New Studies on Minimum Wage Increases Reach Strikingly Different Conclusions

By Owen H. Laird, Esq.

As you may know, many municipalities and local governments have enacted minimum wage increases over the past few years as part of a “fight for $15” campaign. New York City, Los Angeles, and Seattle are a few of the cities that are implementing increases in the minimum wage, ultimately raising it to $15 an hour for most workers. Illinois is in the process of passing a wage bill that would increase the minimum wage statewide.  Proponents of these bills and laws generally take the position that raising the minimum wage will result in higher wages and better working conditions for employees. Two recent studies attempted to assess the economic effects of Seattle’s wage laws and came to strikingly different conclusions.

In January 2016, Seattle increased its minimum wage for large companies to $13 per hour, as part of a series of increases that would ultimately move the minimum wage in the city from $9 per hour in 2014 to $15 in the future.  Two studies—one by UC Berkeley’s Institute for Research on Labor and Employment, the other by economists from the University of Washington—reached opposite conclusions on the impact the increases have had on workers in Seattle, with the Berkeley study finding that workers earned more money and the University of Washington study finding that they earned less.

The Berkeley study focused on wages for workers in the restaurant/food service industry. It found that, for the restaurant and food service industry, a higher minimum wage resulted in increased earnings for low-wage workers, without causing job loss in the industry.  These results seem to support what advocates of minimum wage increases expected: income gains for workers, without a decrease in industry jobs or any significant damage to the local economy.

However, the University of Washington study—which was not limited to one industry, but attempted to look at the Seattle economy as a whole—arrived at a different conclusion. While workers in Seattle earned a higher hourly pay rate as a result of the minimum wage increase, they worked fewer hours after the wage hike. As a result, workers’ actual incomes after the wage increase were ultimately less than their earnings had been before the city raised the minimum wage. This result is consistent with the position taken by many business advocates, who argue that significant wage hikes may lead employers to cut jobs, reduce employees’ hours, or go out of business altogether as a result of increased costs. The University of Washington Study.

Unsurprisingly, the two sides are focusing on the findings that support their respective positions. Seattle’s mayor promoted the findings of the Berkeley study and assailed the methodology of the University of Washington study, whereas conservative media outlets have trumpeted the University of Washington’s findings, while dismissing Berkeley’s findings as limited.

For those hoping to extrapolate Seattle workers’ experiences out to their areas, be careful. What may be true for Seattle—a mid-sized, relatively wealthy city—is not necessarily true for other municipalities. New York, Chicago, and Los Angeles will likely all see unique changes to their local economies as wage increases go into effect.

If your employer has violated your rights under federal, state, or city wage-and-hour laws, including failing to pay you the minimum wage, contact The Harman Firm, LLP.