Monday, June 26, 2017

Seattle Minimum Wage Study shows net loss of income for low wage workers as hours are cut

Researchers at the University of Washington have released a detailed study of the second round of Seattle minimum wage hikes. They determined that the second hike from $11.00 to $13.00 dollars may have led to employers cutting back on employees hours. Washington State is one of four states to collect data on employment hours as well as employment levels.  The detailed data is required for this type of study.  

Overall, the study found a net loss of income for low wage workers. The workers lost earnings because they worked less hours but at higher pay. The first hike is had no effect on employment levels in Seattle.  

Here is the link to the study...

University of Washington Seattle Minimum Wage Study at the National Bureau of Economic Research. If google the title "MINIMUM WAGE INCREASES, WAGES, AND LOW-WAGE EMPLOYMENT: EVIDENCE FROM SEATTLE" you can find a PDF version.

The study found that for Seattle restaurant workers, the recent increase in the local minimum wage from $11.00 to $13.00 reduced hours by 9% and increased wages by 3%. The result was a net loss of $125 dollars per month for low skilled restaurant workers. However, the number of restaurant employees remained stable. 

This was especially interesting because it used state wage hour study appears to be quite good compared to past minimum wage vs. employment studies.  However, overall unemployment was stable.  

However, there are some problems with the study.

1) They used stand alone restaurants only. They excluded multi-location chain restaurants. 
2) About 70 percent of workers in Seattle already make $13.00 and hour or more.  The study shows an employment increase in workers making above $19.00. 
3) The study was limited to Seattle. Seattle is a boom town with few comparable cities. Separating out the "Seattle" effect (great economy, lots of rich people) from the minimum wage effect may be close to impossible. Seattle has a 3.2 % unemployment rate. 

Interestingly, the study may have "accidentally" determined is the equilibrium or trade off point between employment and wages for Seattle for low wage restaurant workers. We have to wait for the results from other jurisdictions that have raised the minimum wage. The results also support minimum wage increases in jurisdictions below the equilibrium. Workers and governments are leaving money on the table. 

Researchers also found that employers shifted to more experienced workers. Many first time workers may find their first job opportunity will decrease. We will have to wait and see the results of the next increase.

Since, the study is so important, there are lots of articles on the topic. 

Washington Post


Here are some over the top headlines

Study: Seattle's minimum wage increase goes horribly wrong

The Center for Wage and Employment Dynamics found no such reduction on jobs in the Seattle restaurant industry. Berkley's Institute for Research on Labor and Employment has a traditional study on the same period using US census data.



The Federal government is cutting the funding for the US Census including expanded data collection on the labor market.

Lastly, We would like to add that the US is the only western democracy where there is a active and vociferous debate about increasing the minimum wage. The UK, France and Germany have all created, where it did not exist, or increased the current minimum wage with much less rancor and debate. In addition, most countries invest in Active Labor Market policies to help the unemployed re-enter the labor market and to help low-wage workers find better paying jobs. 

We are completely confused about the popular demand in the US that people work but our unwillingness to pay them a fair wage.  

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