New study of Seattle's $15 minimum wage says it costs jobs

Xavier Trudeau
Juin 26, 2017

"The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker", researchers concluded. That study found that a $15 minimum wage would work well for citizens in the city.

The study by the University of Washington looked at the effect of Seattle's decision to raise its minimum wage to $11/hour and then $13/hour while surrounding areas did not.

Los Angeles, Washington D.C., Maryland, and OR will raise their respective minimum wages on July 1 as part of ballot measures previously approved by voters. He's seen the new University of Washington study and another put out last week by the University of California Berkeley's Institute for Research on Labor and Employment.

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To control for different types of workers in Seattle, the economists looked at employment and hours worked among those who earn less than $19 an hour.

Even though hours and earnings of low-skill workers declined, the team found that earnings of experienced workers held steady or increased, which suggests that employers switched from low-skill workers who required training to more-skilled workers who did not. "It can be the difference between being able to pay your rent and not being able to pay your rent". It all will add to the petri dish that is Seattle's experiment with the minimum wage. The UW study didn't limit itself just to restaurants but to more than 500 businesses in Seattle. The paper published Monday makes use of more detailed data than have been available in past research, drawing on state records of wages and hours for individual employees.

To try to isolate the effects of the minimum-wage law from other factors, the UW team built a "synthetic" Seattle statistical model, aggregating areas outside King County but within the state that had previously shown numbers and trends similar to Seattle's labor market.

The new study has significant credibility according to David Autor of MIT, who reviewed the study and its conclusions prior to its publication. It will have a substantial impact on the debate.

A high minimum wage may sound like a simple way to provide a living wage.

Supporters of the bill say, "More than 40 percent of IL workers across all industries, across all age ranges and across all points of IL, will benefit from a wage increase", according to a news release from labor union SEIU Healthcare. The second jump, in January 2016, raised the minimum wage to $10.50 to $13.

We estimate statistically insignificant hours reductions between 0.9% and 3.4% (averaging 1.9%) during the three quarters when the minimum wage was $11 per hour. For them their minimum wage is zero, as explained by Jacob Vigdor, one of the authors of the UW study: "If you are someone trying to break into the labor market [and] get your first job - a young person or immigrant - that's where it really seems like it's become more hard".

There are now 30 states with laws that set the minimum wage above the federal rate.

The study, which was commissioned by the Seattle City Council, analyzed quarterly hours and earnings data from the Washington Employment Security Department, which administers unemployment insurance. The authors said the more modest changes from lower initial levels might not produce the same effect.

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