In Which I Read That Seattle Minimum Wage Study
Some workers are earning less money overall; others are earning more.
Last week, the Seattle Minimum Wage Study Team at the University of Washington released a study suggesting that Seattle’s $15 minimum wage—which hasn’t even been fully implemented yet—has done more harm than good.
Or… at least as much harm as good.
The study is behind a National Bureau of Economic Research paywall, but Team Billfold is the kind of community that has access to National Bureau of Economic Research studies, so I have since been able to read the document in full.
Here’s what it’s arguing:
Raising the minimum wage reduces work hours given to minimum wage employees. Or, to quote the study’s abstract:
Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016.
You get paid 3 percent more, you work 9 percent less, and your monthly paycheck drops by $125.
I can’t really get the math to work on that, though. If Seattle’s minimum wage went from $11 to $13 (which is an 18 percent increase, not a 3 percent increase), workload fell by 9 percent, and earnings fell by $125, how many hours are these low-wage workers putting in? If you’re assuming it’s full time, then you get:
They should still be earning more, even while working 9 percent fewer hours. The same math works for part-time:
But I should stop trying to do simple math on complex data and look at the overall point. Raising the minimum wage to $15 causes some workers to lose money.
It also increases wages for other workers, and that’s the part I’d like to see examined more thoroughly. The study describes this as “a pattern of gains for experienced workers coupled with losses for new entrants,” and notes a few interesting details:
- Hours decrease for minimum wage jobs, but as wages get higher, hours start to increase—especially once you hit $19/hr wages.
- The decrease in minimum wage hours is more likely to come from job cuts than from reducing individual worker hours. (A company might prefer to cut two workers, rather than ask ten workers to each work four fewer hours per week.)
- When you put all of that together, you could conclude that one group of workers, specifically entry-level minimum-wage workers whose jobs got cut, are taking the brunt of the economic impact. Other workers are seeing economic benefits.
The question is: does that mean the $15 minimum wage isn’t working?
Raising the minimum wage is naturally going to cause some kind of cutback, that’s how budgets work, and it makes sense that employers are choosing to cut their least experienced employees’ jobs. Whether I feel good about that is a different story, but I can understand conceptually that paying one person more money probably means someone else is getting paid less (or getting laid off).
So we have to ask ourselves if that’s okay, I guess.
If you’d like to read a more thorough critique of the study, check out this article at the Economic Policy Institute:
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