by Charles Lammam
January 24, 2014
For many years, Canadian governments have tried to legislate higher earnings for low-wage workers. Living wage laws are a relatively new policy that gained prominence in American cities starting in the mid-1990s. This report reviews the scholarly research on living wage laws from the United States and concludes that the US experience should make us cautious about adopting this policy more widely in Canada. Both economic theory and evidence suggest that living wage ordinances, like minimum wage legislation, create distortions in the labor market that have a negative impact on employment. A typical result is that fewer jobs and hours become available and it is usually the people who are less skilled who are most adversely affected. Also, living wage laws have the potential to inflate city budgets through higher public service costs.