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August 10 2016

More on Seattle’s Minimum Wage Bump

Patrice L. Onwuka

Seattle’s minimum wage increase is being highly scrutinized as conflicting research and reporting demonstrate. But some early facts have both the left and right in agreement: wages went up for some workers, but employment decreased and some businesses closed.

A factor that hadn’t been considered before, but is playing a role is that a strong tech economy is forcing upward pressure on wages and softening the blow of lost jobs. As a result, it’s becoming increasingly clear that Seattle is not a good bellwether for how other cities would fare against a minimum wage increase.

In 2014, Seattle led the nation in enacting a gradual minimum wage increase to $15 per hour. It’s reportedly currently between $10.50 and $13 per hour depending on the size of the business and whether it pays medical benefits. That’s complex enough, but since the full increase has not been reached, any data is early data.

Nonetheless, the trends are consistent – even if the reporting and spin on the data are not. New research from a University of Washington study of Seattle’s minimum wage finds that wages are up, the availability of jobs went down, hours for workers decreased , employment decreased, and businesses closed (although that was offset by business openings).

Economists and reporters on the left are painting these results as “mixed.” A headline in the uber-progressive Mother Jones, reads “The Seattle Minimum Wage Experiment: Mixed Results.” The reporter opens with a crass joke about Seattle’s experiment being a fun test case to observe because he doesn't have to feel the impact. I’m sure the low-wage workers who can’t find a job any longer, don’t share his sense of humor. He then goes on to explain why this report is neither bad nor good:

I've mentioned before—only half jokingly—that I'm happy to see other people experiment with a $15 minimum wage. It's the best of all worlds: it provides us with test beds to see what happens, but if it's a disaster it won't affect me personally.

Bottom line: wages went up, but employment went down. This is about what you'd expect. However, I'm a little unclear on how to reconcile this employment decrease with the finding that the number of persistent jobs didn't change. Perhaps there was a decrease in seasonal or intermittent jobs? It will probably all become clearer in future reports.

The Fiscal Times and even the Washington Post, which we might consider centrist and left-leaning respectively, are not as generous in their estimations. You can't really spin the results as being positive given the impact on fewer hours, fewer job opportunities, and business closures.

The right-leaning Christian Monitor gathered feedback not just from the researchers, who were cautiously optimistic, but other economists who read the numbers differently:

Increasing the minimum wage benefits some while harming others, David Neumark, a professor of economics at the University of California Irvine who has spoken against a $15 minimum wage, tells the Monitor. The small scale of the increases thus far likely accounts for the result of only small effects, he says. 

"The question is not will we have any job growth or any new business, of course we will," he says. "But will we have fewer opportunities for low-skilled people than we would if we didn't do this? And I think that answer is clearly yes."

While raw hours and earnings went up in Seattle, they might have gone up faster if the minimum wage had not been adopted, Long says. Similarly, there was a net reduction in business closures, but the minimum wage may have slowed down employment opportunities, relative to what may have been expected in the economy. 

Left ,right and center, the picture is clear, even if not complete. The big takeaway especially for cities with economies that are not booming like Seattle is that the impacts of their minimum wage increases to $15 may be far less muted:

The researchers also warn that what happens in Seattle as the city’s minimum wage eventually climbs to $15.75 an hour may not tell us much about how other regions would be affected by a similar hike. “Seattle’s strong economy may make it capable of absorbing higher wages for low-wage workers,” they wrote, “and this capacity may not be present in other regions.”

In addition, the researchers speculate that in the future technology could limit benefits of any wage increases as employers hire fewer new workers and replace humans with machines:

"The economy has changed in ways that give businesses more options for cutting back on labor," Vigdor said. "If you are a person who is trying to make ends meet at the lower rungs of the economic ladder, you might be used to this idea that forces conspire against you. The minimum wage is an effort to try to keep some of these forces at bay, but there are definitely questions about how effectively and for how long."

Bottom line, minimum wage increase is bad, though not as harmful as expected, and hasn’t delivered the life-changing benefits to low-wage workers that proponents expected. A robust job-creating tech sector is the big variable here that has both softened the blow and cushioned lower-income workers. For cities without such a bright spot in their economy, they ought to be cautious. Unless they look like Seattle they better expect even more negative results.

IIndependent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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