Fact check: Has Seattle's minimum wage increase impacted employment?
City of Seattle
Two studies examining the employment impacts of Seattle's higher minimum wage drew headlines last month amid the public debate about income disparities and minimum wage laws.[1][2] In a commentary about the studies, Washington Post writer Ben Spielberg claimed that the increase has "lifted the wages of low-wage workers and been perfectly fine for the economy."[3]
Is this true?
“Perfectly fine” is a subjective standard. We examined the conclusions of the two Seattle studies on the minimum wage increase to determine what impacts, if any, have been documented.
The study of Seattle’s food services industry by researchers at the University of California, Berkeley found that “Employment in food service ... was not affected, even among the limited-service restaurants, many of them franchisees, for whom the policy was most binding.”[1]
Researchers at the University of Washington analyzed employment and wages across all categories of low-wage employees, spanning all industries and worker demographics, and found that the increase in Seattle’s minimum wage “reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent.”[2][4]
Background
The minimum wage ordinance was adopted by the Seattle City Council on June 2, 2014, and Mayor Ed Murray signed it into law the following day.[5] The ordinance calls for phasing in the increase based on employer type. Employers of 500 or fewer employees, those that offer health insurance, and those whose employees earn tips have been given more time to increase wages than larger employers who do not offer health insurance and whose workers do not earn tips.[6]
| Seattle minimum wage increase phase-in by employer type | ||||
|---|---|---|---|---|
| Large employers (501 or more employees) | Small employers (500 or fewer employees) | |||
| Date | No health insurance | Health insurance | No health insurance or tips | Health insurance/tips |
| January 1, 2015 | $9.47 | $9.47 | $9.47 | $9.47 |
| April 1, 2015 | $11 | $11 | $11 | $10 |
| January 1, 2016 | $13 | $12.50 | $12 | $10.50 |
| January 1, 2017 | $15 | $13.50 | $13 | $11 |
| January 1, 2018 | Indexed | $15 | $14 | $11.50 |
| January 1, 2019 | Indexed | Indexed | $15 | $12 |
| January 1, 2020 | Indexed | Indexed | Indexed | $13.50 |
| January 1, 2021 | Indexed | Indexed | Indexed | $15 |
| Minimum wage is indexed (adjusted to rise in proportion to inflation) each year after it reaches $15. | ||||
The states of New York and California and the city of Minneapolis are also gradually increasing minimum wages to a maximum of $15 per hour.[7][8]
The Berkeley study used data through the first quarter of 2016, and the Washington study used data through the third quarter of 2016, after the minimum wage rose to between $10.50 and $13 per hour (depending on employer type).
University of California, Berkeley (UCB) Study
The UCB policy brief, entitled "Seattle’s Minimum Wage Experience 2015-16," was prepared at the request of the mayor's office.[9] The researchers analyzed hourly wages and hours worked for employees in the restaurant industry, noting that "[w]age increases and employment effects in food services are likely to be larger than in other industries, precisely because it has the highest proportion of low-wage workers affected by the minimum wage policy."[1][10]
The researchers compared employment and wage trends in Seattle food services to trends in control counties ("Synthetic Seattle") modeled to represent similar populations, employment trends, and wage trends from 2009 to 2015, but without the wage increase, in an effort to determine whether changes in wages and employment levels in Seattle may be related to the city's minimum wage increase.[1]
The researchers used data from the Bureau of Labor Statistics' industry category of Food Services and Drinking Places and for the subcategories Full-Service and Limited-Service Restaurants. (Limited-service restaurants refer to fast food-type eateries and full-service restaurants are those with table service.)[1]
Concerning wages, the researchers found that "wages increase substantially more in limited service restaurants than in the overall food service industry. And wages in full-service restaurants barely increase relative to Synthetic Seattle." According to the researchers, this finding suggests that full-service restaurants made use of the more gradual phase-in requirement for employers with tipped workers. Limited-service restaurant wages increased by 2.3 percent, compared to almost 1 percent in the industry overall.[1]
The researchers also found that employment gains, while slightly greater in Seattle than in Synthetic Seattle for all restaurants were insignificant for each category.[1]
The UCB study includes the following limitations:[1]
- It did not analyze wages or employment effects on jobs beyond the food services industry;
- The data on restaurant workers includes middle- and high-income wage earners who may dilute the employment effects of the minimum wage increase on low-wage workers;
- Many low-wage workers in the restaurant industry earn tips, and do not resemble low-wage workers in other industries. The effects of the minimum wage on workers in those other industries could be different. The study did not track individuals' actual wages, hours worked, or employment, but relied instead on averages;
- It did not assess whether Seattle's recent high rate of economic growth could be a confounding factor in the rate of employment or increase in wages;[11] and
- Given the different phase-in schedules for different employers, the researchers could not account for how many employees fell into each wage increase category, thereby confounding the weighting (or relative importance) of results.
