A recently released study from University of Washington researchers indicates that relatively high minimum wage increases are likely to decrease the work hours and employment of relatively low paid workers. The report was commissioned by the City of Seattle to study the impact of Seattle’s ongoing series of minimum wage increases that will reach $15 per hour on July 1. The Seattle study indicated that a recent minimum wage increase from $11 per hour to $13 per hour caused a 3 percent increase in hourly wages for a low-wage worker group (those making less than $19 per hour) but a 9 percent reduction in hours worked for that group, on average netting a loss of income of $125 per month, per worker. The number of low-wage jobs in the Seattle study decreased by about 7 percent compared with a control group.
Progressive commentators, journalists and economists promptly criticized the studybased on claimed flaws. Nevertheless, this is not the only study that has shown minimum wage increases often have negative effects on employment. In other words, the laws of fundamental classical economics apply. There is some elasticity in the job market, and employers can and often will use substitutes for relatively low-wage labor when minimum wages rise. If the goal of minimum wage increases is to “fix” income inequality, the Seattle study, which is ongoing, appears to demonstrate that targeting employers of relatively low-wage workers with minimum wage requirements is a distortion of the labor market that not only does not produce the intended results, but also may actually harm the intended beneficiaries. We will be watching for the effects of the next Seattle increase, to $15 per hour, and will report back.