Three Reports on Raising Wages- the smart AND right thing to do!

Local Minimum Wage Laws, Impacts on Workers, Families and Business

Report prepared for the Seattle Income Inequality Advisory Committee,
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

Citywide Minimum Wage Laws, A New Policy Tool for Local Governments

Paul Sonn, Brennan Center:  The Brennan Center for Justice at New York University School of Law unites thinkers and advocates in pursuit of a vision of inclusive and effective democracy. Our mission is to develop and implement an innovative, nonpartisan agenda of scholarship, public education, and legal action that promotes equality and human dignity, while safeguarding fundamental freedoms.

Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania

David Card and  Alan B. Krueger-  Department of Economics, Princeton University Princeton, NJ;  Published in The American Economic Review, Vol. 84, No. 4. (Sep., 1994), pp. 772-793.

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Local Minimum Wage Laws – A Summary

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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

 

 

 

All Politics Is Local – The City Minimum Wage Movement

by Micheal Reich and Ken Jacobs

“In the face of congressional inaction, the debate on raising the minimum wage is moving to the local level. As more cities and counties consider setting their own wage standards, they can learn from the policy experiments already underway.

Since the mid-1980s, states in every region of the country have raised the local minimum wage, often numerous times. Twenty-one states (and Washington, D.C.) currently have wage floors above the federal level ($7.25), and 11 of these raise them every year to account for inflation. Washington State currently has the highest, at $9.32; California’s is set to increase to $10 on July 1, 2016.

More than 120 cities and counties have adopted living wage laws that set pay standards, many of them in the $12 to $15 range. These higher standards usually apply only to employees of city service contractors, like security guards, landscapers and janitors. In some cities, living wage laws cover workers at publicly owned airports or stadiums, as well as at shopping malls subsidized by local development funds. While the impact on the individual workers covered under these laws is often quite significant, their reach is rarely broad enough to affect the local low-wage labor market as a whole.”

http://opinionator.blogs.nytimes.com/2014/03/22/all-economics-is-local/?_php=true&_type=blogs&_r=0

Walmart Threatens DC to Avoid Paying Fair Wages

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alwayslowwages

Wal-Mart says it will pull out of D.C. plans should city mandate ‘living wage’

By Mike DeBonis, Published: July 9 E-mail the writer

The world’s largest retailer delivered an ultimatum to District lawmakers Tuesday, telling them less than 24 hours before a decisive vote that at least three planned Wal-Marts will not open in the city if a super-minimum-wage proposal becomes law.

The ultimatum came a day ahead of a decisive D.C. Council vote on bill that would force $12.50 hourly wage.The company’s hardball tactics come out of a well-worn playbook that involves successfully using Wal-Mart’s leverage in the form of jobs and low-priced goods to fend off legislation and regulation that could cut into its profits and set precedent in other potential markets. In the Wilson Building, elected officials have found their reliable liberal, pro-union political sentiments in conflict with their desire to bring amenities to underserved neighborhoods.

Mayor Vincent C. Gray (D) called Wal-Mart’s move “immensely discouraging,” indicating that he may consider vetoing the bill while pondering whether to seek reelection.

The D.C. Council bill would require retailers with corporate sales of $1 billion or more and operating in spaces 75,000 square feet or larger to pay their employees no less than $12.50 an hour. The city’s minimum wage is $8.25.

http://www.washingtonpost.com/local/dc-politics/wal-mart-says-it-will-pull-out-of-dc-plans-should-city-mandate-living-wage/2013/07/09/4fa7e710-e8d0-11e2-a301-ea5a8116d211_story.html

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

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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:

https://eurekafairwageact.wordpress.com

http://fairwages.org

info@fairwages.org  707-442-7465

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:

https://eurekafairwageact.wordpress.com