health insurance benefits. But many of them also mandated things like paid leave, like community hiring initiatives that they wanted to promote, community hiring and additional protections for the workers as well, like anti retaliation clauses and for further strengthening for worker unions who which have been a big part of the Living Wage movement itself. So in essence, if you think about these policies, they aren’t really just minimum wage policies like state or federal minimum wage policies that just simply raise the wage floor and require higher wages for low wage workers. But they look a lot more like broader attempts at reforming the labor market by introducing both wage requirements and benefits as well. And when one realizes that, I think. Easy to imagine, you know, a lot of possibilities when it comes to health implications of these policies that not only not only the benefits have their own side of potentially improving health, but also the additional income that could improve health as well.

Chancellor: You’ve kind of implied that there is a lot of variation in when these policies were enacted and also just what was in them. How did you collect all this information and how are you tracking these things? There’s a there’s a lot of moving pieces here, right?

Hussein: Yeah, yeah. So we’re standing on the shoulders of giants here. So back in the early 2000s, after a few years after these policies gained traction across many jurisdictions, the number of researchers have done really important ground work on this. So most of the economic evidence, for example, in the labor economics literature on these policies, came out in the early years of the 21st century by Scott Adams and David Neumark. And there also there was also a lot of work done in an excellent book by Stephanie Luce, who’s a sociologist. She wrote a compendium on these policies and living wage movements. And then an amber of other reports and publications on how these policies were implemented, what they are, what they did, including formal evaluations in population samples of the effects, especially the economic effects of these policies. We also saw this I want to acknowledge very generous funding for our project by the Robert Wood Johnson Foundation. With that funding, we were actually my research assistant and I Mikayla Becker. She went back and was able to collect the original ordnance texts, connect with the jurisdictions that issued these ordinances, oftentimes filing FOI requests to, you know, for public records. And then we kind of combed through the ordinance texts and extracted data kind of built our own policy dataset that characterizes each and every one of these ordinances. And then we linked those data pieces to population samples from a study called the Community Tracking Study, which was purposeful in sampling participants from metropolitan areas across the country since the mid-90s. And so we were kind of it’s been really an auspicious thing to be able to collect both and find both the data on the ordinance themselves and their characteristics, and also having that kind of opportune survey data that comes from a lot of these metro areas, many of which had the ordinances and many others did not. So it gives us that kind of variation that we’re looking for in a policy analysis.

Chancellor: I think what’s interesting here is that, you know, as you mentioned before, these policies only it specifically impacted or at least in a direct way, a fairly small group of people, people who are contract with the cities or the metropolitan areas there is working for them. But you’re looking at kind of like spillover effects, like how you know what’s happening in the broader population. Can you tell me about what you’re measuring here and what you’re trying to find?

Hussein: So these policies are these living wage ordinances. Although they were meant to cover only the kinds of employees that worked with kind of the low wage workers that worked for the contractors and the economic developers, and potentially some of them were in, you know, working for the municipality, for the metropolitan jurisdictions of the city or the county. If you think about a couple of things. One, the vigor of these living wage campaigns and the fact that they weren’t limited to those particular employees or even to just that very central city could have reverberations across firms and the entire local economy and also in neighboring cities and jurisdictions. And oftentimes we find things like both the city and the county say, for example, in Chicago and Los Angeles, both have passed ordinances almost at the same time. We also find examples of smaller jurisdictions like school districts or even universities. I think there’s an example of Living Wage, a living wage ordinance for janitors at Harvard back. You know, around the same time, these policies were gaining traction. And then so if you combine the fact that there are a lot of times there are multiple policies within the same kind of metro area, in addition to the broader effects of the living wage movement itself on the labor economy, potentially changing norms of hiring, potentially giving workers stronger negotiating power, especially in places where unions are very active. And in then the fact that, you know, the labor market is large and there is a lot of people that live there. So and the. Is a lot of competition there is, you know, potentially even some displacement going on, some active, some active movement of workers in and around the firms that are covered or not covered by these policies. So potentially more competition for high risk, higher skilled labor and so forth. So all of these factors together give rise to a high potential for these policies to have to affect not only the workers that are directly kind of statutorily covered by the policies, but also other workers as well that live in the same labor economy and the same labor market. And so what is what is very interesting about that, though those observations is that they help explain the large actually substantial effects relative to the size of these policies once again noted that our time and again observed in public use data. So there is a series of papers that were published in the early 2000s between 2000 to 2003, although it about 2007 or so, and then more recent paper that was published in 2012. All of them use data from the from the CPI and the analyzed these policies, and we keep finding the exact same, almost the exact same effects, or at least the findings of wage gains in particular and small dis employment, small loss of employment. Overall, these seem to be they seem to be robust across all of these analyzes and then in our own analysis, and we are using an entirely different dataset that is really pretty much all focused. But it’s, you know, population based kind of random sample we are finding we are able to replicate, we’re able to see some of the wage gains as well, although we’re not seeing exactly the kind of employment losses that were noted before and those in our analysis, the wage gains seem to be pretty kind of dose response or, you know, showing a dose response relationship in the sense that the more likely category of workers are to be covered by directly covered by the ordinance, the higher the estimated effect of the policy on them. So if you take all workers in the labor market, we find it kind of a small, relatively small wage increase if you further restrict the sample to those who are privately employed, those who are potentially in covered industries, and we try to get around that as much as we can to get to that as much as we can, you find stronger and stronger facts. And so that gives some credence to the notion that these policies have effects that show up in an even larger samples.

