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<br /> <br />The Effects of a $15 Minimum Wage by 2019 in Santa Clara County and San Jose 70 <br /> <br />• Overall economy: We sum the total labor and operating costs across all industries with <br />available data and then divide the aggregate labor costs by the aggregate operating costs. In <br />addition to the industries listed above, we are able to use the Annual Services Report to <br />gather data on the following industries: utilities; transportation and warehousing; information; <br />finance and insurance; real estate and rental and leasing; professional, scientific, and <br />technical services; educational services; and arts, entertainment, and recreation. We are <br />missing data for the following industries, and as a result they are not included in our <br />calculation: agriculture, forestry, fishing, and hunting; mining, quarrying, and oil and gas <br />extraction; construction; accommodation; and public administration. Overall, we estimate that <br />the labor share of operating costs is 22.1 percent in 2012, and assume it is constant <br />between 2012 and 2016. <br />Share of payroll costs for Medicare, Social Security and Workers’ compensation <br />The share of Medicare, Social Security, and Workers’ Compensation is assumed to continue to be <br />10.36 percent from 2016 to 2019. We estimate the Medicare, Social Security, and Workers’ <br />Compensation costs separately. Employers are liable for 6.2 percent Social Security taxes and <br />1.45 percent Medicare taxes. We estimate that the Workers’ Compensation employer cost is <br />2.71 percent of wages in California. The estimate of 2.71 comes from Workers’ Compensation <br />Insurance Rating Bureau of California (2014), Chart 6 for “all industries”: <br />http://www.wcirb.com/sites/default/files/documents/state_of_the_wc_system_report_140815. <br />pdf. <br />Turnover reduction <br />For a discussion on savings generated by turnover reduction and the sources we used, see <br />section 5.1 in the main report. <br />Price elasticity of demand <br />The price elasticity of demand measures the effect of a price increase on reducing consumer <br />demand. We use a price elasticity of 0.72. This estimate is based on Taylor and Houthakker <br />(2010), who report price elasticities for six categories of goods and services. We adjust their <br />estimates to account for changes in the elasticity of health care spending attributable to the <br />Affordable Care Act and other changes in the health care system. <br />GDP for San Jose and Santa Clara County in 2019 <br />The 2019 GDP used in our model has been forecasted using the following methodology: <br />• We start with the 2014 GDP reported in IMPLAN, i.e. $84.4 billion in San Jose, and <br />$213.7 billion in Santa Clara County; <br />• We then forecast the GDP for San Jose (respectively for Santa Clara County) by applying <br />the employment growth of 6.79 percent from 2014 to 2019 (respectively 6.79 percent for <br />Santa Clara County), the projected wage growth using the last 10 years of CPI-W growth of <br />8.A. - Page 84