What Happens When a Small City Raises Its Minimum Wage?

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When a big city raises its minimum wage to $15 per hour, local companies probably won’t lose too much business. A few will lose business to online companies, and a few on the border of the city will lose business to competitors right over the city line, but overall losses will probably be modest. It will be a few years until we know for sure, since most cities doing this aren’t phasing in the full $15 rate until 2016 or later.

But what happens if a small city does this? Emeryville is a tiny place nestled in between Oakland and Berkeley that recently raised its minimum wage to $14.44, the highest in the country. Vic Gumper runs a pizza place there:

All workers now earn $15 to $25 an hour as part of an experimental business model that also did away with gratuities and raised prices, making meals at all five locations “sustainably served, really … no tips necessary.”

….Gumper has also earned kudos from patrons for his innovation, but some have recoiled from paying $30 or more for a pizza. He has seen a 25% drop in sales over the last few months and has had to eliminate lunch hours at some locations.

“The necessity of paying people a living wage in the Bay Area is clear, so it’s hard to argue against it, and it’s something I’m really proud to be able to try doing,” he said. “At the same time, I’m terrified of going out of business after 18 years.”

Obviously this wouldn’t be a problem if the national minimum wage went up—though robots might be—but it’s a problem in Emeryville even though its neighboring cities also have pretty high minimum wages.

I don’t have any conclusions to offer here. This is just raw data. We’ll be getting a lot more like this as additional cities join the $15 club and economists eagerly collect data to see what happens. In the meantime, anecdotes like this are all we have.

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