Did Seattle's Higher Minimum Wage Backfire?

New study suggests low-income earners have actually lost money
By Newser Editors,  Newser Staff
Posted Jun 26, 2017 1:53 PM CDT
Updated Jul 1, 2017 8:15 AM CDT
Did Seattle's Higher Minimum Wage Backfire?
In this 2014 file photo, a sign that reads "15 Good Work Seattle" is displayed below Seattle City Hall, referring to the push for a $15 minimum wage.   (AP Photo/Ted S. Warren, File)

Seattle has been gradually increasing its minimum wage, with the city planning to make it $15 by 2021. (It's currently $13 for most businesses.) While advocates may be thrilled, a new study out of the University of Washington suggests that the rising minimum might actually be harming low-income workers in general. Researchers say that while the new law is indeed resulting in higher wages, employers have reduced hiring and hours, reports the Seattle Times. However, skeptics say the study is flawed and point to a second study out of Berkeley with a different conclusion. Details:

  • A key figure: The study, which has not been peer-reviewed, finds that the hike in the minimum wage so far has cost the average low-wage worker $125 a month. The reason? While pay has gone up 3%, workers saw their hours fall by 9% from 2014 to 2016, say the researchers. They also estimate that without the law, another 5,000 low-wage jobs would exist in the city currently. (The study compared Seattle to surrounding control areas that saw no wage increase, notes the LA Times.)
  • 'Very credible': The Washington Post calls the results "bad news for liberals" in its headline and quotes an MIT economics professor who sees the study as "very credible" and predicts it will be influential. It is "sufficiently compelling in its design and statistical power that it can change minds."

  • Different study: The Berkeley study, out last week, found that the wage increase did not result in lost jobs. This study, however, focused only on the restaurant industry, which critics see as a potential weakness.
  • A flaw? The New York Times reports that critics think the UW researchers may be off base in part because Seattle's strong economy has caused employers to bid up wages. "Under such a scenario, one would expect to see a decline in the overall number of hours worked in low-wage jobs. In their place would be a significant increase in hours worked at somewhat higher-paying jobs."
  • Another? From the Post: "To avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. Skeptics argued that omission could explain the unusual results."
  • Unprecedented data: Yes, there are caveats, but the authors had access to "detailed data on the hours and earnings of nearly all employees in Washington state," notes a post at FiveThirtyEight. It thinks the research will have broad political implications as other cities weigh similar increases.
  • Told you so: At Forbes, Tim Worstall, who is a self-described "extremist" on the issue, says the study backs up his prediction that forcing employers to pay more will make things worse for employees. He expects that to continue as the wage rises from $13 to $15.
(More minimum wage stories.)

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