$15 Minimum Wage. November 15, 2016 Item 3.4. City of San José

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1 $15 Minimum Wage November 15, 2016 Item 3.4 City of San José

2 Context March 2013 Local minimum wage raised from $8 to $10 (Measure D) Adopted by San Jose voters on November 6, 2012 Will increase to $10.40 on January 1, 2017 September 2015 Council direction to study $15 minimum wage Study impacts on workers, businesses and overall economy in San Jose and Santa Clara County Work with the Cities Association of Santa Clara County April 4, 2016 Legislation to raise State minimum wage from $10 to $15 By 2022, for employers with more than 25 employees By 2023, for employees with 25 or fewer employees

3 Context April 18, 2016 City Council Study Session Consultants presented findings from economic analysis and employer survey Council directed staff to conduct employer outreach June 2016 Cities Association makes recommendation to member cities Increase minimum wage to $15 by 2019 in three steps: $12.00 on 1/1/2017; $13.50 on 1/1/2018; $15 on 1/1/2019 No exemptions After 2019, index to San Francisco-Oakland-San Jose CPI, capped at 5% During ramp-up phase, off-ramp triggers would allow for scheduled increases to be delayed under certain economic conditions

4 Five SCC cities have adopted a $15 wage ordinance Jurisdiction Current Min Wage Min Wage on 1/1/17 When Reach $15? Mountain View $11.00 $ /1/18 Sunnyvale $11.00 $ /1/18 Los Altos $10.00 $ /1/19 Palo Alto $11.00 $ /1/19 Cupertino $10.00 $ /1/19

5 Five SCC cities have decided not to adopt a $15 wage ordinance at this time Jurisdiction Min Wage Status Gilroy $10.00 Los Gatos $10.00 Morgan Hill $10.00 Los Altos Hills $10.00 Monte Sereno $10.00 Declined to consider; will continue to follow State s minimum wage ordinance Council voted not to move forward with a local minimum wage ordinance on 11/1/16 Council considered at 8/24/16 Council meeting. No action taken; further reconsideration TBD. Council determined it was not applicable due to absence of commercial/industrial zones Council determined it was not applicable due to absence of commercial/industrial zones

6 Five SCC cities are still considering a $15 wage ordinance Jurisdiction Min Wage Status Campbell $10.00 Milpitas $10.00 Council considered on 11/1/16; discussion will continue on 12/6/16 Outreach efforts through October; Council consideration TBD San Jose $10.30 Council to consider on 11/15/16 Santa Clara $11.00 Council directed staff to present a recommendation and outreach plan at February 2017 goal-setting strategy session Saratoga $10.00 Council to consider in December 2016

7 San Jose Staff Recommendation i. Delay implementation of the studied schedule by one year, starting with an increase to $12 in January 2018, an increase to $13.50 in January 2019, reaching $15 per hour in January 2020 ii. Increase San Jose s minimum wage to $10.50 in January 2017, for consistency with the state schedule across employers of all sizes iii. Add an exemption for employees in transitional jobs programs iv. Change the CPI index used for annual increases from the U.S. All Cities CPI- W to the San Francisco-Oakland-San Jose Consolidated Metropolitan Statistical Area (CMSA) CPI-W to more accurately account for the cost of living adjustments in this area v. Include an off ramp provision with two economic triggers similar to the State of California, providing option to delay scheduled increase to the minimum wage if a severe recession occurs during the ramp up to $15

8 Comparison of wage schedules San Jose current minimum wage Cities Association recommendation San Jose Staff Recommendation New CA law more than 25 employees New CA law 25 or fewer employees $10.40 $10.61* $10.82* $11.03* $11.25* $11.48* $11.71* $12.00 $13.50 $15.00 $15.38* $15.77* $16.17* $16.68* $10.50 $12.00 $13.50 $15.00 $15.38* $15.77* $16.17* $10.50 $11.00 $12.00 $13.00 $14.00 $15.00 $15.00 $10.00 $10.50 $11.00 $12.00 $13.00 $14.00 $15.00 *Where minimum wages are scheduled to increase according to CPI, the table uses the average annual CPI increase over the past 10 years to estimate future values. San Jose s current minimum wage is indexed to the U.S. All Cities CPI-W. The Cities Association and San Jose staff recommendations are indexed to the San Francisco- Oakland-San Jose CMSA CPI-W.

9 Key Findings from Study Economic Analysis Average pay increase of $3,000 for 115,000 San Jose workers Payroll costs will increase by an average of 1.3% across industries, 10% for restaurants Price increases are estimated at 0.3% across all industries, 3.1% for restaurants San Jose will see a net loss of 960 jobs by the end of the three-year increase, corresponding to 0.3% of jobs, offset by job gains in broader region where workers live New state law will lessen impacts Employer Survey 76% of respondents agreed felt that a minimum wage increase made sense given the region s high cost of living. 75% agreed that the minimum wage should increase the same throughout the county rather than having different rates in different cities. 66% reported they will likely raise prices 63% agreed that employees will likely be more satisfied and productive 61% felt that a minimum wage increase would create barriers to growth of new businesses

10 City of San José Backup Slides

11 Economic Triggers Decline in seasonally adjusted nonfarm employment for either the 3-month period ending in June or the 6- month period ending in June AND Decline in the state portion of the sales and use tax receipts measured by the 12-month period ending in June compared to the prior year.

12 Scope of $15 Minimum Wage Study Economic Analysis - Scope of Work Conducted by Institute for Research on Labor and Employment (IRLE) at UC Berkeley Analyzed impacts to workers, businesses and overall economy in San Jose and Santa Clara County Studied an equal three-step increase: $12.00 on January 1, 2017 $13.50 on January 1, 2018 $15.00 on January 1, 2019 Does not take into account the new state minimum wage increase to $15 Employer Survey Scope of Work Conducted by BW Research Partnership Included over 500 employers throughout San Jose and Santa Clara County Focused on industries with a high share of minimum wage employees

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