Marcos Bretón

Opinion: Sacramento should proceed cautiously with minimum wage increases

Hoisting signs, supporters showed support for the passage of increasing the minimum wage in the city to $15 for Seattle employers on Monday, June 2, 2014, at City Hall in Seattle. Phased in over the next seven years, Seattle will have the highest minimum wage in America. Sacramento also is entering the minimum-wage discussion.
Hoisting signs, supporters showed support for the passage of increasing the minimum wage in the city to $15 for Seattle employers on Monday, June 2, 2014, at City Hall in Seattle. Phased in over the next seven years, Seattle will have the highest minimum wage in America. Sacramento also is entering the minimum-wage discussion. AP

In late June, the city of Sacramento will take up the highly controversial topic of raising its minimum wage – an issue that sounds good politically but has many unknowns, and is far more complicated than the current talking points for and against it.

In the past year, there has been an explosion of minimum wage increases around the U.S., enacted mostly within coastal cities governed by liberal politicians who say they are tired of waiting for Congress. These cities raised minimum wages themselves – by larger margins than ever before. That’s a critical point for Sacramento to consider, but more on that in a moment.

Last week, Los Angeles voted to increase its minimum wage from $9 an hour to $15 by 2020 – though the actual ordinance spelling out how L.A. will do this has not yet been drafted.

Seattle and Chicago already have raised the minimum wage by similar amounts. So has San Francisco. Elsewhere in California, San Jose has increased its minimum wage, and so has Richmond and San Diego. The East Bay city of Emeryville, home to Pixar Animation Studios, just approved upping its minimum wage to $16 an hour by 2019. That’s among the highest in the country.

“This is pushing beyond what we have seen in the past,” said Ken Jacobs, chair of the UC Berkeley Labor Center and co-author of the academic research Los Angeles council members used as the basis for their recent decision.

Nationally, the “Fight for $15” campaign gains momentum every day. Advocates from are pressing New York to join the fray and raise wages for workers.

Enter Sacramento, where Mayor Kevin Johnson said in January’s State of the City address that “income and equality” would be one of his priorities for the year.

Last October, as president of the U.S. Conference of Mayors, Johnson led an effort of more than 70 mayors urging Congress to raise the federal minimum wage from the current $7.25 to $10.10 per hour. “Even though the economy is rebounding, the wage gap continues at an alarming rate,” Johnson said at the time.

Sacramento’s minimum wage is $9 per hour – same as the statewide minimum wage. In 2016, California’s minimum wage will increase to $10.

Should the city raise its minimum wage further, and if so, by how much? The discussion of that question has already seen some awkward moments.

Three months ago, Johnson’s signature appeared on a letter to state legislators from several California mayors that advocated for raising the statewide minimum wage to $13 by 2017. Then suddenly, Johnson’s staff announced that his name shouldn’t have appeared on the letter. The mayors of San Francisco, Oakland, Santa Ana and Long Beach made the appeal without him.

The inclusion of the mayor’s signature was credited to a “miscommunication” by his staff. To some, it seemed like waffling. But Johnson is right to wait on locking himself into a specific raise in the minimum wage.

If there is one thing Sacramento shouldn’t be doing, it’s jumping on the minimum wage bandwagon without examining what unprecedented wage hikes might do to the city’s recovering economy.

Johnson will unveil a city task force in late June that will analyze the issue before presenting any recommendations. In advance of that, some local economic experts have expressed skepticism about Sacramento becoming a $15-an-hour city.

“It’s not something that I think Sacramento can absorb or sustain or support,” said Sanjay Varshney, professor of finance at Sacramento State and co-author of the nonpartisan Sacramento Business Review. “Our housing prices and cost of living are not as inflated as you would see in San Francisco ... Attracting a more diversified economic base is what is badly needed.”

An increasing number of academics, including Jacobs, disagree with Varshney’s take – as well as Warren Buffett. “I may wish to have all jobs pay at least $15 an hour,” Buffett recently wrote in The Wall Street Journal. “But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills.”

Jacobs and others point to decades of academic study that show that the positive effects of minimum wage increases – more take-home pay, more consumer spending, more job stability – outweigh the negatives of costs passed onto consumers.

But even proponents such as Jacobs acknowledge that cities are raising the minimum wage to levels that have not yet been fully vetted. “There is no simple existing economic model consistent with the empirical minimum wage research literature that can be used to estimate the impact of a minimum wage law, taking into account all the direct and indirect effects as they course through a regional economy,” wrote Jacobs and several colleagues advising Los Angeles council members.

Jacobs and his Berkeley colleagues prepared extensive economic models to justify the wage increase in Los Angeles and put their work up to rigorous peer review. Until this point, Sacramento hasn’t gotten anywhere near that level of scrutiny.

The public holds favorable views of wage hikes for low-income workers, as many polls have shown. And there are plenty of Sacramento workers in need. According to the U.S. Census Bureau, approximately 30 percent of full-time, year-round workers in Sacramento make $31,000 or less. (Full-time workers making $15 an hour earn about $31,000 a year.) Their median age is 35. More than 80 percent of this workforce doesn’t have a college degree. Very few of them – only 4 percent – are under the age of 21.

A strong argument can be made for raising Sacramento’s minimum wage. But is $15 an hour the right number? That requires more study. Sacramento is not Los Angeles. Certain reports show L.A. having a cost of living about 18 percent higher than that of Sacramento.

If Sacramento raised its minimum wage to $15, it would be the first city in California’s interior to do so. We inhabit a different economic ecosystem than other parts of the state. For that reason – and many others – Sacramento needs to proceed cautiously.

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