Seattle’s minimum wage should encourage states, other cities
Arecent study on Seattle’s $15-an-hour minimum wage law reignited the debate over whether higher minimums help workers by lifting pay or harm them by leading employers to cut hours. The study, by University of Washington researchers, found more harm than good, a result that was at odds with a large body of previous research and was challenged by other economists who saw flaws in the study.
The dispute has been healthy. The critics have been specific and data driven, not ideological. The study’s authors have said they welcome criticism and have acknowledged that other conclusions are plausible. The dispute could actually advance the cause for higher minimums and give them a better chance of delivering the desired benefits.
For starters, the debate has underscored the validity of decades of rigorous research and real-life experience showing that moderate increases in the minimum raise the pay of low-wage workers without reducing job growth or work hours.
The only question is whether big increases would also work. The federal minimum is a mere $7.25 an hour and most of the 30 states with higher minimums require less than $10 an hour. Large minimum-wage increases are generally defined as those calling for $12 to $15 an hour.
In Seattle, the minimum rose in 2015 from $9.47 an hour to either $10 or $11, depending mainly on the size of a business. In 2016 it rose to a range of $10.50 to $13. (The period studied covers 2015 and 2016.) In 2017, it hit $11 to $15. By 2021, all Seattle businesses will pay at least $15.
In attempting to assess the effects of the increase, the Seattle study excluded workers at businesses that also have locations outside the city, including chains and franchises like Starbucks and Mcdonald’s. The intent was to isolate the impact on Seattle employers, independent of outside business concerns.
But the consequence was to overlook — and most likely underestimate — the experiences of employers who can best afford the raises. Similarly, the study blames the minimum wage increase for a decline in low-wage work in Seattle, when a likely cause is the city’s strong economy in which competition, not the minimum wage, bids up pay.
Seen in that light, it seems safe to conclude that Seattle has tolerated its minimum wage increase well and that, by extension, other strong economies could do so. It also suggests that a key to successful large increases is a gradual phase-in that gives businesses time to adjust and experts time to study the impacts as they unfold.
Caution is advisable, because large increases are largely untested. What is not acceptable is to do nothing in the face of uncertainty. Minimum wages have to go up: If the federal minimum of $7.25 had simply kept pace over the decades with inflation, it would be nearly $10 an hour today. If it had kept pace with other relevant benchmarks, like average wages and productivity growth, it would be $11 to nearly $19 today. Cities and states are experimenting with higher minimums because Congress has failed to raise the federal minimum. The experiment appears to be working.