Why policy design matters: a tale of two St. Paul controversies

Policy design, implementation and analysis rarely generate much excitement, except perhaps among those of us who teach the subject. Yet recently two policies have been at the center of major political controversies in St. Paul: the adoption of rent control and the rollout in 2020 of St. Paul’s new $15 per hour minimum wage.

The story of both is how bad policy design often produces bad implementation, or conversely, how it makes it difficult to determine whether policies actually are effective and work as planned. The other story is in terms of how analysis needs to confront ethical questions about policy design and impact.

Policy design refers to how laws are made. It refers to the goals of laws, what one hopes to accomplish, and why. Implementation is the enforcement or administration of policies or putting them into effect. Analysis is examining policies to see if they are effective or working the way they were intended.

Proponents who drafted the rent control ballot proposal made numerous mistakes in their policy design. One, they instituted a delay in the effective date of rent control if it were adopted. They should have anticipated that such a delay would incentivize landlords to raise rents, perhaps significantly, prior to its effective date. That is happening now across St. Paul.

Two, the proposal thought little about implementation. Scenario building is an important tool of analysis. By that, one should always ask “What if?” when designing policies. What if the policy is adopted, what is likely to happen or what needs to be done next? Supporters of rent control in St. Paul failed to do that.

Proponents apparently thought little about who is going to enforce the law or the costs of implementation and enforcement, such as hiring of city staff or prosecution of lawbreakers. But neither did the City Council and Mayor Melvin Carter. Both knew last summer that the proposal was on the ballot and it could pass. There is no indication that either thought much about implementation if adopted. The mayor is especially culpable, calling for adoption of rent control but not preparing for its passage.

The second issue is the adoption of a phased-in $15 per hour minimum wage in St. Paul that took effect in 2020, with its full implementation for all businesses not occurring until 2027.  Recently the Federal Reserve Board of Minneapolis did a study on the impact of the law, finding that while it generally did not affect jobs in the city, it perhaps led to a loss of hospitality and restaurant jobs. While the Federal Reserve did a good job in its study of the impact of the new minimum wage, and in qualifying its conclusions, it also made some mistakes that affected its conclusions.

One, the study actually assumes that the St. Paul ordinance had an impact on wages and jobs.  With such a slow phase-in for the minimum wage it is hard to argue that over the last two years the ordinance itself had much impact on wage increases. Other factors such as labor shortages and preexisting trend lines in terms of how wages were already being increased by large employers raise questions regarding whether it was market conditions or the law that led to wage  increases.

Two, assuming the law has a real impact on wages, the Federal Reserve study is good in arguing that it is difficult to untangle the effects that the pandemic and social arrest have had on business openings and closings in general. But the report did note its possible adverse impact on the restaurant and hospitality industries based on some modeling that asked what would have happened in St. Paul compared to the rest of the state had the new minimum wage not been adopted. Yet this model and analysis have three possible problems.

David Schultz

First, it may be ascribing causality to the minimum wage law and its impact on wages and jobs, which, as noted above, is questionable. Second, by its own analysis St. Paul’s wage and job growth over time is volatile and erratic. It is possible that right now in the short-term St. Paul’s hospitality and restaurant industry is in a slide, again for reasons completely missed or not captured by the model, and for reasons that have little to do with the minimum wage law.  Finally, what should have been asked in the study is not simply how many jobs have been lost, but also in comparable periods in the past or in other cities at the same time, how many jobs have been lost and gained.

The Federal Reserve Report to its credit acknowledges that its report leaves open a lot of questions. The problem is not with its report but in constructing a policy in a way that one cannot actually measure its impacts or account for  anticipated variables which could affect its efficacy.  This is the story of both the rent control and minimum wage law:  More attention beforehand in designing the policy could have made it easier to implement and assess after adoption.

Finally, what is missing from the study on minimum wages and the discussion of rent control is something else that policy analysis should address: the normative or ethical questions of policy. Glossed over in the media reports on the St. Paul law is how for the most part raising the minimum wage did not hurt employment in other sectors. That is good. But even if raising the minimum wage did lead to some job losses, is that acceptable given that it also raises wages for many? Similar questions can be asked about rent control. There are winners and losers, and part of what good policy analysis should do is evaluate the tradeoffs.

David Schultz is a professor of political science at Hamline University in St. Paul. His latest book is “Presidential Swing States: Why Only Ten Matter.”