Fiscal Impact Analysis for the City of Spokane regarding Proposition 1 – Worker Bill of Rights

Report issued on September 2, 2015 –

Summary:

Estimations of revenue and expenditures for the City, along with supportive research from numerous cities and counties that have implemented higher local minimum or living wages, show that adopting Proposition 1 will have a net fiscal gain for the City and that the community overall will benefit economically.

Over 120 communities across the United States have implemented higher minimum or living wages than state or federal government, including Sea-Tac and Seattle. Twelve more communities, including Tacoma and Olympia, are currently considering a higher minimum or living wage.

 Overview

Proposition 1 would secure a living wage for employees who work for large employers in the City. Based on existing research, it is expected that the economic benefits to the City would include:

  • Increasing wages will increase the amount of revenue collected for utilities
  • Increasing wages will increase sales tax revenue due to higher amounts of disposable income
  • Increasing wages will increase parking meter revenue due to higher amounts of disposable income
  • Increasing wages will increase parking ticket revenue due to higher amounts of disposable income
  • Increasing wages will move a percentage of people into becoming homeowners vs. renters, which increases property tax revenue
  • Increasing wages reduces the need for public assistance funded or managed, in part, by the City

 Economic Benefits of a Higher Minimum or Living Wage

EMPLOYMENT – Research has found businesses and employees make more money and that there are no employment effects – layoffs, reduction of hours, etc. – when minimum wage increases[i], even in times of economic downturn[ii].

STIMULATES LOCAL ECONOMY – Research has found that raising the minimum wage spurs economic growth[iii], as low-wage workers spend their additional earnings[iv].

REDUCE EMPLOYEE TURNOVER – According to the United States Department of Labor, “Academic research has shown that higher wages sharply reduce employee turnover, which can reduce employment and training costs”[v].

DECREASE IN NEED FOR PUBLIC ASSISTANCE – Higher wages and employer-provided health care would lower both state and federal public assistance costs, and allow all levels of government to better target how their tax dollars are used.[vi]

NO CHANGE IN CITY SERVICES – In a tri-city study (Boston, New Haven, and Hartford) it has been shown that in cities that pay workers a living wage, there was no reduction in city services or support for roads, police, fire, libraries, etc..[vii]

CITY BUDGET – Research has shown little to no impact to a local government’s fiscal health, meaning there is money in the budget to cover higher wages. Upon instituting a higher minimum wage the City of Los Angeles found no measurable effect on the city’s fiscal health.[viii]

EMPLOYEE PROTECTIONS GOOD FOR EMPLOYEES AND EMPLOYERS –– After nearly three decades, Montana’s Wrongful Discharge Act has shown that employers do not experience a competitive disadvantage by legislation that protects their employees from arbitrary and unfair discharge decisions.[ix]

 General Facts and Assumptions

  • Proposition 1 does not go into effect until one year from the date the ballot is certified.
  • The family wage is calculated based on current costs, which may be higher or lower than when the wage goes into effect, compared to today.
  • The family wage will be phased in over a four-year period. The City, as a qualifying employer, will be required to pay those that already not receiving a family wage 60% of that wage a year from ballot certification, 80% of that wage two years from ballot certification, and 100% of the family wage three years from ballot certification.
  • The City is not mandated to enforce any aspect of Proposition 1.
  • City administration time required to calculate the family wage, the only implementation required of the city besides adjustments needed to adhere to the other rights in Proposition 1, should not be significant because there is available data already assessing the costs categories of basic necessities for the Spokane Metro Area as defined in Proposition 1.
  • The percentage of City employees not already covered by or benefiting from some or all the mandates of Proposition 1 is approximately less that 8%, or 160 of 2,091 employees.

Conclusion

The research concludes that the City will likely gain economically from the adoption of Proposition 1. Equally important would be the net positive gain to workers, employers, the local economy, and the community of Spokane if Proposition 1 were adopted.

References:

[i] Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties, November 2010-IRLE Working Paper #157-07, Institute for Research on Labor and Employment; Arindrajit Dube, T. William Lester, and Michael Reich; http://www.irle.berkeley.edu/workingpapers/157-07.pdf

[ii] Over 600 Economists Sign Letter in Support of $10.10 Minimum Wage; January 14, 2014; Economic Policy Institute; http://www.epi.org/minimum-wage-statement/

[iii] How raising the federal minimum wage would help working families and give the economy a boost; August 14,2012; Issue Brief #341; Economic Policy Institute; Doug Hall and David Cooper; http://s1.epi.org/files/2012/ib341-raising-federal-minimum-wage.pdf

[iv] Over 600 Economists Sign Letter in Support of $10.10 Minimum Wage; January 14, 2014; Economic Policy Institute; http://www.epi.org/minimum-wage-statement/

[v] Local Minimum Wage Laws: Impacts on Workers, Families, and Businesses; March 2014; Report prepared for the Seattle Income Inequality Advisory Committee; Michael Reich, Ken Jacobs, and Annette Bernhardt; http://murray.seattle.gov/wp-cothentent/uploads/2014/03/UC-Berkeley-IIAC-Report-3-20-2014.pdf

[vi] The High Public Cost of Low Wages: Poverty-Level Wages Cost U.S. Taxpayers $152 Billion Each Year in Public Support for Working Families; April 2015; UC Berkeley Center for Labor Research and Education; Ken Jacobs, Ian Perry, and Jenifer MacGillvary; http://laborcenter.berkeley.edu/pdf/2015/the-high-public-cost-of-low-wages.pdf

[vii] Living Wage Laws in Practice: The Boston, New Haven, and Hartford Experiences; 2005; Political Economy Research Institute; Mark D. Breener and Stephanie Luce; http://www.peri.umass.edu/fileadmin/pdf/research_brief/RR8.pdf

[viii] The economic impact of local living wages; February 15, 2006; Economic Policy Institute; Jeff Chapman and Jeff Thompson; http://www.epi.org/publication/bp170/

[ix] Just Cause in Montana: Did the Big Sky Fall?; September 2008; American Constitution Society for Law and Policy; Barry D. Roseman; https://www.acslaw.org/files/Roseman%20Issue%20Brief_0.pdf