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 41 This estimate is compatible with, but somewhat larger than, price elasticities estimated from aggregate panel data. Hall (2009), for example, obtains a price elasticity of -0.50. On the other hand, our estimate is very close to that of Blundell et al. (1993). 5.3 Income effects We consider here the increased spending that derives from the higher income of low-wage workers. Our model takes into account the effects of taxes and reduction in public benefits on the affected workers’ take-home pay and the rate at which their households spend (as opposed to save) income compared to others. Greater spending by consumers increases economic demand, which translates into increases in employment and economic activity. We do not expect all of the increases in household incomes to translate into increased consumption demand. A substantial portion of minimum wage earners come from households in the middle of the household wage distribution. These households will save some of their increased income. The amount of such savings will depend on their current savings rates and on the extent to which they view the increase in income as permanent, rather than a short-term windfall. Economic research has found that changes in permanent income generate much higher consumption effects than changes that are, or are perceived as, transitory. Low wage-earners who are young and have more education may regard their low-wage status as transitory. These earners may regard a minimum wage increase as transitory. However, recent research has found that an increasing proportion of minimum wage workers are stuck in minimum wage careers (Boushey 2005; Casselman 2015). These results suggest that the proportion of workers who regard a minimum wage increase as constituting a one-time increase will be small. Moreover, economic theory and evidence suggests strongly that the distinction between permanent and transitory income does not apply to workers who are credit- constrained and whose households have accumulated very little in assets (Achdou et al. 2014). The majority of minimum wage workers fit this description. The IMPLAN model does not account for savings that come from transitory income. The considerations above indicate that any such effects are likely to be small. This is nonetheless a topic for future research. 5.4 Model calculations and net effects on employment for scenario A: a $15 minimum wage increase in San Jose Table 10 displays the results of our model for 2019. Note that the estimates in this table are cumulative. They are estimated relative to the city’s minimum wage in each year, and therefore capture the full effect of increases in the suggested city minimum wage in previous years. 8.A. - Page 55