Don’t Read Too Much Into Early Results of Raising Local Minimum Wages

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Don’t Read Too Much Into Early Results of Raising Local Minimum Wages

Data piling up, but not enough to tell a story, yet.


Wherever you stand in the minimum wage debate, the next few years should be an exciting time. Since U.S. cities have started to take up the challenge of setting their own local minimum wages, from Seattle to St. Louis, we’ll finally start to get data on what happens after such increases. Will businesses pay the higher minimum wage in order to have access to hot urban markets? Or will businesses cut back on hours and workers, attempting to lower costs and squeeze more out of workers who are already exhausted?

A pair of very early, very preliminary studies provides some early feedback on Seattle. The results: mixed, inconclusive, even contradictory.

One study, conducted by researchers at UC Berkeley’s Center on Wage and Employment Dynamics, showed earnings increased for food service workers and hours worked were not affected as a result of Seattle raising its minimum wage. For every 10 percent the minimum wage increased, wages across the food services industry increased 1 percent, the study found. But this study has not been peer reviewed, and it was also limited to the food service sector.

Findings released today in a working paper by University of Washington researchers found that Seattle’s minimum wage increase to $13 in 2016 increased hourly wages in low-wage jobs around 3 percent, but reduced hours worked in such jobs by around 9 percent. This study has also not been peer-reviewed, though it did look at all industries, not just food service.

In its coverage of the studies, the New York Times interviewed minimum wage proponents who explained why they thought the University of Washington study was flawed, arguing that in a booming market like Seattle, it’s to be expected that low-wage hours worked should fall as employers bid up wages for all workers, low wage included. In other words, hours worked in low-wage jobs fell because fewer jobs classified as low wage.

As FiveThirtyEight also reported, the University of Washington researchers had to exclude many multilocation businesses, which means their sample could leave out major low-wage employers such as fast-food chains. Think tank Economic Policy Institute estimates that 40 percent of employees work at multilocation businesses, meaning the University of Washington researchers left out a huge segment of the economy.

At this point, it’s not clear that there really is early evidence of “some effects,” one Los Angeles Times reporter wrote about Seattle’s minimum wage, as opposed to flawed statistics that can be massaged to show it.

In the meantime, even without raising minimum wages, there’s a ton of work that could be done to help those workers. As I’ve reported previously, workers in the U.S. lose as much as $15 billion annually nationwide due to minimum wage violations. With a mere thousand or so investigators to police 7.3 million employers, the federal Department of Labor’s Wage and Hour Division does manage to collect about $730,000 in stolen wages a day. Any reason not to hire more of those investigators?

Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.

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Tags: jobsincome inequalitypovertyminimum wage

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