UC Berkeley research examines effects of minimum wage increases

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On July 1, the city of Berkeley raised its minimum wage to $15.59 per hour. Less than three weeks later, on July 18, the Raise the Wage Act of 2019 — which would increase the federal minimum wage from $7.25 to $15 by 2025 — was passed by the U.S. House of Representatives.

A 2018 study co-authored by Anna Godøy, research economist at the UC Berkeley Center on Wage and Employment Dynamics, looked at the impact of the minimum wage exceeding $10 in the food service industry in six large cities. According to Godøy, the study found that when wages increase, there is little to no impact on job loss or growth.

“The overwhelming consensus is that for the increase of minimum wage we have seen, we haven’t really found any large job losses,” Godøy said. “Most studies didn’t find any effect, and the ones that do see only a small loss. We can definitely expect to see large decreases in poverty.”

Although one July 2019 study by the Congressional Budget Office estimated that 1.3 million jobs could be lost with a $15 federal minimum wage, the study also estimated that 1.3 million people would be lifted out of poverty; additionally, as many as 27 million workers whose wages are at, below or just above $15 per hour could also see wage increases.

According to Stefan Elgstrand, a legislative aide to Mayor Jesse Arreguín, Berkeley’s July 1 minimum wage increase was implemented to reflect the high living costs of the Bay Area. He added that the local economy has been “booming” after the minimum wage increase. Citywide ground floor commercial vacancy rates have dropped from 6.6 percent in 2014 to 5 percent in 2018. During the same time period, unemployment dropped from 4.6 percent to 2.8 percent, according to Elgstrand.

UC Berkeley Center for Labor Research and Education chair Ken Jacobs said in an email that research on higher minimum wages finds little to no effect on employment. He also added that although there might be price increases in restaurants and service industries, employee turnover would be reduced and worker performance would improve. According to Jacobs, an increased minimum wage could also “improve mental health, increase parental workforce participation and reduce child poverty.”

“Federally, it would be good for everyone,” said Kavitha Iyengar, president of United Automobile Workers Local 2865 — the union representing graduate student workers at UC campuses. “There are far too many people in poverty, and far too many people not earning enough due to business loopholes. A federal minimum wage would lift people out of poverty and puts an end to a lot of those bad business practices. I think it’s time for a federal $15 minimum wage.”

Contact Suryan Bhatia at [email protected].