Report finds Seattle's $15 minimum wage may hurting workers

originally posted by: Aazadan

originally posted by: ketsuko
a reply to: RomeByFire

Not really. The low wage workers lost money overall even if they were being paid more per hour.

In other words, they were hurt by the increased wages. And if the employers paid for less hours of labor, you can't just say they worked extra jobs because odds are that pretty much all the low wage employers responded the same way. There are less hours of low wage work for low wage workers.

Higher minimum wages = less available work for low wage workers.

Not really, because you're dealing with averages. A few lost jobs. Those that kept them wound up in a better place. That's unfortunately, going to be a reality we have to deal with.

Lets take a small example. Lets say that in a small community there's $150 per day, hour, or whatever to do these jobs and there's 15 people. That means each person gets $10 for their labor. What if living expenses cost $12 though? That's what it's like being at or near minimum wage today. It doesn't cover living expenses. So we give each person a subsidy to get them up to that $12. The end result is that all 15 people are dependent on government.

Now, lets say we increase the minimum wage from $10 to $15. Lets also say that the pool of $150 doesn't change. I'm sure we could both put forth arguments to either increase or decrease it, but for arguments sake lets just say that the available money to pay employees remains equal. With this wage change we now have 10 people that are employed, but those 10 aren't just getting by at the bare minimum, they're over it by 25% which means they have some disposable income and have measurably better lives. The remaining 5 people are still dependent on government subsidies but the wage increase has now taken us from all 15 people relying on government to only 5 relying on government.

At the same time, the distribution of funds didn't change, before minimum wage there was a $60 deficit, and after minimum wage there is still a $60 deficit.

Doesn't this make sense? We should be looking to minimize the number of people on assistance, correct? Increasing the minimum wage does just that. It doesn't remove everyone, but it removes some, and it makes life a good deal better for others.

Unfortunately this actual situation disproves your hypothetical situation.

Not only did the wage hike result in less people working, but it also resulted ion those that kept their jobs working less hours.

Our preferred estimates suggest that the Seattle Minimum Wage Ordinance caused hours worked by low-skilled workers (i.e., those earning under $19 per hour) to fall by 9.4% during the three quarters when the minimum wage was $13 per hour, resulting in a loss of 3.5 million hours worked per calendar quarter. Alternative estimates show the number of low-wage jobs declined by 6.8%, which represents a loss of more than 5,000 jobs. These estimates are robust to cutoffs other than $19.45 A 3.1% increase in wages in jobs that paid less than $19 coupled with a 9.4% loss in hours yields a labor demand elasticity of roughly -3.0, and this large elasticity estimate is robust to other cutoffs.

www.zerohedge.com...

You are also incorrect that the total "deficit" would be the same.

On average, workers made 6.6% less after the wage increase.

Importantly, the lost income associated with the hours reductions exceeds the gain associated with the net wage increase of 3.1%. Using data in Table 3, we compute that the average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker.

www.zerohedge.com...

You also make the assumption that all of those working now will make more, and so even though there are more unemployed, that is less welfare that will need to be offered.

But that assumes the people that still have jobs will no longer need assistance. It also assumes that each person receives the same amount of assistance. In other words there is a flat number that everyone on assistance gets, so less people means less assistance dollars given.

But that is not the case. A person making $20000 a year will require less assistance than someone making zero.

So the best measure we can use is on average, what was the net benefit or detriment to low income employee wages.

The result was 6.6% less money for these people, which means the amount of assistance that will need to be increased to them is roughly the amount that they lost.

originally posted by: Grambler
Not really. The low wage workers lost money overall even if they were being paid more per hour.

In other words, they were hurt by the increased wages. And if the employers paid for less hours of labor, you can't just say they worked extra jobs because odds are that pretty much all the low wage employers responded the same way. There are less hours of low wage work for low wage workers.

Higher minimum wages = less available work for low wage workers.

Did you happen to read the paper? Or just the stories about the paper? Here's a link to the study (which I'll point out, isn't peer reviewed)
evans.uw.edu...

First of all, the wage is not currently $15/hour, it's $13/hour and they're measuring the impact of going from $11/hour to $13/hour. Secondly, their measurement is highly dubious.

Section 5 beginning on page 16 explains their methodology. They essentially counted jobs lost, as jobs which were below $13/hour. If a job previously paid $11 (the old minimum) and now paid $13, that job was considered lost.

So essentially what this is saying is that jobs that pay below minimum wage tend to disappear.

They also noted that when the minimum wage increased, jobs paying up to 50% above the minimum wage also increased in pay. Not that the jobs disappeared, only that they moved into a higher paying category.

The reduction in employment at wages under $13 could reflect either movement of wage
rates above this threshold or the elimination of jobs. Table 3 panel A shows that over the same two-year time period, the number of jobs paying less than $19 per hour fell from 92,959 to 88,431 (a decline of 4,528).

