Working for a living wage

As campaigns heat up throughout New England, it looks like cities lead the way

By Noah Bruce
Illustrations by Mike Gorman

If Chellie Pingree is able to take down incumbent Senator Susan Collins in 2002, and make the jump from Maine state senator to US Senator, her success will be attributed to her previous win championing the Maine Rx program. Before she took on drug companies and won, however, Pingree challenged Maine companies who receive government subsidies and narrowly lost.

In the 1999-2000 Maine legislative session, Pingree sponsored the “living-wage” bill which would have required that any company that receives over $10,000 in state or local subsidies be required to pay a living-wage. This was defined as two thirds of the average wage for a specific job in a specific county. The bill would have also required affected employers to provide health benefits.

The legislature scratched the benefits portion of the bill, but left its heart — the living wage — unscathed, and it looked like a major win for advocates who feel that companies who receive free money from the state or city should be required to pay decent wages.

“Maine is happy to open its arms to any company that will provide jobs,” says Pingree, “but we shouldn’t use taxpayer money to subsidize low-paying jobs that will require more taxpayer money to subsidize them through food stamps and other government programs.”

Governor Angus King put a stop to any activist celebrating, however, when he vetoed the bill; saying it would be bad for the business climate in Maine.

According to activists like George Christie, director of the Dirigo Alliance, a non-profit group which advocated for the bill, vetoing the legislation was bad for the working climate in Maine. “The rest of the working people didn’t make it onto the governor’s agenda,” says Christie.

Living-wage laws, like the failed Maine legislation, are designed to help the working people at the bottom of the economic ladder. The premise behind the movement is that no one who is working should live in poverty. That seems pretty reasonable.

Yet, according to UMass-Amherst professor of Labor Studies Stephanie Luce, at least 25 percent of the American workforce — roughly 32.5 million workers — earn less than the federal poverty line for a family of four — $17,650. The majority of the working poor are women — 31 percent of working women earn less than $8 an hour, compared with only 20 percent of men.

Part of the problem is the minimum wage. At the current $5.15 an hour, assuming an 8-hour day, a 40-hour week, and a 50-week year, minimum wage pays $206 a week: $10,300 a year. Less than that when social security is subtracted. While this may be enough if you’re a high-schooler living with your parents, you don’t have to be an economist to realize that in today’s world you can’t live on ten grand a year, and you certainly can’t raise a family on this kind of money.

Of course, it’s never been easy to live on the minimum wage, but over the past three decades it has become decidedly more difficult. Simply put, the minimum wage, which requires an act of Congress to raise, has not kept pace with inflation.

In 2000 dollars, a minimum wage job in 1969 paid $6.99 an hour. By 1979, the figure was down almost a quarter to $6.75. Ten years later, it bottomed out at a measly $4.65. Through two raises in the ‘90s, the minimum wage has begun to poke it’s head out of the hole, but the fact is that America’s working poor have not benefited from the economic boom of the past 20 years.

Organizers have decided the most practical route to lifting up the working poor is through changes made to the use of public money. Therefore, living-wage ordinances harness the power of government as an employer, a purchaser of services, and a subsidizer of private enterprise to pay workers a decent wage.

The failed Maine bill focused on the role of government as a subsidizer and with good reason — Maine is a state that doles out a lot of corporate welfare. For fiscal year 2002, the Maine budget allocates $60 million for its largest subsidy, the BETR program. In 2003, the figure will climb to $68 million says Christopher St. John, executive director of the non-profit Maine Center for Economic Policy, and it is growing quicker than planned. “In its seventh year, the BETR program will reach where it was supposed to be in its twelfth year,” he says.

Worse, some of the companies that receive the most subsidy money are the same companies paying dirt wages. In 2000, Commonwealth Institute, a Cambridge-based think tank published Wages at Subsidized Companies in Maine, a report that details how much Maine companies are receiving in subsidies and how much they pay their workers. The study was made possible by a 1998 disclosure law that required Maine companies on welfare to report how much they pay their workers.

According to the study, though it may not run a sweat shop in Taiwan like Nike, New Balance Athletic Shoe has a deal almost as sweet in Somerset County. In 1999, it received over $160,000 in subsidies, but paid 60 percent of its workforce an average income of $15,904. People’s Heritage Bank, based in Cumberland County, took home a $741,463 tax break but still paid 64 percent of their workforce, 1058 people, an average of $19,213. C.N. Brown Company, the Oxford County-based parent company of Big Apple convenience stores, only received $13,000 in taxpayer money but they made up for that shortfall by paying 90 percent of their workforce an average of $12,500.