Chancellor: Could you tell me more about the effects that you are seeing and maybe how you went about measuring those?

Hussein: So in our analysis, we try to analyze the effects of these policies among the kind of more likely affected workers. So we focus on low wage workers, those earning the bottom tenth of the wage distribution, and we’re also looking at workers who have a high school degree or less because those are those hurt. The more likely to be affected groups, the workers in the bottom decile or the bottom tenth of the wage distribution have been, quote unquote the treated group in previous studies. So that helps compare our findings to the previous findings. So we are, as I mentioned minute ago, we are able to see some sizable kind of dose dependent increases in wages. We also see a bit more hours, more weekly hours for employment and hours for these workers greater likelihood that they have access to health insurance and then also potentially a greater likelihood to have more doctor visits and less delayed care overall for high school graduates, those with the high school diploma, which we consider to be slightly more skilled than those with less than a high school education. We don’t see much wage changes, but we see a bit more hours. We also detect kind of in a robust way, better health status and better mental health scores, and also more visits and less delayed care, as we have observed for the for the lowest wage workers. For those who are you who have less than high school education, we see a bit more wages, but potentially less hours, especially among younger workers. So there is a large we detect a large loss of working hours, potentially switching to more part-time hours than full time among younger workers, those who are under 25. And with that, we see kind of a potentially parallel decline in mental health scores as well. So overall, there seems to be there seems to be gains among low wage workers writ large, but those gains seem to be much more pronounced among the higher skilled workers, and they appear to be not only. Riven by gains in wages, but also, perhaps more importantly, gains in hours and potentially benefits as well.

Chancellor: You know, broadly, this is this is a good story, right? I mean, where you’ve seen a lot of positive things, it seems like coming out of the passage of these living wage ordinances, that is that how we should mostly characterize this.

Hussein: I think so. I mean, even beyond our analysis, there has been two streams of work in this. There has been the stream of population samples. You take a study, you take a dataset like the CPS and then you analyze the effects of these policies in those data where you were likely to find some signal and then you find a pretty, pretty strong signal kind of consistently, as we said. And then there is also the other and our study fits within that stream. And then there’s the other stream of work that tried to actually go to the very firms and employees themselves that were directly affected and saw differences and their wages and benefits because of these ordinances and in both studies. And those studies are also showing pretty large effects as well. You’re showing wage gains, robust wage gains. They are showing overall positive changes in employment once again, more towards full time employment, a little a little less part-time hiring, but generally better employee turnover and satisfaction as well satisfaction with the job because now the job is being kind of, you know, is paying benefits and giving higher wages. And so yes, I do believe that we should think positively of these of these policies, both in terms of their effects, their known economic effects and then also the kinds of health effects we’re seeing in our data. And there has been a lot of resistance to minimum wage policies in general because of the potential for this employment and losing jobs. And then all of those all of that discussion, which I have to say based on my reading of the evidence and the meta analyzes that have been done of the minimum wage literature and economics, that there is really little evidence that the minimum wage policies are associated with employment losses. But that point aside, what I wanted to say is that so if you think about what employers are gaining by contracting with the city government, for instance, they are going to do the kinds of jobs or the kinds of functions, you know, their participation in the economy, regardless of whether the city contracts with them or not. The fact that the city contracts that gives them profits above and beyond what they what they were going to get, regardless of working with contracting with the city. And so those additional profits are call more or less economic rent. And so what happens with these living wage ordinances is that workers start to share in those profits along with the employer. And there is evidence that that is actually happening, that the companies aren’t quite passing the additional cost of the ordinances. You know, in terms of higher benefits on higher wages for the employees, to the consumers, but rather they are taking, you know, a piece of their profit and then using that to cover the additional wages and benefits for the employees. And so from an economic standpoint, it’s a more efficient form of redistribution than flat out requiring minimum wages. Although once again, I don’t believe there are necessarily efficiency losses when with broader minimum wage mandates. So overall, yes, I do believe that these policies are pretty positive and they extend to another whole other realm of public policies that have potential health implications and certainly economic implications, but are more obscure but potentially more relevant in our day and age.

