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Title: Effects of a $15 Minimum Wage in California and Fresno

Citation Type: Miscellaneous

Publication Year: 2017

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Abstract: We present here an analysis of the pay and employment effects of the scheduled minimum wage increases to $15 by 2023 in California as a whole and in Fresno County, one of the poorest areas in the state. Critics of minimum wage increases often cite factors that will reduce employment, such as automation or reduced sales, as firms raise prices to recoup their increased costs. Advocates often argue that better-paid workers are less likely to quit and will be more productive, and that a minimum wage increase positively affects jobs and economic output as workers can increase their consumer spending. Here we take into account all of these often competing factors to assess the net effects of the policy. Our analysis applies a new structural labor market model that we created specifically to analyze the effects of a $15 minimum wage. We take into account how workers, businesses, and consumers are affected and respond to such a policy and we integrate these responses in a unified manner. In doing so, we draw upon modern economic analyses of labor and product markets. As we explain in the report, the main effects of minimum wages are made up of substitution, scale, and income effects. The figure below provides a guide to the structure of our model. Our data are drawn from the Census Bureaus American Community Survey and from other Census and U.S. Bureau of Labor Statistics datasets. We also make use of the extensive research conducted by economists-including ourselves-in recent years on minimum wages, and upon research on related economic topics. Our estimates of the effects of a $15 minimum wage are also based upon existing research on labor markets, business operations, and consumer markets. Our estimates compare employment numbers with the adopted policy to employment numbers if the policy had not been adopted. Other factors that may affect employment by 2023 are therefore outside the scope of our analysis. Our analysis does not incorporate recent laws that raise minimum wage in numerous California cities to $15 on a faster pace than the statewide policy. We do so to simplify the presentation and to focus on the overall statewide impact by 2023. We pay special attention to Fresno County because it is one of the poorest areas in the state. Many better-off and more expensive California cities have already examined the effects of higher minimum wages and enacted their own $15 laws. We consider here the effects of a $15 minimum wage in a less affluent and lower costs of living area of the state.

Url: http://irle.berkeley.edu/files/2017/Effects-of-a-15-Minimum-Wage-in-California-and-Fresno.pdf

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Authors: Reich, Michael; Allegretto, Sylvia; Montialoux, Claire; Perry, Ian

Publisher: Center on Wage and Employment Dynamics

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

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