San Francisco's Higher Minimum Wage Hasn't Hurt the Economy

January 22, 2014

San Francisco is often ahead of the rest of the country when it comes to protecting public health and the environment. The city was the first to ban plastic bags in stores, it is considering one of the most restrictive bans on the sale of bottled water, and smoking bans have spread from public parks and entry ways to all public events. San Francisco even banned the free toys in McDonald’s (MCD) Happy Meals.

San Francisco was also one of the first cities to increase the minimum wage beyond the federal level and mandate better benefits for low-income workers. The wage increase went into effect in 2004, long before the notion of one percenters and the recent wave of wage protests by fast-food and retail workers. And now everyone from President Obama to Fox News star Bill O’Reilly is talking about raising the federal minimum wage.

For those who need more evidence, a new book hopes to persuade them. When Mandates Work: Raising Labor Standards at the Local Level argues that San Francisco’s decision to increase the minimum wage and offer other benefits, such as sick leave pay, hasn’t hurt the city’s economy at all. The three editors—all labor experts—found that from 2004 to 2011 overall private employment grew 5.6 percent in San Francisco and 3 percent in Santa Clara County. Other Bay Area counties saw an overall 4.4 percent drop during that time. Among food-service workers, who are more likely to be affected by minimum-wage laws, employment grew 17.7 percent in San Francisco, faster than either of the other Bay Area counties.

A few notes: San Francisco’s minimum wage is indexed to inflation and now stands at $10.74. The federal rate is $7.25, and Obama has talked of raising it to $10.10. Fast-food workers, though, are calling for $15 an hour.

The book’s editors weren’t able to measure any change in the profitability at the fast-food companies operating in San Francisco, says Ken Jacobs, the chairman of the UC Berkeley Labor Center. Consumers, though, did have to pay slightly more at the restaurants. “We did see a small increase, 2.8 percent, in food prices compared to other counties,” he says. Jacobs also points out that companies saved money because of reduced turnover. For example, turnover decreased 60 percent for low-wage occupations at San Francisco International Airport, where workers earn a minimum wage of $11.24 an hour.

Jacobs argues that San Francisco—even with its Silicon Valley elite and reputation for activism—is very much like other big cities in America. And while some in the U.S. House of Representatives might not believe it, “there is strong support among Democratic and Republican voters alike to raise the federal minimum wage. Even Bill O’Reilly said he’s OK with $10.10,” says Jacobs. “Still, the minimum wage isn’t a living wage. A higher minimum wage can’t solve everything, but it does make a real difference.”