Economists reverse claims that $15 Seattle minimum wage hurt workers, admit it was largely beneficial


#1

Originally published at: https://boingboing.net/2018/10/28/fight-for-15.html


#2

Now if only $15/hr was a living wage in Seattle.


#3

cumberbatch-constipated


#4

Wow, is this a misreading of the report.

“We attribute significant hourly wage increases and hours reductions to the policy.”

So wages went up, and hours went down.

“On net, the minimum wage increase from $9.47 to as much as $13 per hour raised earnings by an average of $8-$12 per week.”

So an increase in minimum wage of $3.53 per hour raised earnings by $12/week. Which means that after raising the minimum by $3.53/hr, the actual effect on take-home pay was actually equivalent to a 30 cents/hour raise. So hours actually had to be cut quite a lot.

" The entirety of these gains accrued to workers with above-median experience at baseline; less-experienced workers saw no significant change to weekly pay."

So every bit of gain went to a small set of workers. And!:

"Approximately one-quarter of the earnings gains can be attributed to experienced workers making up for lost hours in Seattle with work outside the city limits. "

The only reason those earnings went up that much is because the people whose hours were cut took second jobs outside of the city.

"We associate the minimum wage ordinance with an 8% reduction in job turnover rates as well as a significant reduction in the rate of new entries into the workforce. "

Which means fewer people being hired. Which is exactly what opponents of this increase warned about.

The authors are correct: this paper doesn’t contradict the earlier one, and saying the authors “reverse claims” is dishonest.


#5

Time and time again, it has been shown that there is no increase in unemployment from a modest increase in the minimum wage. However, this contradicts the oversimplified lessons taught in economics courses, so of course some people doube down and deny reality rather than admit that their pet theory has been falsified*

Of course, what people who are busy looking at a pair of lines crossing on a graph don’t want to know is that minimum wage labor isn’t just a commodity stamped out by a machine. There are real people behind those statistics. And real people don’t just suddenly disappear from the labour market if the price of their labour goes down- they have to work more so that they can afford to live, and there is no other option, since industrialisation and enclosure have removed what little alternatives existed. Therefore, minimum wage labor is always undervalued.

*Incidentally, this is a good way of telling woo from actual scholarship. Any real researcher can tell you what real world observations it would take to undermine their theories. If the theory can explain any observations with a little jargon, or you are told that the observation doesn’t exist, then you’re dealing with theology, not theory. Economics is rife with this attitude, and application of this test to other fields is left as an excercise for the reader.


#7

Laws against dangerous sweatshop labor are also job killers, if you’re loose in your definition of jobs.

If you’re really loose, so are laws against slavery.


#8

it was really the opinion piece that cory linked to which said the authors reversed claims.

to an extent, in their new paper they do. they failed to take into account changes to labor retention. which i think is pretty interesting.

"Finally, conditional on being employed, both less and more experienced workers were more likely to remain employed by their baseline Seattle employer, implying an 8% reduction in labor turnover rates.

Evidence of earnings increases… appears to contrast with our earlier work… Our analysis of the entry rate of new workers into Seattle’s low-wage labor market reconciles the findings."

also, while you’re right some people were picking up a second job to increase their pay, what you’re missing out on is that they were ableto.

previously, they had to bounce from job to job, trying to make ends meet. now they have one solid job , with possibly reduced hours but if so, the total same pay. so, in that same 30-40 hours a week of work were able to get another job, and increase take home pay.

that’s a good thing. having two jobs sucks, but earning more and having more stability is a good thing.

add in some rent control, and single payer insurance - people might have some real lasting gains.


#9

The previous paper, at least in draft form, said that minimum wage workers were worse of in net. This one says they are better off. That’s a reversal.

The way in which they are ‘compatible’ is pretty deeply technical. I think they suggest that the previous paper, perhaps, was essentially measuring a reduction in new low wage jobs in the city. Perhaps those tended to go out of the city instead. But individuals weren’t actually hurt as far as they can see.

Re point two:
And 3/4 of the income gain was not due to picking up some hours out of the city…
The is also the ridiculous idea built in where it is somehow better to work more hours for slightly less money than to work fewer for slightly more. Even if the money is the same getting it for fewer hours is better. Further they is no residency analysis. Seattle is expensive. An lot of the lower wage workers live outside the city. It’s plausible that bumping some jobs out of the city is a benefit for workers. In general the concentration of the boom had been a problem, not a benefit.


#10

So, a little more pay for a lot less work for more experienced workers, who are more likely to have a family to support and kids to take to school/sports/music/help with homework. Same pay for a lot less work for less experienced workers, who have more time for classes and other training.

Yeah, that really sucks.

Meanwhile, employers retain workers at an 8% better clip. Don’t underestimate the cost savings associated with reduced turnover. Hiring and training new workers, even at minimum-wage jobs is expensive.


#12

THANK YOU.

“increase in pay led to fewer hours”. wow, fewer hours and more money per hour. what a shame. everyone loves working as many hours as possible. nobody wants to spend extra time on hobbies or side hustles or starting their own business or etsy.


#13

One earlier minimum wage study looked at workers in Idaho vs Washington State in two cities near the border, within an hour of each other and therefore actually partially the same labor market, but with WA having raised it’s minimum wage to well above that of Idaho. It’s worth looking up. One way of looking at what they found is that it showed that employers are paying stupidly low wages. The minimum wage forced the WA employers to pay more and they ended up with much lower turnover and all the most productive employees. The Idaho employers ended up complaining that they couldn’t hire good people anymore and seemingly at a loss as to how to fix it, heh.


#16

You beat me to the punch. The left must have a different definition for largely beneficial.

Another thing to know is that if Seattle workers are working less hours they may be losing benefits such as health insurance, which would actually leave to a net loss in income.


#17

Perhaps a minimum hours law would help as well. If people want to negotiate fewer hours, it should be up to them.


#18

Read the article. That was covered.


#19

$13-$15/hr entry level jobs are easier to support when you have a large number of high paid tech workers in the area to buy the associated services.

Let’s remember that downtown Seattle is now the leader in cranes per city in the U.S and it’s not even a contest: https://seattle.curbed.com/2018/7/24/17608278/seattle-construction-crane-count-report

65 cranes vs. 40 in city number 2. The growth here is staggering. Amazon can’t build it’s own structures fast enough so is now resorting to leasing entire buildings before that building is even complete.


#20

Of note the paper states:

“The losses in employment opportunities appear to have been concentrated among the least experienced workers, or those attempting their first entry into the labor market.”

“Overall, evidence suggests that employers responded to higher minimum wages by shifting their workforce toward more experienced workers.”

One may want to keep in mind the compositional changes of high minimum wages. Those who are least experienced & productive will lose out to those who are more experienced & productive.


#21

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