Just days after a study of the effect of a minimum wage increase on Seattle’s restaurant industry found no negative impact, another study says that the raise has been terrible for low-wage workers—worse even than sworn opponents of minimum wage increases have found in past studies. What should we make of these differing results? The simplest explanation is that the authors of the new study, based at the University of Washington, didn’t adequately account for the results of Seattle’s booming economy. Increased competition for workers in a great economy leads to higher wages, which means that there are fewer low-wage jobs because they have effectively become higher-wage jobs. Like this:
Micah Simler, whose window-washing business in Seattle has three employees and 15 contractors, said he had already been paying much more than $15 an hour because of the local economy, not the wage law.
“Seattle is in a boom time right now, and I’m competing with construction companies” and many other businesses for employees, he said.
That’s basically what the University of Washington study does show: loss of hours worked at the lowest pay rates, and increased hours worked at $19 an hour and above. But the study’s authors want to blame one on the minimum wage and stay silent on the other, even as an Economic Policy Institute analysis of the study finds that the study’s own data suggests that the two should be linked. If the minimum wage increase caused the loss of work for minimum-wage workers, it also caused the increase in work for higher-paid workers—and that’s just not plausible. According to the study’s data, there was an 8.5 percent drop in jobs paying under $19 an hour and a 21.2 percent increase in jobs paying over $19.
Of course, as some supporters of the ordinance have argued, the minimum wage increase in Seattle might be expected to help push the city onto a “high road” economic development path, thus explaining the big jump in employment above $19.00. But, the relatively small size of the wage increases under study so far (to $13.00 per hour, not yet to $15.00 per hour) and the relatively short duration of the increase (only 3 quarters since the increase to $13.00) mean that it is likely too soon to ascribe the large uptick in high-wage employment to the minimum wage increase. Moreover, the $13.00 minimum wage only applies to large employers that do not pay medical benefits, with minimum wages ranging from $10.50 to $12.50 in force for all other employers.
Nevertheless, the same statistical methods that the authors use to conclude that the minimum wage is reducing low-wage employment also indicate—implausibly—that the minimum wage increase produced a boom in high-wage employment. Given that it is highly unlikely that an increase in the minimum wage to $13.00 an hour could cause a large increase in employment in jobs paying above $19.00 per hour, the finding of large employment increases in these jobs suggests that the authors’ preferred technique is either flawed or has been used in a context where the selected outside control group is not statistically valid.
In short, there’s a lot more going on in Seattle’s economy than a minimum wage increase, and if you fail to separate the minimum wage from the economy’s overall strength, you get results that don’t make sense, suggesting that raising the minimum wage is worse than its opponents have claimed while somehow boosting higher-wage jobs.
It looks an awful lot like the University of Washington researchers screwed up. Unfortunately, that’s unlikely to stop opponents of minimum wage increases from claiming the study shows that a $13 minimum wage is terrible for workers. Given that, during the time of the study, Seattle’s labor market grew by 11.8 percent while the national average was 4.2 percent, we should all be hoping for such a grave injury.