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Incomes and Outcomes

What a $15 Minimum Wage Would Mean for Your City

As the campaign for a $15 minimum wage has gained strength this year, even supporters of large minimum-wage increases have wondered how high the wage floor can rise before it reduces employment and hurts the economy.

The recent recommendation of a wage board in New York State to establish a $15-an-hour minimum wage for workers at fast-food chains provided a case in point. Paying fast-food workers at least $15 an hour in New York City, with its relatively high wages and high cost of living, may be one thing. But mandating wages that high in less economically vibrant cities like Utica and Binghamton may be quite another. (The wage board, aware of the disparity, recommended that the increase not kick in until mid-2021 elsewhere in the state, versus late 2018 for New York City.)

Fortunately, economists have a handy tool for gauging the likely impact of minimum-wage increases: the ratio of the minimum wage to the wage of workers in the very middle of the income distribution, known as the median wage. The higher the ratio of the minimum to the median, the greater the boost to workers.

But the higher that ratio, the greater risk of job losses, too. Where is the point at which job loss risk exceeds the benefit to workers? There is some evidence that cities and states have managed to absorb increases when the minimum wage is in the neighborhood of 50 percent of the median, even a bit higher. But economists have very few historical examples of increases that go beyond 60 percent. And even some economists who are at ease with moderate increases in the minimum wage worry that a minimum wage in that 60 percent range or higher could produce significant job losses.

Michael Reich, a professor of economics at the University of California, Berkeley, whose work has bolstered the case for minimum wage increases, said in a recent interview that it would be disingenuous to suggest that the potential costs of raising the minimum could never outweigh the economic benefits. “We don’t know at what point that kicks in,” he said. “We know that hasn’t happened at 50 percent or 55 percent.” (Other minimum-wage scholars, like David Neumark of the University of California, Irvine, believe this happens much sooner.)

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At a McDonald's in the Los Angeles area. That city has a relatively low median wage.Credit...Emily Berl for The New York Times

Mr. Reich said that a handful of affluent European countries had or would soon have minimum-to-median ratios in the 50s and low 60s and did not appear to show many ill effects. (Some of them, like France, have significantly higher unemployment rates than the United States, but others, like Germany, do not.)

With that in mind, I decided to figure out what the minimum-to-median ratio for 25 cities would be if the minimum wage were to rise to $15 an hour in 2020, as Bernie Sanders, the Vermont senator and candidate for the Democratic presidential nomination, proposes in a recent bill. The exercise revealed a fair amount about the relative ability of each city to withstand a $15-an-hour minimum wage.

Some of the results are what you’d expect: The San Francisco area, thanks in part to its booming tech industry, has the highest current median wage on our list ($25.27), and in 2020 would have a resilient minimum-to-median ratio of 0.47, assuming 2 percent annual growth of the median wage in the interim. Washington at 0.49, Boston at 0.50, Seattle at 0.54 and New York at 0.55 would round out the top metro areas that could sustain a $15-an-hour minimum wage without much fallout. If anything, my calculations may overstate the ratios we’d observe in these areas in 2020, because wages could rise significantly faster there than the 2 percent per year I assumed.

Not surprisingly, two of these cities, San Francisco and Seattle, already have $15-an-hour minimum wage laws, and Washington may well join them next year.

But some of the other numbers are worrying. For example, Los Angeles, which recently approved a $15-an-hour wage bill of its own, may have more trouble handling the change, even though we sometimes mentally lump it in with booming cities like San Francisco and Seattle. The city’s current median wage is actually relatively low — $18.32 in the metro area versus $21.73 in New York and $24.58 in Washington — leading to an estimated minimum-to-median ratio of 0.65 in 2020. This would put it behind Minneapolis (0.61), Philadelphia (0.63) and Detroit (0.64), and roughly in line with Chicago (0.66).

Granted, there are other reasons to believe that Los Angeles will be able to weather its minimum-wage increase better than some less glamorous cities. For example, the relatively high cost of real estate there means wages are generally a smaller percentage of employers’ overall costs than in other cities (certainly Detroit), so wage increases there have a relatively smaller impact on the bottom line. Businesses in cities with a lot of transient customers, like tourists and business travelers, may also have an easier time increasing prices to offset minimum-wage increases.

And, as Arindrajit Dube, an associate professor of economics at UMass Amherst, pointed out, Detroit’s figure may be somewhat misleading. Its relatively high median wage and low minimum-to-median ratio may mask high unemployment or low labor force participation among people who want low-wage jobs but can’t get them. Those jobs would drive down the local median wage if they existed, but they don’t. “Detroit is not a prosperous area, so there’s not demand for low-wage service-sector jobs,” he said. “As a result, the jobs they do have tend to pay higher. Think of it more as the ‘missing jobs.’ ”

(Alternatively, the explanation may be that most of the median-wage numbers are only available at the metro-area level rather than the city level. According to government data, the Detroit metro area, which includes a ring of more affluent suburbs, has had higher economic growth in recent years than the Los Angeles metro area and the same level of unemployment. But this may mask a much weaker economy in Detroit proper.)

Finally, there are a handful of cities that appear to be distinctly ill-equipped for a $15-an-hour minimum. Wages are so low that $15 is fairly close to the median wage there. The minimum-to-median ratio in Las Vegas and New Orleans — big service-economy and tourism hubs — comes to 0.75 and 0.76. Oklahoma City would come to 0.75. Miami, the only city on the list where the most recent median-wage reading is actually under $15 ($14.93), has a minimum-to-median ratio at a staggering 0.8.

The wide variation in minimum-to-median ratios does seem to recommend some variation when raising the minimum wage. A number of the cities that have recently passed minimum-wage laws — like Albuquerque, Louisville and Portland, Me. — have stopped far short of $15 an hour. If Las Vegas and Miami are considering raising their local minimum wages, they might be advised to follow suit. (Oklahoma City may be in a better position to absorb a minimum-wage increase because it has enjoyed very low unemployment and very rapid economic growth in recent years.)

Still, as a general rule, this list is filled with prosperous cities — places it might make sense to single out with high-impact minimum-wage increases. It’s their affluence that fuels the demand for low-wage jobs, exacerbating inequality.

“The demand is essentially either driven by higher-income consumers in that area, or by tourism,” Mr. Dube said. These are the very people, he added, who can afford to subsidize a higher minimum wage by paying more at restaurants and clothing stores.

A note about my methodology:

My approach to picking the cities was highly unscientific—I chose 25 interesting cities among the 50 largest in the country, with the caveat that each region of the country needed some representation. The calculations are a bit crude; I calculated what the median wage would look like if it grew by 2 percent a year between 2014 and 2020. As a rule, I used the smallest geographic area available, but it’s typically larger than the city proper.

One final adjustment: When calculating and comparing minimum-to-median wage ratios, economists typically use the median wage for all fulltime workers, rather than the median wage for all workers. On average over the past decade, fulltime workers have made about 11 percent more than workers overall. So for the purposes of calculating my ratios, I took the median wage for each city and boosted it by 11 percent.

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A version of this article appears in print on  , Section A, Page 3 of the New York edition with the headline: Effect of $15 Minimum Wage Would Vary From City to City. Order Reprints | Today’s Paper | Subscribe

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