Do Living Wage Provisions Harm Economic Growth?
T. William Lester
In times of economic crisis, state and local governments increasingly turn to economic development incentive programs to jumpstart job growth. However, recent efforts to attach minimum labor standards to incentives are seen as a threat to traditional practice. Critics of such “business assistance living wage” laws assert that they may reduce employment or redevelopment activity. This paper measures the actual impact of living wage laws using a time-series analysis of employment and business establishment trends in large U.S. cities that have enacted such laws and finds no evidence that ordinances mandating stronger labor standards affect aggregate economic development outcomes.
Inside Monopsony: Employer responses to higher labor standards in the full service restaurant industry
T. William Lester (Working Paper)
While efforts to increase the minimum wage have stalled at the Federal level, dozens of cities have passed or are considering local increases that will bring the minimum wage up to $15 per hour. The pace and scale of recent wage increases—spurred on by an organizing drive by fast food workers in the “Fight for $15” movement—leave policy makers and analysts wondering about their eventual impacts. While the impact of publicly mandated labor standards on employment is well studied and remains highly controversial,
there are still important missing pieces in our understanding of how locally-enacted labor laws impact the labor market. Although previous research shows that moderate increases in the minimum wage do not result in net job losses and reduces labor turnover in the aggregate, there is still uncertainty as to how higher labor standards may reshape employment practices within firms. Recent studies show support for a model of the labor market that is monopsonistic rather than perfectly competitive using county-level data aggregated for low-wage industries (e.g. restaurants) or groups of workers (e.g. teens).
This paper directly examines employer responses to higher labor standards through a qualitative case comparison of the full service restaurant industry across two fundamentally different institutional settings. Research was conducted in San Francisco—where employers face the nation’s highest minimum wage, no tip credits, a pay-or-play health care mandate, and paid sick leave requirements—and in North Carolina’s Research Triangle region—where there are no locally enacted labor standards. Consistent with the monopsonistic model, evidence shows that higher labor standards led to wage compression in San Francisco even while some employers continued to offer greater benefits to reduce turnover. Employers in San Francisco exhibit greater investment in finding better matches and tend to seek higher-skilled, more professional workers, rather than invest in formal in-house training. Finally, higher wage mandates in San Francisco have exacerbated the wage gap between front-of-house and back-of-house occupations—which correlate strongly with existing racial and ethnic divisions. Initial evidence shows that some employers have responded by radically restructuring industry compensation practices by adding service charges and in some cases eliminating tipping.
Are America's Inner Cities Competitive? Evidence From the 2000s
Daniel A. Hartley, Nikhil Kaza, and T. William Lester
In the years since Michael Porter’s research about the potential competitiveness of inner cities, there has been growing evidence of a residential resurgence in urban neighborhoods. Yet there is less evidence on the competitiveness of inner cities for employment. The authors document the trends in net employment growth and find that inner cities gained over 1.8 million jobs between 2002 and 2011 at a rate comparable with suburban areas. The authors also find a significant number of inner cities are competitive over this period—increasing their share of metropolitan employment in 144 out of 281 metropolitan statistical areas. Also described is the pattern of job growth within the inner city. The authors find that tracts that grew faster
tended to be closer to downtown, with access to transit and adjacent to areas with higher population growth. However, tracts with higher poverty rates experienced less job growth, indicating that barriers still exist in the inner city.
The Long-Term Employment Impacts of Gentrification in the 1990s
T. William Lester and Daniel A. Hartley
In the ongoing debate over the social benefits and costs of gentrification, one of the key questions left largely unaddressed by the empirical literature is the degree to which gentrification impacts local labor markets. This paper begins by exploring the nature of employment change in one archetypical gentrifying neighborhood—Chicago’s Wicker Park—to motivate the central hypothesis that gentrification is associated with industrial restructuring. Next, a detailed analysis is presented on the long-term employment changes in neighborhoods that have experienced gentrification during the 1990s across a sample of 20 large central cities. Specifically, this paper uses Freeman’s (2005) definition to define tracts that experienced gentrification and compares employment outcomes in such tracts and those within a 0.25 mile buffer to comparable nongentrified tracts. This analysis shows that employment grew slightly faster in gentrifying neighborhoods than other portions of the central city. However, jobs in restaurants and retail services tended to replace those lost in goods-producing industries. This process of industrial restructuring occurred at a faster rate in gentrifying areas. Thus gentrification can be considered a contributory and catalytic factor in accelerating the shift away from manufacturing with urban labor markets.
Why Raise the Minimum Wage?
Produced by the UC Berkeley Center for Labor Research and Education:
Jared C. Balog
“Equal Value (Ode To A Squirrel)”
ANIMATION and VOICE OVER
Based on research by:
David Cooper and Dan Essrow. (2013). “Low-wage Workers Are Older Than You Think.” Economic Policy Institute Economic Snapshot
David Cooper. (2013). “Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Millions and Provide a Modest Economic Boost.”
Economic Policy Institute Report
Arindrajit Dube, T. William Lester, and Michael Reich. (2010). “Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties.”
IRLE Working Paper No. 157-07
Arindrajit Dube, Suresh Naidu, and Michael Reich. (2014). “When Mandates Work. Chapter 2: Labor Market Impacts of San Francisco’s Minimum Wage.”
University of California Press
Chicago’s Tax Increment Financing (TIF) Program: Does it pass the ‘But-For’ Test? Evidence Using Time Series Data
T. William Lester
Chicago uses tax increment financing (TIF) to promote economic development to a greater extent than any other large American city. This paper conducts a comprehensive assessment of the effectiveness of Chicago’s TIF programme in creating economic opportunities and catalysing real estate investments at the neighbourhood
scale. This paper uses a unique panel dataset at the block-group level to analyse the impact of TIF designation and investments on employment change, business creation and building permit activity. After controlling for potential selection bias in TIF assignment, this paper shows that TIF ultimately fails the ‘but-for’ test and
shows no evidence of increasing tangible economic development benefits for local residents. Implications for policy are considered.