Again, from the study results

Over this same period, overall employment in Seattle expanded dramatically, by over 13% in headcount and 15% in hours.

Sorry, it's not pasting well, and my keyboard layout is bad for editing it. Here you can see quoted from page 29, that they're basically recognizing that the first increase to $11/hour had great effects and increased wages and hours worked. Then they claim that there's no evidence that going to $13 had the same result... largely because they didn't study that, but just want to say it's different, therefore the results will be different.

It appears that any “loss” in hours
at lower thresholds is likely to reflect a cascade of workers to higher wage leve
ls. In contrast, as
shown in the bottom panel, the negative estimated effects of the second phase
-
in to $13 are
significant as we raise the threshold all of the way to $25 per hour. Thus, there is no evidence to
suggest that the estimated employment loss
es associated with the second phase
-
in reflect a
similar cascading phenomenon.

And again, here they point out their methodology that the loss in hours, was only of specific small businesses during a time of year when things are known to slow down.

This implies that the
minimum wage increase to $13 from the baseline level of $9.47 reduced income paid to low
-
wage e
mployees of single
-
location Seattle businesses by roughly $120 million on an annual
basis.
39
Note that the largest and only statistically significant payroll estimate correspond
s
to the
first quarter of 2016. This result is notable as the first quarter tends to be a time of slack demand
for low
-
wage labor (after Christmas and before the summer tourist season)
–
in effect, Seattle
suffers a mini recession every winter.

And finally, because I'm running out of character space. Directly from their conclusion, page 35

Our finding
of zero impact on
headcount employment in the restaurant industry echoes many prior studies.

a reply to: Aazadan

Man I am furious. I spent an hour going but by bit through your post and the paper and my computer turned off

Needless to say I will sum up.

You are mistaken in your reading of this paper.

Your third quote answers your first two.

It says that the move to $11 an hour had jobs lost, but there was a sort of cascading effect where there was evidence that these jobs lost resulted in jobs made above $19 an hour.

However, that did not occur with the move to $13, hence the numbers I cited of jobs and hours lost were actually lost from that period, not resurfaced elsewhere. This is despite the fact that the economy expanded for higher earners.

In other words, things like a tech boom increased very high paying jobs in Seattle, but the low wage workers lost work.

It not like McDonalds workers got these high skilled tech jobs, so the low skilled people are being hurt more by the loss in jobs.

You quote about the recession period in Seattle is only talking about annual payroll estimates. It has nothing to do with the amount of jobs lost or wages earned or lost in the study. The numbers of hours lost and low wage earners making 6.6% less was measured over the entire year, not just this one quarter.

Foot note 30 even explains why when they measured job loss from 2015 to 2016 they used quarter two to specifiaclyy avoid that recession period.

Your last quote is misleading. It is actually saying other studies only looked at one area like resteraunts, thats why their conclusions were different. They acknowledge, they too get different results if the just look at that inddsutry.

That is why they explain they looked at ALL industries.

They then go on with their conclusions, which include the fact that low wage workers are earning on average 6.6% less money a year after the move to 13%.

Unfortunately, the study says exactly what I claimed, which means more assistance will be needed for these workers, and the increase failed miserably.

a reply to: Grambler

My reading of the paper basically sums things up like this:

They claim that going from 9-11 helped the economy. Then they claim that 11-13 hurt the economy and put them back into the same situation at 9. Essentially they're putting a curve in place saying an optimal range is around $11, above that bad things happen, below that good things happen. But then they point out that their data sources were quite limited, so we can't really put too much stock in their approach.

I suppose if I really wanted to read into that restaurant data, I would take it to mean that McDonalds employees can handle a higher minimum wage, while day laborers can't, so lets just make the minimum wage sector specific.

a reply to: feldercarb

Wages should all be one one straight plain. None of this here and there heresay. That's my take on all that.

originally posted by: Aazadan
a reply to: Grambler

My reading of the paper basically sums things up like this:

They claim that going from 9-11 helped the economy. Then they claim that 11-13 hurt the economy and put them back into the same situation at 9. Essentially they're putting a curve in place saying an optimal range is around $11, above that bad things happen, below that good things happen. But then they point out that their data sources were quite limited, so we can't really put too much stock in their approach.

I suppose if I really wanted to read into that restaurant data, I would take it to mean that McDonalds employees can handle a higher minimum wage, while day laborers can't, so lets just make the minimum wage sector specific.

I would have to spend a lot of time regarding that the move from 11 to 13 took it back to the same level as 9, but I think the thrust of what you are saying is true.

I still favor a more free market approach than these wage laws.

But I enjoyed going over the study with you.

