Scholarly Publications

Peer-reviewed articles and books from affiliated faculty and IRLE Center staff.

The Economic Impacts of a Citywide Minimum Wage
, and   –  Scholarly Publications

Industrial and Labor Relations Review 60(4):522-543. July 2007. Cornell University, School of Industrial & Labor Relations.

This paper presents the first study of the economic effects of a citywide minimum wage— San Francisco’s adoption of a minimum wage, set at $8.50 in 2004 and $9.14 by 2007. Compared to earlier benchmark studies by Card and Krueger and by Neumark and Wascher, this study surveys table-service as well as fast-food restaurants, includes more control groups, and collects data for more outcomes. The authors find that the policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants. The authors also find smaller amounts of measurement error than characterized the earlier studies, and so they can reject previous negative employment estimates with greater confidence. Fast-food and table-service restaurants responded differently to the policy, with a small price increase and substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants, but not among table-service restaurants.
Good Principals or Good Peers: Parental Valuation of School Characteristics, Tiebout Equilibrium, and the Incentive Effects of Competition Among Jurisdictions
  –  Scholarly Publications

American Economic Review, 96(4):1333-1350. September 2006.

School choice may improve productivity if parents choose well-run schools, but not if parents primarily choose schools for their peer groups. Theoretically, high income families cluster near preferred schools in housing market equilibrium; these need only be effective schools if effectiveness is highly valued. If it is, “effectiveness sorting” will be more complete in markets offering more residential choice. Although effectiveness is unobserved to the econometrician, I test for an observable implication of effectiveness sorting. I find no evidence of a choice effect on sorting, indicating a small role for effectiveness in preferences and suggesting caution about choice’s productivity implications.
Basic Family Budgets: Working Families: Incomes Often Fail to Meet Living Expenses Around the United States
  –  Scholarly Publications

International Journal of Health Services 36(3):443–454. 2006.

The ability of families to meet their most basic needs is an important measure of economic stability and well-being. While poverty thresholds are used to evaluate the extent of serious economic deprivation in our society, family budgets—that is, the income a family needs to secure safe and decent-yet-modest living standards in the community in which it resides—offer a broader measure of economic welfare. Basic family budgets take into account differences in both geographic location and family type. In total, this report presents basic budgets for more than 400 U.S. communities and six family types (either one or two parents with one, two, or three children). That the budgets differ by location is important, since certain costs, such as housing, vary significantly depending on where one resides. This geographic dimension of family budget measurements offers a comparative advantage over using poverty thresholds, which only use a national baseline in their measurements.
Race, Income, and College in 25 Years: The Continuing Legacy of Segregation and Discrimination
, and   –  Scholarly Publications

American Law and Economics Review, 8(2):282-311. Summer 2006.

In Grutter v. Bollinger, Justice O’Connor conjectured that in 25 years affirmative action in college admissions will be unnecessary. We project the test score distribution of black and white college applicants 25 years from now, focusing on the role of black–white family income gaps. Economic progress alone is unlikely to narrow the achievement gap enough in 25 years to produce today’s racial diversity levels with race-blind admissions. A return to the rapid black–white test score convergence of the 1980s could plausibly cause black representation to approach current levels at moderately selective schools, but not at the most selective schools.
College Performance Predictions and the SAT
  –  Scholarly Publications

Journal of Econometrics, 121(1-2):297-317. July-August 2004.

The methods used in most SAT validity studies cannot be justified by any sample selection assumptions and are uninformative about the source of the SAT’s predictive power. A new omitted variables estimator is proposed; plausibly consistent estimates of the SAT’s contribution to predictions of University of California freshman grade point averages are about 20% smaller than the usual methods imply. Moreover, much of the SAT’s predictive power is found to derive from its correlation with high school demographic characteristics: The orthogonal portion of SAT scores is notably less predictive of future performance than is the unadjusted score.
Living Wage Ordinances in California
  –  Scholarly Publications

In The State of California Labor 2003, Ruth Milkman, ed. 199-226. Cleveland: Brothers Printing Company. 2003.

Living wage mandates legislate minimum hourly wages that are considerably higher than minimum wage rates. Since 1994 living wage ordinances have been passed and, in varying degrees, implemented in over ninety-five local governmental entities in the United States; among them are twenty-one California cities. The author presents a summary of the living wage ordinances in California, including their wage mandate levels and their coverage. He discusses how the minimum wage and the federal poverty standard have failed to keep up with increased living costs, especially in California’s cities, and reviews arguments for and against living wage policies. The author also surveys older academic studies on minimum wage and living wages and then discusses a new generation of research studies on the impacts of living wages. This new set of studies, which includes detailed analyses of Los Angeles and San Francisco, provides a more careful and complete understanding than was previously available. Using before-and-after surveys of employers and workers and more sophisticated methodology, they reveal that living wage policies increase pay for their intended beneficiaries without creating disemployment effects. Living wage policies also reduce employee turnover and absenteeism and improve worker performance, thereby creating some employer savings in the short run and generating incentives for productivity growth in the long run. The policies’ costs to employers and taxpayers are considerably smaller than some have projected. The author concludes by discussing recent developments in living wage campaigns that may lead to greater impacts in the future.
Living Wages and Economic Performance: The San Francisco Airport Model
, and   –  Scholarly Publications

Institute of Industrial Relations, University of California, Berkeley. March 2003.

