On the surface, new studies on the pay increase appear to conflict. That's not necessarily so — and neither is the end of the debate.
First came a study from the University of California, Berkeley, indicating that Seattle’s step-up to a $15 minimum wage had given the lowest-wage workers fatter paychecks without affecting jobs. But not so fast. A new study released this week by researchers at the Evans School of Public Policy and Governance at the University of Washington indicates many workers intended to be helped by the law have actually been hurt.
Partisans can make of them what they will, but the rest of us can unpack this with as open minds as we mammals can allow.
Each study has its limitations. Berkeley only looked at the restaurant sector, which is heavy in low-wage jobs. The UW analysis, although a much broader and deeper dig, relies on a model comparing the city with a “control group” — which didn’t implement the steep wage hike — being a synthesis of several other places in Washington. But no other city in the state has Seattle’s astonishing boom at its back or its size and economic diversity. UW also didn’t count businesses with multiple locations. The progressive Economic Policy Institute lays out other criticisms here.
Importantly, neither study has been peer reviewed yet. The UW paper was released via the National Bureau of Economic Research, the outfit that “calls” the start and end of recessions, as well as being a clearinghouse for economic research. Economists will now pick over both studies with rigor. Even this won’t “answer” all questions — economics is not a hard science — but we will learn more.
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In their way, the studies are in line with existing knowledge. Most economists have long agreed that, within historic bounds, minimum wage increases have little if any effect on jobs. Seattle’s hike goes beyond those previous increases in size and speed, thus putting in place incentives for employers to reduce hours (which the UW study picks up), as well as to look into automation and be much more selective in hiring even low-wage workers.
Automation is an especially big unknown. It could leave millions unemployed in the near future — and few of our political leaders nationally are even discussing it.
In 2014, I wrote that the $15 minimum wage was an experiment that a city as prosperous as Seattle could try, but the outcomes were uncertain. The City Council’s efforts were also an understandable reaction to narrowing economic opportunity, rising inequality and stagnant wages for most. “Unfortunately, the causes of the collapse of the middle class are national and international in scope. They have been decades in the making.”
I’m still sticking by this. It’s an experiment and the hard evidence is only now beginning to come in. It doesn’t care whether your sympathies are blue or red.
Even if the Seattle wage “works” for many low-wage employees, and is profitable politics here, it is no substitute for progressive taxation, strong unions, public investments to create jobs, abundant quality education and job training. No substitute for a national consensus that frowns on imperial executive compensation, stripping companies for parts, and treating workers like commodities to be shed.
Today’s Econ Haiku:
Did Sprint run away?
T-Mobile, could you just be
Run for customers?