Mayor Ed Murray’s Income Inequality Advisory Committee has released the two studies it commissioned on proposals to raise the minimum wage in Seattle to $15 an hour. I’ve only just skimmed through them—there’s a ton of data and analysis—but I thought it useful to skip straight to the conclusion of the report from three professors at UC Berkeley, Local Minimum Wage Laws: Impacts on Workers, Families, and Businesses:
In 1994 David Card and Alan Krueger published a groundbreaking study that changed how many economists view the minimum wage. Card and Krueger (1994) looked at employment in fast- food restaurants across the New Jersey and Pennsylvania border after New Jersey increased its state minimum wage. They found no measurable negative impact on employment. As we reviewed above, a large body of research has since built upon their methodology. As a result, we have learned a great deal about how employers respond to increases in the minimum wage.
First, paying workers more can change their work performance. It can change their productivity, their attitude about their job, how hard they work, and their ability to make it to the job on time. Second, low-wage labor markets have high levels of job churning. Turnover levels are high as workers leave jobs looking for better wages or because they are unable to stay in their jobs due to poverty-related problems such as difficulties with transportation, child care, or health. As a result, rather than eliminating jobs, raising the minimum wages can reduce turnover and increase job stability. Third, firms can absorb higher labor costs through other means as well. They can pass on some of the increased costs to consumers through higher prices or earn lower profits. In short, firms use a combination of strategies to adjust to higher minimum wages without cutting jobs or hours (Schmitt 2013).
Nonetheless, it is important to emphasize again that the existing research literature is necessarily limited to the range of minimum wage increases that have been actually been implemented. While these studies are suggestive, they cannot tell us what might occur when minimum wages are increased significantly beyond existing local, state, or federal mandates.
Finally, raising the minimum wage is not a cure-all, especially in the face of larger forces generating inequality that require national attention. Still, our assessment of the research evidence is that these policies have worked well. They raise the incomes of low-wage workers and their families. The costs to businesses are absorbed largely by reduced turnover costs and by small price increases among restaurants. Additional benefits, such as reduced spending on public assistance programs and the local stimulus of additional spending by low-income families, might also occur. But we do not yet have enough definitive research on these effects.
Seattle’s business community insists that raising the minimum wage to $15 an hour will result in the loss of hundreds of businesses and thousands of jobs. That’s what opponents claim before every proposed minimum wage hike. Yet according to the UC Berkeley report, there is no evidence that this ever happens.
Yes, the proposed Seattle hike is larger than most others (though not unprecedented), so no, we cannot know for sure that a hike to $15 won’t have a negative impact on businesses or employment. But the point is, there is nothing to suggest that it would. And so the burden of proof is on opponents to support their arguments with more than just the anecdotal empty threats of business owners who are loathe to abandon the low-wage economy to which they’ve grown accustomed.
