Minimum Wage

San Francisco’s Proposed City Minimum Wage Law: A Prospective Impact Study

By Michael Reich, Ken Jacobs, Annette Bernhardt and Ian Perry

142,000 San Francisco Workers Would Get a Pay Raise From Minimum Wage Ballot Measure

• November Ballot Measure to Raise the Minimum Wage Expected to Increase Earnings by $397 Million, Significantly Benefitting Working Families, Women, and Communities of Color

• BERKELEY—A new report released by researchers from the University of California, Berkeley’s Institute for Research on Labor and Employment finds that an upcoming San Francisco ballot measure to raise the minimum wage would significantly benefit workers in the city and strengthen the local economy.

• San Francisco’s Mayor, members of the Board of Supervisors, and labor, business and community leaders recently agreed to place an initiative on the November 2014 ballot. The measure would increase the city’s minimum wage to $15.00 by 2018, with cost-of-living increases thereafter. Oakland will also vote in November to raise its minimum wage to $12.25 by 2015.

• The study finds that about 142,000 workers, or approximately 23 percent of San Francisco’s workforce, will receive a raise under the proposed law. Pay for those workers would rise by an average of $2,800 per year, for a total increase in aggregate earnings of $397 million (in 2014 dollars) by 2018.

• These pay increases would especially benefit workers of color and women. For example, 26 percent of female workers will receive a raise and 71 percent of workers who would be affected by the proposed increase are people of color. Incomes will increase for over three-fourths of working-poor families.

• San Francisco’s 2003 citywide minimum wage ordinance had little effect on overall employment or hours worked, the research shows, and the costs of the minimum-wage law were absorbed through increased worker productivity, decreased turnover, and small, one-time increases in restaurant prices. Projections for the proposed law suggest that prices in restaurants would increase by 2.7 percent by 2018.

• "A citywide minimum wage can help make the economy more equitable without harming economic growth," said Michael Reich, a UC Berkeley professor and Director of the institute that produced the study. "That’s more money in low-wage workers’ pockets for a healthier city and a fairer economy."

Executive Summary

San Francisco’s Mayor, members of the Board of Supervisors, and labor, business and community leaders recently agreed to place an initiative on the November 2014 ballot that would raise the minimum wage in the city to $15.00 an hour by 2018, phased in over four steps. This study examines the effects of the minimum wage proposal on San Francisco workers and businesses. Drawing on a variety of government data sources, we find the following:
About 142,000 workers – or 23 percent of San Francisco’s workforce – would receive a pay raise under the proposed law.

• 26 percent of female workers and 21 percent of male workers would receive pay increases.

Workers’ hourly wages and annual incomes would rise, resulting in a total increase in aggregate earnings of $397 million (in 2014 dollars) by 2018.

• Hourly wages of affected workers would rise by an average of $1.69 per hour.
• Average annual earnings would increase by about $2,800 per year.

Adults, workers of color, and working poor families would see significant benefits of a pay increase.

• 97 percent of affected workers are in their twenties or older, and 63 percent of the workers receiving raises are in their thirties or older.
• The average worker who would benefit from the law contributes 59.5 percent of their family’s income.
• Workers of color (black, Hispanic, Asian and other) make up about 54 percent of the total workforce in San Francisco, but represent about 71 percent of workers affected by the proposed
  minimum wage increase.
• The affected workers have a wide range of educational backgrounds—59 percent have at least some college and 26 percent have a bachelor’s degree or higher.
• Over three-fourths of working poor families in San Francisco will receive an increase in income from the proposed law.
• The current median annual earnings of affected workers are about $19,000, or 35 percent of the median annual earnings in San Francisco ($54,000).

Previous economic research, including research on San Francisco’s 2003 minimum wage ordinance, has found little to no measurable effect on employment or hours from minimum wage policies.

• Instead, research evidence indicates that the costs of San Francisco’s 2003 minimum wage law were absorbed through reduced worker turnover, improved worker performance and small,
  one-time increases in restaurant prices.

The proposed minimum wage law would have a modest impact on business operating costs and consumer prices.

• About half of all affected workers are employed in three industries: retail trade (14.6 percent); restaurants (19.3 percent); and education, health and social services industries (17.8 percent).
• Operating costs would increase by 0.2 percent for retailers and by 3.0 percent for restaurants by the time the proposed law is fully implemented in 2018.
• Restaurant prices would increase by 2.7 percent by the time the law is fully implemented. A $10 meal would increase by 27 cents, to a total of $10.27. For retail and the local economy as
  a whole, price increases would be negligible.

The size of the proposed minimum wage increase lies within the range of existing laws as well as other measures of a local economy’s capacity to absorb higher wage standards.

• Compared to existing law, the proposal would raise San Francisco’s minimum wage by 36.4 percent over 4 years. The 13 existing local minimum wage laws in the U.S. have mandated an
  average total increase of 42.8 percent, with a range of 13.3 percent to 84.5 percent.
• The proposed policy would increase the minimum wage to 46 percent of the San Francisco median wage for full-time workers. This ratio is well within the historical range of the ratio of
  the federal minimum wage to the national median wage.

Our review of a recent study by San Francisco’s Office of Economic Analysis (OEA) finds that the report’s estimation model is a flawed tool for understanding minimum wage effects, and that key inputs used in the analysis are inaccurate.

The full report can be found online: http://irle.berkeley.edu/cwed/briefs/2014-04.pdf.