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Cover page of Workers and the COVID-19 Recession: Trends in UI Claims & Benefits, Jobs, and Unemployment

Workers and the COVID-19 Recession: Trends in UI Claims & Benefits, Jobs, and Unemployment

(2020)

The COVID-19 crisis that hit the world and the United States has resulted in profound changes to our way of life. While this paper focuses on workers and economic effects, we note that the crisis is foremost one of a pandemic. The economic situation is a byproduct. There have been significant differences in countries’ policy responses to the pandemic, which in turn have led to important disparate economic outcomes. It is clear the U.S. Federal government’s abdication of responsibility in responding to the crisis has left far too many in peril, both economically and healthwise. The absence of a coherent national strategy has exposed and exacerbated long-standing racial and economic inequalities—again, both economically and healthwise. Fits and starts of economic activity continue to have feedback loops with the evolution of the virus. Public policy and investment will largely determine our rates of sickness, death and economic pain.

It also warrants early emphasis that information contained in this paper of the profound economic devastation wrought by COVID-19 is neither a call for immediate business reopenings nor stimulus spending as traditionally understood. Comparing the current economic crisis with the Great Recession or any other contemporary recession shows that this crisis is categorically different. While attempts to return quickly to “business as usual” may have been desirable in previous downturns, employing such a strategy in the midst of a pandemic is more likely to be marked by mass death than by sustained economic inroads.

Looking back at the economic recovery following the Great Recession, we see a prolonged period of sluggish growth and weak labor markets; it is clear that stimulus efforts did not go far enough as California endured 44 straight months of double-digit unemployment. The ideal approach to the current crisis, however, may ironically be a slow-recovery path—yet one with additional government relief programs that are large, sustained, flexible, and perhaps even radical, reflecting the gravity of the situation. Relief, more akin to economic survival packages, should keep families as close to whole as possible throughout the pandemic. Additionally, for those who remained on the job as well as those returning to work, enforceable mandated safety regulations are warranted, including workplace grievance procedures and safety boards that include worker voice; this is especially critical for the majority of workers who are not represented by unions.

The coronavirus-induced downturn is not a recession per se, but instead is an economy intentionally stunted as a precaution against sickness and death. Maintaining a degree of economic suspended animation is required if we are to gain control of the pandemic to a degree that, in turn, will allow a safer return of the economy. This will require large and ongoing amounts of government spending. The country is struggling with the question of whether the shutdown is worth the economic damage. It is worth asking, however, if avoidable loss of life is an acceptable cost of returning to the status quo—especially in a country with vast wealth and means to avert such suffering. We move to our economic analyses of the workforce with deep acknowledgment and gratitude to all of the workers who have sacrificed, and continue to sacrifice, so much in the face of this crisis.

Cover page of The Employment Effects of a $15 Minimum Wage in the U.S. and in Mississippi: A Simulation Approach

The Employment Effects of a $15 Minimum Wage in the U.S. and in Mississippi: A Simulation Approach

(2019)

We estimate a calibrated labor market model that we created specifically to analyze the effects of a $15 minimum wage. We take into account how workers, businesses, and consumers are affected and respond to such a policy and we integrate their responses in a unified manner. In doing so, we draw upon modern economic analyses of labor and product markets. As we explain in the report, the main effects of minimum wages are made up of substitution, scale, and income effects. Our estimates compare employment numbers if policy were adopted to employment numbers if the policy had not been adopted. Other factors that may affect employment by 2024 are therefore outside the scope of our analysis.

Our analysis incorporates recent laws that raised state minimum wages, such as in New York State and California. However, we ignore laws that raise minimum wages at the city level. We do so to simplify the presentation. We pay special attention to Mississippi because it is one of the lowest-wage states in the U.S. 

