The trade-offs of Seattle’s $15 minimum wage — positive and negative — are becoming clearer.
SEATTLE’S $15-minimum-wage experiment has gone viral. Fourteen cities or states adopted the higher wage floor, and it made its way into the Democratic Party platform. Queue up the usual reactions: Fans of the movement declared it as a universal good, and opponents, such as state GOP Chair Susan Hutchison, declared it a “job killer.”
They’re both wrong, judging by the excellent ongoing research on the Seattle $15-wage experiment out of the University of Washington. The latest report by professor Jacob Vigdor’s team shows, with increasing clarity, the trade-offs of the economic experiment.
It’s worth noting that, contrary to rose-colored headlines, Seattle’s minimum wage is not yet $15. It is currently $13 an hour for big employers who don’t offer benefits, and $10.50 for small employers who do.
Vigdor’s UW team took a snapshot of the short-term economic effects in 2015 when the wage was $11 an hour for big, no-benefits employers.
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The clearest message from the research is the most obvious: Seattle’s economy is white hot, with job growth triple the national average. That was a reason that the march toward $15 an hour (by 2017 for big employers, 2019 for small employers) had a negligible effect on business openings.
And workers who held jobs in this economic utopia were earning more — about 73 cents more an hour — as the law intended. That figure is based on a complicated economic analysis that modeled Seattle’s economy without a $15 wage law — dubbed “synthetic Seattle” — and compared it to the “real Seattle” with the higher wage.
But there were trade-offs.
Significantly, the UW study found that the wage law “appears to have lowered employment rates of low-wage workers — creating an estimated 1.2 percent drag on jobs compared to “synthetic Seattle.”
People who had jobs lost 35 to 40 minutes per week, indicating that employers may be slightly trimming back shifts, although workers’ paychecks were larger because of the higher wage floor.
And the researchers found that a loss in the number of workers earning less than $11 an hour exceeded the number of workers who were earning higher wages — indicating that the higher wage did come at the expense of some jobs, even if it was not the “job killer” described by Hutchison.
Seattle may be willing to make these trade-offs. Other communities and states also seem to be willing, as the nationwide movement indicates.
But those followers should know the real effects — good and bad — of Seattle’s experiment, and not just fall for the rhetoric — rosy or gloomy.