2006_0821_Packet - Laserfiche WebLink

Home

L.ivingWages & Communities: Smarter Economic Development, LowerThan Expected Costs Finally, contractors may have absorbed some of the increased labor costs because the costs were offset by savings resulting from decreased turnover and higher productivity among the worlcers whose wages rose because of the living wage requirements. When the Pasadena BudgetAdministrator interviewed contractors affected by that city's living wage requirement, a number reported that the higher wages had reduced turnover in their workforces.�4 This finding is consistent with studies that have conclud- ed that living wage laws generate countervailing savings for employers that offset a portion of the increased labor costs. For example, a study of living wage costs at the San Francisco International Airport found that higher labor costs were partially offset by savings to the companies in the form of reduced employee turnover and increased productiviry.3s City Business Subsidies: Smarter Economic Development Ciry and county business subsidy programs ��p+��14• provide taxpayer-fundedgrants, tax abatements or sub- sidized loans to businesses that in exchange pledge to create or retain jobs in the locality In recent years, localities have begun to include such programs under their living wage laws. As explained by stafF in the cities and counties in our study, doing so effectively establishes a ciry policy that business subsidies must be reserved for creating better-paying jobs in the locality. Our investigation examined the experiences of cities and counties that have extended living wage requirements to their business subsidy prograzns. Our aim was to learn whether cities and counties found such requirements impeded the ef�icacy of their programs. Employers Have Continued to Seek City Business Subsidies in Localities Where Subsidized Jobs Must P ay a Living Wage Local po[icyrnakers have sometimes voiced concerns that living wage laws could harm local economies by deterring firms from participating in business subsidy programs—and therefore from locating or remaining in a community. Some have feared that it might be unrealistic to recruit businesses willing to pay higher wages and that a living wage requirement might prevent a city from attracting minimum wage employers—businessesthat, while perhaps less valuable to the local economy, might nonetheless offer some benefits such as generating sales tax revenue. In order to assess whether businesses might be deterred from participating in business subsidy pro- grams because they are unwilling to pay higher wages to their employees, we loolced at ten cities with a living wage requirement for subsidized economic development projects: Duluth, MN; Los Angeles, CA; Minneapolis, MN; Oaldand, CA; San Antonio, TX; San Francisco, CA; Toledo, OH; Warren, MI; Ypsilanti, MI; and Ypsiianti Township, ML These ten cities represented all of those nationally that had had a living wage requirement for subsidized economic development projects in place by 200Q— a year before the study began—and where we were able to identify a city administrator able to assess the impact of the living wage policy on the city program. We interviewed policymalcers and economic development personnel in these cities, and examined reports prepared by the economic development departments of Duluth, MN, Toledo, OH and Oaldand, CA to determine whether businesses have continued to participate in business subsidy pro- grams in localities where subsidized jobs must pay a living wage. As Table 4 on the next page shows, almost no adverse impact on subsidized economic development projects could be detected. Overall, administrators concluded that the requirement to pay a living wage and health benefits to employees did not result in fewer applicants for business x�� :tti '�' In fact, a number of cities report- ed banner years for economic development in 2001, with correspondingly low local unemployment levels?' Administrators who noted a decline in economic development since 2001 attributed this to general economic conditions, rather than to business concerns about the living wage requirement.