University of Washington (UW) study
The UW study, "Minimum Wages Increases, Wages, and Low-Wage Employment: Evidence from Seattle," was issued as a working paper of the National Bureau of Economic Research.[12][2]
The researchers had exclusive access to workers' hourly wage and employment data from Washington’s Employment Security Department. This allowed them to assess individuals’ actual hourly wages and their actual hours worked across all industries.[2]
The researchers compared employment trends (hours worked and number of jobs) in Seattle to areas of Washington state with similar trends between 2005 to 2014 (excluding adjacent cities that could have drawn businesses from Seattle) but that did not increase the minimum wage.[2]
The UW researchers found no effect on employment in the restaurant industry at any wage level, but significant effects in other industries. They concluded that "the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016."[2]
The study includes the following limitations:[2]
- The researchers only had access to data for single-location employers, which excluded data on the employment effects on multi-location firms. Single-location employers account for 62 percent of the workforce;[13]
- The study did not test whether some of the low-wage job losses resulted from increases in jobs paying above $19 per hour;
- The researchers noted that "Some employers may have shifted jobs out of Seattle but kept them within the metropolitan area, in which case the job losses in Seattle overstate losses in the local labor market."
- Seattle's recent economic growth could factor into the decline in low-wage jobs observed in Seattle compared to the control group, if strong labor demand increased wages.[14][15]
Conclusion
Two recent studies examined the impacts of Seattle's minimum wage increase on employment.[1][2] In a commentary referencing the studies, Washington Post writer Ben Spielberg claimed that the increase in Seattle's minimum wage has been "perfectly fine for the economy."[3]
A University of California, Berkeley, study of the restaurant industry found "no significant disemployment" following the second-step increase of the minimum wage (to $13).[1] A University of Washington study found that the minimum wage increase “reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent.”[2]
See also
- City of Seattle $15 Per Hour Minimum Wage Initiative (November 2014)
- Minimum wage reports and analyses
- Fact check/Is Sen. Elizabeth Warren right about stagnating wages and rising costs?
Sources and Notes
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 Institute for Research on Labor and Employment, University of California, Berkeley, "Seattle’s Minimum Wage Experience 2015-16," June 2017
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 NBER Working Paper Series, "Minimum Wages Increases, Wages, and Low-Wage Employment: Evidence from Seattle," June 2017
- ↑ 3.0 3.1 Bangor Daily News, originally published in The Washington Post, "The $15 minimum wage is working just fine," June 27, 2017
- ↑ The study authors go on to say, “Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016.”
- ↑ Seattle.gov, "Council Bill Number: 118098, Ordinance Number: 124490," accessed July 17, 2017
- ↑ Seattle.gov, "Seattle's Minimum Wage," accessed July 17, 2017
- ↑ Reuters, "Minneapolis approves gradual minimum wage hike to $15 an hour," June 30, 2017
- ↑ On May 31, the Illinois General Assembly passed legislation to raise the state's minimum wage to $15 over five years, which is awaiting action by Gov. Rauner. The Chicago Reporter, "On $15 minimum wage hike, Rauner should listen to constituents," July 13, 2017
- ↑ The study was prepared with support from the University of California and the Ford Foundation. Ford Foundation, "About Us: Mission," accessed July 5, 2017
- ↑ Data for the study came from the Bureau of Labor Statistics’ Quarterly Census on Employment and Wages.
- ↑ Seattle Office of Economic Development, "Seattle's Economy," June 2017
- ↑ The study was prepared with financial support from the Evans School of Public Policy and Governance, a grant from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, the Laura and John Arnold Foundation, the Smith Richardson Foundation, and the Russell Sage Foundation. The study was commissioned and partly funded by the city of Seattle, but the City Council voted to cease funding in the fall of 2016. Seattle Weekly, "As Relationship Soured, City Council Stopped Funding UW Minimum Wage Research Team Last Fall," June 30, 2017
- ↑ UW researchers surveyed 500 multi-location employers in Seattle in 2015 and 2016 to ask if they intended to or had reduced employment in response to the ordinance, and the survey responses "suggest multi-location firms were in fact more likely to plan and implement staff reductions." However, corresponding data was lacking.
- ↑ The New York Times, "How a Rising Minimum Wage Affects Jobs in Seattle," June 26, 2017
- ↑ The study notes that the loss of employment hours observed during the first phase-in of the increase to $11 per hour was insignificant.
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