Seattle Minimum Wage Research: Controversy and Reality

Our earlier post on the state collective bargaining agreements included mention of the $12 minimum wage for general government workers. The News Tribune reported that the provision would affect more than 1,100 state workers making less than $12 an hour.

That would give them a jump on Initiative 1433, should voters approve it in November. I-1433 would over four years lift the state minimum wage to $13.50, reaching $12/hour on January 1, 2019. For a good primer on the initiative, we recommend the Washington Research Council Special Report, I-1433: A “Blunt Instrument” Increasing the Minimum Wage and Mandating Paid Sick Leave.

As the minimum wage debate plays out, there continues to be interest in the effects of Seattle’s phased-in $15 minimum wage. We reported on some of the preliminary conclusions of the University of Washington’s ongoing research investigating the effects of the wage hike. The research has prompted some local and national controversy

Why all the fuss about a group of number crunchers and their study, which is scheduled to continue for five years? People across the country — including pundits and activists on both sides of the political spectrum — are closely watching what happens in Seattle as they debate whether to raise minimum wages in their own cities and states, and nationwide.

“I’m not only concerned that we’re in danger of drawing erroneous conclusions about Seattle’s minimum-wage increase — I’m concerned about the consequences that could have on the nationwide fight for $15 (per hour),” said [Seattle City Councilmember Kshama] Sawant, who holds a doctorate in economics and was an instructor at Seattle Central College before winning office.

Activists appear to be concerned with the tentative and mixed findings. In our review, we concluded,

The lessons learned in Seattle so far appear to have limited generalizability.

Moreover, we suggest that the issue is complicated and the effects of incremental wage hikes cannot be easily separated from the characteristics of the local economy. Neither, it seems, can the evaluation of the wage hike be easily separated from the politics surrounding it. So it’s no surprise that partisans are lining up their economists to challenge results that don’t fit the desired narrative. 

But while theories collide and arcane methodological arguments attempt to attract a popular audience, there’s also the telling anecdote.

It may be one of the first casualties of Seattle’s new minimum wage law. The owner of Z Pizza says she’s being forced to close her doors, because she can’t afford the higher labor costs…

Ritu Shah Burnham doesn’t want to go out of business, but says she can’t afford the city’s mandated wage hikes.

“I’ve let one person go since April 1, I’ve cut hours since April 1, I’ve taken them myself because I don’t pay myself,” she says. “I’ve also raised my prices a little bit, there’s no other way to do it.”

Small businesses in the city have up to six more years to phase in the new $15 an hour minimum wage. But Shah Burnham says even though she only has one store with 12 employees, she’s considered part of the Z Pizza franchise — a large business. So she has to give raises within the next two years.

A dozen jobs gone, a small business shuttered, a dining option removed.

The discussion of whether the minimum wage was the proximate cause of the closure will doubtless continue. The owner says she could have made it work if she’d been on the same schedule as other small businesses, with more years to phase in the wage hike. And a backer of the $15 wage is dismissive, saying, restaurants open and close all the time, for many different reasons.

But surely it’s not out of the question that a large increase in labor costs can result in job losses and put some employers out of business, is it?