Berkeley Minimum Wage Hike Study Ignores Key Factor

Los Angeles Mayor Eric Garcetti’s proposal for a $13.25 citywide minimum wage hit a speed bump last week when two city councilmen — Mitch O’Farrell and Felipe Fuentes — insisted on an independent analysis of his plan.

They specifically objected to the group of researchers originally chosen to conduct that analysis, from a labor union-aligned research outfit at the University of California-Berkeley, due to concerns that their final product wouldn’t be sufficiently independent.

Are these concerns justified? Berkeley professor Michael Reich, who has accompanied the mayor on pitch meetings for the proposed wage hike, doesn’t think so.

Reich and his co-authors have been busy writing various reports on California minimum wage increases. In 2014, for instance, they released four separate reports on proposed city minimum wage increases in the state — in San Francisco, San Diego, Los Angeles and Oakland — and another report on a proposed statewide wage increase.

The geographies and populations studied varied dramatically, as did the minimum wage policies proposed: From $11.50 an hour in San Diego up to $15 an hour in San Francisco. And in every instance, the conclusion that Reich and his team produced was the same: Substantial loss of entry-level jobs is unlikely to occur following a minimum wage increase. (This consequence was apparently so remote in San Diego that it wasn’t even worth mentioning in the report.)

This kind of unanimity on the question of job loss and the minimum wage is highly unusual, to say the least: The issue has been studied exhaustively over the past two decades, and according to a summary of all these studies by economists at the University of California-Irvine and the Federal Reserve Board, a majority of the research points to job losses following a wage hike.

Policymakers curious how Reich and his team consistently reach a conclusion at odds with this economic consensus should read the fine print. In a seven-page document released last year explaining how they estimated the impact of citywide minimum wage increases, they offered this disclaimer: “We do not make any adjustments for potential positive or negative changes in employment due to the minimum wage increase.”

Got that? The reason why this team from UC-Berkeley consistently finds no impact on employment from a higher minimum wage is that they assume at the outset it doesn’t exist.

You could have all sorts of fun evaluating public policies following this approach. For starters, you might study the increased revenue from a new 50 percent tax on all new car purchases in Los Angeles — and assume at the outset that higher taxes won’t affect consumers’ purchasing decisions. Or perhaps you could study the ramifications of a $20 per-car toll on the Golden Gate Bridge — and assume from the start that higher tolls won’t impact driving habits. In both cases, you’re guaranteed to succeed!

Of course, if the assumptions are unjustified — if higher taxes on cars really would reduce purchases, for instance, and if a higher minimum wage really could hurt job growth — then this approach starts to run in to trouble.

It’s even more problematic in the case of Reich’s team at UC-Berkeley because the backgrounds of these researchers suggest they have more than the data in mind. Ken Jacobs, for instance, who was a co-author on all four of the city minimum wage studies, was formerly employed as co-director of the San Francisco Living Wage Coalition. Today, he oversees the Center for Labor Research and Education, which is supported by many of the same unions pushing for a higher minimum wage. Another co-author of these papers, Annette Bernhardt, made the leap to Berkeley from the National Employment Law Project , which boasts of “coordinating the campaign to lift the federal minimum wage to more than $10 per hour.”

The least that the City Council can do is commission a report whose independence is not in doubt. With an average 30 percent of Los Angeles’ job-seeking youth failing at finding a job, it’s crucial that any additional barriers to employment associated with a higher minimum wage be seriously examined rather than ignored as if they didn’t exist.

Comments

  1. And besides, if there was any loss of job opportunities following a hike in the minimum wage, it’s all the fault of greedy republicans.

Speak Your Mind

*