Executive Summary

The Lift Up Oakland Coalition, an alliance of community, labor, small business and faith organizations, has placed an initiative on the Oakland November 2014 ballot that would establish a minimum wage of $12.25 for businesses in the city starting March 1, 2015. This study examines the effects of a $12.25 minimum wage on Oakland workers and businesses.

Drawing on a variety of government data sources, we estimate that more than a quarter of the Oakland workforce would benefit from the proposed policy, with the average worker earning an additional $2,700 a year. Our analysis of the existing economic research literature suggests that businesses will adjust to modest increases in operating costs through reduced employee turnover costs, improved work performance, and a small, one-time increase in restaurant prices.

Specifically, we find:

• About 25 to 30 percent of Oakland workers or between 40,000 to 48,000 Oakland workers would receive a pay raise.
  • Between 31,000 to 34,000 would be directly affected by a minimum wage increase.
  • Between 9,000 to 14,000 would be indirectly affected by a ripple effect.
• Workers’ hourly wages and annual incomes would rise, resulting in increased annual earnings of $120 million per year.
  • Hourly wages of affected workers would rise by an average of $1.69/hour.
  • Average annual earnings would increase by about $2,700 per year.
• Adults and workers of color would see significant benefits of a pay increase.
  • 96.5 percent of affected workers are in their twenties or older, and over half of the workers receiving raises are in their thirties or older.
  • Workers of color (Black, Hispanic, and Asian) make up about 62.1 percent of the total workforce in Oakland, but they represent about 78.7 percent of workers affected by a minimum wage increase to $12.25.
  • About 43.0 percent of the affected workers are Hispanic/Latino.
• Increasing the minimum wage would have a modest impact on business operating costs and consumer prices.
  • Research evidence indicates that the costs of a higher minimum wage are absorbed through reduced worker turnover, improved worker performance and small one-time increases in restaurant prices.
  • Operating costs would increase by 0.3 percent for retail businesses and 2.8 percent for restaurants.
  • Restaurant prices would increase by 2.5 percent. A $10 meal would increase by 25 cents, to a total of $10.25. For retail and the local economy as a whole, price increases would be negligible.
• Previous studies found that minimum wage increases have little negative impact on employment.
  • Three rigorous studies of the employment impacts of existing local minimum wage laws all find no significant impact on employment.
  • A national study compares employment in all the counties that straddle state borders with different minimum wages, for the period 1990 to 2012. This study finds no statistically significant effects of minimum wage increases on either employment or hours in restaurants and other low-wage industries, controlling for a range of regional and local differences that previous research did not include.
• The proposed 36 percent minimum wage increase in Oakland lies within the range of previous local minimum wage laws.
  • The ten previous local minimum wage laws in the U.S. have mandated an average increase of 43.0 percent, with a range of 13.3 percent to 84.5 percent.
  • The proposed policy would increase the minimum wage to 54 percent of the Oakland median wage of $22.64 an hour. This ratio is within the historical range of the ratio of the federal minimum wage to the median wage.

Read the full report.