When Seattle decided in 2014 to raise its minimum wage from $9.47 an hour to $15 over seven years, it became a case study for the impacts of such a big change — and for the pitfalls of economic research into this complex topic.
The city of Seattle commissioned a multidisciplinary team of researchers at the University of Washington to track the impacts of the change, which included an initial step-up in the wage to $11 on April 1, 2015, and another boost to $12 on Jan. 1, 2016.
In their initial report, the researchers found startling and negative results, estimating that Seattle lost more than 5,000 low-wage jobs and that low-wage earners ended up making an average $125 per month less. Those findings, which contradicted decades of economic research on what happens when minimum wages are increased, were then revised to show much less impact; and the most recent findings from the same team are largely positive.
“I would say today in Seattle, if you are a teenager looking for work, you’d find it pretty easy,” said Dr. Jacob Vigdor, UW professor of public policy and governance and the principal investigator on the research team.
The team’s most recent findings, released in October through the National Bureau of Economic Research, found that low-wage earners in Seattle are earning more and remaining in their jobs longer. “The minimum wage law increased these workers’ pre-tax earnings by (an) average of around $10 per week,” the study said.
Since Seattle increased its minimum wage, the researchers found that wages went up substantially, and by more than the minimum wage increase required; turnover declined; and businesses didn’t flock to leave the city.
“The reality is if their effects they found the first time were real, there would have been rioting in the streets of Seattle,” said Dr. Michael Reich, professor of economics at the University of California-Berkeley and co-chair of the university’s Center on Wage and Employment Dynamics.
Reich, the author of numerous minimum wage studies including several on Seattle, said, “What they didn’t anticipate was that at the exact same time as the minimum wage went up, Seattle went through a big boom, because Amazon started hiring literally tens of thousands of workers in Seattle. Wage growth in Seattle in general was much higher than it was anywhere else in the state.”
If there were fewer low-wage jobs, Reich said, “those were jobs where the wages were going up. It wasn’t a bad thing that was going on, it was a good thing.”
Vigdor said his team’s findings suggest that employers may have preferred to hire or keep more-experienced workers when the minimum wage went up. That could theoretically disadvantage new workers entering the workforce for the first time. But Seattle’s current economic boom and labor shortage more than offset any such effect, he noted.
The UW team also studied impacts on consumer prices, and found little to no effect in an array of areas, from groceries to retail goods to gas prices. “If the minimum wage did lead to price increases, they were really small — so small that we couldn’t detect them with our statistical methods,” Vigdor said.
Seattle’s minimum wage rose to $15 an hour in 2017 for large employers of more than 500; it’ll rise to the same level for smaller employers in 2021.
Seattle is known lately for its high housing prices, driven by a surge in jobs and population that’s outstripping the supply.
“The story of Seattle is that if you’re looking for work in Seattle, it’s really good news: You’re going to find it easy to work,” Vigdor said. “The news is not so good if you’re looking for an apartment. And the fact that the housing is so expensive helps to explain why we have such a labor shortage.”