Oakland Businesses Adapting to New Minimum Wage as Economy Booms

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BROOKE ANDERSON / FILE PHOTO
  • Brooke Anderson / file photo
It’s been eight months since Oakland’s $12.25 minimum wage law took effect. So what has been the economic impact of higher wages on the city?

For one thing, Oakland’s economy is booming. Plus, unemployment is falling, and new businesses are clamoring to locate in Oakland. And perhaps surprisingly, most business owners don’t seem to think the higher minimum wage is a major obstacle to growing, prospering, and hiring more employees in Oakland. That’s what Sepi Aghdaee, a grad student in the Lorry Lokey School of Business and Public Policy at Mills College, found after conducting a detailed survey of 103 Oakland businesses over the summer.

The Oakland City Council will consider the effects of the minimum wage increase at their finance committee meeting on November 10, and Aghdaee’s study about how the new minimum wage has affected employment, business location, prices, and the overall business climate of Oakland will provide some of the evidence.

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Aghdaee’s survey findings, along with Oakland’s current economic indicators, and new information released by the city, show that so far the minimum wage increase has not harmed Oakland’s economy, despite the sky-is-falling claims of many business owners before, and just after, it was implemented. In fact, business owners overwhelming told Aghdaee that the minimum wage increase is not among the biggest challenges they face in operating a business in Oakland. Instead they ranked the need for a more business-friendly city, crime and safety, marketing and advertising, employee recruitment and retention, the increasing cost of rent, and high taxes as bigger problems.

Aghdaee found that 70 percent of survey respondents reported an increased payroll, mainly as a result of higher wages. About half the businesses raised prices. But only 6 percent of businesses laid off workers to adjust to the new minimum wage.

These survey findings reflect overall job trends in Oakland since the new minimum wage took effect. Oakland’s unemployment rate has fallen from 6.1 percent in February of this year, just before the new minimum wage law took effect in March, to 5.3 percent in September. The number of jobs in Oakland has grown from 196,400 to 199,900, according to a city staff report.

The Oakland City Council also recently set aside more money to enforce the new minimum wage law. According to city staffers, the city has received 22 complaints, mostly alleging violations of the minimum wage requirement, but several also from employees who allege their bosses denied them the right to utilize paid sick days, which the law also requires employers to provide.

Finally, the City of Oakland reported that it was also able to avoid cutting positions in its youth job training programs. The California Department of Corrections and Rehabilitation, which runs Golden State Works, a re-entry employment program for parolees, was also able to maintain its job positions while paying the new minimum wage.

According to city staffers, 569 Oakland youths took part in the 2013–2014 job training programs through the city, but it was anticipated that 20 percent of these positions would be cut when the $12.25 wage took effect this year. However, the city council allocated more funding to the program, and Mayor Libby Schaaf helped raise funds, leading to an expansion of the program with 640 youth being employed at the higher wage level this year.

Similarly, the CDCR upped its grant to Golden State Works by $435,387 to maintain the number of employment opportunities for recently released prisoners.

Ultimately, it’s still too early to tell what the full impact of the higher minimum wage will be. But economic studies of minimum wage increases in other regions have never proven that higher wages harm businesses and employees. What is clear is that right now more Oaklanders are working, and more are taking home bigger paychecks and using benefits like paid sick days.


Oakland Minimum Wage Law 6-Month Report by darwinbondgraham


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