Keep in mind that these income statistics are for full-time workers only. The study left out part-time workers, though maintaining a large amount of part-timers is a classic method corporations use to pay no benefits and keep wages low. “Subsidized employers with large numbers of part-time employees include L.L. Bean, ICT Group, Hannaford Bros., Envision Net, and C.N. Brown Company,” says the report.

Neither does the report include subsidized companies, like Wal-Mart and Rite-Aid, well known for paying low wages, but who failed to provide data to the state.

Unfortunately, 2000 was the first year the law had any teeth — subsidies can now be withheld if companies do not report their wages — prior to this, companies could simply disregard the law. Maine and Minnesota are the only two states that have any sort of disclosure law. The hope in Maine was that if subsidized companies revealed what they were paying, living-wage legislation would follow. It did, but it didn’t pass Governor King.

This legislative session, representative Sue Hawes (D-Standish) sponsored an exact copy of the previous year’s bill, but this time the bill didn’t even make it out of committee.

Passing a statewide living-wage bill may not be politically feasible at this time. That doesn’t mean the living-wage campaign in Maine is dead, but in the future it will most likely manifest at the municipal level like it did in Lewiston-Auburn in 1999.

In that year, the sister cities jointly passed a law requiring companies that receive tax increment financing (known as a TIF) pay a “livable wage” of $9.32 an hour. According to Lincoln Jeffers, an economic development specialist with the city of LewistÖn, the law has not been an impediment to attracting companies to the city at all. “We have not seen any of that,” he says. However, as the empty storefronts will attest, Lewiston/Auburn isn’t exactly a boom-town.

Portland has no such law, though Councilor Jim Cloutier did propose an ordinance similar to Lewiston’s in 1999 that never made it out of committee. According to St. John, there may not be much need. “A case could be made that Portland has been relatively sophisticated in its use of the TIF,” he says.

Still there may be new municipal campaigns brewing in the state. “We’re talking about living-wage campaigns in Bangor and Portland,” says Christie.

The efforts at the state level in Maine and in Lewiston-Auburn reflect what Greg Leroy, director of Good Jobs First, a project sponsored by the Institute for Taxation and Economic Policy, calls “an absolute trend to attaching wage and health care requirements to subsidies.” Leroy says this trend reveals that municipalities are waking up to the fact that they can use subsidies selectively to spur positive economic development.

“The whole purpose of development is to develop the economy,” says Leroy. “I think that means to raise the living standards of the common people.”

In an effort to bring jobs to their area, state and local governments have been dolling out tax breaks to attract companies since the 1930s. However, according to Leroy, state and local corporate welfare didn’t begin in earnest until the recession in the early 1980s.

At the time, Saturn was deciding where to locate its new factory, and a virtual frenzy of incentive one-upmanship erupted between states trying to attract the company. The effort culminated in eight governors taking the rather embarrassing step of appearing on the Phil Donahue Show to beg Saturn to come to their state. Finally, Tennessee won with a deal including tax breaks worth $50,000 per new job. A decade later, in 1993, the stakes had grown to the point where Alabama gave Mercedes Benz $168,000 per job to locate a new factory in the Cotton state.

Today, subsidizing corporate investment is standard operating procedure for state and especially local governments. Large companies frequently lure cities into bidding wars with other cities in an attempt to bring the sought-after jobs to their market. “In America, if you are a company,” says Leroy, “and you’ve made a large-scale investment, and your CFO is awake, you’ve gotten subsidies . . . They are so easy to get.”

While the Saturn and Mercedes figures may seem outlandish, at least the manufacturing jobs they brought were well paid. Far worse is the case when a city or state bends over backwards for a company that thanks the city by offering a bunch of minimum-wage jobs, and this seems to often be the case. According to Wages at Subsidized Companies in Maine, 63 percent of the companies subsidized by the state of Maine paid some of their workers less than a living wage (defined by the Maine Economic Growth Council, another think tank, as 185 percent of the then poverty line for a family of two, or $19,673.)

“Many cities still operate on the premise that any job is a good job, not thinking about long term economic development,” says Jen Kern director of the Association of Community Organizations for Reform Now’s (ACORN), Living Wage Resource Center, a group that tracks living-wage campaigns across the country. “Cities that are most desperate think they have to do this,” she says. “If a city spends its limited resources on enriching a company that has no commitment to paying good wages, you are going to have a city that, due to poverty, will be the least attractive to businesses.”

