New living wage movement

In this chapter, I argue that the living wage movement both in the United States and abroad has been motivated by the transformations in the global economy. In the United States, the living wage movement specifically, and the statewide minimum wage initiatives it has inspired, have been a response to the collapse of the federal minimum wage, or what might be termed as the failure of wage policy. In this vein, it fits into Pontusson’s (2005) liberal market economies framework whereas in other countries it reflects more the social market economies framework. It also fits into Esping-Andersen’s (1990) liberal welfare state regime of limited measures. The collapse of wage policy, especially during the 1990s, ended up being a major factor in the emergence of grass-roots organizations intended to create a minimum wage at the local level. Beginning in 1994 the City of Baltimore passed the nation’s first Living Wage ordinance. Under this ordinance, all companies that had contracts with the city to perform public services were required to pay a minimum hourly wage of $6.10 an hour at a time when the federal minimum wage was still $4.35 an hour. More than a 130 municipalities have since passed ordinances. Although the living wage movement has taken on characteristics of a social movement with the goal of achieving greater justice and fairness in the labor market, it has also been driven by deep structural changes in the labor market, and changes which highlight the need for serious wage policy. Attempts to resurrect wage policy haven’t ended with just the living wage movement, rather they have extended into measures taken by various states to raise their current minimum wages. And in some cases states that never had a minimum wage adopted one. More encompassing statewide efforts have been inspired by the success of these living wage campaigns (Wicks-Lim 2006). Meanwhile, at the national level, the most recent minimum wage increases first legislated in the first 100 hours of the new Congress in 2007 – with increases taking effect in three stages through the summer of 2009 – represented an attempt to restore some elements of formal wage policy. But the action of Congress was preceded by the midterm 2006 election, where not only did the Democrats retake control of the House of Representatives, but several states through statewide referenda passed new minimum wage laws. Perhaps what was most striking about this was that several

states with right-to-work laws passed their first minimum wages. Could we then say that these statewide efforts were a culmination of the smaller local grassroots efforts to pass Living Wage ordinances? The quest for a living wage, however, was not only to be found in the United States, rather living wage movements of varying kinds were developing in other countries, largely in response to a greater tendency to move way from social market economies to more liberal market economies. The living wage, however, does not have the same meaning abroad as it does in the United States. In the United States, the living wage is very narrow, as it generally is a local ordinance requiring private contractors who do business with their local governments to pay a specified minimum wage. Campaigns in other countries are actually reminiscent of the historical living wage in the United States, mainly a quest for a national minimum standard. In Canada, for instance, struggles to achieve a living wage have primarily focused on the need to increase the minimum wage, particularly for members of the Homeworkers Association (Eaton and Dagg 2004). In Britain, campaigns for living wages have been about low-wage workers. According to Damian Grinshaw (2004), the British campaign for living wages, or lowpay campaigns as they are called, essentially contain three dimensions: (a) the improvement of the National Minimum Wage; (b) the elimination of a two-tiered work force; and (c) the prevention of over-reliance on in-work benefits. Or some would say to represent a shift away from older policies of making work pay predicated on in-work assistance to a new ethical view that workers are entitled to a guaranteed minimum income and should be paid wages on some notion of need (Grover 2005). Because other countries’ foci have been on national policy, their achievements have been considerably broader than in the United States where the immediate benefits only accrue to those working for firms with local contracts. In Britain, these low pay campaigns provide new insights for understanding the forces shaping wage structures among low-paid workers. By highlighting the issue of poorly paid workers, they have been successful in pressuring and convincing employing organizations to improve levels of pay. In Britain where there is no official equivalent of the US poverty threshold, the aim of the living wage is nonetheless similar to that of the United States: to increase the wages of poorly paid workers. Living wages, then, are seen as part of a wider concern in the labor movement with tackling poverty (Grover 2005). Indeed, they have been the force behind the attainment of Britain’s National Minimum Wage (NMW) introduced by Britain’s New Labor Party in 1999. Between 1979 and 1997, under a Conservative government, the United Kingdom experienced rising levels of income disparities and poverty, and also a growing percentage of low-paid workers. By 2005, an estimated 22.1 percent of workers in the United Kingdom were categorized as “low pay.” Low pay in the United Kingdom has also been associated with female employment, part-time work, and low-skilled occupations. And compared to continental Europe, the United Kingdom never had a highly regulated labor market. A rapid increase in earnings inequality and a sharp increase in the number of households during the

