Wal-Mart Stores Inc. wages are so low they force many of its employees onto the public doles, creating a drag on taxpayers and the economy, according to a new report from the staff of congressional Democrats.

“Mayor Bloomberg, enough is enough!” Bronx Borough President Ruben Diaz, Jr. said at a lively May 12 rally organized by grassroots group Living Wage NYC. “If your friends don’t want to pay us a living wage, then don’t take our tax dollars!”

Diaz, a reliable supporter of New York City workers’ rights, introduced the Fair Wages for New Yorkers Act in the spring of 2010. It was this legislation that brought hundreds of living wage supporters together on May 12, when the bill finally, after more than a year of delays and false starts, received its first City Council hearing.

Although the bill is far from sweeping (it would merely guarantee a $10-$11.50 hourly wage for the estimated 3 percent of New York City workers who are employed by companies in city-subsidized developments), it has garnered strong support among the city’s labor activists, religious community and local leaders — support that has been met, with equal measure, by propaganda-pushing from the Bloomberg administration and resistance from powerful businesses. All the while, living wage activists around the country are watching with great interest as the knock-down, drag-out fight plays out, as it could set the stage for the success or failure of living-wage battles elsewhere.

How did a relatively toothless piece of legislation become such a hotly debated, nationally watched issue? It happened in part because the outer boroughs of New York City have seen income disparities grow wildly in recent years — something residents of many other urban areas can relate to. Ruben Diaz, Jr. wrote about the issue in an op-ed adapted from his May 12 City Council testimony:

[W]e have tremendous income inequality in this city, which is not just a local problem but a national cause of concern. The middle class, both locally and nationally, are working harder and earning less. As important, the working poor in our city are being forced to work multiple jobs for an ever-lower standard of living if not being forced to get food stamps, emergency housing and other government assistance. Our economic policies should facilitate upward mobility. Instead, they are accelerating a downward spiral, in which our middle- and working-class families have less and less and where our tax dollars and other city resources are instead being used to facilitate low-wage job creation.

Diaz goes on to note that “nowhere is this [economic inequality] clearer than in my home borough of the Bronx.”

The Bronx suffers from the highest poverty rate among U.S. urban areas (a staggering 28.5 percent) and has the unfortunate distinction of being the county with the highest unemployment rate in the nation. According to a recent Fiscal Policy Institute study, between 1990 and 2007 hourly wages in the city fell by nearly 9 percent. Unsurprisingly, at the same time income inequality grew; the bottom 90 percent of city workers now earn only 34.5 percent of the money made in the city, while the top 1 percent earn a disproportionate 44 percent of the money.

This is maddening, frustrating stuff. Even worse is the fact that, as economic inequality went off the charts in New York City, the Bloomberg administration was green-lighting huge numbers of city-backed developments, with the promise that they would lead to job creation. However, those jobs did not materialize. Since 2002, the Bronx saw some $11 billion in new development, but, as Diaz notes, “the promised employment gains from the major developments…have been inconsequential.”

The activists and citizens who support the Fair Wages for New Yorkers Act recognize city-subsidized developments as a first step to addressing the overwhelming problem of economic inequality in New York City. Their argument is straightforward: if a development is going to receive taxpayer dollars, the jobs created by that development should help taxpayers by paying at least a decent wage. Or as City Comptroller John C. Liu put it, “Taxpayers should not be subsidizing minimum wage jobs.”

The term “decent” in the above paragraph is operative, since the $10 an hour that would be guaranteed by the Fair Wages for New Yorkers Act ($11.50 if employees aren’t offered health insurance) is hardly a living wage in the most expensive city in the country. As Charles Barron, a councilmember representing District 42 in Brooklyn, said at the May 12 rally, “We can’t even live off $10! And how dare you want to give us less?” He added, “We aren’t here just to survive, we want to live.”

Indeed, the city’s billionaire mayordoes want to give city workers less than a meager $10 an hour — much less than they need to live. His campaign against the Fair Wages for New Yorkers Act has been anything but subtle, and has pitted business interests against grassroots activists, Goliath v. David-style. Bloomberg’s “friends,” as the Bronx borough president dubbed them, are of course the Goliaths in this battle — the big companies that don’t want to be required to pay their employees fairly.

