Seattle’s Minimum Wage Experience 2015-16

Source: Michael Reich, Sylvia Allegretto, and Anna Godoey, University of California – Berkeley, Institute for Research on Labor and Employment, Center on Wage and Employment Dynamics (CWED), June 2017

From the abstract:
This brief on Seattle’s minimum wage experience represents the first in a series that CWED will be issuing on the effects of the current wave of minimum wage policies—those that range from $12 to $15. Upcoming CWED reports will present similar studies of Chicago, Oakland, San Francisco, San Jose and New York City, among others. The timing of these reports will depend in part upon when quality data become available. We focus here on Seattle because it was one of the early movers. …. Our results show that wages in food services did increase—indicating the policy achieved its goal—and our estimates of the wage increases are in line with the lion’s share of results in previous credible minimum wage studies. Wages increased much less among full-service restaurants, indicating that employers made use of the tip credit component of the law. Employment in food service, however, was not affected, even among the limited-service restaurants, many of them franchisees, for whom the policy was most binding. These findings extend our knowledge of minimum wage effects to policies as high as $13. …

Related:
Press Release

Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle
Source: Ekaterina Jardim, Mark C. Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor, Hilary WethingNBER Working Paper No. 23532, June 2017
(subscription required)

From the abstract:
This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. 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. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.

Five Flaws in a New Analysis of Seattle’s Minimum Wage
Source: Rachel West, Center for American Progress, June 28, 2017

A team of faculty and students at the University of Washington was tasked with assessing how Seattle’s 2014 minimum wage ordinance, which is gradually raising the city’s minimum wage to $15 per hour, is affecting low-wage workers. This week, the group released a working paper—without peer review—that looks at the ordinance’s first two phases, under which the minimum wage for most workers increased from $9.47 to $11 per hour in 2015 and then to $13 per hour in 2016.

Methodological flaws plague the group’s approach, causing them to draw conclusions wildly out of step with dozens of studies of similarly sized wage increases cited by both critics and proponents of higher minimum wages. The vast majority of rigorous, credible studies conclude that higher minimum wages have appreciably boosted workers’ earnings with little or no effects on employment. By contrast, the University of Washington researchers conclude that higher minimum wages not only reduced employment and hours worked in Seattle, but that the costs of the wage hike outweigh the benefits for the average low-wage worker—a finding at odds with the conclusions of even the most skeptical mainstream researchers. At the same time, the study’s results suggest—implausibly and largely inexplicably—that the wage hike to $13 per hour caused substantial growth in jobs paying more than $19 per hour in the restaurant industry. That’s just one of several questionable results that should give readers serious pause…..

Seat­tle and the (Method­ol­ogy of the) Eco­nom­ics of Min­i­mum Wage
Source: Ben­jamin Sachs, OnLabor blog, June 26, 2017

….Noam Scheiber also has a good story on the UW pa­per which lays out a cri­tique worth men­tion­ing here. In sum, the em­ploy­ment ef­fects iden­ti­fied by the UW study might be due, not to Seat­tle’s min­i­mum wage in­crease, but to a boom­ing job mar­ket in which high-wage jobs are re­plac­ing low-wage jobs. On this the­ory, the em­ploy­ment “losses” in the low-wage sec­tor that the UW study re­ports would ac­tu­ally just be peo­ple mov­ing from low- to high-wage em­ploy­ment. …

How a Rising Minimum Wage Affects Jobs in Seattle
Source: Norm Scheiber, New York Times, June 26, 2017

Seat­tle and the Eco­nom­ics of Min­i­mum Wage
Source: Ben­jamin Sachs, OnLabor blog, June 26, 2017

….There are, as al­ways, caveats. First, the Wash­ing­ton pa­per has yet to be sub­ject to peer re­view – it was re­leased on­line as an NBER work­ing pa­per. Sec­ond, an­other re­cent study – this one from Berke­ley – found that the Seat­tle or­di­nance “raises pay with­out cost­ing jobs.” As FiveThir­tyEight also re­ports, the Berke­ley study fo­cused ex­clu­sively on the fast food in­dus­try, and the Wash­ing­ton study it­self found no em­ploy­ment ef­fects of the min­i­mum wage hike on the restau­rant in­dus­try. One pos­si­bil­ity, then, is that the Wash­ing­ton study’s broader fo­cus is pick­ing up ef­fects that are missed by the (more tra­di­tional) fo­cus on the restau­rant in­dus­try. Many econ­o­mists, in­clud­ing Jared Bern­stein, how­ever, de­fend the method­olog­i­cal de­ci­sion to fo­cus a min­i­mum wage study on restau­rants. There are also, as al­ways, ad­di­tional method­olog­i­cal crit­i­cisms of the Wash­ing­ton study. (EPI has a press re­lease and pa­per that iden­ti­fies a num­ber of these con­cerns.)

Then there is an im­por­tant caveat in the other di­rec­tion: Seat­tle might be a city in the best po­si­tion to ab­sorb min­i­mum wage in­creases, which means – if the Wash­ing­ton study is right – that the em­ploy­ment ef­fects could be even stronger else­where. ….

The “high road” Seattle labor market and the effects of the minimum wage increase – Data limitations and methodological problems bias new analysis of Seattle’s minimum wage increase
Source: Ben Zipperer and John Schmitt, Economic Policy Institute, June 26, 2017

From the summary:
A team of researchers at the University of Washington has released an analysis of the economic impacts of the 2015 and 2016 increases in the Seattle minimum wage. The study, Jardim et al. (2017), looks at the first two stages of a phased-in set of increases that will eventually take the minimum wage in the city to $15.00 per hour. The authors of the study argue that they find large job losses associated with these first two rounds of increases, in which the minimum wage for most workers rose from $9.47 per hour to $11.00 per hour in April 2015 and then to $13.00 per hour in January 2016.

The authors’ analysis, however, suffers from a number of data and methodological problems that bias the study in the direction of finding job loss, even where there may have been no job loss at all. One initial indicator of these problems is that the estimated employment losses in the Seattle study lie far outside even those generally suggested by mainstream critics of the minimum wage (see, for example, Neumark and Wascher [2008])—as the authors themselves acknowledge.

In this report, we describe the most important shortcomings in the new analysis and make suggestions for how the researchers can attempt to correct for these problems in future iterations of their long-term study of the Seattle minimum wage.
See also: press release