This approach hurts not only the folks who end up with the low-paying jobs, as Pingree pointed out, but taxpayers in general who end up subsidizing the low-wage workers who, more often than not, receive benefits from the government like food stamps and Medicaid. “As a taxpayer, I have a self interest in subsidizing companies that pay a good wage,” says Leroy.

The living-wage movement is a very significant development moving toward economic justice in our time,” says Paul Sherry, a past president of the United Church of Christ with a history of social activism who now consults with living-wage campaign organizers in Cleveland. “In an effective way, it relates the morality of working towards the goal of people having sufficient resources to live with an effective method for change. It combines good ethics with sound practical politics.”

Sherry believes there is a “renewed commitment to economic justice in the religious community” reflected in the participation of churches with progressive activists and organized labor in most living-wage campaigns.

The collaboration of leadership from these three activist communities has led the campaigns in cities throughout New England, a region that has played host to a hot-bed of living-wage organizing. The laws are especially significant here because, according to Jared Bernstein, an economist with the Economic Policy Institute (EPI), a Washington-based think tank, it has the highest cost of living in the United States.

Despite the campaign to force subsidized companies to pay a living wage, and the law in Lewiston-Auburn, and the almost unique disclosure law, Maine remains behind the bulk of New England in instituting living-wage laws.

First of all, besides the Lewiston-Auburn law, and living-wage requirements for some of the smaller state subsidies, Maine has no living-wage ordinances. Secondly, the effort in Maine has been narrow in focus. While it has worked to see that subsidized companies pay decent wages, unlike campaigns in Massachusetts and Connecticut and to some extent Vermont, it has not looked at the issue of paying city employees or, more importantly, city contractors a living wage.

Though the term “living-wage ordinance” is used differently by different activists, for the sake of this discussion it is defined as a law at either the city, state, or county level that mandates an hourly rate above the federal or state minimum wage for included workers. Included workers can work for employers from three categories — government, companies with government contracts, and companies that receive government subsidies.

Cambridge is the only New England city with an ordinance that affects all three categories. Boston, New Haven, Connecticut, and Hartford have laws affecting city contractors, while Somerville, Massachusetts, passed an ordinance including city employees and those who work for contractors. Burlington, Montpelier, and Barre, Vermont have laws ensuring that government employees receive a living wage.

Now, city councils in both Providence and Bridgeport, Connecticut, are currently considering instituting comprehensive ordinances like the one in Cambridge.

If instituted, the Providence ordinance will mandate a living wage of $12.30, the highest in the country. Bridgeport is not far behind with $11.08. Like many living wages, both figures are based on the federal poverty line. In the case of Providence, it’s 150 percent of the wages necessary to keep a family of four at the line, 130 percent for Bridgeport.

One significant difference is in the treatment of benefits, or rather lack of benefits. Under the Providence law, if an employer fails to provide health benefits, they must tack on an additional $4.02, bringing the total living wage sans health benefits to $16.32. Not a bad wage to drive a bus or sweep floors. In Bridgeport employers must pay an additional $1.50 per hour.

The Providence and Bridgeport campaigns demonstrate how newer campaigns are building upon foundations laid by earlier laws. According to Jon Green, head organizer at ACORN Connecticut, the lead organization in the Bridgeport campaign, his job is made easier by the previous efforts in Hartford and New Haven. “It is definitely helpful that other cities in the state have done this,” he says. “We’re not breaking the mold. It makes people feel more comfortable.”

In addition to the comfort factor of exploring charted territory, the Bridgeport and Providence campaigns both borrow language directly from the Boston and Hartford laws.

Both campaigns borrow a provision in the Boston law that requires included companies to post jobs with “community-based hiring halls” and consider hiring folks referred by the halls before looking elsewhere to fill a position. The halls will be operated by community non-profits and unions and, according to Mathew Jerzyk of RI Jobs with Justice, will ensure that “folks in the community have access to the jobs first.” Green adds that this provision enables the “transforming of neighborhoods” as many of the halls will be located with organizations that work with poorer communities. “If you get 50 new jobs in the east side [of Bridgeport] that could mean 50 more people with mortgages . . . That could mean a new business could open up in the neighborhood or a business that doesn’t have to close its doors.”

Borrowing from the Hartford ordinance, Providence and Bridgeport include a provision that ensures that affected employers will not impede the forming of a union. In exchange, the new union promises not to strike for the duration of the contract. “The idea is to make it easier to organize unions,” says Green and to help ensure “labor peace” which is “in the best interest of the city.”

