D.C. residents stand to lose thousands of jobs over the next decade as a result of hiking the minimum wage to $15 an hour, according to the first comprehensive review of the law’s potential economic impact since its passage.
The city’s chief financial officer said in a blog post this week that up to 1,200 jobs could be lost by 2020 due to the new policy, with the job losses approaching 2,500 by 2026 due to the mandatory wage hike. What’s more, many of the benefits of the higher wages will go to workers in Maryland and Virginia, according to the analysis by the city’s Office of Revenue Analysis.
Mayor Muriel Bowser made the drive for a $15 minimum wage — more than twice the current federal standard of $7.25 an hour — a cornerstone of her 2016 State of the District speech, and shows no sign of rethinking her stand following the damaging report.
A spokesman for Miss Bowser said the mayor stands by the law.
“The mayor still believes that raising the minimum wage was the right thing to do and a key component of the administration’s efforts to create more inclusive prosperity for all residents,” Bowser spokesman Kevin Harris told The Washington Times.
The District’s hourly minimum, now $11.50, will increase by about 70 cents annually until it reaches $15 in 2020. After that, yearly increases would be automatic and tied to inflation.
Mr. Harris said that District residents have always had to compete for jobs with neighboring jurisdictions.
“The answer isn’t to keep wages low, rather it’s to make sure we are doing more to provide residents with the skills and access they need to the job growth occurring in our city,” Mr. Harris said.
The District last year joined California, Washington state and New York City when it approved a $15 minimum wage law. It is set to increase incrementally and hit $15 by 2020. The Baltimore City Council this week voted to raise the city’s minimum wage to $15 an hour, but it’s not clear if Mayor Catherine E. Pugh will sign it.
The job losses aren’t the only problem, according to the analysis. One prime result of the minimum wage increase could be more suburban residents taking city jobs.
The CFO’s office attributed that to what’s called the commuter effect. The District is surrounded by more populated jurisdictions with lower minimum wages, giving low-wage suburban residents a strong motivation to look for jobs in the city.
“The result of this competition will force some D.C. residents who previously would have been able to find jobs in D.C. to have to look elsewhere,” Jeffrey Wilkins, an economist in the CFO’s Office of Revenue Analysis, wrote in his blog post first put up Wednesday.
Currently, D.C. residents make up about half of those working in the city and earning $12.50 per hour or less. But the CFO report says that will likely change as the wage floor continues to increase toward $15.
“The group working outside D.C. will have greater and greater incentive to find work in D.C.,” the report says.
Weighing the evidence
The D.C. Fiscal Policy Institute, a progressive economic think tank that focuses on the local D.C. economy, said there isn’t clear evidence that there will be any job loss from the minimum wage hike.
“When workers have higher wages, especially at the lower end of the wage scale, they spend that money on goods and services. That boosts the local economy. Those businesses see positive effect,” said DCFPI economist Ilana Boivie.
The CFO’s report was based on an economic modeling system and five possible scenarios. The CFO analysts used what they thought was the most likely scenario when presenting the data and offered only minimal analysis of data from the other four scenarios.
“The big caveat about models is that the results are so dependent on the initial assumptions you make,” Ms. Boivie said. “You have to plug in assumptions on the front end to get results on the back end. Based on those differing assumptions gets differing results.”
In fact, since no state that passed a $15 minimum wage has reached that ceiling yet, all data on what will happen once wages get that high is speculation.
Yesim Sayin Taylor, head of the D.C. Policy Center, said the results of the CFO’s report aren’t surprising and aren’t even necessarily a bad thing. The DCPC was launched earlier this month by former Mayor Anthony Williams, who now heads the Federal City Council — a powerful pro-business economic advocacy group in the city.
She said the increased incentives will attract more skilled workers and that many of the unemployed workers in the suburbs have higher qualifications than those unemployed and living in the city.
Data from the Census Bureau’s 2015 American Community Survey show there are thousands more unemployed residents in the Maryland and Virginia suburbs who have associate and bachelor’s degrees than those unemployed in the District.
“We are an open economy, so competition for jobs is fierce,” said Ms. Taylor, who up until last year worked for 10 years as the CFO’s director of fiscal and legislative analysis. “Increases in the minimum wage will make competition for these jobs fiercer.”
But Ms. Boivie said the report wasn’t all bad news. In fact, District residents who keep their jobs will see very positive effects. The CFO projects that 61,000 of the 345,000 people who both live and work in the District will see averages of 20 percent increases in their income.
“Even in the scenario that shows a 2 percent job loss, there’s still an average of 20 percent wage gain for the rest of District workers,” she said. “That’s a pretty significant positive effect.”
A March 15 report from the liberal Economic Policy Institute said that pay for low-wage workers in 2016 rose faster in states that have increased the minimum wage than those states that didn’t pass a similar measure.
Along with the District, 17 states increased their minimum wage in some way last year. In those jurisdictions, low-wage workers saw a 5.2 percent pay increase. In states where there was no increase, low-wage workers saw 2.5 percent increase.