UC Berkeley faculty present study on potential impact of higher minimum wage in LA

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On Tuesday, several UC Berkeley researchers and faculty members presented to the Los Angeles City Council a study on the prospective impact of raising the minimum wage in L.A.

The study was conducted by UC Berkeley’s Institute for Research on Labor and Employment after being requested by the council. It aimed to determine what possible effects raising the minimum wage — to $13.25 by 2017, and $15.25 by 2019 — would have on employees and businesses.

The wage proposal is a multistep one. Although specific steps have not yet been determined, the goal is to phase in the higher wages gradually over several years.

The impact study, authored by Michael Reich, Ken Jacobs, Annette Bernhardt and Ian Perry, found that about 41.3 percent of covered workers would receive pay increases by 2019. These pay increases would average to an approximate $4,800 rise in average annual earnings. Additionally, workers of color and low-income families are expected to see some of the highest benefits from the proposed law.

The study also conjectured that the majority of workers getting raises from the proposed wage policy will belong to the “private, for-profit sector.”

With full implementation of the proposal, operating costs for businesses would increase 0.9 percent by 2019, the study said, likely translating into higher prices for consumers.

The study found, however, that the costs of increasing the minimum wage would be offset by lower worker turnover, better employee performance and greater spending by low-income individuals and families.

“Raising prices does have some effect on demand. But you also have higher demand from those who now have more money in their pockets, and these balance each other out,” said Jacobs, chair of UC Berkeley’s Center for Labor Research and Education.

But the effect of a higher minimum wage on the economy remains contested. According to another report by Beacon Economics, paid for by the Los Angeles Area Chamber of Commerce, the proposed law could cut annual job growth to less than half of the expected rate, thereby making growth nearly or totally stagnant.

On June 10, Berkeley City Council adopted a three-stage plan to raise its minimum wage. In accordance with the plan, on Oct. 1 the minimum wage was raised from $9 to $10. In October the minimum wage is set to rise to $11, and in 2016 it will reach $12.53.

The city of Berkeley has not yet conducted a study to analyze the effects of the plan, according to city spokesperson Matthai Chakko.

 

Contact Ivana Saric at [email protected] and follow her on Twitter @ivanas26.

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  • Mike Hunt

    The Fair Labor Standards Act, the federal legislation that governs minimum wage regulations, has what is called a 14(c) exemption. This applies to businesses that employ workers with disabilities. Basically if a business employs an individual with a serious disability, then they can be paid below the minimum wage.

    Now imagine what would happen if Congress eliminated this provision and required businesses to pay all workers, regardless of disability status, at least the minimum wage. What would happen?

    Now apply that same reasoning to raising the minimum wage for the entire economy. The consequence is essentially identical.

  • Mike Hunt

    In Seattle the minimum wage is already destroying jobs: http://goo.gl/jqOx4b

  • Guest

    It is Berkeley. I would have thought they would have pushed a $50 minimum.