Doctoral Dissertation Research In Economics: The Gift Of The Living Wage: A Study Of Unequal Wage Schedules In An Experimental Labor Market

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Living wage ordinances, unlike traditional minimum wage laws, are policies used by cities to increase the minimum wage for a subset of employers in the city. Sold as a tool to offset urban wage inequality, living wage laws reshape local labor markets by creating a minimum wage differential in which the minimum varies by firm. One proposed advantage of requiring a higher wage through living wage laws is increased worker performance. This proposed research investigates the behavioral response of workers and firms in markets with living wage ordinances. Gift exchange labor markets are used with various wage restrictions to test the effect on worker effort, policy spillover, and labor supply. This experiment seeks to directly test the claim that living wages produce higher effort from employees. Because effort is a perfectly observable value in laboratory experiments, differences between markets with and without a living wage law will reveal any potential variance in worker behavior. Social preferences and reciprocity models provide conflicting predictions for worker behavior. Because wage increases are involuntary for affected firms, workers may not reciprocate accordingly. The findings of this study will progress understanding of both living wage laws as well as behavioral reciprocity models.