San Francisco Becomes First in Nation with $10 Minimum Wage (and the Sky Isn't Going to Fall)

"Sir,  would you like me to add french fries to your order?"

The business community is screaming that the higher wages will "cost jobs," but the data suggest otherwise.

December 30, 2011

On January 1, the minimum wage in San Francisco will cross the psychological threshold of $10 an hour. An automatic cost-of-living adjustment built into city law will raise the wage floor 3.2 percent, from its current $9.92 to $10.24. Predictably, employers have been warning that the increase will cost jobs. In fact, a great deal of economic evidence suggests otherwise.

Last March, my CEPR colleague, David Rosnick, and I finished a detailed study of the employment impact of the first three years of the San Francisco minimum wage. Back in early 2004, San Francisco established a city-wide minimum wage of $8.50 --25 percent higher than the $6.75 California state minimum wage at the time and 65 percent higher than the prevailing federal minimum of $5.15.

We analyzed employment patterns in a range of industries with a high share of low-wage workers, including fast food and retail. We compared trends in wages and employment in San Francisco before and after the increase with trends over the same period in San Francisco's adjacent suburbs and, separately, in nearby Oakland, two areas where the minimum wage was unchanged.

To rule out statistical flukes, we looked at the impact after one year, then two years, then three years. We also examined the impact on low-wage employers, regardless of industry, and we isolated the impact on small employers (fewer than 10 employees and 10 to 24 employees).

We consistently found that the minimum-increased boosted wages, but had no discernible impact on employment. Wages rose significantly in fast food, broader food services, and in low-wage establishments (regardless of industry). Because wages in San Francisco were already relatively high in retail trade, the law had no significant impact on wages in that sector. At the same time, the new, higher minimum wage had no measurable impact --one way or the other-- on employment in these same industries and establishments.

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