If an economist running a city decided to raise the minimum wage, she’d either have sinister motives in purposely engineering a disaster, or she’d be Seattle city councilwoman Kshama Sawant looking for social justice.Even economists in favor of raising the minimum wage view $15 an hour as problematic, but that didn’t stop Sawant from actively pushing for a $15 minimum wage to be part of the city’s agenda. As we all know, Seattle did end up it, which will be phrased in fully by 2021.
Initially, the minimum wage was raised to $10 for small businesses, and $11 for large businesses on April 1st, 2015. On January 1st of this year, businesses saw their minimum wages raised to $12, $12.50, or $13 an hour depending on size. The increases will keep going up until all businesses have a $15 minimum wage – which could come as early as New Year 2017, however, the final phasing in could be delayed to 2018 or 2019. Lastly, businesses with under 500 employees will have until 2021 to phrase in the hike.
So how did this affect workers? They are known consequences to business from minimum wage hikes, and when they see their bottom line shrinking due to labor costs, where else do you think they’re going to cut? Employees will see hours cut, benefits reduced, have to pay more for benefits, or lose their job in the worst case scenario. A new study from that the Washington Post found an extremely small amount of the minimum wage hike has actually ended up in workers pockets. In fact, for some workers, they’re actually taking in less money after the hike.
At first glance, things seem to be going pretty well since Seattle bumped the hourly minimum wage for large businesses up to $11 last year, from the statewide minimum of $9.47 an hour. Low-wage workers are getting more time on the job and making more money. Fewer businesses are closing, and more new ones are opening. The technology and construction sectors are booming. Even the weather cooperated for a change. The spring was unusually dry in Seattle, which was good for the city’s fishing fleet.Yet the actual benefits to workers might have been minimal, according to a group of economists whom the city commissioned to study the minimum wage and who presented their initial findings last week.
The average hourly wage for workers affected by the increase jumped from $9.96 to $11.14, but wages likely would have increased some anyway due to Seattle’s overall economy. Meanwhile, although workers were earning more, fewer of them had a job than would have without an increase. Those who did work had fewer hours than they would have without the wage hike.
Accounting for these factors, the average increase in total earnings due to the minimum wage was small, the researchers concluded. Using their preferred method, they calculated that workers’ earnings increased by $5.54 a week on average because of the minimum wage. Using other methods, the researchers found that the minimum wage hike actually caused total weekly earnings to drop — by as much as $5.22 a week.But if all that analysis is making your head spin, just take a look at this graph. See jobs climbing after the recession? Nice. Now look what happened immediately after the $15 minimum wage was passed. Not pretty.
Can’t say we didn’t warn ya.
[Note: This post was authored by Matt Palumbo. Follow him on Twitter @MattPalumbo12]