Opinion

What San Diego Can Learn From San Francisco’s Minimum Wage Bump

What San Diego Can Learn From San Francisco’s Minimum Wage Bump

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San Diego is joining a growing movement of cities using local policies to counter rising income inequality and falling real wages.

fix san diego opinionCity Council President Todd Gloria, other Council members and a community coalition called Raise Up San Diego announced plans to put a comprehensive measure on the November ballot in support of earned sick days and an increase in the minimum wage.

Research on earned sick days and on the higher minimum wage rate in San Francisco shed important light on the economic impacts when cities raise the low-wage floor.

Ten years ago, San Francisco became the first city in the U.S. to enact a city-wide minimum wage ordinance. The wage floor, now $10.74, is indexed to maintain buying power over time. More than 50,000 workers received higher pay as a result of the law, and low-wage workers earnings increased by an estimated $1.2 billion over the next decade.

The minimum wage law enabled San Francisco to buck a national trend of declining real wages (meaning adjusted for inflation) for workers at the bottom of the income spectrum. Between 2003 and 2013, real wages for low-paid workers stagnated and then fell in surrounding Bay Area counties and the rest of the country. But in San Francisco, wages rose.

The city also passed a paid sick leave ordinance in 2006. Workers earn one hour of paid sick leave for every 30 hours worked. While employers initially expressed concern about San Francisco’s ordinance, a survey after the law was implemented found broad employer support.

Critics warned that these laws would kill jobs and hurt economic development – just like opponents are now doing in San Diego. Extensive academic research on San Francisco’s policies, however, found wages and benefits improved significantly for tens of thousands of people without hurting employment or the economy.

From the first quarter of 2004, when the minimum wage ordinance took effect, to the first quarter of 2011, employment in restaurants, the industry most affected by the law, increased by 17 percent in San Francisco, compared with 13 percent in neighboring Bay Area counties without raised wages.

San Francisco’s experience is not unique. Economists from universities across the country compared hundreds of pairs of counties with different minimum wage rates across state borders over a 16-year period. They found the same thing: Minimum wages raised incomes without harming employment.

In a separate study using similar methods, University of Massachusetts, Amherst professor Arindrajit Dube also found that raising the minimum wage was an effective strategy to reduce poverty. The $10.10 national minimum wage proposed by Sen. Tom Harkin and Rep. George Miller would reduce the number of people in poverty by 4.6 million.

But how did San Fransisco pay for higher wages? Workers stayed in their jobs longer, generating savings to employers on turnover costs. Another source of savings came from improved performance.

After a mandated wage increase at the San Francisco International Airport, employers reported reduced absenteeism and grievances, improved morale and better customer service.

Consumers absorbed the rest of the costs through slightly higher prices at restaurants. After the 26 percent minimum wage increase, prices in San Francisco restaurants rose 2 to 3 percent more than in similar restaurants across the bay. Price increases in other sectors were negligible.

Since San Francisco passed its minimum wage ordinance, eight other cities and counties, including San Jose, have done the same. Many more cities are currently considering their own proposals. Five other cities and Connecticut have adopted earned sick days policies.

These policies make good economic sense, especially in cities that have higher-than-average costs of living.

The California minimum wage, even after the scheduled increases, will stay low by historical standards, and it isn’t indexed for inflation.

Jobs that pay too little for families to live on continue to pose a major problem for local economies. City-based policies can be part of the solution.

Ken Jacobs is chair of the UC Berkeley Labor Center, and Michael Reich is a professor of economics and director of the Institute for Research and Employment at UC Berkeley.  They are co-editors along with Miranda Dietz of When Mandates Work: Raising Labor Standards at the Local Level. Jacobs and Reich’s commentary has been edited for style and clarity. See anything in there we should fact check? Tell us what to check out here.

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38 comments
Joshua Brant
Joshua Brant subscriber

A local increase in minimum wage should be county wide, not city wide.

-P
-P subscriber

Another situation to keep an eye on - Seattle's mayor is proposing raising their minimum wage to $15 p/h

Matty Azure
Matty Azure subscriber

My buddy Jim Bass, he works pumping gas. He makes $2.50 an hour.  He's got rhythm in hands as he's beating on the cans.  He sings rock and roll in the shower.