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Cover page of The New Wave of Local Minimum Wage Policies: Evidence from Six Cities

The New Wave of Local Minimum Wage Policies: Evidence from Six Cities

(2018)

We examine the effects of minimum wage policies in six large cities with high citywide minimum wages: Chicago, the District of Columbia, Oakland, San Francisco, San Jose and Seattle. At the end of 2016, the last period of our data availability, citywide minimum wages exceeded $10 in all of these cities and had reached $13 in two—San Francisco and Seattle.

Recent research on minimum wages up to $10 has generally not found employment effects. Ours is the first comprehensive look at effects of minimum wages above $10.

Cover page of A post-Great Recession overview of labor market trends in the United States and California

A post-Great Recession overview of labor market trends in the United States and California

(2018)

It has been well over a decade since the economy tumbled into what is now dubbed the Great Recession—reflecting the historical severity and swiftness of the downturn. The recession officially lasted from December 2007 through June 2009. However, the economy underperformed for nearly a decade as the output gap—GDP coming in under potential—did not close until the end of 2017. After being in the grips of the worst recession since the Great Depression the economy is currently in a lengthy expansion with record job growth, stock market performance, and unemployment rates. But, troubling challenges remain such as weak wage growth, depressed employment rates, high rates of poverty, and increased inequality.

There has been a lot of media attention around advances in automation and how robots are leading to widespread joblessness as the demand for workers shrinks. We find that both of these claims are dubious, at least on a large scale. As this brief will show, job growth is in an unprecedented stretch of monthly gains, unemployment is low and falling, and productivity growth has been on the wane—not much support for the hypothesis of automation causing mass worker displacement. The “gig” economy continues to get significant media attention, but it remains a small fraction of all jobs—estimated to be 0.5 to 1.0 percent of the workforce. The Labor Department recently released the Contingent Worker Survey after a hiatus since 2005. The share of workers that engage in alternative work, including independent contractors and temp workers, did not change—estimated at 10.1% in 2017 compared to 10.7% in 2005. The vast majority of the workforce continue to work in traditional employment situations.

Cover page of Seattle’s Minimum Wage Experience 2015-16

Seattle’s Minimum Wage Experience 2015-16

(2017)

This brief on Seattle’s minimum wage experience represents the first in a series that CWED will be issuing on the effects of the current wave of minimum wage policies—those that range from $12 to $15. Upcoming CWED reports will present similar studies of Chicago, Oakland, San Francisco, San Jose and New York City, among others. The timing of these reports will depend in part upon when quality data become available. We focus here on Seattle because it was one of the early movers.

Seattle implemented the first phase of its minimum wage law on April 1, 2015, raising minimum wages from the statewide $9.47 to $10 or $11, depending upon business size, presence of tipped workers and employer provision of health insurance. The second phase began on January 1, 2016, further raising the minimum to four different levels, ranging from $10.50 to $13, again depending upon employer size, presence of tipped workers and provision of health insurance. The tip credit provision was introduced into a previously no tip credit environment. Any assessment of the impact of Seattle’s minimum wage policy is complicated by this complex array of minimum wage rates. This complexity continues in 2017, when the range of the four Seattle minimum wages widened, from $11 to $15, and the state minimum wage increased to $11.

We analyze county and city-level data for 2009 to 2016 on all employees counted in the Quarterly Census of Employment and Wages and use the “synthetic control” method to rigorously identify the causal effects of Seattle’s minimum wage policy upon wages and employment. Our study focuses on the Seattle food services industry. This industry is an intense user of minimum wage workers; if wage and employment effects occur, they should be detectable in this industry. We use county level data from other areas in Washington State and the rest of the U.S. to construct a synthetic control group that matches Seattle for a nearly six year period before the minimum wage policy was implemented. Our methods ensure that our synthetic control group meets accepted statistical standards, including not being contaminated by wage spillovers from Seattle. We scale our outcome measures so that they apply to all sectors, not just food services.

