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$15 Minimum Wage Policies: Early Evidence

Paper Session

Friday, Jan. 5, 2018 10:15 AM - 12:15 PM

Pennsylvania Convention Center, 202-A
Hosted By: Labor and Employment Relations Association & American Economic Association
  • Chair: Alan Krueger, Princeton University

Assessing the Differential Impacts of Minimum Wage Increases in Labor Market Areas in California

Edward E. Leamer
,
University of California-Los Angeles
Jerry Nickelsburg
,
University of California-Los Angeles
Till M. von Wachter
,
University of California-Los Angeles
Frederic Zimmerman
,
University of California-Los Angeles

Abstract

Our research evaluates the differential impacts of the effect of the minimum wage across labor market areas in California in which minimum wages are predicted to have different degree of 'bite.' It is well known that there is a substantial heterogeneity in both the distribution of hourly wages as well as labor market tightness across the state of California. Hence, minimum wages could have very different impacts on both earnings and employment across local labor markets. We exploit both variation in the minimum wage schedule within the County of Los Angeles and for California as a whole. In 2015 the City of Los Angeles enacted legislation that will move the City minimum wage up in steps, beginning at $10 per hour in January 2016 and culminating at $15 per hour in 2020, and thereafter incrementing with inflation. In July 2014 and January 2016 the minimum wage in the State of California rose from 8$ to $9 and $9 to $10, respectively. In addition, in 2016 the state passed a new minimum wage law that stipulates a sequence of increases in the statewide minimum wage that move in parallel with the minimum wages enacted by the LA City Council, with one year lag. We use multiple data sources to analyze the impact of minimum wages on earnings, employment, firm outcomes (such as openings and closings) by sector, firm size, worker types, and region using administrative data sources. We also bring two sources data we collected for this project to bear. We have collected price data ourselves to analyze the pass-through effect on product prices in one heavily affected sector, restaurants. In addition, we analyze firm-level survey data to measure hiring expectations of firms. Finally, to explore the potential effect of higher earnings on wellbeing we will study health outcomes.

The New Higher Minimum Wages: Effects in Seven Cities

Sylvia A. Allegretto
,
University of California-Berkeley
Anna Godøy
,
University of California-Berkeley
Michael Reich
,
University of California-Berkeley

Abstract

Dozens of cities and eight states throughout the U.S. have enacted bold policies that will gradually phase in minimum wages in the $12 to $15 range over the next several years. These policies will have much larger bites than previous minimum wage increases. We examine early evidence on the wage and employment effects of these policies in seven large cities that have a) already exceeded the $10 level, and b) for which we will have sufficient post-treatment data by late 2017: Chicago, Los Angeles, Oakland, San Francisco, San Jose, Seattle and Washington, DC. We use only publicly-available data or data that is currently available to all researchers: the Quarterly Census of Employment and Wages for counties and cities. Our methods include a) comparisons of restaurant pay and employment trends with surrounding or adjoining counties and b) applying the synthetic control approach using donor counties. For the nearby county estimator, we examine whether trends are parallel in the pre-treatment period. For the synthetic control estimator, we use as long a training period as the available data allow and examine the robustness of our results to the length of this period. We also pay special attention to possible wage spillover issues with the donors, to whether the synthetic control provides a good-enough fit with the treatment city, and to tests of significance. To avoid contamination effects, our potential sample of donor counties varies for each city, depending on whether the city indexed its minimum wage in prior years and state policy. Our results suggest a range of treatment effects on wages and employment among the seven cities. When we pool the results across the seven cities, we find significantly positive effects on wages and small effects on employment, consistent with many previous studies.

Minimum Wage Increases, Wages, And Low-wage Employment: Evidence from Seattle

Mark C. Long
,
University of Washington
Robert Plotnick
,
University of Washington
Ekaterina Jardim
,
University of Washington
Jacob Vigdor
,
University of Washington
Hilary Wething
,
University of Washington

Abstract

This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to as much as $11 per hour in 2015 and to as much as $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.
Discussant(s)
Jeffrey Paul Clemens
,
University of California-San Diego
Laura Giuliano
,
University of Miami
Ben Zipperer
,
Economic Policy Institute
JEL Classifications
  • J3 - Wages, Compensation, and Labor Costs