The Impact of City-Specific Minimum Wage Standards

From the Center for Economic and Policy Research.

City minimum wages don't hurt the employment prospects of low-wage workers, according to a new report released today by the Center for Economic and Policy Research (CEPR) that analyzes the wage and employment effects of the first three city-specific minimum wages in the U.S.

“The experience of the first three cities to implement city-wide minimum wages demonstrates that these laws can raise the earnings of low-wage workers with no negative impact on employment,” said John Schmitt, a senior economist at CEPR and an author of the study.

The report, "The Wage and Employment Impact of Minimum-Wage Laws in Three Cities," evaluates the effects of city-specific minimum wage standards in San Francisco, Santa Fe, and Washington DC. The authors used data from a virtual census of establishments in these cities, their surrounding suburbs and nearby metropolitan areas and found these policies did not have significant negative effects on the employment of low-wage workers.

The authors compared wages and employment before and after the city minimum wage with changes over the same period in wages and employment in comparable establishments in nearby areas that did not see an increase in the minimum wage.

The report found that wages rose significantly in San Francisco and Santa Fe in fast food, food services, retail and low-wage establishments, but employment was unaffected. The findings support the view that modest increases in the minimum wage have no discernible impact on the employment prospects of low-wage workers.

“This report confirms what we have found generally in our numerous participatory research studies on the industry, based on more than 5000 surveys of restaurant workers and 300 employer interviews nationwide. Increasing the minimum wage for America's lowest-paid workers - restaurant workers - does not hurt our thriving industry; in fact, because restaurant workers consume so much in their own industry, we know that putting a few extra dollars in their pockets comes right back as stimulus to our industry and the economy as a whole,“ said Saru Jayaraman, Co-Director and Co-Founder of the Restaurant Opportunities Centers United.

The authors also find that the increase in the minimum wage implemented in 1993 in Washington, DC, was too small to raise wages in the same sectors. In Washington, most workers were already above the new minimum wage and few workers were in the range affected by the new minimum. At the same time, the implementation of the minimum wage did not have any negative effects on employment for low-wage workers.

However, the cases in San Francisco and Santa Fe suggest that small establishments do not respond to minimum wages differently than larger firms. David Coss, the Mayor of Santa Fe, also concurred with the report’s findings: “I am proud of Santa Fe’s living wage law. I am also very proud of the businesses in Santa Fe who pay a living wage. Our work on the living wage has made Santa Fe a national leader and has strengthened our economy, community and working families.”

The full report can be found here.