California Economists In Support of a Statewide $15 Minimum Wage
Add my name to the group of economists that supports raising California’s minimum wage.
5.6 million California workers deserve a raise!
We, the undersigned economists and social scientists, support the proposal to increase the state’s minimum wage to $15 an hour by 2022 for large businesses and 2023 for small firms. The $15 target is equivalent to $12.80 in today’s (2015) dollars. This level of the minimum wage is only 34 percent above that of 1968, though economy-wide productivity has more than doubled since then. This prudent and much-needed policy would raise the incomes of struggling low-wage workers and boost their spending power without hurting the state’s economy.
Real wages have fallen for the bottom half of the California workforce since 1979, while gains in real earnings have been concentrated at the top of the income distribution.[i] The current minimum wage of $10 an hour does not adequately cover basic living costs for families. A single adult living in California and working full time would need to earn $14.22 an hour in Fresno (in today’s dollars) and $19.89 in San Jose to meet basic living expenses.[ii]
A phased increase to $15 in 2023 would deliver much-needed earnings increases to an estimated 5.6 million workers. This includes both direct wage increases and “spillover” effects, as employers adjust their internal wage ladders. On average, these workers would earn $3,700 more in annual pay. Adding in the 800,000 workers who will already reach $15 due to local minimum-wage policies, 37 percent of the state’s workforce would see their wages rise.
The vast majority of employees who would benefit are adults (96 percent) in working families who work at least 20 hours a week and depend on those earnings to make ends meet. Workers who would benefit from the wage increase earn an average of half of their family’s income.
In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that minimum-wage increases have had their intended effect: improving incomes for low-wage workers and their families without substantial effects on employment.[iii] The planned California minimum-wage increases are bold but put California on a similar trajectory as France and the United Kingdom, and where Australia was in the 1990s.
Higher wages may be absorbed by employers through a variety of channels, including lower turnover, improved productivity, and small increases in price. The adverse effects on business of charging slightly higher prices will be largely offset by the increased sales generated by the low-wage workers who receive raises.[iv]
Along with the immediate benefit to workers and their families, the state would realize long-lasting benefits, as research shows that additional family income improves health for both workers and their children[v], and increases children’s school achievement[vi] and cognitive and behavioral outcomes.
A phased-in increase in the California state minimum wage to $15 an hour makes sound economic sense.
[i]UC Berkeley Center for Labor Research and Education. 2015. Low Wage Work in California.
[ii] Economic Policy Institute, Family Budget Calculator.
[iii] Belman, Dale and Paul J. Wolfson. 2014. What Does the Minimum Wage Do? Kalamazoo, MI: W.E. Upjohn Institute for Employment Research; Schmitt, John. 2013. “Why Does the Minimum Wage Have No Discernible Effect on Employment?” Center for Economic and Policy Research.
[iv] Reich, Michael, Sylvia Allegretto, Ken Jacobs and Claire Montialoux. 2016. “The Effects of a $15 Minimum Wage in New York State.” Center on Wage and Employment Dynamics, Institute for Research on Labor and Employment, UC Berkeley, Berkeley, CA.
[v]See, for example: Leigh J. Paul and Juan Du. 2012. “Are Low Wages Risk Factors for Hypertension?” European Journal of Public Health, 22(6): 854-859; Human Impact Partners. May 2014. Health Impacts of Raising California’s Minimum Wage. Oakland.
[vi]See for example: Duncan, Greg, Pamela Morris and Chris Rodrigues. 2011. “Does money really matter? Estimating impacts of family income on young children’s achievement with data from random-assignment experiments.” Developmental Psychology, 47(5): 1263–79.