Wages & Benefits
Written by Walker Kahn and Maria Manansala
What's the Problem & How are Progressives Addressing It
Although the United States’ economy has expanded over the years and worker productivity has increased, workers haven’t seen their incomes rise with the overall growth of the economy. Adjusted for inflation, the average wage in 2018 had nearly the same purchasing power as it did in 1978. With the increased cost of living, these stagnant wages are no longer enough to ensure that full-time employees can pay their bills, provide for their families, and afford education. The federal minimum wage was intended to secure an adequate standard of living for employees, but at $7.25, it’s too low to provide financial security to workers. Adjusted for inflation, the minimum wage has declined 17% within the past decade alone. Coupled with a lack of employee benefits, workers are not given the resources they need to support themselves and their families’ survival.
Low wages, along with wage theft, benefit corporations and wealthy individuals at the expense of working- and middle-class Americans. Wage theft was estimated at $15 billion annually in 2017, while the total value of all robberies, burglaries, larceny, and motor vehicle theft in the United States in 2015 was $12.7 billion. According to Census Bureau data, in September 2019, income inequality in the United States reached its highest level in more than 50 years. In particular, women and people of color account for the bottom of the economic hierarchy, due to their over-representation in low wage jobs, and the racial and gender pay gap.
In this time of rising economic inequality, exacerbated by the COVID-19 pandemic, local communities can take a high road development strategy to promote equity and achieve healthy and prosperous communities. Local tax codes can be altered to build greater pay transparency, prevent wage theft, and end discriminatory pay gaps. Additionally, raising wages and benefit floors to provide all workers with a sufficient living wage, health insurance, and paid leave can ensure that employees are justly compensated for their labor. Lastly, creating and improving access to good jobs can build a healthy and productive workforce, capable of supporting themselves and improving the economy.
Available Local Levers & Targets for Reform
While local governments have led initiatives to raise wages and benefits standards, these efforts are often obstructed by state preemption laws that overrule their authority. In 26 states, cities and counties are outlawed from establishing municipal minimum wages higher than the level set by the state. Similarly, 28 states have passed laws that prohibit cities and counties from establishing local paid leave requirements, or requirements that differ from state-wide standards. When crafting progressive labor rights policy, local policymakers must creatively navigate around these state-wide restrictions.
In states that do not outlaw municipal minimum wages, city and county governments can gradually raise the local minimum wage to $15-per-hour. A $15 minimum wage would narrow racial and gender pay gaps, lift millions of workers out of poverty, and help stimulate the economy by putting more money in the hands of consumers. Local policymakers can also lift wage standards by enacting living wage ordinances. A living wage is determined by the average cost of living in a specific area, which is a calculation that the federal minimum wage and most state minimum wages neglect. A report by the Economic Policy Institute found that living wage laws positively benefit working families, raise productivity, and decrease turnover.
Additionally, in states that do not outlaw local paid leave requirements, policymakers can pass paid sick leave and paid family leave ordinances. These benefits are especially important during the COVID-19 pandemic, as they help mitigate the spread of the virus and provide necessary time for workers who contracted the illness to recover.
Local policymakers can enact wage theft ordinances to ensure that workers receive the wages and benefits that they contractually owed, stop independent contractor misclassification, and protect workers from retaliation for asking what is owed to them. Cities and counties can also ban salary history disclosure and enact pay equity and transparency ordinances to promote just worker compensation and reduce racial and gender pay disparities.
Unlike employees, independent contractors are excluded from many of these laws regulating wages and benefits. In particular, gig workers are exempt from wage laws, family and medical leave laws, and benefits and social insurance programs that are accessible via employee status. As a result, many employers mislabel their employees as independent contractors in order to evade payroll taxes, minimum wage requirements, and more. To mitigate this problem, local policymakers can establish worker misclassification task forces, while striving to extend labor laws and employee protections to include independent contractors.
The ordinances that cities and counties adopt are meaningless if they are not enforced. Existing wage laws have significantly high rates of noncompliance because employees are too fearful of retaliation to come forward with complaints, while the penalties employers face in the rare chance they are caught are minimal, and fail as disincentive to wage theft. In order to build robust enforcement for raised wages and benefits standards, cities and counties can create local enforcement agencies, establish private right of action and retaliation protection, subject violators to the same criminal penalties we impose for other types of theft (such as fines, jail time, etc.), pass violations to the district attorney, and revoke or deny renewal of business licenses from violators. They can also utilize procurement and responsible contracting strategies by prohibiting contracts and spending from businesses who do not pay a sufficient, living wage; this tactic is especially useful for municipalities that are outlawed from passing a local minimum wage.
