2014-02-25

Co.Exist

What Can We Learn From How The Last Tech Boom Affected Inequality?

In the 1990s, when the city was last flush with new wealth, San Francisco put into place a series of programs to help low-income workers. The results? Helping people rise up, without hurting business.

The long-simmering tension between the increasing opulence of San Francisco’s tech elite and, well, everybody else, reached an apex last month. Protesters blocked the driveway of a high-level Google employee, and, after a three-hour hearing, San Francisco’s transportation agency agreed to impose fees on the contentious company shuttles using public bus stops.

At issue in the ongoing bus stop debate is how much private companies can use public resources without investing wholeheartedly in the communities in which they live. But the protests also overshadowed a significant bit of good news about San Francisco’s sense of social justice.

In the late 1990s tech boom, San Francisco became one of the first cities in the country to aggressively pursue a series of mandates that bettered conditions for low-wage workers. San Francisco raised the minimum wage, extended paid sick leave, and expanded access to health care for the poor. At each step, industry protested, arguing that the laws would negatively affect employment. But a new book authored by three researchers at the University of California-Berkeley’s Labor Center proves the opposite.

Raising the minimum wage worked, the authors of the book say, and no, it didn’t negatively affect employment or compensation. San Francisco, in fact, may be one of the best model scenarios out there for other cities looking to augment conditions for workers while encouraging economic growth.

“If we look at what’s happened in the U.S. as a whole in the last decade, wages for people in the bottom 10% first stagnated, then declined with the Great Recession. In San Francisco, they rose when the policies were put in place, then stayed higher,” explains Ken Jacobs, chair of the Labor Center and co-author of When Mandates Work: Raising Labor Standards at the Local Level.

“As an important note, each time one of the laws was proposed it was termed a ‘job killer,’ and each time the results were the opposite,” Jacobs says. “So in the face of growing inequality, the laws have helped a number of people hardest hit by the changing economy by raising real wages and expanding real benefits.”

San Francisco’s growing innovation sector meant more prosperity, the book explains, but it also brought increasing inequality. The rich were getting richer, and the poor poorer--until the city got proactive about addressing the problem.

Comparing San Francisco to surrounding cities and counties between 2004 and 2011, after these policies had been introduced, private employment grew at a faster rate. And more than any other sector, that employment growth happened in the food service industry, which traditionally relies on low-wage work. In total, the law put $1.2 billion into low-wage workers’ pockets while the city’s economy continued to grow.

Part of the reason why the mandates worked, the book argues, is that costs of increasing wages and the like were absorbed in reduced turnover--the expensive process of hiring and training new workers when other employees routinely leave. In a study that looked at how the mandates affected work at the San Francisco International Airport, turnover decreased by 60%.

“Employers reported improved work performance, improved customer service, fewer grievances, fewer conflicts at work. So overall, on a set of wide measures on productivity, you have improvement as a result of a law,” Jacobs says.

More recent research has also pointed to the economic benefits of mandatory paid sick leave. In 2012, a CDC study traced 53% of norovirus, or stomach flu, outbreaks nationwide to infected food workers--79% of whom don’t have, or don’t know if they have, paid sick leave. Every year, flu hospitalizations and outpatient visits cost some $10.4 billion, while some $16.3 billion is lost in economic output.

That’s not to say that the mandates didn’t make some things more expensive. Prices in fast food restaurants went up 2.8% as a result of the mandates.

“But that’s a small increase spread over a large number of people, compared to the concentrated and strong increases in people’s wages in low-wage jobs,” Jacobs says. In other words, better wages were partially absorbed by the consumer--but low-income consumers were also earning enough to cancel it out.

Now that the city’s witnessing another period of economic growth--another tech boom--Jacobs and his co-authors agree that it’s important to feature affordable housing and living wages as conditions on economic development. Jacobs suggests that tech companies also reflect on their own low-wage hiring practices.

“When [tech companies] contract with janitorial firms and food service, what are the wages that those companies are paying--and are they upholding higher standards? I think their own contracting policies make an important difference,” Jacobs says. “Are those dollars being spread into the community that helps bring people up?”

[Image: Golden Gate Bridge via Shutterstock]

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