Yes, We Should Discuss That Seattle Minimum Wage Study

Is a $15/hr wage bad for workers, or is the study flawed?

Photo credit: Jerry Meaden, CC BY 2.0.

I guess we need to talk about this, since everyone else is:

Analysis | A ‘very credible’ new study on Seattle’s $15 minimum wage has bad news for liberals

When Seattle officials voted three years ago to incrementally boost the city’s minimum wage up to $15 an hour, they’d hoped to improve the lives of low-income workers. Yet according to a major new study that could force economists to reassess past research on the issue, the hike has had the opposite effect.

The city is gradually increasing the hourly minimum to $15 over several years. Already, though, some employers have not been able to afford the increased minimums. They’ve cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found.

My first reaction was “wait, that’s not what I’ve been hearing.”

My second reaction was “maybe there’s something else going on here.”

Here’s what people were saying about Seattle’s $15 minimum wage in July 2016:

Minimum wage data finds ‘the sky is not falling’

According to [the Seattle Minimum Wage Study Team at the University of Washington] — who also found that the increase didn’t drive up prices in an earlier study — employment and wages in Seattle reached record highs in 2015. They called it “a very good year,” even though employers were forced to pay a teeny bit more.

So 2015 worked out reasonably well for the minimum wage increase. What could have changed since then?

Well, first you have to consider that Seattle’s minimum wage increase was designed to be implemented gradually—and in 2015, we weren’t actually handing out $15/hr wages. Large employers (companies with more than 500 employees) are only required to offer $15 minimum wages starting in either 2017 or 2018, depending on whether they also pay employees’ health benefits. Smaller employers don’t have to offer $15 minimum wages until 2019 or, in some cases, 2021.

This chart explains how the increases work:

As we move closer to a $15 minimum wage, we are seeing some unanticipated side effects. In early 2017, Seattle residents began noticing that certain restaurants were asking patrons to pay a “minimum wage increase surcharge.”

Here Come the Surcharges

But that appears to only be happening in a handful of establishments. What else could be causing payroll cuts, layoffs, and hiring freezes? Maybe everything else that’s going on in the country right now?

On a national level, we’ve got industries contracting—especially the retail industry—and a general sense that we should all avoid spending/investing because we don’t know what’s going to happen next. It absolutely makes sense that Seattle businesses would follow the same pattern.

If you read the entire Washington Post piece, they give a lot of additional reasons for why the $15 minimum wage appears not to be working but might actually be working:

  • The study’s authors “did not include large employers with locations both inside and outside of Seattle in their calculations.”
  • “[…] small businesses have responded to the increase not by downsizing but instead by hiring more experienced workers.”
  • The study has not yet been peer-reviewed.

Also, there’s this convoluted theory that Seattle’s booming economy means that people who formerly earned minimum wage might now earn more than minimum wage. They might also have changed employers in the process, and even if their former employer chose not to re-fill their position, that individual worker is still better off financially. (Other workers who can’t find jobs because employers aren’t re-filling those positions are worse off financially, and yes, the WaPo acknowledges this.)

The Washington Post gets to the end of the article and is essentially “we’re not too sure about this study?” That’s how I feel too. Especially because I can’t read the paywalled study for myself. But the WaPo gave this story a headline that made everyone want to talk about the Seattle $15 minimum wage, so I figured I’d add my bit to the conversation.

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