BY: MICHAEL SALTSMAN / Forbes Contributor, June 26, 2017
What a difference a week makes.
Last week, Seattle Mayor Ed Murray trumpeted a new report on his city’s minimum wage experiment, from a team of researchers sympathetic to the cause. As I wrote at the time, the Mayor’s request of this report was unusual, given that the city had already funded a separate University of Washington study.
Today, the reason for the Mayor’s actions is clearer: A devastating new entry in the University of Washington inquiry details the harm that Seattle’s higher minimum wage has caused to the employees it’s meant to help.
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. 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.
To put that nine percent drop in context: That’s a loss of “3.5 million hours worked per calendar quarter.” The bold finding above is particularly harmful to the fighters for $15 because it suggests that the policy’s core goal–to raise wages at the bottom end of the pay scale–is not being achieved.
The movement for $15 has faced significant setbacks in recent months. Policymakers in left-of-center locales such as Baltimore, Cleveland, and Montgomery County, MD, have declined to endorse $15, noting its negative impact on small businesses. The empirical evidence is also catching up to the anecdotal evidence: Prior to today’s University of Washington release, a separate study using Yelp data found a spike in closures for median-rated San Francisco restaurants following an increase in that city’s minimum wage.
The SEIU has spent at least $90 million so far on the Fight for $15, and today’s credible evidence on the policy’s consequences is unlikely to move its most-ideological adherents. But sensible policymakers in liberal enclaves should heed the words of credible-third parties who let the evidence, rather than ideology, guide their conclusions:
“This is a study that has the power to move people’s beliefs. It will have a substantial impact on the debate,” said David Autor of MIT, one of the country’s leading labor economists, who reviewed the paper before it was published.
“It suggests we should be proceeding cautiously when we start pushing minimum wages into ranges where they are pretty significant,” Autor said.