04/20/2018

California Dreamin’ of Higher Wages

The economists’ preferred model shows that past minimum wage increases in California have caused a measurable decrease in employment among affected employees. Specifically, they find that a 10% increase in the minimum wage would cause a nearly five-percent reduction in employment in an industry where one-half of workers earn wages close to the minimum. In an industry with an average share of lower-wage workers, their findings imply that each 10% increase in California’s minimum wage has reduced employment for affected employees by two percent.

The authors apply these estimates to the state’s forthcoming $15 minimum wage. By 2022, approximately 400,000 jobs would be lost as a consequence. (This estimate is conservative, as it measures the impact of California’s state minimum wage but does not account for job loss in counties that had insufficient data.) Industries with the greatest number of affected employees are most severely affected by job loss, according to Even and Macpherson; nearly half of the observed job loss occurs in foodservice and retail industries.

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