In January 2017, the Seattle minimum wage hike increased the city’s minimum wage from $13 an hour to $15 for employees of large companies, the second such increase in less than a year. It pushed Seattle to having the highest-in-the-country minimum wage.
A comprehensive new study using the most sophisticated methods and detailed data of any study ever has found that the minimum wage increase has had a significant unintended consequence: a steep decline in employment for low-wage workers, and fewer hours for those workers who were fortunate enough to keep their jobs.
Even the Washington Post called the study “very credible.”
The research and analysis, performed by a team of economists at the University of Washington, found that the overall net impact of Seattle’s minimum wage increase was negative for low wage workers.
In other words, the negative impacts of unemployment and under-employment caused by the wage hike outweighed the extra earnings that some workers made.
Specifically, if we average out the losses of jobs and hours across the workforce, low-wage workers ended up earning $125 less per month because of Seattle’s minimum wage increase.
The paper concludes:
“Our preferred estimates suggest that the Seattle Minimum Wage Ordinance caused hours worked by low-skilled workers (i.e., those earning under $19 per hour) to fall by 9.4% during the three quarters when the minimum wage was $13 per hour, resulting in a loss of 3.5 million hours worked per calendar quarter.”
The study adds, “Alternative estimates show the number of low-wage jobs declined by 6.8%, which represents a loss of more than 5,000 jobs.”
“The goal of this policy was to deliver higher incomes to people who were struggling to make ends meet in the city,” said Jacob Vigdor, a University of Washington economist and co-author of the study. “You’ve got to watch out because at some point you run the risk of harming the people you set out to help.”
Seattle Mayor Tries to Bury The Study
The University of Washington study was carried out by a highly-qualified, unbiased research team at the University of Washington.
The roster includes an impressive array of researchers with a variety of expertise, including Jacob Vigdor, a professor at the university and an adjunct fellow at the Manhattan Institute, and Hillary Wething, who formerly worked at the union-supported Economic Policy Institute.
You’ve got to watch out because at some point you run the risk of harming the people you set out to help.Jacob Vigdor, co-author of the study.
The City of Seattle paid the same research team to conduct six other studies on the effects of the minimum wage increase. The mayor’s office, however, looked outside the state and commissioned another, more flattering study from the University of California, Berkeley, two weeks ago after seeing the potentially damning findings of the University of Washington’s study.
Supporters of the minimum wage pushed the Berkeley study out to their followers over the last week, but some critics noticed the inherent bias.
Forbes’ Michael Saltsman noted that the title page of the Berkeley report discloses that it “was prepared at the request of the Mayor of Seattle.” Saltsman criticized the study for looking more like “a public relations prop” than a good-faith academic exercise in understanding the effects of policy:
“Seattle Mayor Ed Murray conveniently had an infographic designed and ready to go for the study’s release. His office excitedly tweeted that the policy had ‘raised food workers’ pay, without negative impact on employment,’ linking to an uploaded study version on the Mayor’s personal .gov website rather than a University domain.” – Michael Saltsman
American Enterprise Institute: Other Cities Should Wait and Watch Seattle Before Raising Minimum WageLos Angeles Wage Hike to $12/hour Starts Next Month
In light of the University of Washington study, the American Enterprise Institute (AEI) called Seattle the “canary in the coal mine” for minimum wage increases, and warned other cities to proceed with caution in raising their minimum wages:
“If booming high cost-of-living Seattle had a hard time absorbing a $13 an hour minimum wage last year without experiencing negative employment effects (reduced hours, jobs and earnings for low-wage workers), it will have an even more difficult time dealing with the additional $2 an hour increase that took place on January 1 without even greater negative consequences.
“And if Seattle’s risky experiment with a $15 an hour minimum wage represents the ‘canary in the coal mine’ for cities around the country that want to increase their minimum wages to $15 an hour, those cities may want to hold off for a few years to get a final count of the ‘dead canaries’ in Seattle before proceeding.” – Mark J. Perry, scholar at AEI
The fallout leaves onlookers to wonder what the Berkeley researchers who glossed over Seattle’s troubles with minimum wage increases are going to do if the City of Los Angeles’ own climb to $15 (starting with a hike to $12/hour on July 1), ends up costing California workers jobs and hours.