Minimum Wage Increase Results in Net Loss for Workers, Study Finds

Minimum Wage Increase Results in Net Loss for Workers, Study Finds

An ordinance to increase the minimum wage in Seattle lowered the earnings of low-wage workers in the city an average of $125 a month, a report funded by the Laura and John Arnold Foundation finds.

According to an eighteen-month analysis of the 2014 ordinance, which mandated a stepped increase in the city's minimum wage from $9 to $15 an hour, the increase to $13 an hour resulted in a reduction of hours worked by low-wage workers by some 9 percent in 2016, while the average hourly wage for such jobs increased by some 3 percent. The result, according to researcher Jacob Vigdor and colleagues at the University of Washington, was a drop in total payroll for low-wage jobs in the city.

The study, one of the first to examine the effects of a substantial increase in the minimum wage, covered a broad range of workers and examined both employees' earnings and the number of hours they worked. And while it found no evidence of negative consequences associated with an increase to $11 an hour, it did find that an increase to $13 an hour caused many employers to cut hours, resulting in a net loss for workers.

"[A]lthough the UW study makes significant contributions to our understanding of the minimum wage, questions remain, and the study does have limitations," said LJAF senior vice president Josh McGee. "For one, it doesn’t involve multi-site employers, because UW researchers were not able to tell whether the workers for those companies were employed inside or outside the city limits. In addition, we can think of many reasons why the Seattle market today is idiosyncratic — high real estate costs, a relatively high prior minimum wage, and a robust economy. These factors may very well preclude us from applying this work to other jurisdictions."

"More Than a Number: the Impacts of a Higher Minimum Wage." Laura and John Arnold Foundation Press Release 08/03/2017.