Dying to kill the living wage

If Andrew Richner has his way, most unskilled workers will earn no more than the federal minimum wage: $5.15 an hour, a pay rate unchanged since 1997.

The Republican state representative from Grosse Pointe Park is sponsoring a bill that, if enacted, would prohibit Michigan municipalities from passing living-wage ordinances. It would also prevent cities such as Detroit (which passed the first living-wage ordinance in the state in 1998) from enforcing their existing laws.

Under Detroit’s ordinance, companies that have a city contract, get tax breaks, planning assistance or grants exceeding $50,000 from the city must pay employees a wage equal to the federal poverty level for a family of four. Today, that is $9.05 an hour with health benefits and $11.31 an hour without benefits. A dozen other communities around the state have adopted similar ordinances.

Richner says his bill is needed to create wage uniformity so that companies doing business in more than one city are not burdened by having to comply with different laws.

“It would be insurmountable, especially for small businesses. It would be onerous on mom-and-pop shops,” says Richner.

He also fears that the laws will force government contractors to charge more for their services. Business groups have the same concerns, and they support Richner’s bill.

But studies of the effects of living-wage ordinances suggest that Richner’s fears may be unfounded. The laws have increased wages with minimal costs to cities.

It is not clear how the living-wage ordinance is affecting Detroiters since it was not included in the studies and the city does not track the law’s effects. However, prodded by complaints from workers and labor unions, city officials say they are poised to better enforce the ordinance.

But Detroit’s efforts may be rendered moot by Richner’s legislation, which he expects to introduce next year.

Wayne State constitutional law professor Robert Sedler says that state legislators have the power to override local laws.

“Under the state Constitution all units of local government are creatures of the state. The state can regulate local government,” says Sedler.

The chances of it passing are better than good.

Democratic Gov.-elect Jennifer Granholm would then have the option of vetoing the bill.

“No concrete basis”

The Detroit Regional Chamber is a staunch supporter of Richner’s bill. Jeffrey Hunt, senior director of regional public policy, says businesses will avoid Detroit because of the ordinance.

“You can forget about any box-cutter retail in the city — Home Depot, Kroger, CVS, Wal-Mart,” says Hunt. “I don’t know how many CVSes will pay people to stock shelves at $12 an hour.”

But the ordinance does not apply to CVS pharmacies, which do not have city contracts or receive city tax breaks, says company spokesman Michael DeAngelis. CVS, which has 34 stores in Detroit, is eager to expand in the city. “We’re always looking to open new stores,” says DeAngelis.

Hunt says that the ordinance was designed to get unskilled workers higher wages, but in effect will do the opposite.

“It will reduce the job market and shut out those who the ordinance was intended to help,” he says.

Hunt said he could not share information about what companies have left the city or refused to move additional employees or facilities to Detroit because of the living-wage ordinance.

He won’t identify specific companies because he says some are already doing business in the city and received $50,000 or more in city planning assistance, which also makes them subject to the law. However, the city has not stringently enforced this part of the ordinance. If he mentions companies by name, the city may make them comply with the law, he says.

Richner believes the living-wage ordinance ultimately will increase taxes.

“If the contractor providing service to a city has to pay more, that raises the cost to taxpayers,” he says.

David Reynolds has heard it all before.

“It’s amazing to me that the opposition still generates stuff that has no concrete basis,” says the Wayne State labor studies professor.

Since Baltimore enacted the nation’s first living-wage ordinance in 1994 — and dozens of other cities followed suit — there is no evidence that business, workers or municipalities have been negatively impacted, says Reynolds.

“To me that’s pretty striking,” he says.

Reynolds cites a Baltimore study that indicates that contractors did not charge the city more for services after the ordinance took effect.

“Economic development officials also said that they didn’t think it negatively impacted them,” says Reynolds.

The Brennan Center at New York University recently surveyed 22 cities with living-wage ordinances. The study, which will not be published until early next year and did not include Detroit, found that the increase in contract costs was modest.

