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- Category: Labor
POLICY BRIEF: How Did the Higher Minimum Wage in the City of Los Angeles Impact the Earnings and Employment of Low-Wage Workers?
REPORT: Evaluation of the Impact of the City of Los Angeles’ Minimum Wage Ordinance
PRESS RELEASE: New Report: Food Service Workers Saw Increased Earnings But No Employment Losses From L.A.’s Minimum Wage Ordinance
The City of Los Angeles enacted a minimum wage ordinance in 2015 that gradually increased the minimum wage from $9 per hour to $15 per hour. Because not all workers are earning the minimum wage, this study looked at how this increase impacted the wages of food service industry workers, who are more likely to be earning minimum wages, and whether it affected levels of employment. Los Angeles is a particularly important place to study the effects of minimum wages, since it has the highest share of low-wage workers in the state, a majority of whom are adults. The research team used an event study approach and a synthetic control to measure the earnings and employment impacts.
This research shows that when the City of LA minimum wage jumped from $10.50 to $12.00 in July 2017 and then to $13.25 in July 2018, average weekly wages of food service workers in the City increased by 4.1% and 6% respectively. Limited-service restaurant workers in the City (who typically do not receive additional compensation via tips) experienced the highest average weekly wage increases as a result of the annual increases to the minimum wage.
A common way to assess the effect of raising the minimum wage across different periods and differently sized increases is to measure the effect of a percent increase in the minimum wage. The researchers found that, across the City of LA’s stepwise increases, a 10% minimum wage increase leads to a 2.1–3.2% increase in earnings for food service workers (which is in line with previous estimates). For limited-service restaurant workers, a 10% minimum wage increase leads to a 4.3–5.2% increase in earnings, due to the fact that a larger share of these workers earn the minimum wage. The report findings provide empirical evidence that the minimum wage ordinance was effective at raising the earnings of low-wage workers in the City without any adverse employment effects.
Figure 1 shows that average weekly wages for food service workers in the City of LA and in nearby areas were moving in parallel until the City’s minimum wage was implemented, at which point the trends diverged, as City of LA food service workers began to have higher average weekly wages.
Figure 1: Trends in average weekly wages among food services workers in the City of LA and nearby areas, Q1 2010–Q4 2018
Figure 1 Note: This figure shows the trends in average weekly wages for food services workers in the City of LA (in orange) and in the comparison group from neighboring areas (in blue) from the QCEW. The City of LA raised its minimum wage stepwise from $10 to $15 and the dashed, vertical lines indicate the timing of those annual minimum wage increases. Prior to the implementation of the increased minimum wage, the two groups trend in parallel. After the City of LA implemented the new minimum wage, the trends diverge, showing higher average weekly wages for City of LA food service workers.
Figure 2 shows that employment levels among food service workers in the City of LA and in nearby areas were moving in parallel before the City’s minimum wage was implemented and that this trend continued after the City’s minimum wage went into effect, demonstrating the higher minimum wage did not lead to employment levels decreasing.
Figure 2: Trends in employment among food services workers in the City of LA and nearby areas, Q1 2010–Q4 2018
Figure 2 Note: This figure shows the trends in total employment for food services workers in the City of LA (in orange) and in the comparison group from neighboring areas (in blue) from the QCEW. The City of LA raised its minimum wage stepwise from $10 to $15 and the dashed, vertical lines indicate the timing of those annual minimum wage increases. Prior to the implementation of the increased minimum wage, the two groups trend in parallel. After the City of LA implemented the new minimum wage, the trends continue in parallel, indicating that the policy did not lead to adverse employment outcomes.
Table 1 presents the events study results of the impact of the City of LA minimum wage increase on the weekly earnings and employment of food service workers in LA relative to nearby areas. Column 3 shows that between 2017 Q3-Q4 and 2018 Q3-Q4, the City’s minimum wage increases raised weekly wages for food service workers in LA by 1.8% – 6.0%, while column 4 shows that there was no statistically significant change in the level of employment of food service workers in LA due to the minimum wage increase.
Suggested citation: Von Wachter, T., Garcia Lemus, B., Barone, M.V., Huet-Vaughn, E. (2020). Evaluation of the Impact of the City of Los Angeles’ Minimum Wage Ordinance. California Policy Lab. https://capolicylab.org/impact-of-los-angeles-minimum-wage/