Laserfiche WebLink
<br /> <br />The Effects of a $15 Minimum Wage by 2019 in Santa Clara County and San Jose 36 <br /> <br />reservations, and ordering systems. An increase in the minimum wage is likely only to generate <br />small increases in the adoption of more automated systems. <br />Equally important, the rate of adoption of technical change depends on changes in the relative <br />prices of capital and labor, not just on the price of low-wage labor. Although the prices of <br />computer-related equipment and software have fallen dramatically, by approximately a factor of <br />ten in the past several decades, the decline in the past five years is much smaller. Meanwhile, <br />median wages have stagnated and real minimum wages remain lower than they were in the early <br />1970s. <br />The declining cost of capital is also reflected in declines in long-term interest rates in recent <br />decades. Five-year and ten-year inflation-protected interest rates have also fallen dramatically. <br />These changes in relative prices have been the main impetus to increased automation. Even a <br />doubling of the minimum wage policy, which would imply (according to (Allegretto et al. 2015) an <br />average wage increase of about 22 percent, would have very little impact in comparison. <br />However, interest rates are unlikely to fall further. It is therefore likely that actual automation in <br />low-wage industries is slowing. <br />To summarize, empirical estimates of the elasticity of substitution of capital for labor that include <br />low-wage industries in their sample range between 0 and 0.4. We use 0.2, the midpoint of this <br />range. Since Aaronson and Phelan find a much smaller elasticity, our use of 0.2 is conservative. <br />Reductions in paid hours relative to working hours <br />Some commentators assert that a higher minimum wage will lead employers to cheat workers of <br />a portion of their wages. However, such practices already exist; the question at hand is how much <br />the minimum wage increase will increase their prevalence and intensity. Although it is difficult to <br />measure changes in wage theft, we know that employee-reported increases in pay (to a census <br />surveyor) after a minimum wage increase match up well to employer-reported increases in pay on <br />administrative reports that determine payroll taxes (Dube, Lester, and Reich 2010). These results <br />suggest that most employers comply about as much after the increase as before. <br />Employee turnover and employer recruitment and retention costs <br />The correlation between low wages and high employee turnover is well known (Cotton and Tuttle <br />1986).16 Over the last decade, annual employee turnover in accommodation and food service <br />averaged 70 percent a year, compared to 41.4 percent in other services, 30.5 percent in health <br />care and social assistance, and 32 percent in non-durable manufacturing (Statistics 2014).17 <br />Quits are higher in low-wage occupations because workers leave to find higher-wage jobs or <br />because they are unable to stay in their jobs due to problems such as difficulties with <br />transportation, child care, or health. <br />Recent labor market research has gone beyond establishing a correlation between pay and <br />turnover. We now know minimum wage increases have well-identified causal impacts that reduce <br />worker turnover. Dube, Naidu and Reich (2007) found that worker tenure increased substantially <br />8.A. - Page 50