City Minimum Wages

Four US cities have minimum-wage laws that raise the bottom of the local labor market above the prevailing state or federal minimum. David Rosnick and I have a new report (pdf) out that examines the employment impact of the first three of these citywide laws, in San Francisco (2004), Santa Fe (2004), and Washington, DC (1993). Overall, we found no evidence that the new laws had any systematic effect on employment in low-wage establishments in those cities.

Our paper uses detailed data on establishments in those cities to measure the employment response during the first three years after the implementation of the three citywide minimums. (We didn’t include the fourth city, Albuquerque, because the law wasn’t implemented until 2007, and lags in data availability did not allow us to look at the impact over three full years.) We compared the employment change in low-wage establishments in each of the cities, before and after the minimum-wage law went into effect. In order to control for changes in broader economic trends, we compared each city’s before-and-after employment changes with before-and-after employment changes in the suburbs and in a nearby city (Oakland for San Francisco, Albuquerque for Santa Fe, and Baltimore for Washington, DC), where the minimum wage did not change.

We focused on establishments in low-wage industries such as fast food and retail, where the minimum wage is most likely to have an effect on pay. In San Francisco and Santa Fe, the new laws significantly raised wages across most low-wage establishments, but had no measurable impact on employment. In Washington, DC, the city minimum-wage law was so modest that it had no discernible impact on wages (or employment) in the low-wage labor market.

UPDATE 03/27/11: Today’s New York Times has a great editorial on the importance of the minimum wage. The piece has the added feature of citing our new study.

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