The main business opposition to the bill has come from the 5 Boro Chamber Alliance, a group of chambers of congress from around the city that was formed in 2009 to put the kibosh on a paid sick leave bill. That effort was successful, in part because the group was able to convince Council Speaker and mayoral hopeful Christine Quinn not to support the bill. The 5 Boro Chamber Alliance has reportedly requested meetings with Quinn on the living wage legislation as well. Quinn, whose support of the legislation is considered critical to its passage, has declined to take a stand on the issue.

But that’s not all. Friend-of-industry Mayor Bloomberg went so far as to spend $1 million in city funds to commission a study on the potential impact of the Fair Wages for New Yorkers Act. That would be a fine thing to do, if the researchers he chose for the job were impartial. As Crain’s New York reported, that was not the case:

[T]he very administration commissioning the study has repeatedly argued that living and prevailing wage provisions would hinder development and kill jobs, creating the perception that the outcome is already determined.

And the selection of Charles River [Associates] added fuel to the fire because two of its leading consultants—David Neumark and David Macpherson—are outspoken critics of wage mandates, though Macpherson is not on the living wage study team.

As you might’ve guessed, the study was not favorable to the living wage legislation; it concluded that “the employment losses that could result from a decline in real estate in response to the living wage mandate are significant….These losses impact employees at all wage levels.” These findings were disputed by a counter-reportpublished by the National Employment Law Project and other groups, which found that “errors in methodology and analysis” in the city-funded report “render the study fundamentally flawed.”

Why are New York businesses (and their ally, the mayor) putting up such a fight against the activists who want a mere $10 hourly wage requirement for a tiny percentage of New York workers? To put it plainly, businesses are concerned because they know living-wage laws are effective.

In San Francisco, for instance, city leaders signed a piece of living-wage legislation into law in 2000. The law turned out to be successful and popular enough that other, more far-reaching laws were passed. University of California Berkeley Labor Center Chair Ken Jacobs recently examined San Francisco’s legislation, and found that both workers and businesses have benefited:

San Francisco’s labor standards laws do not appear to be deterring retailers who want to locate in the city or developers looking for tenants or project financing. A new Lowe’s just opened up in the city, just a short drive from their existing store in South San Francisco, which has no labor standards requirements beyond what is in state law.

The verdict is clear: labor standards policies of the kind San Francisco put in place improve workers’ income, productivity and health, reduce turnover and decrease job vacancies; they have not reduced the number of jobs.

This is good news indeed for the workers and businesses in cities, such as New York, that are considering new living wage policies on economic development programs. San Francisco may be unique in the breadth of protections we provide our workers, but we are not special in our need to improve labor standards.

Living-wage laws have also been passed in Baltimore, Chicago, Pittsburgh, and some 40 other cities. Even though Jacobs and numerous other researchers have found that living-wage laws are a win-win-win for these cities, their workers and their businesses, many industry leaders still tremble at pro-labor legislation, for fear that it might impact their bottom line. And that is exactly what business groups are fighting against in New York City.

Mayor Bloomberg and his business friends may have the advantage of money and influence, but grassroots activists — the Davids of the living-wage battle — have managed to put up an impressive fight. Living Wage NYC, a campaign organized and led by the Retail, Wholesale and Department Store Union, has brought together a diversity of organizations and individuals to support the measure, including the African American Clergy and Elected Officials, the Drum Major Institute, City Harvest, the Stonewall Democratic Club, the Jewish Labor Committee, the National Lawyers Guild-NYC Chapter, and a number of local unions and elected officials. The campaign’s rally’s have been well attended and high-energy (you can watch a video of some rally highlights here), and its list of supporters is growing by the day.

One significant name who’s thrown his support behind the campaign is Martin Luther King III, who wrote in a statement, “New York City offers a national roadmap for continuing my father’s unfinished work of economic justice….We need the living wage movement to succeed and spread to other parts of the country.” He went on, “Countless stories of the working poor today are about people making impossible choices: food or rent, clothing or electricity. When we pause over those stories, and understand their painful significance, we grasp something fundamental about a country as wealthy as ours: no working person should have to settle for surviving over living. It’s that simple.”