The Weird Twist in Seattle’s $15 Minimum Wage Experiment
Seattle made waves a couple of years ago by forging ahead with an ambitious new policy: the $15 minimum wage. Now, Seattle’s no stranger to pushing the envelope when it comes to progressive policies. Washington was one of the first two states to legalize marijuana, for example. Seattle is also home to Gravity Payments, which caused a stir when its CEO decided to implement its own minimum wage of $70,000.
But what about an entire city lifting the wage floor to $15 — roughly twice that of the federal minimum wage? It wasn’t just ambitious; it was also risky. While many people have argued the minimum wage is too low (federally), a jump to $15 per hour was relatively unheard of until a few years ago.
Since Seattle implemented the change, the wage has been slowly increasing year over year until it hit the $15 mark in January 2017. Policymakers and economists have been watching patiently, waiting to see what happens. After all, if the $15 wage floor is proven to be too much for businesses in an economic hot spot, such as Seattle, it surely wouldn’t work in Topeka or Youngstown.
We’ve had some studies with snippets of data leading up to this point, but now we have even more concrete findings to work with. They come in the form a study from the University of Washington (in Seattle) that shows us what happens when the wage floor takes a considerable jump. Unfortunately, it’s not as clear cut as it seems.
The minimum wage study
The University of Washington study is a working paper, meaning it’s still a work in progress. Also, because the $15 floor was only implemented in January, we only have data to look at from the past couple of years, when the minimum wage went up to $11 (2015) and $13 (2016).
Here’s what the study found: “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,” the paper continued.
So our key takeaways are low-wage workers (defined as those earning less than $19 per hour) earned roughly $125 less per month than before, and they worked fewer hours. All told, the average low-wage worker, according to this study, earned 6.6% less than they did before.
That’s not exactly the news progressives want to hear, but there’s a lot more to it than that. In fact, when some in Seattle realized the new policy wasn’t producing the desired result, they took matters into their own hands.
The twist, in this case, is other studies — also from big, public universities using similar methods to study the $15 wage floor’s impact — have come to drastically different conclusions. Another study, released by the University of California, Berkeley, said: “Seattle’s groundbreaking minimum wage law is raising pay for low-paid workers without hurting jobs.”
“Seattle’s minimum wage law is working as intended, raising pay for low-wage workers, without negatively affecting jobs,” said Professor Michael Reich, lead author of the report, per a Berkeley press release. “These findings are consistent with the lion’s share of rigorous academic minimum wage research studies.”
So now we have competing conclusions from two different universities. And another interesting piece to the puzzle is Seattle’s City Council, which was funding the University of Washington study, reportedly cut that funding after realizing it wasn’t going to get the results it wanted. The city’s mayor, Ed Murray, also shared some of the University of Washington team’s work with the Berkeley researchers — presumably to help find a more favorable outcome.
But what about other studies? And what do they mean for the big picture?
What about other studies?
Although these two most recent studies came to two different conclusions, we need to look at the big picture. Again, the minimum wage in Seattle only recently moved up to $15 per hour, so there’s still a lot of data to be collected. For that reason, it’s important to consider the University of Washington and Berkeley research as a part of the overall mosaic looking into the effects of minimum wage increases.
On the most basic level, we would expect an increase in the wage floor to have effects. Two of them would be higher unemployment as workers are pushed out and fewer hours worked as those hours become more expensive. The University of Washington study seems to confirm those two things are happening.
Previous studies have shown relatively small minimum wage increases don’t have huge impacts on employment and hours worked. But the Seattle experiment is a whole different scenario, likely because the increase was so large. Also, there is a lot of conflicting research out there. There have been papers saying minimum wage bumps don’t cost jobs, but upon re-examination they do. So there’s no clear answer — at least not yet.
Don’t call the $15 minimum wage a bust yet …
So is $15 minimum wage a bust or what?
The initial findings of the University of Washington study are disheartening to supporters of $15 minimum wage. But we can’t say definitively if the whole thing is a bust. The reason is we simply don’t have enough data.
At the end of the day, the data from the University of Washington and Berkeley studies only really provide more ammunition for talking points. That goes for both sides of the debate. Obviously, seeing that hours and take-home pay fell after the wage increase will confirm many suspicions. But there are some flaws and methodological issues to be worked out that can be used to argue the findings.
In fact, there are voices both in support and railing against the $15 minimum wage that are claiming victory. But getting bogged down in who’s right and wrong, in this single case, ignores the big picture. And that’s important because there’s a strong push to bring the $15 minimum wage nationwide.
This is really what makes Seattle’s experiment so important. If the city’s policy ends up being effective, it could be a national model. In some respects, it already is. But if it falls flat, the opposite could happen. Given that Democrats are open to adopting the $15 minimum wage as a part of their platform, we’re looking at some very consequential policy down the road.
We also have to take into consideration localized wage increases. They might prove effective only in a bubble. Seattle is in the midst of an economic boom. This can obviously skew things. As mentioned, a large minimum wage increase might make sense in Seattle or San Francisco, but it might do more harm than good in Spokane or Modesto.
What about the alternative plans?
You might remember a couple of years back when then-President Barack Obama attempted to push through minimum wage legislation. He signed an executive order that raised the wage floor for federal workers but was unable to make any progress on the national level. Democrats’ plan to raise the federal wage to $10.10 per hour seems pretty pedestrian now, given that Seattle and many other states and cities are pushing through bigger increases.
But there are other plans out there, and we shouldn’t discount them. Likewise, our first indicators out of Seattle should be set to simmer a little bit before we draw more conclusions. So far, people are going to take from it what they will, and that will be that. When it comes to taking the debate to the national stage, however, we’ll need more to go off of.