Study: Seattle’s Minimum Wage Hike Hurting Low-Income Workers

Employers forced to cut back hours after implementation of mandatory hourly rate hike

by Edmund Kozak | Updated 27 Jun 2017 at 7:27 AM

The results of the first comprehensive study of Seattle’s minimum wage increase are in — and it’s bad news for liberals and artificial wage-hike advocates.

The new study, done by academics at the University of Washington and published by the National Bureau for Economic Research, has revealed that Seattle’s decision to raise its minimum wage has generated negative results for the city’s low-wage workers.

“This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016,” the study’s abstract states.

"Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent," the study read. "Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees' earnings by an average of $125 per month in 2016."

Calculated for the year, that represents a total loss of $1,500 in earnings — a serious and significant reduction in income for a low-wage worker.

"This important study ought to be a big wake-up call that the 'Fight for $15' minimum wage effort is actually hurting those they say they want to help — reducing incomes and eliminating economic opportunities for low-income Americans who need them most," said Jeremy Adler, communications director of America Rising Squared, a conservative political group on the forefront of the minimum wage debate.

The study found exactly what conservatives have long claimed: that when the government forces businesses to pay hourly employees a higher wage than their labor is actually worth, those businesses will either hire fewer workers or have their staff work fewer hours.

"The reduction in employment at wages under $13 could reflect either movement of wage rates above this threshold or the elimination of jobs," the study states. "[O]ver the same two-year time period, the number of jobs paying less than $19 per hour fell from 92,959 to 88,431 (a decline of 4,528). Measuring hours worked at low wages rather than employee head count, the table shows a 5.8 million-hour reduction at wage rates under $13, and a 1.7 million-hour reduction at wages under $19."

"Though it would be premature to make causal inferences on the basis of this single-differenced data, both head-count and hours data suggest that reduced low-wage employment can be apportioned primarily, but less than entirely, to wage increases," says the study.

Proponents of the "Fight for $15" have consistently dismissed conservatives' warnings that wage hikes lead to either reduced hours, a reduced workforce, or all three. With the publication of this study, it may be difficult for them to continue to do so.

"No matter how hard they may try, politicians can't repeal the law of supply and demand," tweeted Sean Davis, co-founder of The Federalist website.

"The real world gets in the way of liberal utopianism AGAIN," tweeted former Secret Service Agent and conservative activist Dan Bongino.

A number of other cities and states are raising or are examining the possibility of raising their respective minimum wages. In November 2016 Washington voters opted for an increase in the statewide minimum wage with a target of $13.50 per hour by 2020, while Arizona voters agreed to a hike to $12 per hour, also by 2020. Atlanta mayor Kasim Reed announced just last Thursday that his city is raising its minimum hourly wage to $15.

In New York in 2015, fast-food workers' wages won an increase to $15 per hour by 2018 in New York City (and by 2021 in the rest of the state) after a sustained campaign by the organized far left. In conjunction with that successful campaign, New York Gov. Andrew Cuomo issued an executive order increasing state employees' minimum wage to $15 per hour.

But a report by the New York Post, published only last week, suggests that the effects of the rise in New York City — which went into effect in 2016 — have been just as devastating as the hike in Seattle.

"The Empire State lost 1,000 restaurants last year and the number of jobs as cooks, servers and dishwashers grew by an anemic 1.4 percent," the Post reported. "Employment growth at fast-food restaurants in the city — which are required to pay $12 an hour, or $1 more than other employers — shriveled to 3.4 percent last year compared with 7 percent growth from 2010 to 2015."

"The spiral has continued into 2017, which has generated just 2 percent growth through May. Full-service restaurants in the city are adding even fewer jobs, with growth at just 1.3 percent last year compared to 6.5 percent over the previous five years. This year it's down to 1.2 percent through May," the Post reported.

"This is a drop-off in restaurant growth that didn't even show up during the great recession,” Michael Saltsman, managing director of the Employment Policies Institute, told the Post.

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