Seattle’s ever-increasing minimum wage represents an experiment that has complex economic implications. And, as with any experiment, it is important to avoid jumping to conclusions about the results.
In 2014, the Seattle City Council passed an ordinance that is phasing in a $15-an-hour wage floor for all workers by 2021. This year, the minimum wage in the city ranges from $11.50 to $15.45, depending upon the size of company, level of employee benefits, and whether or not the worker receives tips.
The city council’s decision quickly resulted in arguments as old as the idea of a minimum wage itself. Critics said increasing the wage would harm the economy by leading businesses to hire fewer workers; if employers are forced to pay more than an additional worker adds in revenue, they won’t hire that worker. Proponents said the increase would improve the economy by giving workers more money to spend. While the issue is more nuanced than those boiled-down talking points, some truth can be found on both sides of the debate.
All of which leads us to a recent study from the University of California, Berkeley, that looked at the food services industry in six cities — including Seattle — that have adopted a minimum wage of at least $10 an hour. The report found no negative impact on hiring: “In addition to our findings of positive effects on earnings, we do not detect negative significant employment effects in any of the individual cities, or when pooling them together.”
This is headline-worthy material, but it requires further examination. For one thing, the economy is booming, particularly in Seattle; a minimum-wage increase could have a different impact during lean times. For another thing, there are many low-wage workers in industries other than food service.
The most important caveat, however, is this one: In 2016, the Albany (N.Y.) Times Union found that the Berkeley group had conducted numerous studies of the minimum wage, often funded by labor groups, and always concluded that a wage increase provided economic benefits. Logic tells us that the issue has more gray than the black-and-white portrait provided by the recent study, and that it will take years for a complete picture to emerge.
A study at the University of Washington has found that Seattle’s minimum-wage law is having the desired effect of increasing pay for low-income workers, but did result in a slight decrease in employment. Most important, that study will continue for years, through boom times and bust, to provide information that can help guide policymakers in the future.
Seattle’s sharp wage increase is a worthy experiment. There are clear social and economic benefits that come with increasing pay for low-level workers; the questions, however, surround the liabilities of an increase and the impact on employment levels.
Washington’s minimum wage this year is $11.50, a number that is the highest among the states but below that of Washington, D.C. Whether cause-and-effect or simply coincidence, Business Insider earlier this year ranked the District of Columbia and the state of Washington as having the two best economies in the country. Under Initiative 1433, passed by voters in 2016, Washington’s minimum will increase to $12 next year and to $13.50 in 2020 before being tied to a cost-of-living index.
That likely will lead to ideologically driven predictions of either massive failure or runaway success. Either way, it will be important to avoid jumping to conclusions.
