08 July, 2017
Seattle has added about 40,000 jobs overall in the last few years. It ensures wages don't lose purchasing power while protecting employers from large spikes in labour costs.
Still, Seattle is a unique city in that it started with a high wage floor.
UW researchers are predicting the study's findings will have political fallout regardless of the study's shortcomings.
Additionally, the study claimed that if the city had never raised its minimum wage, the city would have 5,000 more minimum wage jobs. Even though average pay went up for people at the bottom, there was less work, so they became worse off overall.
The new paper, unlike Card and Krueger, has broad data covering all of Washington's workers, not just those employed by fast food franchises that happened to be operating at the beginning of the study.
A recent study of Seattle's high-profile plan to raise minimum pay to $15 an hour by three University of California, Berkeley economists found no drop in employment in the food-services industry as a result of the new higher wage.
Well, according to a new study conducted by economists at the University of Washington, the latter argument appears to have prevailed. The researchers are in the unique position of possessing fine-grained and precise Danish monthly payroll data, allowing them to know employment status, earnings, age, and hours worked.
Low-wage workers are earning less, working fewer hours, and finding fewer opportunities at the bottom rung of the work force.
Indeed, to account for local labor markets, Congress might grant states waivers to set their own minimum wages higher or lower than the federal one, provided that they do so by applying the federal methodology to state wage levels. But the UW study, importantly, looked at the impacts on low-wage employment beyond the food-service industry. Now, we might have some data to ponder.
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One thing nearly all economic studies agree on these days is that higher minimum wages don't throw many people out of work. For this reason, about 38 percent of Washington state workers had to be left out of the study, possibly skewing the calculations.
Students and others protest on the University of Washington campus. "If you raise the minimum wage, there are undoubtedly people whose wages will go up and who will benefit". The city's unemployment rate reached a low of 3.2% in May. Seattle mayor Ed Murray said the minimum wage hike was "a great step forward" in the fight against income inequality.
For an average low-wage worker in Seattle, that translates into a loss of about $125 per month per job.
The report, by members of the University of Washington team studying the law's impacts for the city of Seattle, is being published Monday by a nonprofit think tank, the National Bureau of Economic Research. In fact, in relative terms, it seems to be roughly as generous as the federal minimum wage in 1968, back before the value of the federal minimum wage was eroded by inflation.
Information is scant about the statewide impact of the minimum wage, but no doubt it will be forthcoming in the future. Instead, some analysts say, lower wage earners have seen a paycheck bump because of natural economic trends.
The effects of minimum wage increases on employment ― or lack of them ― have been studied for years. But fortunately for working people, it turns out the study's findings are far from that.
But the UW researchers had the advantage of being able to delve deeper. And we also find no effect for the restaurant industry as a whole.
The Congressional Budget Office now maintains a low estimate of youth employment elasticity, -0.075, in the United States: Its figure means that a 10 percent increase in the minimum wage should reduce youth employment by 0.75 percent. In other words: if you thought it was settled science that raising the minimum wage is good for workers, be prepared to think again.
Reality was always more complicated.
Card, who was traveling, said in an email that he had not yet read the paper, but cautioned overinterpreting this single study.
Yet the study will not put an end to the dispute.
