New study of Seattle's $15 minimum wage says it costs jobs
Jun 27 2017
The amount of pay in low-wage jobs (defined by the authors as those jobs paying less than $19 an hour) increased slightly overall, but it also resulted in a nien-percent reduction in total hours worked, which in turn resulted in a six-percent drop in what employers paid for such work.
One study, conducted by researchers at UC Berkeley's Center on Wage and Employment Dynamics, showed earnings increased for food service workers and hours worked were not affected as a result of Seattle raising its minimum wage.
Seattle has the highestminimum wage in the country. Per the chart below, minimum wages in Seattle increased from $11 in 2015 to $13 in 2016 and $15 in 2017 for large employers.
This includes both employers who have already met the goal of $15 per hour and others which are not yet required to increase their wages.
In addition, the UW study concluded that, thanks to the minimum-wage increase, some 5,000 low wage jobs in Seattle were never created. Studies elsewhere have found employment loss can be severe, especially for low-skilled workers. Prior elasticity estimates in the range from zero to -0.2 suggest there are few suitable substitutes for low-wage employees, that firms faced with labor cost increases have little option but to raise their wage bill. Saez conceded that it is well designed, but said that the city's booming economy may be to blame for driving away low-wage jobs rather than the hiked-up minimum wage.
Perhaps more importantly, whereas much of the previous literature examines low-wage industries (usually restaurants or retail) or teenagers as proxies for those impacted by minimum wage changes, this paper uses a comprehensive data set allowing assessment on employment for all categories of low-wage employees across industries and demographics. In November, Washington voted to raise the minimum wage to $13.50, the Seattle Times reported.
But liberal groups are criticizing the Washington study's methodology.
Last week, Thomas Firey blogged here on how proponents of higher minimum wages tend to be selective when reviewing the academic literature.
Seattle now has the nation's highest minimum wage at $13 an hour. A downturn in the economy could mean a loss of more jobs and more hours.
Nevertheless, the wage hike has made a big difference in some people's lives.
But not all low-wage workers are seeing that same benefit according to the new study. But the problem remains that low-wage workers in the USA are struggling to get by.
"Most people will tell you there is a level of minimum wage that is too high", Jacob Vigdor, a professor of public policy at the University of Washington and director of the team studying the increase, said in a phone interview.
The effects of a higher minimum wage have been hotly debated since the 1990s.