John Schmitt and David Rosnick, Center for Economic and Policy Research, March 22, 2011

This report analyzes the wage and employment effects of the first three city-specific minimum wages in the United States –San Francisco (2004), Santa Fe (2004), and Washington, DC (1993). We use data from a virtual census of employment in each of the three cities, surrounding suburbs, and nearby metropolitan areas, to estimate the impact of minimum-wage laws on wages and employment in fast food restaurants, food services, retail trade, and other low-wage and small establishments.

We evaluate these impacts using the general approach outlined in Card and Krueger’s (1994, 2000) studies of the 1992 New Jersey state minimum-wage increase. In our setting, the Card and Krueger methodology involves comparing wages and employment before and after the city minimum-wage with changes over the same period in wages and employment in comparable establishments in nearby areas unaffected by the citywide minimum wage.

The results for fast food, food services, retail, and low-wage establishments in San Francisco and Santa Fe support the view that a citywide minimum wages can raise the earnings of low-wage workers, without a discernible impact on their employment. Moreover, the lack of an employment response held for three full years after the implementation of the measures, allaying concerns that the shorter time periods examined in some of the earlier research on the minimum wage was not long enough to capture the true disemployment effects.

Download The Wage and Employment Impact of Minimum-Wage Laws in Three Cities