RELEASE: The Mayor of Los Angeles’ Proposed City Minimum Wage Policy: A Prospective Impact Study

Press Release

News from the University of California, Berkeley

September 1, 2014
CONTACT:
Ken Jacobs, 510-643-2621, kjacobs9@berkeley.edu
Michael Reich, 510-643-7079, mreich@berkeley.edu

567,000 Los Angeles Workers Would Get a Pay Raise From Mayor’s Proposed Minimum Wage Policy

FOR IMMEDIATE RELEASE

BERKELEY—A new report released by researchers from the University of California, Berkeley’s Institute for Research on Labor and Employment finds that the minimum wage policy proposed by Los Angeles Mayor Eric Garcetti would provide significant gains in income to Los Angeles’ low-wage workers and their families.

The Mayor’s proposed policy would increase the city’s minimum wage to $13.25 an hour by 2017 phased in over three steps, with annual cost-of-living increases thereafter.

The study, by the UC Berkeley Researchers Michael Reich, Ken Jacobs, Annette Bernhardt and Ian Perry finds that about 567,000 workers, or approximately 37 percent of the workers covered by the ordinance, would receive a raise under the proposed law. Pay for those workers would rise by an average of $3,200 per year, for a total increase in aggregate earnings of $1.8 billion (in 2014 dollars) by 2017.

These pay increases would especially benefit adults, workers of color and working poor families. Researchers estimated that 97 percent of the workers are in their twenties or older and 59 percent in their thirties or older. The average worker benefiting from the policy contributes slightly more than half of his or her family’s income. Workers of color (Black, Hispanic, Asian and other) make up 83 percent of the affected workers. Over 80% of Los Angeles workers in low-income families would receive an increase in income under the policy.

Previous economic research on federal, state and local minimum wage increases found little to no measurable effect on employment or hours worked. 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 4.1 percent by 2017. Increased costs may also be offset by the additional spending by low-wage workers and their families, acting as an economic stimulus in local economies.

The proposal would raise Los Angeles’ minimum wage by 47.2 percent over three years. This is above the average of existing local minimum wage laws, but within their range.

“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. “Most businesses will be able to absorb the increased costs, while consumers will likely see a small one-time increase in restaurant prices.”

To date, 14 cities and counties have approved local minimum wage laws including Seattle, San Francisco, San Diego and San Jose. Oakland will vote on a $12.25 minimum wage in November and San Francisco will vote on a $15 minimum wage.

The research was carried out at the request of the Los Angeles Mayor’s office.

The full report can be found online: https://irle.berkeley.edu/files/2014/The-Mayor-of-Los-Angeles-Proposed-City-Minimum-Wage-Policy.pdf.