Jun 27, 2017

Study: Seattle's $13 wage law cost poor workers $125 a month


Last week, Berkeley economists published research showing that Seattle's aggressive minimum wage increases in recent years didn't lead to job losses. On Monday, the anti-minimum wage movement has a study of its own showing the opposite: new research from University of Washington saying that the 2016 minimum-wage hike from $11 to $13 caused employers to shed jobs and cut back on hours, the cumulative effect of which reduced the income of poor workers by $125 per month.

Why such different results? The two studies relied on different methodologies.

  • The Berkeley study focused on Seattle's restaurant industry, because a high proportion of low-wage earners work in food services. It then compared that to employment in a computer-generated "synthetic Seattle," composed of counties across the country. These counties, however, didn't experience minimum wage increases.
  • The University of Washington study looked at all low-wage workers in Seattle, using data from Washington State's unemployment insurance program. This, the study's authors said, enabled them to study the wages and hours worked for a much larger and more targeted share of low-income workers, though it excluded low-income contract workers and those who work for multi-site businesses. It also constrained the synthetic control group from using counties in Washington State itself.

Which study should be believed? Folks who argue for higher minimum wages say that the Washington State study is misleading because its control group cannot mimic Seattle's booming economy, in which high-wage jobs are replacing low-wage ones regardless of minimum wage policy.

Critics of the Berkeley study say that its focus on the restaurant industry leads to missed job and hour losses in other sectors of the low-wage economy.

We'll have a better understanding of which study accurately reflects Seattle's high-minimum wage economy after these studies go through peer review. But economists on both sides of the issue have been publishing competing studies for more than a generation without reaching a consensus — so don't expect them to any time soon.

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