Our results show that wages in food services did increase—indicating the policy achieved its goal—and our estimates of the wage increases are in line with the lion’s share of results in previous credible minimum wage studies. Wages increased much less among full-service restaurants, indicating that employers made use of the tip credit component of the law. Employment in food service, however, was not affected, even among the limited-service restaurants, many of them franchisees, for whom the policy was most binding. These findings extend our knowledge of minimum wage effects to policies as high as $13.

Cover page of Credible research designs for minimum wage studies

Credible research designs for minimum wage studies

(2016)

The employment consequences of increasing the minimum wage in the United States continue to be a major subject of debate, but how researchers choose to estimate the effects of raising the minimum wage can substantially affect the results of their work. In “Credible Research Designs for Minimum Wage Studies”, my coauthors and I examine one group of low-wage workers—teenagers—whose hourly wages are significantly raised by minimum wage increases.

A common objection to raising minimum wages is that doing so will reduce the employment opportunities of low-skilled workers such as teenagers. We show, however, that some studies find negative effects of the minimum wage on teen employment because they fail to control for other economic factors that independently reduced employment around the time of a minimum wage increase. After controlling for these factors, we demonstrate that the large, negative effect on teen employment disappears.

Cover page of Data and Methods for Estimating the Impact of Proposed Local Minimum Wage Laws

Data and Methods for Estimating the Impact of Proposed Local Minimum Wage Laws

(2016)

In this technical report we document a methodology developed by the UC Berkeley Center on Wage and Employment Dynamics to estimate the number of workers affected by proposed local minimum wage laws, as well as the expected increase in wages. This methodology is similar to that used by researchers to generate impact estimates for national and state minimum wage proposals, but differs in several respects because of significant data limitations for city- or county-based analyses.

In Section A we describe the data source, sample definition, and wage variable creation and cleaning. In Section B we describe the process for estimating the number of workers affected and the expected increase in wages.

Cover page of The Effects of a $15 Minimum Wage by 2019 in San Jose and Santa Clara County

The Effects of a $15 Minimum Wage by 2019 in San Jose and Santa Clara County

(2016)

We present here, at the request of the City of San Jose, an analysis of the impact of minimum wage increases for both San Jose and all of Santa Clara County. Both scenarios begin on January 1, 2017 and increase to $15 by January 1, 2019.

Critics of minimum wage increases often cite factors that will reduce employment, such as automation or reduced sales, as firms raise prices to recoup their increased costs. Advocates often argue that better-paid workers are less likely to quit and will be more productive, and that a minimum wage increase positively affects jobs and economic output as workers can increase their consumer spending. Here we take into account all of these often competing factors to assess the net effects of the policy.

Our analysis applies a new structural labor market model that we created specifically to analyze the effects of a $15 minimum wage. We take into account how workers, businesses, and consumers are affected and respond to such a policy and we integrate these responses in a unified manner. In doing so, we draw upon modern economic analyses of labor and product markets. As we explain in the report, the main effects of minimum wages are made up of substitution, scale, and income effects. The figure below provides a guide to the structure of our model.

Our data are drawn from the Census Bureau’s American Community Survey and from other Census and U.S. Bureau of Labor Statistics datasets. We also make use of the extensive research conducted by economists—including ourselves—in recent years on minimum wages, and upon research on related economic topics.

Our estimates of the effects of a $15 minimum wage are also based upon existing research on labor markets, business operations, and consumer markets. Our estimates compare employment numbers if the policy were to be adopted to employment numbers if the policy is not adopted. Other factors that may affect employment by 2019 are therefore outside the scope of our analysis. We have successfully tested our model with a set of robustness exercises.

Our analysis does not incorporate the recent state minimum wage law passed in April 2016. Since the San Jose and Santa Clara County scenarios are on a faster timeline, the number and demographics of workers affected would be similar if we had included the scheduled statewide increases. However, the size of the average wage increase and the effect on firms compared to the new baseline established by the state would be somewhat smaller.

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