In Seattle, Minimum Wage Hike Comes at a Cost to Some Workers
Advocates say higher incomes help low-wage employees, but one new report suggests the reality is more complicated.
Nothing is free, especially things that cost money. That may sound blindingly obvious, but the idea that Seattle’s minimum-wage increases have come at a significant cost to some workers has generated a fair amount of controversy.
Seattle was at the vanguard of the movement to increase the minimum wage to levels as high as $15 an hour. Researchers at the University of Washington have been studying the effects on employment as the wage has gradually ticked up. What they have found is that low-income workers who log longer hours and are more experienced have seen a boost in pay, but those with less experience are finding fewer jobs open to them.
A long line of studies about the minimum wage has revealed that it can drive down employment at the low end of the wage scale, but those losses are made up for by increases in higher-paying jobs. The University of Washington findings, however, suggest that there’s some merit to the usual complaint that gets lodged against minimum-wage hikes -- that they’re not only expensive for employers, but threaten to cut the first rung on the career ladder out from under teenagers or others just getting their start in the labor market. “The evidence that we’re picking up is consistent,” says Jacob Vigdor, an economist at the University of Washington. “We’re pricing out low-skill workers.”
The series of studies that Vigdor coauthored has received national media attention. It has also drawn fire from economists supportive of higher wages. They point out that the study doesn’t fully take into account the broader effects of Seattle’s booming economy, which is evolving to include more jobs that demand higher skills. Vigdor insists that changes in hiring practices were mostly a response to the minimum-wage increases, not to the economy, since changes clearly took place just as mandated raises kicked in. But not everyone is convinced. “Workers who were working very low hours experienced a small reduction in their hours, but it was fully offset by hourly wage increases,” according to the Economic Policy Institute, a labor-backed think tank, “leaving these workers with the same take-home pay from fewer hours of work.”
A more recent study, from the Center on Wage and Employment Dynamics at the University of California, Berkeley, looked at minimum-wage hikes in the restaurant industry in Seattle and five other major cities. According to that study, employment levels stayed constant when wages went up. “We find that minimum wages in the $10 to $13 range increased pay for workers,” says Michael Reich, who co-chairs the Berkeley center, “and we do not detect any adverse effects on their employment.”
It’s possible to agree that companies can afford to pay workers a higher minimum wage, and that such increases provide workers with needed raises, while also acknowledging that higher salaries are a cost some employers will seek to avoid with reduced hiring. This is not necessarily the end of the world. The Berkeley team may be right that the effects on hiring are small to nonexistent in cities where the economy is growing. And teenagers who are priced out can take alternative paths that make them more desirable even at higher costs, such as staying in school longer.
But in Vigdor’s view, employers paying a premium may be reluctant to take on inexperienced workers and offer them on-the-job training. “There are minimum-wage advocates that are sticking to the position that there are no trade-offs,” he says. “Our evidence weakens the case that it’s a win-win for everybody.”