Signed,

John Stewart

saltymarg
saltymarg

@ToddGloria Funny how no outrage over sky-high rent and gas but God forbid you pay people enough to afford to live here and work for you.

saltymarg
saltymarg

@ToddGloria Wages for legal professionals like me are around $12-18/hr. I earn more but barely afford rent. Wages must match cost of living

MarcEmmelmann
MarcEmmelmann

@ToddGloria ...we are just "reacting" to inflation, not responding to it. Trace the root issue... :)

Donald Kimball
Donald Kimball subscribermember

San Francisco was already geographically small, and expensive tourist town, with convenient public transportation from the outlying areas.  For example, Forbes Island restaurants costs are not dominated by the dishwasher labor. In addition, some labor, such as sole proprietor food carts do not have employees, and are off the books. San Francisco hotels are not cheap, and costs are not dominated by maid money.  San Diego could raise the minimum wage downtown and in La Jolla with good results, but not in Kearny Mesa and Mira Mesa.

Chris Brewster
Chris Brewster subscribermember

I note several comments here that generally disparage this commentary based on sarcasm and suggestions that these individuals are biased. I note no comments that refer us to data which refute their asserted facts and conclusions. It's always frustrating to see a cherished belief refuted, but if you disagree with the bases of the commentary please give me tangible arguments, not political dogma.

James Weber
James Weber subscriber

Figures lie and liars figure.

Grammie
Grammie subscribermember

In the latest financial news tonight, Venezuela just raised its minimum wage by 30%!  Surely we San Diegans can do better than that. 

Steven Greenwald
Steven Greenwald

pure fecal matter more citizens will not be able to afford going to a restaurant or staying in a san diego hotel.. less tourists for san diego more for cities with cheaper hotel rates .. less jobs and more poverty and homelessness as has pappened doring the lasdt 5 ears in sam diego .. greenwald 4 California governor 2014 if its brown flushit down !!

Steven Greenwald
Steven Greenwald

pensioners and the working families .. full time college students are forced out of san francisco

Steven Greenwald
Steven Greenwald

what a farce there are more homeless and people living in poverty than in the last 10 years.. san Francisco is unaffordable for 67% of the citizens living there!!

Mark Giffin
Mark Giffin subscribermember

I may very well support and vote for the wage increase.  But not for the biased "research" a couple of pro labor liberal academics put forward.

If we want to slow population growth in this sector (lower income) a closed shop may very well be the way to do it.

San Diego has way too many people and far to rapid of population growth.

Roger Leszczynski
Roger Leszczynski

Yes those with money from tech industry boom helped to pay the wages. Prices at restaurants went up too. Basically inflation. How long is it going to last? tech bubble 2 is about to pop. We need to be competitive with machines that are replacing people (see self check out? just need 1 person to manage 4 of them instead of 4 cashiers). It is unfortunate cost of living is high. I think rent control might be the option, as this will help businesses stay open - look how quickly businesses turn over and bellyflop in downtown/hillcrest and north park. THe 1% includes slum lords

Grammie
Grammie subscribermember

How many high school kids, are supporting families? 

Chris Brewster
Chris Brewster subscribermember

Mr. Kimball: What is your evidence to support the statement that, "San Diego could raise the minimum wage downtown and in La Jolla with good results, but not in Kearny Mesa and Mira Mesa."

Muriel
Muriel subscriber

@Chris Brewster The reason why restaurants have increased employment in San Francisco is because the Silicon Valley wealth is living in San Francisco and going out to eat more often in higher priced restaurants. This masks the damage in the union-driven minimum wage hike explosion

-P
-P subscriber

@Grammie    According to this USA Today article, more than half of the fast food workers are also on public assistance. http://www.usatoday.com/story/money/personalfinance/2013/10/29/how-you-subsidize-the-minimum-wage/3295759/

The Earned Income Tax Credit helps, too

http://www.forbes.com/sites/janetnovack/2013/07/23/mcdonalds-minimum-wage-budget-ignores-tax-credits-food-stamps-and-reality/

Apparently about 45% of the minimum wage workers are over 25, 49% of the people making less than minimum wage (jobs with tips/ some agricultural jobs, etc) http://www.bls.gov/cps/minwage2012.pdf

-P
-P subscriber

@Jim Jones  According to an article in the  Seattle Times, there's another study by Nicolas Potter from the University of New Mexico that looked at basically the same effect in Santa Fe. The article also claims the  Berkeley study looked at 8 cities, and 21 states. Joseph Sabia of SDSU has a study which has very different findings than either Berkeley or New Mexico studies. 

http://seattletimes.com/html/localnews/2023116005_wageimpactsxml.html

In other words, economic theory can be murky.

