Gains, losses cancel out from Seattle's minimum-wage hike

These are exciting times in America's minimum-wage debate.

Advocates of higher minimums are naturally thrilled by their big political wins — and by the big minimum-wage hikes being phased in, to $15 an hour and beyond — in cities like Seattle and Los Angeles and others. They're pleased, too, with the headway the movement has made in places like Minneapolis, where city leaders recently blocked a push to enact a $15 minimum by charter amendment but promise to keep working on the issue.

And, of course, many low-wage workers are happy to be getting raises, often through modest, state-level increases in minimum wages (including in Minnesota) as well as the dramatic local hikes in some places.

But nobody may be more energized by all this minimum-wage ferment than economists, statisticians and other swashbuckling seers who are curious about how the world really works. That's because these supersized, geographically isolated jumps in the minimum wage constitute laboratory-like experiments of a kind people seldom conduct on one another.

Sharply jacking up the minimum wage in one jurisdiction, right next door to otherwise similar places where no comparable increase occurs, could help researchers overcome the big difficulty they always face in measuring the effects of minimum wages — a difficulty that has long meant this debate had to be waged mainly through dueling barrages of abstract theory and melodramatic anecdote.

The difficulty is that it's hard to distinguish the good or bad effects of a minimum-wage hike from the impact of all the other forces that constantly influence any job market.

To what extent would wages have risen anyway, because of a growing economy, even without a minimum-wage increase? And to what extent might low-wage jobs have disappeared anyway, because of new technology, even without a minimum-wage hike? Being able to make comparisons with neighboring communities that are affected by nearly all the same factors except for a big change in the minimum wage makes such questions easier to answer.

Or so hope members of something called the Seattle Minimum Wage Study Team at the University of Washington, which recently issued the first in a series of planned reports on the effects of the dramatic minimum-wage policy Seattle enacted in 2014 (tinyurl.com/grrb44q).

On his Conversable Economist blog, Macalester College economist Timothy Taylor explains that "the Seattle study team looks at patterns of wages and jobs in Seattle before and after the rise in the minimum wage, and compares it to patterns in four other areas." These are surrounding counties plus a "synthetic Seattle" composite of more distant Washington communities, employed to help filter out any "spillover" effects Seattle's wage policy might have on adjacent areas.

In short, this looks like rigorous research. The report takes pains to warn that outcomes may change over time and that local economies differ. And its results include real-world contradictions and complications.

But enough delay. What's the bottom line? Taylor boils it down to this: "[T]he early evidence from Seattle is that a higher minimum wage at the city level doesn't raise total earnings by much, because low-skilled workers end up with fewer hours on the job."

It's worth noting that Seattle and environs are thriving economically, and the city's only gotten started raising the minimum. It rose to $11 in 2015, to $13 this year, will reach $15 next year and soar to $18 by 2025.

The study team's first report covers only the initial hike to $11. They found, unsurprisingly, that in its wake lots of low-income Seattle workers got a raise. Their earnings rose $1.18 an hour on average.

But low-end wages were rising in the comparison areas, too, where the mandatory minimum wage did not increase. The study concludes that just 73 cents per hour of the Seattle raise was actually attributable to the legislation.

Meanwhile, in two other ways — the employment rate of low-wage workers and the number of hours they worked per week — Seattle workers fared less well than those in the comparison communities — even though all of them were faring pretty well in the prosperous region. The study concludes that Seattle's low-wage workers were on the clock about 19 minutes less per week, on average, than they would have been without the minimum-wage increase, and their employment rate was about 1 percentage point lower.

The report summarizes things this way:

"The major conclusion one should draw from this analysis is that the Seattle Minimum Wage Ordinance worked as intended by raising the hourly wage rate of low-wage workers, yet the unintended, negative side effects on hours and employment muted the impact on labor earnings.

"The Seattle economy ... is booming ... . Yet, our best estimates find that the Seattle Minimum Wage Ordinance appears to have lowered employment rates of low-wage workers. This … is concerning and needs to be followed closely in future years, because the long-run effects are likely to be greater ... . The effects of disemployment appear to be roughly offsetting the gain in hourly wage rates, leaving the earnings for the average low-wage worker unchanged. Of course, we are talking about the average result."

The last point is worth remembering. Averages leave out important details. There are winners and losers in any economic intervention — and there may be more winners than losers from minimum-wage hikes.

But might the losers lose more than the winners win? A Seattle cashier who has kept her job and lost no hours may, it seems, have gained a dollar or so per hour in income — a notable but not life-changing benefit. But one who has lost or been unable to find a job has suffered a costly misfortune.

Anyway, as the report and Taylor emphasize, it will take time for the results of these "experiments" to become clear. But they are interesting indeed, and bear watching.

D.J. Tice is at Doug.Tice@startribune.com.