1. Michael Reich, Ph.D. Pasadena City Council February 11, 2019
Pasadena's Minimum Wage Policy Effects on Workers, Businesses and the Local Economy
Michael Reich, Ph.D.
Pasadena City Council
February 11, 2019

2. Introduction and preview of findings
Pasadena an affluent city with many low-wage jobs; competes with LA for low-skilled workers
Caution: Patterns in Pasadena likely affected by LA’s MW increase
Main findings
Pasadena economy continued to grow
Pay increases in Pasadena restaurants, with no negative effects on overall numbers of businesses or jobs

3. Minimum wage Pasadena, LA and California
Los Angeles
California
July 1, 2014 $9
July 1, 2015 9
July 1, 2016
10.50 10
July 1, 2017 12
10.5
July 1, 2018
13.25 11
July 1, 2019
14.25
July 1, 2020 15 13
July 1, 2021
CPI 14
July 1, 2022
California increases take effect January 1 of each year. CPI refers to indexing by the regional Consumer Price Index. Schedule shows higher rate for businesses with > 25 employees.
Pasadena’s increases from to in two years constitutes about a 30 percent increase, or 15 percent over two years. CA’s increase was 10 percent. The scheduled future increases total 13 percent over two years. Increases in Pasadena are in line with increases in Los Angeles and Santa Monica, smaller than in San Francisco and greater than in California.

4. Unemployment rate, Pasadena and other areas

5. Sales tax revenue, low-wage industries

6. Low-wage industries in Pasadena, 2016q1
Employment
Average weekly wage ($)
Retail
8,868
660
Full-service restaurants
4,889
472
Services for youth, elderly, disabled--nonresidential
3,703
344
Limited-service restaurants
2,907
350
Home health care aides
1,101
603
Nonalcoholic beverages
642
327
Largest low-wage industries ranked by size of employment: food services (restaurants, bars and cafeterias), retail trade, individual and family and home health care services, child care, janitorial and car washes.
Pay in retail ($660 per week = about $20 per hour, so not very affected by MW.
Key sector: food services
Other industries have a small number of employees, so data is very noisy.
Rest of presentation : full-service and limited-service restaurants

7. Numbers of restaurants, Pasadena
Gray vertical line: CA MW increases
Red vertical line: Pasadena MW increases

8. Restaurant jobs, Pasadena

9. Restaurant jobs, LA

10. Restaurant jobs after Pasadena/LA MW increases
Pasadena: full-service jumps, limited-service stable
LA: full-service stable, limited-service increases slightly
These patterns contradict each other; they should be similar
Effects of MW? OR of consumers moving up-market from limited service to full service restaurants? OR some other cause?
Evidence is too weak to make causal arguments

11. Drill further down in data: Use standard treatment/ control method
1. Change before and after MW, relative to Pasadena overall MW does not affect Pasadena overall 2. Change before and after MW, relative to restaurants in other areas Use areas not affected by local MWs Not OK to choose areas too close to Pasadena 3. Combine no. 1 and no. 2

12. Comparison 1, Pasadena restaurants, relative to private sector
Black : private sector Red: full-service Blue: limited-service
Y-o-y growth, not levels. Line above zero: positive growth
Pay and employment growth for restaurants during MW increases.
Pay growth is slightly higher during than before or after. Employment growth in full-service restaurants increases during and after MW increase.
Employment growth in limited-service restaurants was positive but slowing down since 2014 through 2017.

13. Comparison 2, Full-service, Pasadena versus other areas
Pay growth in full service restaurants very close to that in comparison counties.
Employment growth is some what higher.

14. Comparison 2, Limited-service, Pasadena versus other areas
Pay growth in limited-service restaurants close to that in other areas.
Employment growth has been slowing from a very high level and slightly negative in recent years

15. Combine comparisons 1 and 2, full-service
D in D compares pay and employment trends to private sector in Pasadena and to differences in other areas. This is the most careful comparison
Pay and employment both increase in full-service restaurants faster than in comparison areas

16. Combine comparisons 1 and 2, limited-service
D in D for limited-service:
Pay growth increases sharply when MW is increased
Employment growth generally higher too, except for past year.

17. Summary: After MW increases
Pasadena's local economy continued to grow
Earnings of restaurants workers increased
Employment rose in full-service restaurants, remained stable in limited-service restaurants
Additional comparisons confirm the same patterns

18. Pausing Pasadena’s MW increases
Would not improve Pasadena’s economy
Would mean lower pay in low-wage jobs, relative to pay in LA
Pasadena businesses likely to lose their best low-wage workers to LA