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 68 income (including capital depreciation) is 38 percent. Knowing that the labor share of operating costs is 22.1 percent in 2016, we apply the growth rate of payroll costs to estimate the labor share of operating costs in 2019 and estimate that the profit share of revenues is therefore estimated to be 0.15 in 2021. The remainder of businesses revenues is composed of materials, intermediate inputs and rent. Productivity gains For a discussion of productivity gains and the sources we used, see section 5.1 in the main report. Labor share of operating costs Net payroll cost increases for businesses are a function of three factors: (1) the total wage bill increase, after reduction due to substitution effects and productivity gains; (2) Medicare, Social Security, and Workers’ Compensation increases, and (3) turnover costs savings. The payroll costs increase as total compensation increases and decrease with turnover costs savings. • The total wage bill increase from 2016 to 2019 is estimated with our wage simulation model based on micro data. For each year, we calculate the reduction in wage bill due to job losses from substitution effects and productivity gains, assuming that capital-labor substitution and productivity gains are constant over the years. We assume in our calculations that capital- labor substitution is equal to 20 percent every year, and that productivity gains are equal to 5 percent every year. • Employers’ costs for Medicare, Social Security, and Workers’ Compensation will equal 10.36 percent of wages from 2016 to 2019. We estimate the three components—Medicare (1.45 percent), Social Security (6.2 percent), and Workers’ Compensation costs—separately. Since we are estimating only the effects of a minimum wage increase, we assume the Medicare and Social Security rates will not change between 2016 and 2019. For Workers’ Compensation costs, we draw from a report of the National Academy of Social Insurance {Citation}(2013). Table 14 (p. 37) of this report indicates that Workers’ Compensation employer costs in 2013 amounted to $1.50 per $100 of eligible wages. These costs increased $0.11 cent increase a year over 2011–2013, slightly more than the 2009–2011 change. To account for these cost increases, we adjust the 2013 cost by $0.34. Consequently, we estimate that Workers’ Compensation costs will equal 1.84 percent of wages in San Jose and Santa Clara County from 2016 to 2019. • Turnover costs savings are based on the estimates of Pollin and Wicks-Lim (2015), Fairris (2005), Dube, Freeman and Reich (2010), Dube, Lester and Reich (2016), Boushey and Glynn (2012), and Jacobs and Graham-Squire (2010). See section 5.1 in the main report. 8.A. - Page 82