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Dan Morris

The Pro-Business Argument for a Living Wage

In her LA Times op-ed today headlined Living Wages are Key to Poverty Eradication, Joyce Appelby writes:

But paying a living wage can benefit businesses too. A study of L.A.'s 1997 living-wage law, for instance, funded by the Ford Foundation and undertaken by LAANE in conjunction with the University of California, discovered that the ordinance had increased pay for an estimated 10,000 jobs. Employment reductions amounted to 1%, or an estimated loss of 112 jobs. Most firms gained from reduced employee turnover, which can be costly and disruptive.

This called to mind a somewhat forgotten but important study, Choosing the High Road: Businesses that Pay a Living Wage and Prosper, released back in 2000 by Responsible Wealth, a large network of business owners, investors, and affluent individuals. The study offers a straightforward pro-business argument, synthesizing evidence, data and testimony from large and small businesses. It was published when the living wage movement in the U.S. was not as large as it is today. Much more evidence, data and testimony have appeared in the past decade. Plenty, in fact, to cast doubt on the idea that any large city would need to commission a new study of the benefits of a living wage. I am referring of course to New York City, where debate over living wage jobs is once again heating up. Here is a reminder of what members of the business community already understood ten years ago.

“Businesses… report that higher wages reduce employee turnover and absenteeism, leading to lower costs in the recruitment and training of new employees and improvements in the quality of products and services delivered to customers… Having a motivated and stable workforce not only creates a work environment that supports increased productivity, but it reduces the significant expense of recruitment and training. Such business benefits can go a long way toward offsetting higher wage and payroll tax costs associated with paying a living wage. Not only do individual businesses benefit from paying higher wages, but entire local communities, particularly low-income communities, gain when low-wage workers’ wages increase. Low-wage workers are more apt to spend earnings locally, circulating money back into local economies, which has the potential to help rebuild America’s poorest communities and spur job growth… Increasing the economic self-sufficiency of workers enhances business productivity and opens new markets, while also reducing poverty, strengthening communities and shrinking the demand for government assistance to low-income families.”

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Posted at 4:34 PM, Jun 14, 2010 in Economy
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