One of the most important steps to building a healthy and justly-rewarded workforce is to improve access to and create more good jobs, or jobs that pay sufficient, living wages and benefits. This can be done by closing the skills gap by investing in basic skills training programs to teach the foundational skills that are necessary to secure a job. This strategy is particularly beneficial for job seekers that lack education and immigrants that are not fluent in English. Employers can recognize competency-based credentials to increase access to good jobs for those that have noncredit-bearing education. Moreover, through public investment in infrastructure, cities and counties can create significant job opportunities to meet the rising demand for good jobs.
Current Reforms & Tools to Fight for Them
Many local governments have passed living wage laws, including in Los Angeles, Santa Cruz, and Madison. NELP has compiled a list of local living wage ordinances across the country, and many more examples and resources can be found in the ProGov21 database. In Los Angeles, the living wage policy included healthcare coverage for airport workers. In states where minimum wage laws are prevented by preemption, municipalities can institute procurement policies that require suppliers, contractors, and subcontractors for the city to pay a living wage.
Minimum wage ordinances have also been beneficial to individuals and working families. Over the years, these ordinances have progressively increased the minimum wage in Los Angeles, San Francisco, Albuquerque, Montgomery County, and San José. The ProGov21 database has numerous resources highlighting these ordinances across the United States.
Prior to the COVID-19 pandemic, paid sick leave ordinances have been passed in Milwaukee, Jersey City, Chicago, and many other cities. Due to the COVID-19 pandemic, policies protecting workers’ health are vital now more than ever. As of March 2020, many cities, such as San José, have begun updating or creating new paid sick leave laws in response to the COVID-19 pandemic. New anti-retaliation ordinances have also been passed in Chicago and Los Angeles that protect workers if they report or organize against health and safety violations.
With pay discrimination negatively impacting many workers, cities such as San Diego and Albuquerque have passed ordinances that prohibit pay discrimination. In Philadelphia, San Francisco, and New York City employers are banned from inquiring about a job applicant’s prior wages through ordinances. The Detroit Regional Workforce Fund has worked to bridge this skills gap and increase adult education among low- and moderate-income people.
Other cities have taken the lead on enforcement. Los Angeles, El Paso, and San Francisco, have prioritized effective enforcement of minimum wage and wage theft ordinances by organizing multi-agency task forces.
In Washington, D.C. and Santa Fe non-compliance with wage theft ordinances can result in fines and imprisonment. A report from The Center for Popular Democracy lists cities (including New Brunswick, Princeton, San Francisco, Seattle, Houston, and Chicago) where businesses risk having their licenses revoked if they commit wage theft. Cincinnati passed an ordinance that revokes procurement contracts if contractors violate wage theft laws in order to dissuade the practice. This toolkit has strategies cities can use to enforce wage theft and minimum wage ordinances, such as creating an Office of Labor Standards and Enforcement empowered to access payroll records, interview workers, and inspect labor sites.
Taking it to the Next Level
With an over-representation of people of color and women in low-wage jobs, improved wages are necessary to address rising income inequality and the racial pay gap and gender pay gap.
Benefits that increase access to education and technical training build a diverse, qualified workforce while ensuring that marginalized communities are represented in well-paying careers. Community-focused apprenticeship programs like Industrial Manufacturing Technician (IMT) can improve equity and address demands for skilled workers in the manufacturing sector.
Creating good jobs that pay good wages and provide benefits can rebuild the economy by putting more income in the hands of consumers. By prioritizing the creation of good jobs, we can rebuild the shrinking middle class and ensure shared prosperity.
Public investments for sustainable infrastructure can create good, green jobs with livable wages that benefit their communities. Localities can use city planning and building codes to promote sustainable land use and development while offering good paying jobs to residents.
Inclusive business participation in local government procurement and contracting can be an important source of income and generate employment in communities of color. The upcoming procurement roadmap can provide further guidance for localities looking to advance equity and create jobs with good wages and benefits through the procurement process.
The ProGov21 Home Rule roadmap details how local governments can fight against preemption laws and state intrusions, strengthen local authority, and pass wage laws that work for local residents.
Community Benefits agreements promote corporate and government accountability in economic development, ensuring that job creation fulfills the needs of communities.
Helpers, Allies, and Other Useful Organizations
The following organizations provide useful, high-quality policy material related to wages and benefits policy:
- National Employment Law Project
- Economic Policy Institute
- Corporation for a Skilled Workforce
- Center for American Progress
- Policy Matters Ohio
Mayors Innovation Project, our sister organization, is a national learning network for mayors committed to shared prosperity, environmental sustainability, and efficient democratic government.