Biased UC-Berkeley Research Team Not Credible on Minimum Wage

Berkeley team’s reports plagued by suspect methodology, lack of evidence
  • Publication Date: July 2015

  • Topics: Minimum Wage

WASHINGTON, DC – Today, the Employment Policies Institute (EPI) called for skepticism of a forthcoming Sacramento minimum wage study by a team of biased researchers affiliated with UC-Berkeley. Their report supporting a minimum wage increase in Sacramento is expected to be released next week.

In an op-ed in today’s Sacramento Bee, EPI Research Director Michael Saltsman explains why the Berkeley study should be greeted with skepticism and argues that the city deserves a neutral, bias-free analysis of the proposed wage hike’s effects.

Read the op-ed here.

The problems with the output from the Berkeley team include:

Suspect methodology. In separate 2014 reports on minimum wage proposals for San DiegoOakland, San Francisco, and Los Angeles, the authors downplay, dismiss, or ignore entirely the prospect of serious impacts on entry-level employment, despite the fact that the overwhelming majority of academic research points to reduced job opportunities at higher minimum wages.

Flawed analyses. In their San Francisco minimum wage report released last year, the Berkeley researchers estimated that, if passed in San Francisco, the $15 minimum wage would cause an increase in retail industry operating costs of just two-tenths of one percent and that it would be offset by an identical small price increase.

But a widely-cited story of an independent bookstore in San Francisco that nearly closed as a consequence of the wage hike provided the public with a close-up view of the real costs associated with a higher city minimum wage. The owner of Borderlands Books estimated that his labor costs would increase by 39% because of the law, and that operating costs would rise by 18% — 90 times greater than the UC-Berkeley estimate. Other San Francisco businesses have been forced to close, citing the wage increase as the driving factor.

In the Berkeley team’s Oakland minimum wage analysis, it found that Oakland’s $12.25 minimum wage would cause restaurants to increase prices by just 2.5 percent. But theEast Bay Express reported that many Oakland restaurant owners planned to raise prices substantially—some by 20 percent of more. The San Francisco Chroniclereported similar price increases, and both papers noted that some restaurant were eliminating tips to offset higher menu prices. One restaurant, Bocanova, saw sixty percent of its staff quit when they realized that eliminating tips reduced their hourly pay from a high of $70 an hour down to $22-$28 an hour.

Questionable past associations. The backgrounds of the research team that worked on these studies betrays their ideological biases:

  • One of the study authors, Ken Jacobs, was previously the co-director of the left funded lSan Francisco Living Wage Coalition. Both Jacobs and his co-author on earlier reports, Ian Perry, work at the Center for Labor Research and Education, which is funded by some of the same labor unions advocating for minimum wage increases.
  • Another one of the authors, Annette Bernhardt, was previously policy co-director at the Union aligned National Employment Law Project (NELP). NELP openly admits that it is “coordinating the campaign to lift the federal minimum wage to more than $10 per hour.”

EPI started the website to chronicle real stories of small business owners forced to adapt to drastic minimum wage increases. In cities such as Oakland, Seattle, and San Francisco, serious consequences have already occurred in response to recent wage hikes.

“With a decision as consequential as raising the minimum wage, Sacramento deserves neutral research rather than union-funded advocacy,” said EPI Research Director Michael Saltsman. “The stories of business closures, major price increases, and lost jobs not foreseen by the visually impaired Berkeley team means that Sacramento should take their report with a grain of salt — if not the whole shaker.”