Giving Compass' Take:
- This article discusses the minimum wage increase for Washington state. The author explores the effects it had on business, the economy and within the work itself while offering some potential steps moving forward.
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A few years ago, Seattle decided to increase its minimum wage from $9.47 to $15 per hour. Worker unions and activists applauded the move, and hoped to leverage the momentum on the national level. No doubt some of the law’s supporters were well-intentioned; they also predicted the law would help low-wage workers.
But intentions aside, compelling new research suggests Seattle’s minimum-wage law harmed poor workers significantly. A University of Washington study released Monday indicates that the move from an $11-per-hour minimum wage to a $13-per-hour minimum wage in Seattle was associated with a more-than-9% cut in low-wage workers’ hours.
This is a loss of 3.5 million hours worked per quarter, and translates into a $125 average decline in low-wage employees’ earnings per month. Other estimates in the paper suggest that the minimum wage is associated with 5,000 jobs lost in Seattle.
These results fit well with traditional economic theory, which predicts that minimum-wage laws reduce low-wage employment. This makes intuitive sense: If the cost of an employee rises artificially, but employee skills or output don’t rise commensurately, competitive companies look for alternatives. Possible alternatives may include automating work, eliminating the position altogether, or transferring responsibilities to more productive employees.
So, what to do? Putting a moratorium on the phase-in of the current minimum-wage law, and freezing new minimum-wage bills, would be a good start. For Seattle’s City Council to push ahead in the face of persuasive evidence of negative effects is a dereliction of duty. Other ideas to help low-wage workers should also be considered, such as relaxing occupational licensing laws that make it harder for workers to legally begin working in their field.