10/17/2021

Seattle’s Fake Free Lunch

A new study of Seattle’s minimum wage is being presented in some corners as a progressive vindication. But the details are pretty much what any Econ 101 student would predict: bad news for young, unskilled workers trying to gain a foothold in the economy.

In 2015-16, Seattle phased in a wage floor of $13 an hour for large businesses—defined as companies or franchises with more than 500 employees—and $12 an hour for small firms. The old mandate was $9.47, meaning the increase was nearly 40% at the top end. In a paper published last year, academics at the University of Washington gave a depressing estimate of the result. The number of hours worked in low-wage jobs dropped by 9%, implying the average worker lost perhaps $125 a month. (That estimate was later revised to $74.)

These same researchers now have published a more granular study, which tracks people who already held jobs when the minimum wage rose. The study splits the effects into two categories: Experienced workers earned $84 a month more, on average, although about a quarter of the gain came from taking additional work outside Seattle to make up for lost hours. Inexperienced workers got no real earnings boost. They simply spent less time on the clock.

. . . The authors point to a marked decline, about 5%, in the number of people entering Seattle’s low-wage workforce each quarter. One graph shows that the city used to track roughly with the rest of Washington state on this metric. The lines diverged as the minimum wage passed. If Seattle had kept up the pace, something like an additional 500 people would be joining the low-wage workforce each quarter.

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