A working paper for the National Bureau of Economic Research by a University of Washington team — the same team hired by Seattle to evaluate its minimum-wage experiment — just found serious ill effects:
This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude 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. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.
A Jonathan Meer post reprinted by Alex Tabarrok spells out just how bad that news is:
– The numbers of hours worked by low-wage workers fell by *3.5 million hours per quarter*. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.
– The losses were so dramatic that this increase ‘reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.’ On average, low-wage workers *lost* $125 per month….
I know that so many people just desperately want to believe that the minimum wage is a free lunch. It’s not. These job losses will only get worse as the minimum wage climbs higher, and this team is working on linking to demographic data to examine who the losers from this policy are. I fully expect that these losses are borne most heavily by low-income and minority households.
But there’s more. When Seattle’s City Hall got word the adverse study was coming from members of its own research team, it quickly commissioned a pro-labor group at Berkeley to do a counter-study looking at restaurants and concluding that everything was peachy keen [Seattle Weekly] “Does City Hall really want to know the consequences, or does it want to put blinders on and pat itself on the back?” [Seattle Times editorial]
One other takeaway from the NBER: the low-wage-earner losses weren’t in restaurant jobs, which are far less mobile. Few Seattle city residents will switch to suburban eateries for everyday dining, even in response to relative shifts in cost or quality. But many blue-collar and clerical jobs can migrate to suburbs or locations farther away than that. In short, beware of restaurant-sector-only studies of local minimum wage effects, which will typically understate damage to hours worked.
More: Ben Casselman and Kathryn Casteel, Five Thirty-Eight; Max Ehrenfreund/Washington Post; Michael Saltsman/Forbes (“New Report Marks The Beginning Of The End For ‘Fight For $15′”); Ryan Bourne, Cato.