Local Minimum Wage Laws – A Summary

shortlink here:  http://wp.me/p2w2NH-yI

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Report prepared for the Seattle Income Inequality Advisory Committee

http://seattletimes.wpengine.netdna-cdn.com/opinionnw/files/2014/04/Berkeley-minimum-wage-study.pdf

March 2014

Michael Reich

UC Berkeley Professor of Economics and Director, Institute for Research on Labor and Employment, UC Berkeley

Ken Jacobs

UC Berkeley, Chair, Center for Labor Research and Education, Institute for Research on Labor and Employment

Annette Bernhardt

UC Berkeley Visiting Professor of Sociology and Visiting Researcher, Institute for Research on Labor and Employment

Acknowledgments: We thank Miranda Dietz and Jenifer MacGillvary for their contributions to the research and writing of this report.

 

Contents

Executive Summary ……………………………………………………………………………………………………………………. 1

1. Introduction …………………………………………………………………………………………………………………………. 4

2. Profile of existing local minimum wage laws ………………………………………………………………………………. 4

3. How San Francisco enforces its minimum wage law ……………………………………………………………………. 7

4. The research literature on minimum wage effects …………………………………………………………………….. 10

5. The effects of minimum wage laws on workers and families ………………………………………………………. 10

6. The effects of minimum wage laws on businesses …………………………………………………………………….. 17

7. Conclusion ………………………………………………………………………………………………………………………….. 26

References ……………………………………………………………………………………………………………………………… 28

Figures

Tables 1

Executive Summary

As cities and counties across the country increasingly debate whether to establish their own minimum wage laws, policymakers are understandably asking a host of questions. How are existing laws designed? What do we know about the impacts of local wage mandates on workers and their families? What does research tell us about the effect of local wage mandates on employment, and, in particular, do businesses move outside city or county borders in response? In this report, we address these and related questions.

Existing local minimum wage laws

Nine localities in the United States currently have enacted minimum wage laws: Albuquerque, NM; Bernalillo County, NM; Montgomery County, MD; Prince George’s County, MD; San Francisco, CA; San Jose, CA; Santa Fe, NM; Santa Fe County, NM; and Washington DC. (Richmond, CA, just voted to raise its minimum wage to $12.30 an hour by 2017, and a final vote is pending to pass the law.)

Current mandated wage levels range from $8.50 in Bernalillo County to $10.74 an hour in San Francisco. (New wage mandates in Washington DC and Santa Fe, Montgomery, and Prince George’s Counties go into effect later this year.)

On average, the existing local minimum wage laws have mandated total wage increases of 41.4 percent, many of them in multiple steps and the majority indexed to inflation thereafter. Localities with larger increases have been more likely to implement them in several steps. Across the localities, the average per-step minimum wage increase is 16.7 percent.

The nine laws are similar in covering the large majority of work that is performed within the boundaries of their cities or counties. San Francisco delayed coverage of nonprofits and small businesses (less than 10 employees) for one year. Santa Fe initially exempted small businesses but later amended its law to cover all establishments.

Two of the nine laws (San Francisco and San Jose) follow their state’s law in treating tipped workers the same as non-tipped workers, maintaining a uniform minimum wage for both groups. The other seven laws follow their states’ laws in maintaining a lower minimum wage for tipped workers (even as some increased the base wage for tipped workers). Several of the laws make similar provisions for commissioned workers.

How San Francisco enforces its minimum wage law

San Francisco uses a variety of high-impact enforcement and education strategies to ensure that the city’s minimum wage law has its intended effect.

2

From the beginning of 2004 to mid-2012, San Francisco’s enforcement agency processed 616 worker complaints related to the minimum wage and recovered $5.8 million in back wages on behalf of 3,004 workers. These are higher benchmarks than typically achieved by state and federal enforcement agencies.

San Francisco’s Office of Labor Standards Enforcement assigns 7.5 compliance officers to minimum wage enforcement on behalf of approximately 611,000 people employed in the city. These officers share responsibility for enforcement of the city’s paid sick leave law as well.

Approximately $979,000 supports the 7.5 positions devoted to minimum wage enforcement. In addition, $462,125 is contracted to community organizations that provide education, outreach, and case referrals, largely focused on minimum wage violations.

Effects of minimum wage laws on workers and families

Researchers consistently find that minimum wage laws raise pay for workers at the bottom rungs of the labor market. These increases include both directly affected workers (those earning between the old and the new minimum wage) as well as those indirectly affected (those earning above, but near, the new minimum wage).

