A minimum-wage increase will be a boon to tens of thousands of workers in San Francisco, D.C., and other cities. These hikes don't stymie business—in fact, they don't go far enough to address inequality.
If San Francisco passes a ballot measure this November, almost one-quarter of San Francisco's workforce will get a raise. That's a lot of grateful voters. But by the time the full force of the measure takes effect (in 2018), many of those workers may not reside any longer in San Francisco, forced out by the steep and rising costs of housing—if they can even afford to live in the city now.
A new report from the Center on Wage and Employment Dynamics (CWED) finds that about 142,000 San Francisco workers stand to gain from the measure, which would increase the minimum wage to $15 over four phases by 2018. The minimum-wage hike would boost aggregate earnings in San Francisco by nearly $400 million, the report says, with the bulk of the benefit going to workers of color. Some three-fourths of San Francisco's working poor families will get a boost from the measure, if it passes.
Meanwhile, Sen. Mitch McConnell got busted this week over comments he made to a secret gathering of bonkers-wealthy donors. According to audio obtained by The Nation, Sen. McConnell complained during that meeting that all the Senate ever does is vote on minimum-wage increases. Given the recent research on the minimum wage, he should drop his stiff opposition to an increase. Even the largest increases being mulled by cities won't curb growth in the hottest metro areas—much less affect the bottom line for Sen. McConnell's friends.
San Francisco's first minimum-wage increase—the nation's first-ever municipal minimum-wage hike, passed in 2003—hardly cratered the city, after all. That law led to a one-time increase in restaurant prices, according to the CWED report. The measure that the city is mulling now would result in "negligible" price increases going forward: a 0.2 percent increase in operating costs for retailers, and a 3.0 percent increase for restaurants. The $12 ma po tofu at Mission Chinese Food might cost as much as $12.32 once the wage measure is enacted.
The city of Washington, D.C.—where Sen. McConnell spent the spring filibustering a federal minimum-wage increase—recently passed a law raising its own minimum wage to $11.50 an hour by 2016. A new study from the Urban Institute finds that 41,000 D.C. workers will be affected by the measure, about half of whom work in the District but live in either Virginia or Maryland. (Prince George's County and Montgomery County in Maryland passed similar increases, but suburban Virginia counties haven't.)
Of the workers who live and work in D.C. and will be touched by this law, almost one-quarter lack a high-school diploma. Some of the workers receive federal benefits, including the earned income tax credit (33 percent of affected workers), SNAP (28 percent), LIHEAP (15 percent), and federal housing assistance (13 percent). The Urban Institute notes that while "some of the increase in earnings will be offset by reductions in government benefits and tax credits, almost 80 percent of affected families will keep at least half of their earnings gains."
In fact, some families will benefit even if they don't receive wage increases directly. The Urban Institute report notes that while the number of families receiving federal aid might fall a bit because of the higher minimum wage—a drop of around 3 percent—other D.C. families who receive block-grant aid could receive a higher share of assistance as a result. Fewer slices of pie meaning bigger slices. (Not necessarily, of course: Block grants tend to go the way of the glaciers over time.)
As with San Francisco, a minimum-wage increase in D.C. won't drive out the small-plates bistros or local vintage retailers that have become fixtures of the city's gentrifying corridors. Both the San Francisco and the D.C. studies contradict the claims made by business organizations such as the International Franchise Association, which filed suit in federal court to challenge a bill adopted by the Seattle City Council in June to raise the city's minimum wage to $15 an hour (over three or four years).
So while the darkest nightmares harbored by Sen. McConnell and his colleagues may be vivid, but they're unfounded. Findings from 12 different recent meta-analyses of some or all of the 22 states (plus D.C.) where the minimum-wage floor is higher than the federal minimum wage show that the reduction in employment—from restaurant employers to teenage workers—is rarely statistically significant, per the Urban Institute study. That might not be a reason for Sen. McConnell to line up in favor of increasing the minimum wage, but if he's so tired of fighting over it, he could do worse than to compromise on this issue. (I'm kidding! Sen. McConnell would rather shut down the government.)
Liberals, too, need to fact up to reality: Higher wages in D.C. and San Francisco is far from a dream solution. Both cities rank among the highest in the nation in terms of inequality. Both are small in terms of geographic size but not nearly dense enough to meet the demand for housing. Both are single-industry towns that afford some of the highest salaries in the nation. While many workers stand to benefit from the increase, it won't be enough to bridge an inequality gap driven by a lack of housing supply.
"Because D.C. is the nation’s capital, the federal government and public sector play outsized roles in the local economy and the job market is dominated by service-sector jobs. The job market is somewhat bifurcated with an abundance of both low-wage and high-wage jobs," the Urban Institute report reads. To a lesser extent, the same can be said of San Francisco and its relationship with Silicon Vally.
The report continues: "The conundrum is that, given D.C.'s high cost of living, employers must pay more than the minimum wage to attract workers for many jobs, and even workers earning more than the minimum wage have trouble making ends meet."
Sen. McConnell overestimates the downsides of a minimum-wage increase. Worker wage hikes won't reach far enough to slow down monopsonist labor markets like Silicon Valley or Military Contractor–land. By the same token, a minimum-wage increase alone isn't enough to help the poorest workers living in sectors where high salaries and a lack of housing supply make it tough to get by.