“The increase of the overall city budget on average was less than 1 percent,” says Paul Sonn, Brennan Center associate counsel. Sonn added that the survey showed that cities with living-wage ordinances were able to attract and retain businesses.

“The goal of most cities is to attract higher-paying jobs,” says Sonn. “We found that the living wage ordinances formalized and reinforced this policy.”

Marilyn Talbot, head organizer for Illinois ACORN (Association of Community Organizations for Reform Now), says that Chicago’s living-wage ordinance has been very successful since it was enacted in 1998.

She says that critics predicted the ordinance would cost the city $20 million in inflated contracts, but a recent ACORN study shows that the cost was only $1 million.

Chicago also recently reviewed its ordinance and raised the minimum wage for affected contractors from $7.60 an hour to $9 an hour. No health benefits are included in the Chicago living-wage ordinance and nonprofits are exempted from the law.

But Talbot says that though the ordinance does not apply to nonprofits, it has helped raise wages at some organizations as well as increase pay rates at businesses that are not required to comply with the law.

“We are finding that the law is helping those it was intended to help — low-wage workers,” says Talbot.

If studies show that living-wage laws are working in other cities, why do business groups still oppose them?

“I think that the battle is really at a philosophical and ideological level,” says Reynolds.

Business leaders generally don’t have a problem with living-wage laws, he says, but fear they are a stepping stone to additional regulations.

“They don’t want the public having these discussions, but believe businesses should set these policies,” says Reynolds.

Tracking Detroit

Detroit officials do not know how many employees have been paid a living wage since the ordinance took effect in 1999, and they do not know if any companies stopped doing business with the city because they did not want to pay so-called living wages.

What is known is that Detroit has not stringently enforced its ordinance. Hundreds of workers complained to the Detroit City Council about this two years ago. The council set aside $70,000 in fiscal year 2000 for two new Finance Department positions. The new personnel were to monitor compliance with the living-wage ordinance.

But faced with a looming budget deficit, former Mayor Dennis Archer declared a hiring freeze — the positions were never filled.

Under the new administration, council again set aside $70,000 for the two staff positions. Mayor Kilpatrick’s administration intends to fill the positions within 30 days, according to Carolyn Abney, a Finance Department purchasing manager. Abney and another employee have been responsible for investigating workers’ living-wage complaints and ensuring that companies comply with the ordinance.

Abney relies on workers to let her know when a company is not in compliance. Though businesses are required to sign a statement saying they will comply with the law, there was no way to verify this unless the company was audited. The two new employees would perform site audits to ensure compliance.

There are about 650 city contracts, grants and tax breaks that exceed $50,000; some companies have more than one contract with the city. Abney says companies will be audited quarterly.

If Richner’s bill passes, however, the city’s audits may not get off the ground.

A coalition of unions, churches and other organizations intend to fight Richner’s bill. However, Detroit AFL-CIO president Don Boggs says they don’t have much chance of succeeding.

“I’m not naive,” says Boggs. “They have the party-line votes. They will have them in greater numbers come January.”

If the bill passes, Boggs says that a statewide referendum is an option.

Even if cities like Detroit are able to retain their living-wage laws through a state referendum, such ordinances are not enough to make workers self-sufficient, according to the Michigan League for Human Services. The nonprofit public policy group defines self-sufficiency as the hourly pay necessary to meet one’s basic needs without the help of public or private aid. MLHS based its calculation on seven costs: housing, food, clothing, child care, transportation, healthcare and household items (including a phone and payroll taxes). The self-sufficiency wage for a Michigan worker with two children is $15.72 an hour, says Sharon Parks, senior research associate for the league. The federal minimum wage has not been adjusted since 1997 while the federal poverty level is adjusted annually.

“Most living wage ordinances are $9 to $12 an hour depending on if it includes benefits,” says Parks. “Yes, it brings you a little above the poverty level, but you still need food stamps, day care and housing subsidies.”

Thomas Hawkins claims he was fired because he forced his employer to comply with Detroit’s Living Wage Ordinance. Read the feature story that accompanies this article. Ann Mullen is a Metro Times’ staff writer. E-mail [email protected]

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