Seattle Minimum Wage Ordinance Backfired, New Research Finds

Author: Michael Cardman, XpertHR Legal Editor

June 26, 2017

When Seattle raised its minimum wage from $9.47 to $11.00 in 2015, the increase had little effect on employment.

But the next round of increases in 2016, from $11.00 to $13.00, resulted in a 9% reduction in hours worked in low-wage jobs, according to new research released today. Meanwhile, hourly wages in those law-wage jobs increased by only about 3%, meaning low-wage employees' monthly earnings actually decreased by an average of $125 as a result of the city's minimum wage ordinance.

The researchers cautioned that their findings should not be generalized to minimum wage policies set by other localities, because the effects of minimum wage ordinances will vary depending on "industrial structure, characteristics of the local labor force, and other features of the local and regional economy."

Nevertheless, the new research has the potential to shape the minimum wage debate nationwide. Part of a multi-year study being conducted by the University of Washington, it is more credible and authoritative than the output of think tanks and other more ideological sources. It also is some of the first research to look at higher minimum wages that approach $15, which has been the goal of activists and legislators in states and cities around the country.

Both advocates and foes of higher minimum wages will find nuances in the research to bolster their cases.

Advocates will be quick to note the researchers' observation that some more experienced workers - household heads responsible for maintaining a family's standard of living - may have experienced significant wage increases with no reduction in hours while teenagers and other new entrants in the job market found it harder to secure work.

Foes will surely seize on the job losses as evidence that minimum wage increases fail to help the poor, as they are intended to do.

Because the research looked at the effects of different marginal increases in the minimum wage, one main conclusion could be that there may be a "sweet spot" somewhere between the current level and $15 to which the minimum wage can rise without resulting in offsetting decreases in employment.