1980s and early 1990s led to a substantial increase in household poverty (Mason et al. 2008). Historically, trade unions provided significant protection for many workers at the low-end of the labor market. Union membership peaked at 53 percent in 1979, but that peak was followed by a sustained decline, precipitated initially by the severe recession at the end of the 1970s through the beginning of the 1980s. Union density now stands at 29 percent. In 1989 when density was 53 percent, about 78 percent of the workforce was covered by collective agreements. Now with 29 percent density, only 36 percent of the workforce is covered by collective agreements. In the vast majority of firms, there is no negotiation or consultation regarding pay and working conditions, including unionized workplaces. In contrast to other Western European countries, there never was a single all encompassing system of industrial relations in the United Kingdom. Under the Thatcher government new laws were introduced which not only reduced the scope of unions to act, but essentially created an environment whereby employers were able to withdraw recognition of trade unions. Until 1999, the United Kingdom didn’t have a national minimum wage, but there were other forms of low-wage protection – through a broad system of wage councils (Mason et al. 2008). In Australia, the concept of a living wage is actually an integral element in a national system of wage determination. At the center of Australia’s unique wage setting institutions are quasi judicial tribunals that were established around the turn of the century to manage and resolve industrial disputes. The idea of a living wage was a founding concept in the Australian industrial arbitration system. The Australian Council of Trade Unions launched their living wage campaign in 1996 as a claim before the Australian Industrial Relations Commission to vary awards. With the living wage campaign, the ACTU was attempting to mount a counter-offensive against the newly elected government that was committed to breaking union power and deregulating the labor market. The living wage has, in short, been about preventing the collapse of hourly wage rates in an economy plagued by chronic unemployment and underemployment (Buchanan et al. 2004). And in New Zealand, the living wage has been about achieving fair labor standards. In New Zealand’s labor market, wage determination occurred principally through centralized bargaining systems until the mid-1980s. “Fair wages” were initially defined with reference to prevailing wage rates, but over time they became conflated with appropriate living standards. For nearly a century, the Industrial Conciliation and Arbitration Act of 1894 had established a basic framework for industrial relations. As part of a 1925 statement of the Arbitration Council, the living wage was considered to be a minimum rate earned by a man that would be sufficient to maintain himself, his wife, and two dependent children. Until 1984, the labor market had been governed by the full-income concept – a social wage – that included all non-wage benefits paid by employers, as well as contributions from government revenue to wage earners or the entire population. But between 1984 and 1990, the Labour party, which was always closely linked to the trade union movement, began a process of dismantling market reg-

ulations. In 1991, the National Government enacted the Employment Contracts Act (ECA), which didn’t even mention trade unions; rather they were subsumed under bargaining agents, thereby weakening their ability to recruit and represent workers. Given this climate, the living wage in New Zealand, as is the case in Britain, has been about improving the national minimum wage, which always fluctuated widely in its ratio to average wages (Heyman 2004). The key difference between the United States and other countries, is that the living wage is part of a broader wage policy to either maintain national gains that workers achieved in the past that are perhaps perceived to be under threat, or to obtain a better national wage policy. It is, in short, about national minimum income standards that are meant to encompass all workers. In the United States it is much narrower, and reflects the limited purpose of wage policy – to simply boost wages. In the spirit of incrementalism that characterizes the policy making process in the United States, the living wage has merely attempted to offer assistance to a narrow subset of workers just for a start. That is, with a local foundation in place, the precedent exists to expand further at a later time. There are voices in the United States that view the living wage as a vehicle through which to reinvigorate the declining labor movement (Turner and Cornfield 2007). Arguably, living wage campaigns outside the United States have been successful in achieving the ideals found in the rhetoric of justice and fairness employed by many American campaigns to galvanize low-wage workers. The US living wage movement, in particular, is of interest for two reasons: first, campaigns for Living Wage ordinances have sprung up in response to municipalities contracting out municipal services to private contractors. This outsourcing has primarily been an effort to save money at the local level by having services once performed by relatively highly paid unionized municipal employees to private contractors paying their non-unionized employees considerably less. In this vein, the outsourcing has only represented an assault on wage policy in that it has been an assault on municipal unions. Both of these are reflective of the collapse of wage policy. Living wage campaigns, then, are in essence a response to that assault. Second, these campaigns have also been in response to the failure of minimum wages at both the federal and state levels to keep pace with inflation, which has in essence been the erosion of wage policy. In a larger sense, the contemporary living wage movement, at least in the United States and elsewhere, has been how economic transformations have driven evolving forms of wage policy and also evolving forms of democracy. The rhetorical justification for the living wage has long been the failure of the federal minimum wage to keep up with inflation, coupled with rising inequality. Most treatments of the living wage have focused on the fairness issue. But the living wage has been an inevitable response to much more. On one level, as I demonstrate on the basis of census data from the Integrated Public Use Micro-series data (IPUMS), the living wage was a byproduct of historical forces that made it more likely that some cities would pass ordinances over others. That is, the living wage had more to do with labor market forces. On another level, they have been a response to the failure of economic development

policy, particularly at the local level, in response to these transformations, to attract and create the type of jobs that would pay livable wages. And in the absence of serious wage policy, it was only inevitable that grass-roots organizations – maybe even a social movement – would emerge that would seek to redress the basic grievance – that at root these jobs simply do not pay sufficiently. Although the data in this chapter only looks at economic transformations in the United States, the analysis is nonetheless illustrative of the impact of changing economies. Therefore, it should have lessons for other countries even though policy objectives will differ. What should become clear towards the end of the chapter is that labor market transformation resulting in the disappearance of high-paying skilled jobs ultimately need to be met with a wage policy that will ensure the continuation of a middle class. Moreover, this may well be consistent with much of the literature that has stressed the cruciality of economic development to the maintenance of democracy. Wage policy is actually part and parcel of economic development. That there has been a proliferation of living wage campaigns, particularly in the United States, it is very much a response to the nature of economic development as it has been taking place, and is wrapped up in the politics of redevelopment.