Higher Minimum Wage Boosts Pay Without Reducing Jobs, Study Says

(Bloomberg) -- Minimum wage increases in six U.S. cities boosted worker pay without harming job growth, according to a study released Thursday by University of California at Berkeley researchers.

Economists at the school’s Center on Wage and Employment Dynamics examined U.S. Labor Department data from the first major cities to raise their local wage floors above $10 an hour: Washington, Chicago, Seattle, San Francisco, Oakland, and San Jose.

In the food services industry, a major employer of low wage workers, a 10 percent increase in minimum pay increased average weekly earnings 1.3 percent to 2.5 percent on average across the six cities, the authors found. They found no “significant negative employment effects.” Instead, they estimated the impact on jobs at between a 0.3 percent reduction and a 1.1 percent gain.

“Policies are working as the policy makers intended,” paper co-author Sylvia Allegretto, a labor economist and co-chair of the center, said in an interview. “The sky is not falling.”

While the federal minimum wage has been $7.25 per hour since 2009, cities and states have made a slew of increases in their own wage floors, spurred in part by protests mounted by low-wage workers in industries such as fast food. New York City employers with 11 or more staff now must pay at least $13 per hour, and $15 starting Dec. 31.

Wage Standard

“With a substantial number of additional cities and states poised to soon enact similar policies, a large portion of the U.S. labor market will be held to a higher wage standard than has been typical over the past 50 years,” the economists wrote.

As a result, they estimate, such policies will increase pay directly for 15 percent to 30 percent of the workforce in cities raising their minimums and as much as 50 percent of the workforce in some industries and regions. By contrast, they said, “the federal and state minimum wage increases between 1984 and 2014 increased pay directly for less than eight percent of the applicable workforce.”

The findings contrast with a study by University of Washington economists last year that estimated Seattle’s $13 minimum wage reduced hours worked in low-wage jobs. The Berkeley economists suggest that Washington’s study failed to account for a Seattle-area employment boom at the time that led to workers moving from lower-wage to higher-wage jobs.

City and state minimum wage hikes have helped spur congressional Democrats and some seeking the party’s 2020 presidential nomination to call for a nationwide $15 minimum. As a candidate, President Donald Trump said American wages were too high to be globally competitive, then later that the minimum wage “has to go up” but that the issue should be left to the states rather than the federal government.

To contact the reporter on this story: Josh Eidelson in Palo Alto, California at jeidelson@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Jeff Kearns, Robert Jameson

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