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<br /> <br />The Effects of a $15 Minimum Wage by 2019 in Santa Clara County and San Jose 73 <br /> <br /> <br />12 Hirsch, Kaufman, and Zelenska (2011) and Reich, Hall, and Jacobs (2003) found <br />improvements in worker productivity following higher wage mandates. <br />13 The turnover savings are considered constant in 2017 and 2018, at 17.5 percent of increased <br />labor costs, a midpoint estimate in the literature (Hirsch, Kaufman, and Zelenska 2011; Reich, <br />Hall, and Jacobs 2003). These savings are likely to accrue at smaller rates as wage levels go <br />higher; we therefore assume that by 2019 the marginal increase in earnings relative to 2017 no <br />longer yields any additional turnover savings. As a result, we estimate that the total savings from <br />turnover at a $15 minimum wage in 2019 would be 11.3 percent of increased labor costs for <br />San Jose and 11.9 percent of increased labor costs for Santa Clara County. <br />14 We use a payroll tax rate of 7.65 percent (6.2 percent for Social Security and 1.45 percent for <br />Medicare). Workers’ compensation insurance rates vary by industry (see Table 6: <br />http://www.wcirb.com/sites/default/files/documents/state_of_the_wc_system_report_140815. <br />pdf. <br />15 The turnover savings are considered constant in 2017 and 2018, at 17.5 percent of increased <br />labor costs, a midpoint estimate in the literature (Hirsch, Kaufman, and Zelenska 2011; Reich, <br />Hall, and Jacobs 2003). These savings are likely to accrue at smaller rates as wage levels go <br />higher; we therefore assume that by 2019 the marginal increase in earnings relative to 2017 no <br />longer yields any additional turnover savings. As a result, we estimate that the total savings from <br />turnover at a $15 minimum wage in 2019 would be 11.3 percent of increased labor costs for <br />San Jose and 11.9 percent of increased labor costs for Santa Clara County. <br />16 Since workers often increase their wages by moving from one employer to another, we cannot <br />assume that the correlation between wages and turnover indicates that low wages are causing <br />higher turnover. As we discuss below, however, policy experiments with living wages and <br />minimum wages have provided the evidence needed to determine that wages do, in fact, affect <br />turnover. <br />17 These averages include the low-turnover period of the Great Recession, and can be expected to <br />increase towards higher pre-recession levels as the labor market tightens. <br />18 The estimate of 17.5 percent represents the midpoint between the 20 percent estimate of <br />Pollin and Wicks-Lim (2015) and a 15 percent (unpublished) estimate that draws upon Dube, <br />Freeman and Reich (2010) and Dube, Lester and Reich (2016). <br />19 Burda et al. 2016, Table 6 (cols. 3 and 5) reports that a $1 increase in weekly pay reduces the <br />incidence of shirking by -.027 (.0054), on a base of .032 (from Table 1). For a full-time worker, <br />going from $10 to $15 per hour raises weekly pay by $200, so the effect on productivity would be <br />about .2x.027 = .005, or 0.5 percent. This estimate measures just the effect of reducing <br /> <br />8.A. - Page 87