The minimum wage fight: From San Francisco to de Blasio’s New York

In his State of the Union address last month, President Barack Obama urged cities and states to bypass Congress and enact their own minimum wage increases. “You don’t have to wait for Congress,” he stated.

Ken Jacobs and Michael Reich

On Monday, New York City Mayor Bill de Blasio followed the president’s advice. De Blasio announced, in his State of the City address, that he plans to ask Albany next week to give the city the power to raise the minimum wage.

The New York mayor is not the only elected official putting Obama’s words into action. Cities across the country, from New York to Seattle, are moving aggressively to confront rising income inequality and falling real wages for low-paid workers. These cities can learn important lessons from San Francisco’s bold experiments over the last 15 years.

San Francisco has now passed nearly a dozen laws to raise low-wage workers’ pay, expand access to healthcare and extend paid sick leave to every worker. These laws include living wage policies for workers at the San Francisco International Airport, on city economic-development projects and for city contractors; an across-the-board minimum wage — now $10.74 an hour; a broad paid sick leave ordinance, and an employer healthcare requirement.

These laws have brought substantial improvements in compensation and access to healthcare for tens of thousands of low-wage workers and their families. Over the last decade, as real wages for low-paid workers stagnated and then declined nationally, San Francisco stood apart. Real wages rose for the lowest-paid workers and maintained their value because of indexing in the minimum wage law. During these 10 years, the minimum wage law alone has put an estimated $1.2 billion into workers’ pockets.

Two out of five San Francisco workers benefited from the paid sick-leave ordinance, using this access to paid leave to take care of their own or a family member’s health. Three-quarters of city employers expanded workers’ access to healthcare. Taken together, the laws bring the total minimum compensation for workers in large San Francisco firms to $13 an hour — 80 percent more than the federal minimum wage.

Every time one of these new laws was proposed, local critics described it as a “job-killer” and warned it would seriously hurt economic growth. Yet academic studies on the laws’ effects reveal that these concerns were not borne out. Overall employment grew faster in San Francisco than in neighboring counties — including employment among food-service workers, who were most likely to be affected by the law. Between 2004, when the minimum wage law went into effect, and 2011, food service employment grew 17.7 percent in San Francisco, compared to 13.2 percent in other Bay Area counties.

Firms absorbed the higher mandated pay costs in various ways. Reduced turnover led to savings on hiring and training. Since all businesses were held to the same set of rules, they were able to pass some costs along through higher prices. As a result of the minimum wage law, restaurant prices in San Francisco rose 2.8 percent more than those across the bay in Alameda County. Prices in the remaining 90 percent of the economy, however, increased hardly at all.

The laws also brought businesses important benefits. Employers reported improved work performance and employee morale, better customer service and declines in grievances and absenteeism. Employees reported that they were working harder. The length of employee tenure also increased in fast-food restaurants.

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Ultimately, San Francisco businesses adapted, folding the new standards into their normal operations.  San Francisco

Mayor Ed Lee recently called

for a further increase in the citywide minimum wage — and opposition has been muted thus far.

It is tempting to dismiss San Francisco as unusual. Its recent economic history and structure, however, are typical of many other American cities. Citywide minimum wage laws were recently passed in San Jose, California, the Seattle suburb of SeaTac, and Washington, District of Columbia, and its surrounding suburbs — which all have similar patterns of economic growth with increased inequality and a loss of middle-paying jobs.

Other cities, including Chicago, Seattle and New York, are now looking to do the same. A proposal in Los Angeles would set the minimum wage for large hotels to $15 an hour.

Local labor standards, though, are not a real panacea. Like many other growing cities, San Francisco faces high housing costs. The broader trends generating U.S. income inequality are too great for cities to resolve on their own. But, as San Francisco proves, it turns out they can make a real difference — especially in addressing the problem of low-wage work.

PHOTO (TOP): New York Mayor Bill de Blasio delivers remarks at the plenary session of the U.S. Conference of Mayors in Washington January 23, 2014. REUTERS/Joshua Roberts

PHOTO (INSERT !): Protesters calling for higher wages for fast-food workers stand outside a McDonald’s restaurant in Oakland, California, December 5, 2013. REUTERS/Noah Berger

PHOTO: San Francisco Mayor Ed Lee (C) at City Hall in San Francisco, June 28, 2013. REUTERS/Stephen Lam