As a person who lives in downtown Seattle (Queen Anne neighborhood), I can tell you that no one is living anywhere near the state of comfortable living off $15/hour in this city.. Cost of living here is through the roof. its tough for people who are well off. Minimum wage will never cut it here... I'm sure most, if not all, these minimum wage workers all live way outside Seattle in like Federal Way or even further out..

a reply to: feldercarb

evans.uw.edu...

Not sure if this was brought up yet but the link is the actual National Bureau of Economic Research study. It was paid for in part by the City of Seattle itself. As opposed to previous studies, this one has the most robust data to examine. It examines all low wage employees across all industries.

The quick version:

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.

Im calling bs.

For those interested,

Here is an interesting article that shows that the Mayor knew this study was going to be bad for him.

So he called his boy at Berkely that he knew would give him a favorable study. And he used tax payer money to do it too.

www.seattleweekly.com...

The right and left both argue from either supply side or demand side economics, but the economy is the interaction between supply and demand. Both sides are equally right in a very simplistic way. Yes, raiding the minimum wage will reduce the amount of jobs. Yes, this will be offset by faster money circulation throughout the economy. No, it will not solve any problems all by itself.

If you take away all the wage rules and let companies do what they want, wages will drop significantly for every minimum wage worker across the country, which will hasten the current retail crisis and will have deflationary effects that ripple throughout the economy.

If you increase wages, companies will automate and offshore jobs wherever they can (or continue to do so), while workers who keep their jobs will benefit, few others will, and we may ultimately have the same deflationary effects if more jobs are lost than retained.

Right now, 5 people own more wealth than 3.5 BILLION people. This is a structural problem that will continue to worsen until we are all impoverished except the top .00001%. That is, until the economy collapses from its own topheavy structure, the exact same thing that caused the Great Depression. The problem is a lot bigger than the minimum wage, and if you really want to fix it, well......... good luck. Neither of those policies will actually make a difference to the real problems.

Real solutions probably start with abolishing the federal reserve, completely overhauling the current banking system, getting money out of politics, building an economy that rewards saving instead of debt, incentivizing multiple small businesses rather than a few large ones, making it easier to be gainfully self employed (change self employment tax), and completely changing our education system to take advantage of the fact that every human has such a wealth of information literally at their fingertips.

If there was an easy solution to any of our problems, that problem would be fixed by now. We are facing problems created by the structure of our system, and it's difficult to see what must be changed with so many problems in the way. We all might as well start listenimg to both sides, because if you stick to one side only, you're automatically half wrong.

Weird. They say Australia is upside down, being we're down under...

Whew, $17.70 an hour minimum wage, and we're not all living in tents eating grubs for dinner. Strange..

Not only that, but we have safe working environments, unfair dismissal laws, regulations that ensure workers are not taken advantage of, paid sick time, paid holidays.. etc..

*scratches head* at-will-states.. *shakes head*

originally posted by: ketsuko

originally posted by: peck420

originally posted by: BASSPLYR
Other countries can pay their employees close to 15 an hour as minimum wage and yet their economy is doing better than the usa.

Unless the US is planning on making their laws and regulations the same as the other country, this is an irrelevant point.

Even State vs State comparisons, in the US, are difficult due to the discrepancies in this area.

This is correct, and those other countries also have much higher costs of living than the US too.

Being paid $15/hour isn't all that if you live in an area that costs a lot to live in.

originally posted by: badw0lf
Weird. They say Australia is upside down, being we're down under...

Whew, $17.70 an hour minimum wage, and we're not all living in tents eating grubs for dinner. Strange..

Not only that, but we have safe working environments, unfair dismissal laws, regulations that ensure workers are not taken advantage of, paid sick time, paid holidays.. etc..

*scratches head* at-will-states.. *shakes head*

Easy to do when only 1/3 of your continent is habitable by regular people, and you've got some exports as well as tourism

I'd wait for more info, but I think that time has passed for this in a city that is one of the fastest growing in the US.

Thirteen dollars an hour which is what they are being paid in this test run is not going to amount to a damn thing, neither is $15.00 and hour if 70 thousand a year is now "below poverty" in Seattle. As the growth of the city, one of the fastest growing, to the investments in real estate further driving up rents(which has been speculated by some to be big part of the problem as well), will gentrify the low income and the middle class even more.

I figure it comes close in similarity to how insurance was causing jobs to go from full time to part time where the company didn't have to pay insurance for less hours.

The only option for many citizens is to now live homeless and work or to move further outside of the city. However, you can only live so far out until your paying a lot in gas, toll and ferry money and wear and tear on your car to make it to the job areas of the region, which is mainly the cities area.

If this is to continue, the service/hospitality sector in Seattle is going to have to go the way of Amazon and or other with automated pay, maybe part of the plan anyway, where stores that don't use people for monetary transactions but apps and self pay registers instead.

Well if this stuff true, and it going to cause more inflation and unemployment, it going to be coming to Canada very soon too.

Yep, were #ed too.