Raising the minimum wage also pushes up the wage floor relative to the median wage, thereby reducing pay inequality.

Researchers consistently find that the affected workers are largely adults and disproportionately women and people of color.

New research on the effect of minimum wage increases documents important reductions in family poverty rates and enrollments in public assistance programs, such as food stamps.

Researchers have not estimated the amount of economic stimulus actually created by the new spending power of low-wage workers after minimum wage increases. We do know that low-wage workers and their families are likely to spend a significant portion of those increased earnings.

Effects of minimum wage laws on businesses

Economists have increasingly recognized that raising the minimum wage does not automatically mean that employment will fall. Increased labor costs can be absorbed through a variety of other channels, including savings from reduced worker turnover and improved efficiency, higher prices, and lower profits. Modern economics therefore regards the employment effect of a minimum wage increase as a question that is not decided by theory, but by empirical testing. 3

• Labor economists continue to debate the actual impacts of the minimum wage on employment and hours. We discuss in our assessment the most rigorous studies and offer a non-technical explanation of the nature of the disagreements in the research literature.

• To date, three rigorous studies have examined the employment impacts of San Francisco’s and Santa Fe’s local minimum wage laws. Each finds no statistically significant negative effects on employment or hours (including in low-wage industries such as restaurants).

• A larger body of economic research investigates the effects of state and federal minimum wage increases. These studies compare employment trends for states or counties that have different minimum wages. The best studies make comparisons to nearby states or counties to control for regional economic trends. These studies also find no statistically significant negative effects on employment or hours at an aggregate level or for low-wage industries such as restaurants and retail stores, or for specific groups of workers such as teens. These studies also do not find substitution effects (such as shifts in hiring away from black and Latino teens).

• Studies of the impact of minimum wage increases on restaurants’ operating costs find that an increase of 10 percent in the minimum wage increases operating costs by about 1 to 2 percent.

• Researchers find small one-time price increases in the restaurant industry (of about 0.7 percent following a 10 percent minimum wage increase), but not in other industries.

• Researchers find that increases in the minimum wage reduce employee turnover, translating into a reduction in direct costs (recruitment, selection, and training of new workers) and a reduction in indirect costs (lost sales, lower quality service, and lost productivity as the new workers learn on the job). Some studies have also identified additional benefits of higher wages, including improved morale, improved work performance, and reductions in absenteeism.

• Researchers have not found evidence that employers absorbed minimum wage increases by reducing health benefits or pensions.

In summary, our assessment of the research evidence indicates that minimum wage mandates raise the incomes of low-wage workers and their families, and that the costs to businesses are absorbed largely by reduced turnover costs and by small price increases among restaurants. That said, it is important to emphasize that existing research is necessarily limited to the range of minimum wage increases that have been implemented to date. While these studies are suggestive, they cannot tell us what is likely to happen when minimum wages are increased significantly beyond current local, state, or general.

 

The full report: http://seattletimes.wpengine.netdna-cdn.com/opinionnw/files/2014/04/Berkeley-minimum-wage-study.pdf

 

 

 

Arindrajit Dube Debunks Meer and West

Minimum Wages and Job Growth: a Statistical Artifact

Arindrajit Dube” Associate Professor of Economics – UMass
 
In a recent paper, Jonathan Meer and Jeremy West argue that it takes time for employment to adjust in response to a minimum wage hike, making it more difficult to detect an impact by looking at employment levels. In contrast, they argue, impact is easier to discern when considering employment growth. They find that a 10 percent increase in minimum wage is associated with as much as 0.5 percentage point lower aggregate employment growth. These estimates are very large, as John Schmitt explains in a recent post, and far outside the range in the existing literature. But are they right?

As I show in a new paper, the short answer is: no. The negative association between job growth and minimum wages is in the wrong place: it shows up in a sector like manufacturing that has few minimum wage workers, but is absent in low-wage sectors like food services and retail. In other words, it is likely a statistical artifact, and not a causal relationship.

http://arindube.com/2013/10/04/minimum-wages-and-job-growth-a-statistical-artifact

Meta Analysis: Raising the Minimum Wage Has Zero Disemployment Effect

minimum wage effects

Hristos Doucouliagos and T. D. Stanley (2009) conducted a meta-study of 64 minimum-wage studies published between 1972 and 2007 measuring the impact of minimum wages on teenage employment in the United States. When they graphed every employment estimate contained in these studies (over 1,000 in total), weighing each estimate by its statistical precision, they found that the most precise estimates were heavily clustered at or near zero employment effects.

