Don't Read Too Much Into Early Results of Raising Local Minimum Wages


In January 2016, Seattle's minimum wage jumped from $11 an hour to $13 for large employers, the second big increase in less than a year. The next one, to $13, had an elasticity of -3, with hours falling 9 percent while wages grew just 3 percent. It found that only about 25% of low wage workers benefited from the increase while most were hurt by it because of a significant decrease in both hours worked and low wage jobs overall. According to Reuters, the University of Washington research paper said low-wage workers on average now clock 9 percent fewer hours and earn $125 less each month than before the Pacific Northwest city set one of the highest minimum wages in the nation. The Berkeley study focused on the restaurant industry where low-wage jobs are common.

The new study takes a different approach from past research which suggested that the minimum wage had little to no effect on the number of work hours.

"At least in what we've seen so far from either of these studies", Burgess said, "I don't think you can say that any negatives are the result of the minimum wage increase".

A new report on Seattle's groundbreaking minimum wage law has bad news for some low-wage workers.

Seattle became one of the largest cities to embrace the $15 minimum wage-double the federal minimum of $7.25-in 2014, adopting an ordinance that would achieve the hike by 2017 for major employers and 2019 for small businesses.

"That's really a step beyond what essentially any past studies of the minimum wage have been able to use", Jeffrey Clemens, an economist at the University of California, San Diego, told WaPo.

The report also estimated that there are about 5,000 fewer low-wage jobs in the city than there would have been without the law.

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Jacob Vigdor, one of the University of Washington economists involved in the study, explained the goal of the policy was to help people make more money but, had the opposite effect.

The effects of a higher minimum wage have been hotly debated since the 1990s.

With the evidence mounting in support of minimum wage reform, detractors' arguments are crumbling rapidly.

The truth is more nuanced, and unearthing it requires the kind of study being conducted by a team at the University of Washington. It was based on areas that "do not at all resemble Seattle", Reich warned in a letter to the city Monday. Many variables affect what a company pays workers and in a healthy economy those effects are less pronounced.

'The reduction in hours worked by low-wage employees was sufficiently great that it offset the increase in their hourly wages'.

Reich also thought the $19 threshold was too low, and he said the UW researchers' report "finds an unprecedented impact of wage increases on jobs, ten times more than in hundreds of minimum wage and non-minimum wage studies". Yet other executives in the fast-food business, including Andy Puzder, President Trump's first nominee for Labor secretary, say the industry is headed in that direction in part to keep labor costs down.