Pasadenas Minimum Wage Policy Effects on Workers Businesses
Pasadena's Minimum Wage Policy Effects on Workers, Businesses and the Local Economy Michael Reich, Ph. D. Pasadena City Council February 11, 2019
Introduction and preview of findings • Pasadena an affluent city with many low-wage jobs; competes with LA for low-skilled workers • Caution: Patterns in Pasadena likely affected by LA’s MW increase Main findings • Pasadena economy continued to grow • Pay increases in Pasadena restaurants, with no negative effects on overall numbers of businesses or jobs
Minimum wage Pasadena, LA and California July 1, 2014 July 1, 2015 July 1, 2016 July 1, 2017 July 1, 2018 July 1, 2019 July 1, 2020 July 1, 2021 July 1, 2022 Pasadena Los Angeles California $9 9 10. 50 12 13. 25 14. 25 15 CPI CPI $9 9 10 10. 5 11 12 13 14 15 California increases take effect January 1 of each year. CPI refers to indexing by the regional Consumer Price Index. Schedule shows higher rate for businesses with > 25 employees.
Unemployment rate, Pasadena and other areas
Sales tax revenue, low-wage industries
Low-wage industries in Pasadena, 2016 q 1 Employment Average weekly wage ($) Retail 8, 868 660 Full-service restaurants 4, 889 472 Services for youth, elderly, disabled--nonresidential 3, 703 344 Limited-service restaurants 2, 907 350 Home health care aides 1, 101 603 Nonalcoholic beverages 642 327
Numbers of restaurants, Pasadena
Restaurant jobs, Pasadena
Restaurant jobs, LA
Restaurant jobs after Pasadena/LA MW increases • Pasadena: full-service jumps, limited-service stable • LA: full-service stable, limited-service increases slightly • These patterns contradict each other; they should be similar • Effects of MW? OR of consumers moving up-market from limited service to full service restaurants? OR some other cause? • Evidence is too weak to make causal arguments
Drill further down in data: Use standard treatment/ control method 1. Change before and after MW, relative to Pasadena overall MW does not affect Pasadena overall 2. Change before and after MW, relative to restaurants in other areas Use areas not affected by local MWs Not OK to choose areas too close to Pasadena 3. Combine no. 1 and no. 2
Comparison 1, Pasadena restaurants, relative to private sector
Comparison 2, Full-service, Pasadena versus other areas
Comparison 2, Limited-service, Pasadena versus other areas
Combine comparisons 1 and 2, full-service
Combine comparisons 1 and 2, limited-service
Summary: After MW increases • Pasadena's local economy continued to grow • Earnings of restaurants workers increased • Employment rose in full-service restaurants, remained stable in limited-service restaurants • Additional comparisons confirm the same patterns
Pausing Pasadena’s MW increases • Would not improve Pasadena’s economy • Would mean lower pay in low-wage jobs, relative to pay in LA • Pasadena businesses likely to lose their best low-wage workers to LA
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