So, there you have it: A clear picture of the hunt for job-loss effects clumping around zero.  That doesn’t mean no one ever loses a job or faces hours’ cutbacks when the minimum wage goes up.  But it does mean that the policy has its intended effect of raising the pay of its target population without the unintended consequences relentlessly touted by opponents.

read the entire article by Michelle A.M. Brown @  MSNBC:

http://tv.msnbc.com/2013/02/25/minimum-wage-meta-analysis-evidence-over-theory/

STUDY: How a $12.00 An Hour Wage Standard Would Impact Walmart Workers and Shoppers

shortlink:  http://wp.me/p2w2NH-7K

CONCLUSION

http://laborcenter.berkeley.edu/retail/bigbox_livingwage_policies11.pdf

http://laborcenter.berkeley.edu/research/walmart.shtml

Should policy makers consider supporting legislation that would raise wages at Walmart? Should they be concerned that low-income shoppers will bear the cost if Walmart is required to increase its minimum wage to $12 an hour?

Our data suggests that a $12 per hour minimum wage standard at Walmart would be effective in aiding lower-income families. If Walmart increased its minimum wage to $12 per hour, 41.4 percent of the income gain would accrue to workers with wages below 200 percent FPL. These low-wage workers could expect to earn an additional $1,670 to $6,500 a year in income.

If Walmart passed on 100 percent of the wage increase to consumers through price increases, which is unlikely, the impact for the average Walmart shopper would be $12.49 a year (Table 6, page 8). We estimate that 28.1 percent of the impact of the price increase would be borne by shoppers with incomes below 200 percent FPL.

Finally, we should consider the impact of a mandated wage increase on the economic viability of big box retailers. Some analysts suggest that Walmart could not just raise wages, and prices, given that it operates in a competitive environment. However, a living wage policy would require all large retailers to operate under the same standards.

Jacobs, Graham-Squire, and Luce | APRIL 2011 7

Defending the Community:

$12.00 an hour minimum wage for large employers in Eureka:

http://eurekafairwageact.wordpress.com

http://fairwages.org

info@fairwages.org  707-442-7465

The Low Wage “Recovery” – Evidence from Chicago

THE CHICAGO METROPOLITAN STATISTICAL AREA LOST MORE THAN 150,000 jobs between 2001 and 2011, despite adding hundreds of thousands of new residents and many new jobseekers over that period. As more job-seekers chase fewer jobs, the number of low-wage workers has grown. Just as significant, the identity of those workers has changed. Compared to a decade ago, the typical low-wage worker in the Chicago region is likely to be older. She is more likely to have a college degree, and to support a family. And a growing number of these low-wage workers contribute their earnings to households that receive all of their income from low-wage jobs:

31.2 percent of payroll employees ages 18-64 worked in lowwage jobs (paying $12 or less per hour) in 2011. This represents a substantial increase from the 23.8 percent of workers employed in low-wage jobs in 2001.

With few exceptions, low-wage job holders are not teenagers working for disposable income. Fully 94 percent of lowwage job holders in 2011 were 20 years or older, and more than half (57.4 percent) were over the age of 30.

In 2001, fewer than 10 percent of low-wage job holders had a college degree. Today, more than 16 percent, or approximately 1 in 6, hold college degrees.

As job opportunities dwindle across the labor market, the low-wage workforce has become marginally more male and marginally whiter. The available evidence suggests that women and African-American workers displaced from lowwage jobs have exited the labor market altogether, rather than moving into higher-wage positions.

Increasingly, low-wage jobs play a crucial role in supporting households, rather than augmenting core income. More than half of the Chicago area’s low-wage workers (56.7 percent) live in households that get all of their income from low-wage jobs. This represents a substantial increase from the 45.7 percent of households fully reliant on low-wage jobs in 2001.

$12 per hour represents a modest and conservative measure of low-wage work. At this wage level, a full-time worker living by herself will barely be able to cover life’s basic costs without public assistance. When a worker earning $12 per hour is supporting family or other household members, public assistance programs will likely be indispensable to household subsistence.

http://actionnowinstitute.org/wp-content/uploads/2012/09/Chicagos-Growing-Low-Wage-Workforce.pdf

STUDY: How a $12.00 An Hour Wage Standard Would Impact Walmart Workers and Shoppers

CONCLUSION

http://laborcenter.berkeley.edu/retail/bigbox_livingwage_policies11.pdf

http://laborcenter.berkeley.edu/research/walmart.shtml

Should policy makers consider supporting legislation that would raise wages at Walmart? Should they be concerned that low-income shoppers will bear the cost if Walmart is required to increase its minimum wage to $12 an hour?