While there has not yet been much opposition to the law in Bridgeport, the same cannot be said for Providence where the business community has come out as “definitely opposed to it, absolutely,” in the words of Jim Hagan, president of Providence’s Chamber of Commerce. “We think it would make the city uncompetitive.” Hagan’s principal argument is simple and is at the heart of the opposition to living-wage laws all over the country. He believes forcing affected employers to pay higher wages will dissuade companies from moving to Providence and will force businesses — especially small businesses — already in Providence to leave. Thus, he reasons, Providence will suffer economically, employment will go down, and the ordinance will end up hurting the low-wage workers it was designed to help.

Hagan is not alone. University of Notre Dame professor of economics Thomas Gresik says that, for an employer, the hiring process is a gamble, and “an artificially inflated wage,” he believes, increases the stakes of this gamble, making employers less willing to hire. “If you have to pay those wages,” he says, “you’re not going to be willing to hire those workers.”

He further argues that after a living-wage ordinance is passed, “the people lining up for the [new higher paid] work,” are, for the most part workers “with bad reputations or no experience.” In other words, crummy, or at the very least, unproven. The logic runs that superior employees will have already found better work and do not need the help afforded under a living-wage law.

To support his argument, Gresik presents the hypothetical situation wherein, instead of raising the wage, a city lowers it. “Suppose you were to lower the wage. Folks that were conscientious, they’re going to have opportunities. It’s the folks with bad reputations and no experience that are going to be left behind.” If we flip things over to the proposed situation where the wage is raised, it’s these same irreputable louts, in Gresik’s view, who benefit.

Gresik’s argument rests on the tenet of pure capitalism that the marketplace rewards good, conscientious workers and punishes the slack and lazy.

Yet, does anyone really believe that the 25 to 30 percent of Americans who work jobs that pay under $17,650 (the poverty line for a family of four) are all slothful or incompetent?

If not, then one must conclude that the marketplace does not necessarily reward good workers. As Richard McIntyre, professor of economics at the University of Rhode Island, writes in his report The Providence Jobs and Living Wage Ordinance, “Minimum- and living-wage laws raise the uncomfortable truth that some workers do not receive the true value of their contribution in ‘free’ labor markets.” In fact, oftentimes the market screws those at the bottom to save money.

Such was the case with Sara Gonzalez, a teacher’s assistant in the Providence school system who for three years worked for $5.65 an hour without benefits. If she worked 60 days straight the school was required to pay her a better rate and provide benefits. To get around this stipulation, every 59 days the administration at her school would “terminate” her to keep her from receiving benefits and full-time pay only to re-hire her and start her at day one.

Gonzalez, who is a mother of three was clearly not lazy — during the three-year stretch she worked a second job at a grocery store. And she doesn’t lack gumption — finally after three years she and her co-workers organized and had meetings with the School Department resulting in full-time employment. Today, Gonzalez is one of the organizers working on Providence’s living-wage ordinance.

To predict how Providence’s law would impact its business community, we can look to examples provided by the 60-plus cities with living-wage ordinances. Gresik points out that there is little hard data from these examples, and Luce, the UMass professor who co-authored a book on the subject entitled The Living Wage: Building a Fair Economy (New Press, 2000) admits “there is less data than one would expect,” primarily because most of the laws are very recent.

However, data does exist. According to an evaluation conducted by EPI, “Baltimore’s living-wage ordinance found no job loss as a result of the ordinance.” Further it states “the majority of workers interviewed for the study reported no changes in the number of hours they worked after the ordinance went into effect.” Some contractors in this report said the ordinance leveled the playing field by eliminating pressure to cut labor costs in order to win city contracts.

A report on the San Jose ordinance conducted by the San Jose Office of Quality Assurance found no evidence that contractors were unwilling to make bids with the city as a result of the ordinance. According to Luce, an impact study done in Los Angeles that studied 30 government contractors reported that only five claimed to have reduced employment minimally.

One of the arguments in favor of the living-wage ordinance is that at least some of the money municipalities and businesses lose by paying higher wages is made up by decreased turnover, training, and hiring costs, and increased productivity. Still it is unrealistic to believe that large numbers of low-wage workers will receive pay raises without someone else losing money.

As McIntyre writes in his report on the Providence ordinance, “Scenarios where everyone wins are always attractive but they are rare in practice. It is likely that some of the income gains achieved by low-income workers through this ordinance will come at the expense of contractor profits. It is likely the amount will be low, but the transfer aspects should be honestly acknowledged.”

Luce’s research supports McIntyre’s prediction that businesses will lose profits, but only slightly. “Our research shows,” she says, that the ordinances “cost on average one percent of a firm’s total cost of doing business.” However, this is before factoring reduced training costs and increased productivity into the equation.

