U.S. News /14 Jan 2018

Seattle’s $15 Minimum Wage Experiment is Working

When Seattle started down the road to the $15 minimum wage, the city hired a University of Washington team of economists to analyze the wage’s effects on the city. In the years since, the Seattle Minimum Wage Study Team’s findings have been largely positive. In 2016, they found that wages in Seattle are up, low-wage employment increased in the city, and the number of hours worked increased. They reported earlier this year that the wage increase had “near zero” impact on restaurant employment. And this week, in their final study for the city, the Seattle Minimum Wage Study Team released a report proving prices at restaurants and grocery stores haven’t increased because of the minimum wage. When taken in total, the Seattle Minimum Wage Study Team’s reports have proven that the $15 minimum wage is a success.

Every time a city or state discusses raising the minimum wage, businesses and conservative lawmakers respond with a series of three threats. They argue that the higher minimum wage will kill jobs,that the wage will kill businesses and that prices will skyrocket. Here’s an EPI survey from before Seattle’s wage increase showing that businesses overwhelmingly predicted all three of those outcomes. Those are the three primary arguments against raising the wage, and the Seattle Minimum Wage Study Team has now clearly disproven all three of those threats. This report discusses both cost data—in the form of restaurant and grocery store price changes that are observable and quantifiable—and anecdotal information, in the form of interviews with business owners and workers. It’s important to remember which is which as we discuss the results of the study.

First, let’s start with the data. In the report’s executive summary, the Study Team says they compared “menu prices for different types of restaurants and grocery prices from supermarkets inside Seattle and in the surrounding King County, before and after Seattle’s most recent minimum wage increase on January 1 2017.” It’s about as simple and clear-cut a study as you can do: record prices before and after an increase, both inside Seattle (where the wage increase happened) and outside Seattle (where it didn’t happen.)

And how did that study turn out? I quote directly from the report: “Sampled restaurant prices in both Seattle and the surrounding areas increased by 2% between late 2016 and early 2017, with most of the increases happening in full service restaurants…Market basket grocery store prices for Seattle and King County remained relatively stable from March 2015 to May 2017, declining by 0.4% overall, and there was no detectable impact of the Ordinance.”

That’s conclusive. Those who argued that the minimum wage was going to result in exorbitant food price hikes have been proven wrong. The rest of the UW Study Team’s report is made up of interviews with employers and workers, which means it doesn’t consist of factual data but instead of impressions. That’s important stuff—it demonstrates how the minimum-wage law is perceived by real people—but it shouldn’t be analyzed in the same way as information gathered through observation and statistics.

In the next few weeks, you’ll likely see conservative outlets (and quite possibly the Study Team itself) working hard to turn the interviews into negative headlines about the minimum wage. But the truth is that these interviews are poor indicators of the actual results of the minimum wage. The interviews with owners, particularly, are precisely as reliable as that survey I linked to at the top of this piece—the one from 2014 that predicted apocalyptic doom if Seattle passed a $15 minimum wage.

For instance, about half of the business owners interviewed in this report claim to have raised prices in order to pay for the minimum wage. But the data collected by the UW Study Team proves those claims are false. What could this mean? Possibly the owners only raised prices as much as they otherwise would have—but because the minimum wage was such a contentious and publicized issue, they attributed those cost increases directly to the wage.

The rest of the interviews with employers went about as expected: owners largely believed that they knew better than the city what they should pay their employees, and they felt as though the city didn’t understand what it means to run a business. This is to be expected; many of those owners likely made the same claims before the minimum wage was passed. Just as people don’t like paying taxes but they do like the goods and services that taxes create, owners don’t like having to pay employees more even though they do like the increased value those workers earn for them. It’s just human nature.

Also as expected: workers who received raises liked being paid more. The majority of them reported stable employment, and many reported working more hours since the wage was increased. But many of the workers also attributed the rising costs of rent in Seattle to the minimum wage. One told the Study Team, “My rent went up $180 because of this. You know? And I noticed that a lot went up. Things went up. Things went up. My car insurance went up.”

Of course, affordability is a huge issue in Seattle. But nobody—not the UW Study Team, not anyone—has connected the $15 minimum wage with rising rent costs and/or home prices. In fact, the outrageous costs of housing are much more likely attributed to the high-wage tech workers who have flocked to the city in record numbers: gentrification. Without the minimum-wage increase, a lot of workers would be even less likely to find housing than they are now. The report itself acknowledges that these interviews are “not evidence of the effects of the Ordinance but rather evidence of the feelings and attitudes of workers.”

One problem that the worker interviews highlighted was a lack of information about the wage increases. About half of the workers interviewed said they didn’t see the city-produced posters announcing the minimum wage posted at their place of employment, & only a third of them could correctly identify the actual current minimum wage in the city. This report highlights a significant problem with any minimum-wage rollout in any city: Seattle can always do a better job of education and enforcement. Before they can enjoy their rights, workers have to understand what their rights are.

So what can we learn from this study? On the data side, we see that everything is proceeding as planned. Nobody’s paying $50 for a burger at McDonald’s, or $16 for a can of tuna at Safeway. Employers wish their profits were higher, and workers are glad they got a raise, but they wish they made more money. Three years after Seattle started down the road to $15, everything is as it should be. Those apocalyptic claims of destruction and business closures have been proven false.

One thing the study didn’t explain was why the sky didn’t fall as promised. Why weren’t workers laid off in droves, or replaced with robots? Why didn’t prices skyrocket? Why does Seattle have more restaurants now than at any point in its history? It’s because those workers who saw a raise now have more money to spend in the city around them. Those restaurant workers are eating in more restaurants. They’re buying more groceries. They’re buying more clothes and cars. That increased consumer demand is creating jobs, more than paying for the increased minimum wage. The $15 minimum wage established a positive feedback loop that created growth in Seattle by including more people in the economy. In other words, it worked exactly as intended.

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