Report to Seattle City Council Highlights Strong Economy, Mixed Effects of Minimum Wage

Impact of the Minimum Wage Ordinance on Low-Wage Seattle Workers
At this morning’s public briefing session before the Seattle City Council, Seattle Minimum Wage Study (SMWS) investigators Mark Long and Jacob Vigdor presented the team’s latest report, a comprehensive overview of trends in Seattle’s labor market since the Council passed the groundbreaking Minimum Wage Ordinance just over two years ago.  While the labor market has performed very well over that time period, evidence documents that the City’s low-income workers would have fared almost equally well had the minimum wage not increased.  While the ordinance clearly increased wages, cutbacks in employment and hours have led to muted impacts on earned income.

The SMWS study team, augmented with the recent addition of Duke University-trained economist Dr. Ekaterina Roshchina, took advantage of the most comprehensive dataset ever used to study the impact of a minimum wage policy in the United States.  Washington state is one of a small handful of states that requires private sector employers to report both hours worked and income earned for every worker on payroll every three months.  This enables the SMWS team to extend prior research that has focused almost exclusively on small subsets of the low-wage workforce, such as the fast-food industry or teenagers.

The data, provided by the Washington State Employment Security Department, span the years 2005 through 2015. The report aims to answer two primary questions. First, how has Seattle’s labor market performed since the City passed the minimum wage ordinance? Next, how well is Seattle’s labor market performing relative to how it would have performed without the ordinance?

The answer to the first question is easy to compute, as it only requires a straight comparison of labor market statistics before and after the ordinance went into effect.  The answer is also straightforward: Seattle added tens of thousands of jobs after the Council passed the minimum wage ordinance, outpacing the national employment growth rate by a factor of three.  This growth was clearly driven by increased opportunities for highly-skilled, high-paid workers in the city’s tech sector, but positive trends are visible throughout the economy.

The second question requires sophisticated methods to answer.  The SMWS team employed a variety of methods to infer how Seattle’s labor market might have evolved in the absence of a minimum wage increase.  These include state-of-the-art “synthetic control” methods that collect statistics from a set of ZIP code regions outside Seattle to form a comparison region with a strong track record of matching Seattle’s labor market historically.

These methods yield a series of findings:
  • The minimum wage ordinance raised wages for individuals at the low end of the City’s workforce at the time the law passed.  In late 2015, the average wage for this group was 73 cents higher than the team’s estimate of what might have happened in the absence of the wage increase.
  • Evidence points to a modest negative impact of the ordinance on employment opportunities.  The City’s lowest-paid workers became slightly more likely to exit the workforce, slightly more likely to leave the City for jobs in the surrounding region, and saw cutbacks in hours.
  • The positive effects on hours and negative effects on employment opportunities come close to canceling one another out in an analysis of total earned income.  The team’s preferred estimate suggests gains of a few dollars per week, but the estimate is sensitive to methodological choice.
  • The minimum wage had little or no net effect on the number of businesses in the City.
The report cautions this initial study is only capturing short-run impacts of early phase-in of the wage ordinance, other explanations of the changes cannot be completely ruled out, and these results cannot be generalized to other cities or the entire state of Washington.
Read the Full Report
View the Presentation to the Seattle City Council

Dr. Roshchina Joins the SMWS Team

In June, Dr. Ekaterina Roshchina joined the SMWS team. Dr. Roshchina is labor economist with extensive experience working with administrative datasets similar to the Employment Security Department data. She received a Ph.D. in Economics from Duke University in May of 2016, focusing her research on local labor markets, labor demand and job search. In her dissertation, she used an employer-employee matched dataset from Brazil to study how much employment growth across firms is constrained by labor market conditions, such as wage growth or tight labor markets, both of which make hiring more costly. As part of the SMWS, she is particularly interested in understanding how businesses in Seattle adjust to higher labor costs caused by the minimum wage hike.

SMWS Across the Pond

Last month, SMWS research was highlighted at the Association for Public Policy and Management (APPAM) International Conference “Inequalities: Addressing the Growing Challenge for Policymakers Worldwide.”  The conference, held at the London School of Economics, featured a session titled "Minimum Wage Policies as an Approach to Reducing Inequality." This session was organized and moderated by SMWS investigator and Evans School Associate Professor Heather Hill, and included presentations from Michael Reich (University of California, Berkeley) and Micheal Collins (NERI-Nevin Economic Research Institute). Jake Vigdor represented the SMWS in presenting a paper on the immediate impacts of the Seattle minimum wage ordinance, focusing on employer survey and family interview data which highlighted the expected employer adaptations to higher wage costs.
This November, APPAM will move back to the states, where the SMWS will be represented on four different panels in Washington, DC. Mark Long and Jake Vigdor will lead presentations on this research in sessions focusing on social equity and the impacts of policies intending to increase family income. Heather Hill will present a report of the qualitative low-wage worker interviews during the implementation, and Jennifer Otten will present a paper looking at the minimum wage’s effect on food prices. Full papers and presentation details will be posted on our site once they become available.
Detailed APPAM panel information:
  1. "Immediate Impacts of the City of Seattle Minimum Wage Ordinance"
    Allard, Bailey, Hill, Long, Otten, Plotnick, Romich, Vigdor, and Vance-Sherman. 
    Session: Impacts of Policies Intending to Increase Family Income, Thursday, November 3, 2016: 8:15-9:45 a.m.
  2. "The Effect of a City-Level Minimum-Wage Policy on Food Prices: A Study of Supermarket Food Prices in Seattle-King County"
    Otten, Tang, Buszkiewicz, Aggarwal, Vigdor, Drewnowski, and Long
    Session: Diet, Healthy Food Access and Food Environments, Thursday, November 3, 2016, 1:15-2:45 p.m.
  3. "Early Evidence on the Impact of Seattle's Minimum Wage Ordinance"
    Session: Social Equity and the Methodology of Assessing the Impacts of Minimum Wage Increases, Friday, November 4, 2016, 10:15-11:45 a.m.
  4. "Living on the Minimum: A Qualitative Study of Low-Wage Workers during the Implementation of Seattle's Minimum Wage Ordinance"
    Hill, Romich, Wething, and Kahn-Kravis
    Session: Qualitative Studies of Local Labor Regulations, Friday, November 4, 2016, 1:30-3 p.m.
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