The Tale of Two Minimum Wage Studies: Seattle as an Experiment

By July 20, 2017Washington

Seattle’s Experiment in Minimum Wage

When Seattle passed its new minimum wage law, it became the highest and fastest rising minimum wage city in the country. As a result, and as part of the law, Seattle funded a 6 year study to determine the effects of minimum wage on the city. As a case study, Seattle was an optimal choice for this kind of economic experiment. Seattle has maintained a relatively low unemployment rate at 3.2%, has seen increase job growth, and has a relatively skilled workforce. Further, Seattle is a high cost city, which means that it should be able to absorb a higher minimum wage much easier than other lower cost parts of the country.

The First University of Washington Study Shows Minimal Impact

The University of Washington was commissioned to study the effects of Seattle’s rising minimum wage on workers, business growth, and jobs. When the first study came out after year one, it showed minimal impact of the minimum wage to $11 an hour. Some jobs were added, some were reduced, but the minimum wage had an overall net effect of zero. The main reason noted for this minimal impact is that the majority of Seattle’s lowest wage earners already made above minimum wage and above $11 an hour. Therefore, there was little impact to workers and to businesses. Not surprisingly, this first study hardly made waves in the economic world. Minimum wage advocates could look at the study and show that minimum wage has little to no impact on economic growth.  

The Second Minimum Wage Study Shows Great Impact on Workers and Jobs

However, that changed with the second year study of the effects of the new raise to $13 an hour in Seattle. That first report showed that the first minimum wage hike didn’t affect wages or jobs, because little changed in minimum income across Seattle Jobs, but an increase to $13 an hour did affect jobs. In fact, the newest study by the University of Washington showed that on average minimum wage workers saw their total income on their paycheck decrease by $125 per month from decreased hours. Roughly 5,000 low wage jobs were lost in 2016 after the new wage went into effect. Numerous businesses closed their doors.

Controversy over the U.W. Minimum Wage Study

Not, coincidentally, the week before the University of Washington’s study was made public, another study by U.C. Berkeley came out showing exactly the opposite: that the new minimum wage increase had virtually no impact on Seattle economy.

Why the discrepancy?

Michael Saltsman, a Forbes writer on economic policy, noticed something that many reporters missed. He  noticed that the U.C. Berkeley study was prepared at the request of Seattle’s mayor, Ed Murray.

In fact, the Mayor’s office and his own personal social media twitter account tweeted that the new minimum wage had increased workers pay and had no negative impact on jobs as soon as the U.C. Berkeley study was released. They even had an infographic prepared to highlight the study.

Saltsman asked an important question: why is U.C. Berkeley preparing a study on Seattle’s minimum wage, at the request of the mayor, when Seattle is already funding six studies on the minimum wage increase already?

He had an important theory. That the U.W. released a preliminary study to the Mayor’s office weeks before it was scheduled to become public. The mayor, an avid pro minimum rights activist noted that the study didn’t bode well for minimum wage and requested the Berkeley study to come out just before the public release of the U.W. study.

Interestingly enough, U.C. Berkeley has already done six other studies on the effects of minimum wage. It has never found any negatives related to minimum wage increases, an ironic stance, considering the universities own history with minimum wage increases.

The Methodology Behind Two Studies

In addition to the apparent political motivations behind ordering the Berkeley study, there are other issues. First, the Berkeley study didn’t take into account all the information that the U.W. study had access to. The U.W. study looked at individual pay stubs of low income workers in Seattle and compared jobs on a granular basis. U.W. researchers had access to to detailed data of hours and wages of nearly all employees in Washington State. The U.C. Berkeley study compared Seattle to other comparable cities and only looked across the restaurant industry. Comparing sister cities is a common economic practice and the U.W. study is criticized for failing to do just that. However, the U.W. Study has unique and detailed data points that don’t exist across other parts of the country because of Washington’s labor reporting laws. Therefore the U.W. study can look at details that have never been able to be studied before by economists such as the granular impact of the increase.

Anecdotal Evidence May Support the U.W. Study

Saltsman also points out in his analysis of the two studies that individual small business owners in Seattle appear to support the conclusion of the U.W. Study citing incidents where they have reduced minimum wage staff, cut hours, or closed the doors altogether due to the minimum wage increase.

Meanwhile, Seattle’s minimum wage has more upcoming minimum wage increases and another 4 studies to be done by the University of Washington. It will be interesting to notice if negative studies on minimum wage continue to be torn apart and the study discredited by critics. Remember, the first study, which was positive did not get torn apart by critics. A second study was only ordered by the mayor when the U.W. Study failed to provide positive political ramifications.

Let SwipeClock Help

Wages are typically the largest single expense of a business. That is one reason why utilizing the SwipeClock software, which will save money on wage income and maximizes scheduling for the greatest effect becomes so important.

Businesses who have employees in Seattle, throughout California, and many other places must monitor often many different local minimum wage laws. In addition Seattle, Emeryville and San Francisco also have to manage restricting scheduling laws, sick leave laws and other overlapping employment leave laws.

Additionally, these businesses have to also comply with Federal Overtime Laws, the Family Leave Medical Act and any other national or local laws that are enacted. SwipeClock provides a comprehensive array of workforce management and time tracking tools that can help businesses to more easily stay in compliance with local and national laws.

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References

Forbes: The problems with a new study on Seattle’s 15 minimum wage

Seattle Weekly: Seattle is getting an object lesson in weaponized data

University of California Berkeley Minimum Wage Study

University of Washington Minimum Wage Study

Written by Annemaria Duran. Last updated July 20, 2017