Business & Economy

Minimum wage studies: Critics question economists' ties to labor

Los Angeles City Council Building
Los Angeles City Council Building
Chris Hall/Flickr (Creative Commons-licensed)

Los Angeles city leaders are again drawing criticism for their choice of researchers studying the impacts of raising the minimum wage.

This time, the criticism is tied to L.A.'s choice to hire two economists to peer review three recent minimum wage studies. Critics from the Employment Policies Institute have pointed out that the two men, Till von Wachter and Jeffrey Wenger, have potential conflicts of interest because of their ties to the labor community.

Wenger and von Wachter's analysis, which looks favorably at a $13.25 minimum wage, will be presented Tuesday at the city's Economic Development Committee meeting.

Von Wachter is an Associate Professor at UCLA. Wenger is an assistant professor at the University of Georgia, who is currently a visiting fellow at the RAND Corporation.

Wenger has written reports for the Economic Policy Institute, a Washington-DC-based think tank backed by labor unions. AFL-CIO President Richard Trumka chairs the board of directors for the think tank, and on its website, it discloses that a quarter of its funding comes from labor unions. 

Von Wachter is listed as a member of the faculty advisory committee for UCLA's Institute for Research on Labor and Employment. That institute was a subcontractor to the Economic Roundtable in its study of the potential minimum wage hike, commissioned by the Los Angeles County Federation of Labor. That study was one of the three studies von Wachter was hired to peer review.

"You would want to find someone who is not so closely tied to the particular debate at hand," says Michael Saltsman, research director at the Employment Policies Institute. Saltsman acknowledged that his institute receives some funding support from restaurants, which have voiced opposition to the wage hike, and added "I think people would look at us and say 'you have a conflict of interest too.'... but I’ve also not been tasked to do a neutral study on the impact of having a higher minimum wage."

L.A.'s Chief Legislative Analyst Sharon Tso defended her office's decision to hire the team of Wenger and von Wachter. 

"We asked [the applicants] specifically about conflicts of interest and told them point-blank that they needed to disclose any conflicts," Tso told KPCC. "Their response was that they had no conflicts." 

Tso said she will revisit the matter with von Wacthter and Wenger, who have both declined interviews until after they present their peer review to the city council's Economic Development Committee Tuesday. Tso said the city received two bids to do the peer review work, and added that finding qualified economists who are neutral on the minimum wage is a challenge.

"Anybody who is doing this kind of work on minimum wage, everybody is going to have a bias," she said.  

Ruben Gonzalez, senior vice president of the L.A. Area Chamber of Commerce, said the peer review can't be objective. "When you have folks doing a peer review who already agree with the agenda one of the folks they're reviewing, it skews the lens on how they take in the information presented," he said.

Saltsman said he hoped that city would slow down. "They need to take the time to do a comprehensive survey of small businesses," he said. "Until the city council does that study, I don't think they can, in good conscience, move ahead with a proposal like this." 

Los Angeles leaders decided to order a peer review earlier this year after the city received three different studies, all of which came to different conclusions on the impact of a minimum wage hike in Los Angeles.