Our data suggests that a $12 per hour minimum wage standard at Walmart would be effective in aiding lower-income families. If Walmart increased its minimum wage to $12 per hour, 41.4 percent of the income gain would accrue to workers with wages below 200 percent FPL. These low-wage workers could expect to earn an additional $1,670 to $6,500 a year in income.

If Walmart passed on 100 percent of the wage increase to consumers through price increases, which is unlikely, the impact for the average Walmart shopper would be $12.49 a year (Table 6, page 8). We estimate that 28.1 percent of the impact of the price increase would be borne by shoppers with incomes below 200 percent FPL.

Finally, we should consider the impact of a mandated wage increase on the economic viability of big box retailers. Some analysts suggest that Walmart could not just raise wages, and prices, given that it operates in a competitive environment. However, a living wage policy would require all large retailers to operate under the same standards.

Jacobs, Graham-Squire, and Luce | APRIL 2011 7

Defending the Community:

$12.00 an hour minimum wage for large employers in Eureka:

http://eurekafairwageact.wordpress.com

STUDY: States with Higher Minimum Wage Have Had Less Employment Loss During the Great Recession

STUDY: States with Higher Minimum Wage Have Had Less Employment Loss During the Great Recession

Because attempts to increase the minimum wage are being met head on by the GOP talking point that doing so would cause employers to cut jobs and hours, the Massachusetts Budget and Policy Center looked at two decades of data in their recent report, The Minimum Wage and Job Creation.

The study found that minimum wage increases have not had a negative effect on employment in New England.

In Massachusetts alone, the minimum wage has increased six times since 1995.  During this period, growth in industries with concentrations of high minimum wage earners has been higher than total employment.

http://massbudget.org/report_window.php?loc=minimum_wage_job_creation.html&utm_source=cc&utm_medium=email&utm_campaign=min_wage

http://wepartypatriots.com/wp/2012/08/20/study-states-with-higher-minimum-wage-have-had-less-employment-loss-during-the-great-recession/

http://www.democraticunderground.com/10021168480

STUDY: Do Minimum Wages Really Reduce Teen Employment?

Do Minimum Wages Really Reduce Teen Employment?

Accounting for Heterogeneity and Selectivity in State Panel Data

SYLVIA A. ALLEGRETTO, ARINDRAJIT DUBE, and
MICHAEL REICH

Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state-and year-fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long-term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long-run effects. In addition, we do not find evidence that employment effects vary in different
parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.

 http://www.irle.berkeley.edu/workingpapers/166-08.pdf

Study: Minimum Wage Hikes Are Not Job Killers

Minimum wage hikes don’t eliminate jobs, study finds

By Kathleen Maclay, Media Relations | December 1, 2010

BERKELEY —Increasing the minimum wage does not lead to the short- or long-term loss of low-paying jobs, according to a new study co-authored by University of California, Berkeley, economics professor Michael Reich and published in the November issue of the journal The Review of Economics and Statistics.

chart of economic growth patternsThe economic growth in the 17 states that (as of 2005) had a minimum wage level above the federal level was roughly the same as in the other states. The dotted line represents the 17 states and the solid line charts the others.

The study resolves the often conflicting research on the minimum wage in the United States and may provide guidance in future policy debates on the topic, said Reich, who is also the director of UC Berkeley’s Institute for Research on Labor and Employment.

The new study is available online:  http://www.irle.berkeley.edu/workingpapers/

read the rest of the article:  http://newscenter.berkeley.edu/2010/12/01/minimumwagejobs/

 

Study: Raising the Minimum Wage Does Not Kill Jobs

“A significant body  of academic research has found that raising the minimum wage does not  result in job losses even during hard economic times. There are at least five different academic studies focusing on increases to the minimum wage made during periods of high unemployment—with unemployment rates ranging from 7 percent to 12.3 percent—that find an increase in the minimum wage has no significant effect on employment levels. The results are  likely because the boost in demand and reduction in turnover provided by a minimum wage counteracts the higher wage costs.

Similarly, a simple analysis of increases to the minimum wage on the  state level, even during periods of state unemployment rates above 8  percent, shows that the minimum wage does not kill jobs. Indeed the  states in our simple analysis had job growth slightly above the national  average.”

Read the study at:

http://www.americanprogressaction.org/issues/2012/06/minimum_wage.html