Supporters of the living wage argue that full-time workers should be assured a high enough wage so that they

can afford the essentials of life: food, clothing, shelter, and healthcare. Since Baltimore passed the first living

wage law in 1994, several dozen cities enacted similar laws in the late 1990s and the 2000s. The living wage

ordinances do not apply to all employers, but they have specified that all employees of the city or employees of

firms that the city hires be paid at least a certain wage that is usually a few dollars per hour above the U.S.

minimum wage.

Figure 4.4 illustrates the situation of a city considering a living wage law. For simplicity, we assume that there

is no federal minimum wage. The wage appears on the vertical axis, because the wage is the price in the labor

market. Before the passage of the living wage law, the equilibrium wage is $10 per hour and the city hires 1,200
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