Labor Standards and Local Economic Development

Abstract

In times of economic crisis, state and local governments increasingly turn to economic development incentive programs to jumpstart job growth. However, recent efforts to attach minimum labor standards to incentives are seen as a threat to traditional practice. Critics of such “business assistance living wage” laws assert that they may reduce employment or redevelopment activity. This paper measures the actual impact of living wage laws using a time-series analysis of employment and business establishment trends in large U.S. cities that have enacted such laws and finds no evidence that ordinances mandating stronger labor standards affect aggregate economic development outcomes.