In response to low pay for workers and low service quality for taxpayers, about 100 local governmental entities in the United States have instituted living wage ordinances. Generally, these ordinances apply wage and benefits mandates for employees of contractors conducting services for a municipal government. Some of the ordinances also apply to employers who conduct business on government-owned property.

An innovative and far-reaching living wage ordinance has been implemented at San Francisco International Airport (SFO). Nearly two years before September 11, 2001, SFO adopted a Quality Standards Program (QSP), which was designed to improve safety and security at SFO as well as improve the conditions of the SFO labor market. The program went well beyond the FAA regulations in place at the time, establishing compensation, recruitment and training standards for a wide range of airport employees whose performance affects airport safety and security. Two additional policies in San Francisco in 2000 also restructured the labor market at SFO: a Labor Peace/Card Check Rule and a Minimum Compensation Ordinance (MCO), which places living wage mandates into airport leases and service contracts not covered by the QSP.

In this study we examine the determinants of low-wage labor markets at the airport, the scope of the new policies at SFO, and the impacts of those policies on workers, employers, consumers and taxpayers, with special attention to the effects on airport safety and security. This study constitutes the first examination of the impacts of the policies. In this summary of our findings, we focus on the main findings of our study. The document that follows provides our full report.

To conduct the study, we carried out detailed surveys of airport employers and workers in the summer and fall of 2001, and we interviewed labor, management and airport officials. We also drew upon government documents and census datasets, the airport’s own security badge data, and FAA data on security at major U.S. airports.

A Small Raise for the Bottom
and   –  Scholarly Publications

InThe State of California Labor 2001, Paul M. Ong and James R. Lincoln, eds. 123-148. Cleveland: Brothers Printing Company. 2001.

Despite the longest economic boom in California’s history, a large and increasing number of low-paid workers are not sharing in its prosperity. Indeed, from the mid-1970s to the mid-1990s real hourly wages fell steadily for most workers, by around 25 percent for the lowest fifth of the California workforce and 20 percent for the median worker, and rose only for the top fifth of the workforce. As a result, wage inequality in California is now at record levels and much higher than in the rest of the U.S.

For the vast majority of California wage earners, real hourly pay began to grow again only in 1996, at the beginning of the most recent round of minimum wage increases. By 1999 pay at the tenth percentile reached $6.04, 12.1 percent higher than in 1995, while pay at the fiftieth percentile grew by 2.8 percent, to $13 and pay at the ninetieth percentile grew 9.2 percent, to $32.61. As a result, the rate of growth in wage inequality has slowed. This timing suggests that the 1996-98 minimum wage increases may have played a part in a “small raise for the bottom.”

In this chapter, we first discuss the size and growth of low-wage employment in California since 1980 and then examine rising wage inequality in the state in the same period. We go on to present a sustained examination of the 1996-98 California minimum wage increase, which raised the state minimum by 35 percent, from $4.25 to $5.75, or $.60 above the national minimum.

We focus on the extent to which the 1996-8 minimum wage increases can be given credit for the reduction in wage inequality that occurred in the late 1990s. We find that the minimum wage increases did not negatively affect the strong employment growth over the period. At the same time it did benefit large numbers of low-wage workers. Through a series of statistical tests, we also find evidence that the minimum wage increases did reach the lowest income workers and households and did not spill over to high-paid workers.

We pay particular attention to the impacts of the policy on low-wage sectors of the economy. Precisely because minimum wages target the lowest paid in the labor market, we need to be careful that it does not lead to the displacement of the most vulnerable workers. Compared to the 1988 increases, the employment and wage
effects of the increases were both more benign and more durable.

Finally, we discuss the potential impact of increasing the minimum wage further, to $8 (which is the 1968 level in 1999 dollars). The effects of the latest round of increases provide a useful basis from which to assess the likely effects of a further increase.

An Empirical Analysis of Homosexual/Heterosexual Male Wage Differentials: Unmarried And Unequal?
and   –  Scholarly Publications

ILR Review, 54(3):631-646. April 2001.

Using data from the 1990 U.S. Census (PUMS 5%), the authors present the first large-scale study of wage differentials between heterosexual and homosexual men. The homosexual sample, consisting of gay men in unmarried partnered relationships, are estimated to have earned 15.6% less than similarly qualified married heterosexual men, and 2.4% less than similarly qualified unmarried partnered heterosexual men. The authors interpret these two figures as upper- and lower-bound estimates of the differential between homosexual and heterosexual men. The dual comparison enables the authors to disentangle the penalty to being unmarried from other determinants of the wage differential; estimated at 14.1%, this variable appears to be the main source of the wage gap.