AgdaPkt 2017-09-25 Closed and Joint SA PFA

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The Effects of a $15 Minimum Wage by 2019 in Santa Clara County and San Jose 31 we take the midpoint of those estimates and assume that 17.5 percent of increased labor costs are absorbed via turnover savings in the first year.12 These savings are likely to accrue at smaller rates as wage levels go higher; we therefore assume that by 2019 the marginal increase in earnings relative to 2017 no longer yields any additional turnover savings. As a result, we estimate that the total savings from turnover at a $15 minimum wage in 2019 would be 11.3 percent of increased labor costs.13 Table 7 shows our estimates of the increase in business operating costs (net of savings from reduced turnover) in retail and restaurants, the two industries with the largest number of workers receiving a raise under Scenario A. By 2019, we estimate that businesses in the restaurant industry would see their payroll costs rise by 10.2 percent and businesses in the retail industry would see their payroll costs rise by 2.2 percent; these cost estimates include payroll taxes and workers’ compensation insurance expenses.14 Across the entire San Jose economy, we estimate that payroll costs would rise by 1.2 percent by 2019. However, operating costs will rise by a much smaller amount, because labor costs only make up a portion of the total costs that businesses face. We estimate that labor costs excluding health benefits currently account for 30.7 percent of restaurant operating costs, 10.8 percent of retail operating costs, and 22.1 percent for the overall economy (these percentages will increase over time as labor costs rise faster than other costs due to the proposed minimum wage increase). We therefore estimate that by 2019, total operating costs would rise by 3.1 percent for restaurants, 0.2 percent for retail, and 0.3 percent for the overall economy. (See Appendix A2.2 for more detail on how we estimate the labor share of operating costs by industry.) Table 7. Cost impacts for businesses in San Jose by 2019 Percent change in payroll costs Labor costs as percent of operating costs Percent change in operating costs and prices All 1.2 22.1 0.3 Restaurants 10.2 30.7 3.1 Retail 2.2 10.8 0.2 Source: US Census Annual Wholesale Trade Report and authors’ analysis of ACS, OES, and QCEW data. See Appendix A2 Part B for details. 4.2 Scenario B: Santa Clara County Table 8 shows the estimated distribution of affected workers across industries in Santa Clara County under Scenario B. As in Scenario A, over half of affected workers are employed in three service sector industries: food services (20.2 percent), retail (16.1 percent), and administrative and waste management services (11.9 percent). These same industries have a high proportion of low-wage workers who would get a raise in the scenario (for example, 71.0 percent in food services and 47.6 percent in administrative and waste management services). 8.A. - Page 45