UC-Berkeley Minimum Wage Miss Provides Warning for Los Angeles

Small Business Closures a Warning Sign for Los Angeles
  • Publication Date: February 2015

  • Topics: Minimum Wage, Paid Sick Leave, Researcher

Washington – Today, the Employment Policies Institute pointed to new credibility problems with a University of California-Berkeley analysis of a $15 minimum wage in San Francisco. These problems call into question the accuracy of a similar analysis that researchers at the school conducted for Los Angeles Mayor Eric Garcetti.

Last year, the Berkeley authors estimated that, if passed in San Francisco, the $15 minimum wage would cause an increase in retail industry operating costs of just two-tenths of one percent and that it would be offset by an identical small price increase.

But a widely-cited story last week of an independent bookstore in San Francisco forced to close as a consequence of the wage hike provided the public with a close-up view of the real costs associated with a higher city minimum wage. The owner of Borderlands Books estimated that his labor costs would increase by 39% because of the law, and that operating costs would rise by 18% — 90 times greater than the UC-Berkeley estimate.

In the short time since the law was passed, several small businesses have closed or announced plans to close and specifically cited the higher wage as a cause. This reality highlights the serious flaw in the UC-Berkeley methodological approach — lumping together all businesses in an industry regardless if they’re affected by the wage hike while ignoring potential employment impacts. 

Michael Saltsman, research director at EPI, released the following statement:

“This team of researchers at UC Berkeley has a long history of advocacy for wage hikes, and a body of research where the results reflect those biases,” said Saltsman. “As real businesses in San Francisco discover that the costs of the law are much greater than advertised, policymakers in Los Angeles should take the results of the Berkeley reports with a grain of salt–if not the whole shaker.”