The Effect of Detroit’s Living Wage Law on Nonprofit Organizations

Abstract

A common argument made against local passage of living wage laws is that they harm nonprofit organizations by compelling employers—with tight, strained budgets—to increase wages. Ninety-six nonprofits covered by Detroit’s living wage law were contacted 1 1/2 years after the 1998 law had gone into effect. Although a small number of nonprofit employers needed help to implement the living wage requirements, overall, the living wage law neither had a negative effect on nonprofit organizations nor did it result in appreciable job losses. The study’s findings are relevant not simply to other municipalities whose laws cover nonprofit employers but to living wage laws generally. If living wage laws are harmful to employers or employees, the effect should be most pronounced among the most vulnerable employers—namely, nonprofit organizations. This research confirms that living wage requirements do not generally pose a significant cost relative to contract amounts, employers’overall budgets, or the local municipal budget.