U.C. Berkeley slammed over allegedly biased minimum wage report

U.C. Berkeley slammed over allegedly biased minimum wage report
Non-viable, with a 39% increase in payroll costs. (Image via Ricochet)

A top researcher has called out University of California, Berkeley for allegedly releasing a biased research paper that served as leverage for the San Francisco minimum wage increase.

Economic expert Michael Saltsman, research director at the Employment Policies Institute, argues that a biased research paper by U.C. Berkeley helped lead residents of San Francisco to support a rapid minimum wage increase, which possibly contributed to several businesses closing. As Saltsman argues, the wage increase makes the cost of operations a much worse burden for business owners. They often have to cut hours or even in some instances completely close their business.

The paper, “San Francisco’s Proposed City Minimum Wage Law: A Prospective Impact Study,” was released in August, and argued that an increase of the minimum wage will have a vastly positive impact for workers in the city.

The study noted:

Drawing on a variety of government data sources, we estimate that 140,000 workers would benefit from the proposed minimum wage law, with the average worker earning an additional $2,800 a year (once the law is fully implemented). Our analysis of the existing economic research literature suggests that businesses will adjust to modest increases in operating costs mainly through reduced employee turnover costs, improved work performance, and a small, one-time increase in restaurant prices.

The following November, residents of the city voted to increase the minimum wage gradually to $15 an hour over the course of three years. Saltsman argued the UC Berkeley study used biased findings.

“These are the comforting studies they can turn to,” Saltsman said, adding:

It creates stories that say you can raise the minimum wage without consequences. If you look at the methodology, [however] basically they didn’t take into account the fact it could have a negative impact on employment.

Saltsman argued that the study only looked at how the wage increase will benefit workers, as opposed to how it may negatively impact businesses. If a business owner is unable to hire as many employees or has to close their business because of the higher cost of operations, it becomes bad for workers, too.

“These contribute to the public policy debate,” Saltsman continued. “It’s become a key position in the public policy debate.”

Saltsman said their approach and the results of the study are not at all surprising. Some of the researchers involved had activist backgrounds:

The problem at UC Berkeley is they are presenting themselves as unbiased economists. This is the sort of thing you expect from an advocacy group.

Michael Reich, one of the researchers involved in the report, shot back at the claims the study was biased:

In restaurants and retail, stores both open and close all the time. You’d need to know whether closings increased and openings decreased relative to a control group. That’s an objective method that all economists, including me, use to identify the causal effects of a policy.

Though the wage increase has not gone into full effect yet, opponents are already pointing to several businesses that have closed. These include Borderlands bookstore, Abbot’s Cellar, Luna Park and Source.

This report, by Connor D. Wolf, was cross-posted by arrangement with the Daily Caller News Foundation.

 

LU Staff

LU Staff

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