New Study: Citywide Wage And Benefit Mandates Reduce Opportunities for Young Jobseekers

Study Suggests $10 Minimum Wage in San Jose Could Have Unintended Consequences
  • Publication Date: October 2012

  • Topics: Minimum Wage

Today, the Employment Policies Institute (EPI) released a new study authored by University of Kentucky economist Aaron Yelowitz, which examines the impact of citywide compensation floors in cities like San Francisco. The study finds that (all else being equal) each additional $1 in wage and benefit mandates reduces young adults’ labor force participation by roughly two percentage points, increases unemployment by 4.5 percentage points, and causes a 26-hour reduction in annual hours worked.

In the City of San Jose, which is currently considering an initiative to create a $10 minimum wage, similar employment consequences from a San Francisco-style mandate are expected.

The full study and executive summary are available here:

Progressive researchers have long insisted that San Francisco’s highest-in-the-nation compensation floor (including a soon-to-be $10.55 minimum wage, mandatory heath care spending, and paid sick leave requirements) has had no negative impact on employment. However, by closely examining Census Bureau data from San Francisco and similar cities around the country, Dr. Yelowitz demonstrates that increasing compensation floors causes significant harm to the employment prospects of young adults.

“San Francisco might consider itself a unique progressive outpost where the laws of economics don’t apply, but this study’s results suggest otherwise,” said EPI research fellow Michael Saltsman. “The evidence is clear—labor and wage mandates create job losses, particularly for the least-skilled job seekers.”

Advocates for a higher minimum wage—such as those currently campaigning for an increase in San Jose—rely on a handful of outlying studies to make the case that a higher minimum wage has no effect on employment. Yet according to economists at the University of California-Irvine and the Federal Reserve Board, 85 percent of the most credible studies on the subject from the last two decades point to job loss following an increase in the minimum wage.

“San Jose voters are currently deciding whether to follow San Francisco down the path of onerous employer mandates,” Saltsman concluded.” They should think twice before adopting a policy that will eliminate jobs for the city’s most vulnerable jobseekers.”