The University of Washington report released yesterday has sparked considerable national attention. In our previous post we cited commentary by economists and analysts calling the research very credible and compelling. The debate continues today.
In the Wall Street Journal, Josh Zumbrun writes,
Seattle’s finding suggests that while small increases in the minimum wage do no harm, at some point a minimum wage gets so high that it becomes counterproductive for the very workers the policy is meant to help.
That’s consistent with most previous research, contrary to the contentions of proponents of the wage hike. The difference between incremental increases and Seattle’s rush to $15 is significant. Zumbrun comments on a unique element of the UW research.
The new study takes advantage of a quirk in the way the state of Washington administers its unemployment insurance program. Washington is one of just four states that gather data not only on earnings of workers, but also on the number of hours employees work. That allowed the researchers to account for the hours and earnings of jobs across industries and demographic groups before and after the minimum wage changes were put in place. They compared the employment changes in Seattle with changes in the rest of Washington outside the Seattle metro area.
“These results suggest a fundamental rethinking of the nature of low-wage work,” the studies’ authors write. Previous research that had found “firms faced with labor cost increases have little option but to raise their wage bill,” they said, but the new data “suggests that low-wage labor is a more substitutable, expendable factor of production.”
It was only when Seattle pushed wages to new highs—they note that even adjusting for inflation, the federal minimum wage has never been as high as $13—that the ill effects became apparent, a finding that many cities contemplating higher minimum wages may consider cautionary.
Cleveland, it appears, will be among the cities ignoring the caution flag
A sizeable increase in the minimum wage in Seattle has resulted in less money, rather than more, for low-wage earners, University of Washington researchers found.
…The release of the findings coincides with Cleveland Mayor Frank Jackson announcing that he proposes to raise the minimum wage of city workers to $15 an hour.
And an organization called Raise Up Cleveland, with assistance from the Service Employees International Union, has been advocating for Cleveland to set a citywide minimum wage of $15 an hour.
.American Enterprise Institute scholar Michael A. Strain uses the new research to repurpose a 2014 warning into a 2017 “I told you so” piece.
Increasing the minimum wage increases the cost of employing minimum-wage workers. Because of this, many economists worry that a higher minimum wage will translate into fewer jobs for these workers, as businesses take steps to keep their payroll costs down…
Many economists and policymakers favor modest increases from time to time in the federal minimum wage, with modestly higher state minimums as circumstances dictate, judging that the reduction in employment is worth the increase in earnings accruing to low-wage workers. In addition, many economists believe that a modest increase in the federal or state minimum wage will be associated with negligible employment losses. But Seattle’s increase is far from modest, and it applies only to one city. It is very hard to imagine that a Seattle-specific minimum wage of such generosity won’t noticeably hurt the very people its authors are trying to help…
And a city-specific $15 per hour minimum wage is simply reckless.
There will be more research as Seattle continues to implement its staged wage hike. But it’s already becoming more difficult for proponents to claim that everything is working as intended, with no negative consequences for low-wage workers and their employers.