Evidence suggests costs to governments are similarly low. A study published by the Center for Labor Research and Studies at the Florida International University before Dade County, Florida enacted a living-wage law in 1999 estimated costs at .01 to .02 percent of the county’s operating budget.

It is clear that living-wage ordinances are no panacea — EPI reports that local governments are often slow to enact the procedures necessary to monitor companies’ compliance and the laws leave many workers unaffected (according to McIntyre, if the Providence law were enacted in 1999 it would have affected 313 workers). McIntyre argues that even the Providence law, which would provide the highest living wage in the country, “does not truly provide a ‘living’ wage, if by that we mean what is necessary to support a family of three at a modest standard without income supports or child and medical care subsidies.”

On the other hand, even Luce, who is a proponent of the ordinances, agrees with Gresik on the premise that at some level a living wage will negatively and significantly affect employment. The question is where is that level and is the proposed $12.30 ($16.02 without bennies) above it?

Unfortunately, neither Luce, nor other economists, seem to have an answer.

Nationally, the living-wage movement is growing. According to ACORN’s Living Wage Resource Center, since 1994, when Baltimore passed the first living-wage law in the country, over 60 cities have followed suit and passed ordinances of their own. The center lists current campaigns in over 75 cities spread across the country, including the New England cities of Brookline, Massachusetts, New Briton, Connecticut, and Portsmouth, New Hampshire.

This is a true grass-roots movement working toward loosening the bonds of poverty on at least some of America’s working poor. On its site, ACORN quotes syndicated columnist Robert Kuttner calling the movement “the most interesting (and underreported) grassroots enterprise to emerge since the civil rights movement . . . signaling a resurgence of local activism around pocketbook issues.”

In a startling move that could broaden the scope of the living-wage movement, in May, Santa Monica, California passed an ordinance that guaranteed $10.50 plus benefits to all workers in the city’s tourism district. This is big news because it applies to all workers, not just those that work for the city, a city contractor, or a city-subsidized company.

According to an article by Vivian Rothstein that appeared on Alternet.org on May 29, 2001, the law is still indirectly based on the argument that businesses that benefit from taxpayer money should pay a living wage. A decade ago, Santa Monica invested $170 million in taxpayer money to revitalize its tourist district. The measure paid off, and turned “Santa Monica into one of the nation’s most lucrative seaside resort towns,” says Rothstein. However, the hotels that benefited from the tourism boom still paid thousands of service workers poverty wages.

This new law opens up the realm of the living-wage ordinance. If municipalities can target entire sectors of their economies that have benefited from public money but still pay low wages, the number of workers affected by living-wage laws would increase dramatically. Rothstein says, “The most likely candidates for future campaigns are tourism-oriented cities where a substantial investment of taxpayer dollars has generated a booming economy supported by low-wage workers.” Kind of sounds like Portland.

However, if laws like Santa Monica’s spread, expect a strong backlash from the business community. Already, in Santa Monica, the hotels are threatening legal action.

Another significant offshoot of the movement is its spread to college campuses. In what may be at least a small resurgence of campus activism, according to ACORN, students at over 10 colleges are demanding that workers at their schools receive a living wage. During the 1999-2000 school year, students at Wesleyan University in Middleton, CT won a year long struggle to force their school to pay contracted janitors a living wage. On May 9, 26 student protesters at Harvard ended a three-week sit-in of an administration building after the university promised to re-examine university wage policies for low-paid workers and contractors. Also in May, students at UConn took over an administration building and won a living wage for janitors subcontracted by the university.

With New England cities and universities at the forefront of a growing movement, where does Maine, a leader on the clean election and affordable prescription drug campaigns, stand? After having lost the fight to tie a living wage to subsidies two years in a row, it looks like the statewide campaign will take a breather.

On the local level, aside from Lewiston-Auburn, Maine has been rather dormant. Thanks to progressive policy institutions like The Maine Center for Economic Policy and the disclosure law, we have a profusion of research, but precious few laws.

Regarding a broader ordinance that would affect not only TIFs but city contractors, Portland Councilor Jim Cloutier says he has given the matter some thought, but the fact that low-wage employers in Portland have a hard time finding employees is an indicator that workers have at least some range of options. The main problems for those at the bottom says Cloutier is lack of housing and health care, problems that are not effectively addressed by legislation that affects a only a select number of workers.

Still, says Cloutier “there are parts of Maine that see a consistent resorting to the minimum wage.” Hopefully we will begin to see municipalities in Maine use the living-wage tool to uplift the people who, despite working full-time, are stuck in poverty. n

Noah Bruce can be reached at nbruce@phx.com.