Donald Kimball
Donald Kimball subscribermember

@Chris Brewster You obviously are ignoring the laws of supply and demand as influenced by the forces of competition,  and are incapable of estimating business operating costs share based on labor, unless someone else tells you in a some peer reviewed journal paper. All your statements indicate that you are unwilling to make any mathematical estimates on your own, and are thus lacking in the application of critical thinking skills required for a reasoned debate. This is intentional on your part, especially given the very high price of real estate in San Francisco, for which I have submitted no evidence. 

Chris Brewster
Chris Brewster subscribermember

Ms. Forsberg: Firstly, any evidence of this or are you simply expressing an opinion? Secondly, you state that, "This masks the damage in the union-driven minimum wage hike explosion." Two questions: 1) What damage? 2) What explosion?

Chris Brewster
Chris Brewster subscribermember

Thank you for adding emphasis to my point.

-P
-P subscriber

@Jim Jones Hey Jim, sounds like you've been reading up on that old insurance executive Charles Ives. His big thing was developing Estate Planning. Anyway, he proposed that there should be cap on individual property. I think he wrote that around 1916.

Grammie
Grammie subscribermember

@-P @Grammie  That means 55% are under 25. How big a family were you supporting at that age?

Chris Brewster
Chris Brewster subscribermember

Mr. Kimball: I appreciate that you are of the view that I am lacking in the application of critical thinking skills. You opinions in that regard notwithstanding, I am merely asking for the basis for your statement.

Chris Brewster
Chris Brewster subscribermember

Mr. Jones: More unsubstantiated hyperbole. Who says there will be any increase in unemployment. Got any evidence of that? According to 600 economists:

"In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market."

http://www.epi.org/minimum-wage-statement/

Chris Brewster
Chris Brewster subscribermember

Got it. I personally like the Ron Unz justification (i.e. don't let employers pay so little that we end up subsidizing them through social welfare programs).

Mark Giffin
Mark Giffin subscribermember

@Chris Brewster  

- "The wage was indexed and is now $10.74."

 Much as the state has proposed. Like I said I consider that prudent. Assumption that ours goes to the proposed increase that would be a large % jump.

"While employers initially expressed concern, a survey after the law was implemented found broad employer support."

That statement is nebulous. Define Broad support

-" Since the minimum wage ordinance took effect employment has increased 17% in SF versus 13% in neighboring cities."

OK. how much minimum wage vs higher paying jobs. No breakdown.

Looks like cherry picking to me.

Like I said in another post I may very well support this but for a different reason.

I'm not trying to refute the "facts" as much as I'm saying their Key facts are ambiguous and do not go into much depth leaving .

In addition there is no figures on how many businesses increased or decreased and whether those increase decrease were in larger higher end or in small operations

Chris Brewster
Chris Brewster subscribermember

Mr. Giffin: My interest is mostly in the underlying data which, as I have noted, no one seems to be able to refute here. Instead, there is a lot of opinion and so on. Here are some key facts they have laid out. Do you believe them to be untrue? You could request a fact check.


- 10 years ago SF was first to create a city minimum wage ordinance.

- The wage was indexed and is now $10.74.

- 50,000+ workers received higher pay as a result of the law.

- Between 2003 and 2013, real wages for low-paid workers stagnated and then fell in surrounding Bay Area counties and the rest of the country. But in San Francisco, wages rose.

- The city also passed a paid sick leave ordinance in 2006.

- While employers initially expressed concern, a survey after the law was implemented found broad employer support.

- Since the minimum wage ordinance took effect employment has increased 17% in SF versus 13% in neighboring cities.

- Similar situations have been found elsewhere in the country.

- The $10.10 national minimum wage proposed by Sen. Tom Harkin and Rep. George Miller would reduce the number of people in poverty by 4.6 million.

Chris Brewster
Chris Brewster subscribermember

Precisely. Versus the study referenced in this article.

-P
-P subscriber

@Jim Jones Yup, for most people, if they are lucky enough to own their own home, it is their largest investment. You are sounding more and more like that old insurance mogul. He wasn't being sarcastic, though.

-P
-P subscriber

@Jim Jones @-P  I don't think he was referring just to land, but to personal wealth in general.

danwroy
danwroy subscriber

@Grammie @-P  How many rhetorical questions equal a statement? The article lays out a clear picture that would justify a minimum wage increase. It looks like charity but it ends up benefitting employees and employers alike. It's an opinion piece and labeled as such.


"But most of those employees are dumb kids! How are they going to build character if they're able to earn a living wage?"

shawn fox
shawn fox subscriber

@Jim Jones @-P  After that explanation, I'm thinking that I should vote for it.  After all if it affects very few people, and has such a minimal effect then what harm can it do?