Seattle's increased minimum wage has had little effect so far, say researchers(Read article summary)
Research from the University of Washington suggests although Seattle's increasing minimum wage has not had the negative effects opponents feared, it may not be all good news for Seattle workers.
As Seattle's minimum wage rises toward $15 an hour, research from the University of Washington suggests that the city has not seen the major business closures and job losses that opponents of the increase predicted, nor has it seen a significant improvement in the lives of workers that proponents envisioned.
Despite clear wage increases, the research suggests the policy had an ambiguous net effect on the earnings of low-income workers because of small reductions in their likelihood of remaining employed and a slight reduction in average number of hours compared to what would have been expected without the ordinance.
As one of the first major cities to pass a $15 minimum wage ordinance, Seattle has been something of a test case for other communities considering measures to boost wages for low-income workers. In recent years, the so-called Fight for $15 movement has gained momentum among fast-food and service-industry workers who say they need higher wages to improve their living standards.
Business owners have cautioned that forcing employers to increase minimum wages too quickly could actually have the opposite effect, by forcing businesses to reduce worker hours or scale back hiring. This study suggests that the reality lies somewhere in between.
"We had some ambiguous impacts on earnings," researcher Mark Long, a professor of public policy and governance at the University of Washington, tells The Christian Science Monitor. "That's not surprising because, while we're finding their hourly wage rate is going up, if their hours are being cut, then the net effect on their earnings... would be ambiguous."
In 2014, Seattle passed a gradual minimum wage increase that will eventually hit $15 for all workers. Currently, it is between $10.50 and $13 an hour depending on the business size and whether it pays for employee's benefits, as Seattle Weekly reported.
To determine what would have happened to Seattle in the absence of the ordinance, the researchers looked to Seattle's neighboring region for comparison. They also created a "synthetic" version of Seattle by looking at a set of zip codes from outside Seattle that, when added together, mimicked the behavior of Seattle before the ordinance.
"While we see in Seattle that hours and earnings went up, they went up less than what we see in the comparison region," Long says. This contributes to the 1 percentage reduction in the likelihood for low-income workers of remaining employed, and a slight reduction in hours (an average of 19 minutes a week).
The study found wages for workers increased by about 73 cents per hour.
Workers in Seattle have felt the positive effects of the policy, Sage Wilson, a spokesperson for Working Washington, a worker's advocacy organization, tells the Monitor.
"The most important thing that it shows is that our $15 minimum wage law is clearly compatible with high job growth, with high economic growth, with more hours worked, with more businesses opening," he said. "That's just a very powerful lesson to cities and states across the country that are considering raising wages, is that when business lobby groups say the sky will fall and jobs will be lost, we can show that in Seattle that is absolutely not true."
Increasing the minimum wage benefits some while harming others, David Neumark, a professor of economics at the University of California Irvine who has spoken against a $15 minimum wage, tells the Monitor. The small scale of the increases thus far likely accounts for the result of only small effects, he says.
"The question is not will we have any job growth or any new business, of course we will," he says. "But will we have fewer opportunities for low-skilled people than we would if we didn't do this? And I think that answer is clearly yes."
While raw hours and earnings went up in Seattle, they might have gone up faster if the minimum wage had not been adopted, Long says. Similarly, there was a net reduction in business closures, but the minimum wage may have slowed down employment opportunities, relative to what may have been expected in the economy.
However, Wilson questioned the effectiveness of the "synthetic Seattle" model, saying Seattle had a smaller recession and quicker recovery than the surrounding area, which may explain the faster growth “synthetic” Seattle experienced. Also, Seattle is growing at a fast pace, a pace Wilson says may be the "upper bound" of how fast the city can grow.
"What Seattle workers experienced was higher wages, more hours and more employment," Wilson says. "The argument of some of the takeaways from the report were about whether that was slightly relatively less than they modeled as possible, which is a much more hypothetical question than the reality of a worker's experience, which is several hundred more dollars a quarter in income, which is substantial. The only negatives were relative ones"
The debate over whether to raise the minimum wage was contentious in Seattle, as it has been across the country. This research shows that conditions in Seattle were neither as bad as opponents nor as good as proponents suggested they were going to be, researcher Jake Vigdor, a professor of policy and governance at the University of Washington, tells the Monitor.
"What I want to see happen is, we can kind of move away from a argument that is pitting people who say the minimum wage never harms anyone against people who say the minimum wage never helps anyone, to a dialogue that says there is some combination of these things happening," he says.
As the research continues, Vigdor says the researchers are going to try to determine a way to describe who the workers who are seeing higher incomes are and who the workers facing the cutbacks are.
"That's the kind of analysis for people who really want to make a reasoned decision about whether they favor a policy like this," he says. "The big question for policymakers concerns this tradeoff, and whether we're comfortable with the tradeoff we have between the help and the harm."
[Editor's note: This story has been updated to correct an error in the reported increase in take home pay. It was 73 cents per hour.]