S.F. praised as model for U.S. on increasing minimum wage
San Francisco Chronicle, January 28, 2014
by Carolyn Lochhead
Washington -- San Francisco's 15-year experiment in liberal labor policies has raised the compensation of low-wage workers 80 percent higher than the federal minimum wage without destroying jobs, according to a group of UC Berkeley economists.
San Francisco can provide a model for cities around the country that are considering boosting the minimum wage, said Ken Jacobs, chairman of UC Berkeley's Center for Labor Research and Education. He said the evidence also backs President Obama's call in his State of the Union address Tuesday for policies to reduce income inequality.
Higher wages and benefits reduced turnover and improved work performance rather than costing jobs, said Jacobs, one of the editors of a collection of studies on San Francisco's policies.
The evidence "makes a strong point, that people are not widgets," Jacobs said. "If I pay more for a hammer, the hammer performs the same way than if I paid less. But when you pay people differently, their performance changes."
Jacobs, along with Miranda Dietz, a researcher at the center, and Michael Reich, director of Berkeley's Institute for Research on Labor and Employment, Labor Research and Education, compiled research on San Francisco in the recently published book "When Mandates Work."
The studies show that the city's higher minimum wage, paid sick leave and health care benefits have helped it prosper.
"There's been a sea change in how economists think about the minimum wage," Jacobs said. Research in San Francisco and elsewhere has shown that differences in minimum wages in bordering states or counties had little effect on employment levels, he said, contrary to the fears of those who opposed wage increases.
"Generally, the research shows the employment effects are zero or close to zero," Jacobs said.
Doing better in S.F.
Counting mandated health benefits and sick leave, the authors said San Francisco workers in large firms earned at least $13 an hour in minimum compensation last year, 80 percent more than the federal minimum wage and 60 percent higher than California's minimum.
They found that real wages at the bottom of the labor market have grown in San Francisco but declined in surrounding counties. Employment in low-wage industries such as fast food rose despite the higher wages.
From 2004 to 2011, the research shows that private-sector employment grew 5.6 percent in San Francisco and 3 percent in Santa Clara County, but fell 4.4 percent in other Bay Area counties.
Employers absorbed the higher wage costs largely through significantly reduced turnover, lower absenteeism, fewer grievances and improved customer service and work performance, Jacobs said.
The researchers were unable to measure whether profits took a hit. Because most low-wage jobs are in service industries such as fast food, retailing or health care, they are relatively immune to competitive pressure from manufactured imports or automation, which employers often turn to if labor costs rise.
The city's labor law changes included not just higher wages, but equal benefits for domestic partners and minimum employer spending on health care benefits. The laws now affect 77,500 workers.
The minimum wage boost alone "put $1.2 billion into the pockets of low-wage workers," Jacobs said.
San Francisco's economy, despite its high-tech glitter, is not unique, the UC researchers said, and could provide a national model.
Like other regions, the Bay Area has lost manufacturing jobs in recent decades. But as the city's policies took effect starting in the mid-1990s, the UC researchers said, San Francisco's success in raising compensation at the low end of the labor market bucked the national trend.
There has been support from the political right in recent months for a higher minimum wage, led by California entrepreneur Ron Unz, who is circulating a ballot measure to raise California's base pay to $12 an hour by 2016.
A higher minimum appeals to some conservatives worried about rising government spending on food stamps and taxpayer aid to low-wage workers.
A higher minimum wage is paid entirely by employers. But GOP leaders such as former vice presidential nominee Paul Ryan are gravitating toward an increase in the Earned Income Tax Credit, a cash subsidy for low-wage workers. They argue that would minimize job losses.