For the past two decades, California has pursued minimum wage levels about the federal standard. It will be the first state to reach a $15.00 per hour minimum wage, in 2022.
A new study by Dr. David Macpherson of Trinity University and Dr. William Even of Miami University explores the consequences of California’s wage-raising experiment, and estimates the future impact of California’s current minimum wage law.
Their findings are stark: The economists’ preferred model show that past minimum wage increases in California have caused a measurable decrease in employment among affected employees. Specifically, they find that each 10% increase in the minimum wage has led to a nearly five-percent reduction in employment in industries with a higher percentage of lower-paid employees.
The authors apply these estimates to approximate that California will lose 400,000 jobs as a consequence of higher minimum wages by 2022. Nearly half of the observed job loss occurs in foodservice and retail industries.
The economists’ findings are in line with other recent minimum wage research. A 2015 Federal Reserve Bank of San Francisco review of economic research found minimum wage increases have been more harmful to low wage employment than previously thought. And earlier this year, researchers at Harvard Business School and Mathematica Policy Research looked at San Francisco’s $15 minimum wage and found restaurant closures associated with the increase in labor costs.
EPI chronicles the stories of small businesses in California and across the country who have suffered the consequences of higher minimum wages on its website facesof15.com.