Chancellor: I want to just dwell on the employer piece of it for just a moment because you’ve written a bit about how there’s the potential right that if workers are being paid better, have you seen better health outcomes, right? That that’s good for the employer usually, right? I mean, are we going to see better retention, you know, sort of less hiring costs, things like that?

Hussein: Yeah. Yeah, that’s a very good question. So the gains for the employer, one thing we were talking about when we started working on this, what are the potential mechanisms that could improve that could make these policies improve health for the employees, for the workers themselves? And a big part of that was really job satisfaction and turnover. And if you think about these particular benefits, they aren’t just for the employees, they’re also for the employer as well. When you have a more satisfied group of employees, they become more loyal and you’re giving them better. Fitz, you’re also competing in the in the in the marketplace, and so that helps attract more talent and build loyalty to the employers. And so I do believe there are absolutely potential benefits here for the employers having these kinds of policies. And there has been I mean, on that on that side, there has been very interesting work as part of the shift project, I think at Berkeley and then maybe now at Harvard, I believe showing that companies that pay the most attention and give better benefits to the workers, especially in the retail sector, have greater worker satisfaction and much lower turnover rates and loyalty. So I was one time at one of those companies, the top cited company. I’m not sure if I’m allowed to cite, you know, commercial examples. But Costco, for instance, is considered by many labor economists or economic sociologists working in this sphere to be offering really the best benefits and having the higher rates of retention among its workers. And indeed, you can actually feel that kind of energy, that kind of loyalty among the employees among cashiers and other frontline workers at places like that. So, yeah, I certainly believe that this has its own benefits for the employers as well. When you have a satisfied, healthy and well population of employees, the work will feel fair better.

Chancellor: What has been your takeaway from this research and what does it seem like matters?

Hussein: You know, these policies started being popular being, you know, started going around since the mid 90s. And some of them, for example, we double checked with the city of Milwaukee when we started this project, and they have. The ordinance has been on the books since then. The living wage amounts have been updated since then come all the way until we’ve been, we started working on this. So one thing that I know is that many of these policies are still alive and they are still working, and they also have their counterparts in the state and federal government as well. We have contracting laws that demand or mandate similar or comparable minimum wages, higher minimum wages and potentially benefits as well for service manufacturing and in construction workers, both at the state government levels and in federal government as well. There’s the MacNamara O’Hara Act, there’s the Davis-Bacon Act. There’s a bunch of legislation that has been around for many, many years that does the same thing at higher and higher level jurisdictions, state and federal. So we know that these policies continue to exist. At the same time, we know that they are obscure, so they are obscure to that to the general public. They are sometimes even obscure to the clerks, to the kind of clerical employees in some of these cities. For example, when we try to get some of the ordinance texts the original actual legal documents from some of the cities, the clerks sometimes didn’t know whether there was actually an ordinance for that or not. So they are they might be obscure from that perspective, but they are also. Their effects are not well studied either, and they continue to be important tools in the absence of universal wage and benefit mandates. They continue to be important tools for ensuring or improving the economic well-being of low wage workers and helping them with income challenges. And so I think living wage policies, as they have been built in the comparable laws at the state and federal levels, they both try to address the precarity of contract work and the fact that although that work exists, it can exist. But it has to be regulated in some ways to guarantee some just basic minimums in wages and benefits for the economic and health well-being for these populations. And so the evidence our studies are trying to generate could inform could shed some light on why these policies are important and should perhaps be expanded and until we have more universal system of social protection for low wage workers from both wages and benefits standpoint.

Chancellor: Thanks so much to Professor Mustafa Hussein for taking the time to talk about his work with us. This podcast was produced as part of a grant from the U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation. But its contents don’t necessarily represent the opinions or policies of that office, any other agency, the federal government or the Institute for Research on Poverty. Music for the episode is by Martin DeBoer. Thanks for listening.