Seattle’s Minimum Wage.. A Great Test Case

At $13 per hour, Seattle’s minimum wage is the highest in the nation.

Prior to April of 2015, the minimum wage in Starbucks’ home town was at a relatively high $9.47. Then, come April, in compliance with a city ordinance passed in 2014, the minimum wage was increased to $11 per hour. In January of 2016, the min. wage was again increased to the current $13 per hour.

A study recently published by a group of economists out of the University of Washington indicates that the relatively quick increase in the minimum wage has led to a net decrease in low wage (<$19/hour) employee earnings.

The study found that:

  • Hours worked in low wage jobs decreased by 9%
  • Hourly wages in low wage jobs increased 3%
  • Monthly earnings for low wage workers decreased by $125

This study has been met with equal praise and scrutiny. Right wing minimum wage opponents say it just proves what every economist already knows. Left wing advocates say that the methodology is flawed and reference other studies that have produced contradictory results.

Specifically, a study out of Berkeley found that the minimum wage surge led to a net increase in earnings. However, this study focused only on Seattle’s restaurant industry, excluding the rest of Seattle’s $315 billion economy.

Who’s Right? I Just Want a Straight Answer..

Too bad.

We won’t truly know what effect the increase in Seattle’s minimum wage has had until their economy cools off.

Currently, Seattle is in a bit of a boom, and employers are actively competing for laborers. Critics claim that this is the real reason behind UW’s findings.

Their logic is that a booming economy creates more competition in the labor market, aka employers need more workers to handle the increase in business. Employers then offer higher wages in order to attract more employees.

Naturally, the higher wages offered push some jobs past the threshold to be considered low a wage job. Critics say this phenomena skews UW’s data, producing misleading results.

The UW research team implemented a control in their study to test for free market effects, such as the situation described above. They ran similar studies on surrounding cities that increased the minimum wage by the same numbers, but who’s economies are weaker than Seattle’s. Their results were the same.

This is not enough for some critics however, who say that there is only one Seattle, and that the city has a unique economy, therefore, using other cities as a control is useless.

The answer to this debate will become clear once Seattle’s economy slows and free market effects are taken into less consideration.

Seattle has already commissioned a new study to investigate UW’s findings, which have effectively been undermined by minimum wage advocates.

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