Recent headlines declaring little price impact from Seattle’s groundbreaking $15-minimum-wage experiment did not quite tell the whole story.
The news was based on University of Washington research, which took a snapshot one year into the seven-year phase-in toward a $15 wage floor. With a maximum of $11-an-hour minimum wage in effect during the study period of 2015, retail and rent prices indeed had not spiked.
But Seattle restaurant prices — a leading indicator of the impact — had jumped nearly 9 percent. And the restaurant industry trend toward a 20 percent service charge was not fully captured in those price spikes.
Sifting out these early indicators is vital because Seattle’s $15 wage law rolled out as a political campaign, not a finely tuned economic experiment. The rhetoric is now being tested, and it’s not all rosy.
Data are particularly important with the tidal wave of momentum toward a higher minimum wage nationally, and a voter initiative calling for a phased-in $13.50 minimum wage statewide that might be on the November ballot. We need to know the broad economic trade-offs of a higher minimum wage. Seattle is a great case study.
The UW research team, under contract with Seattle and led by professor Jacob Vigdor, is tracking 500-plus businesses and 50-plus low-wage employees for the coming years.
At first blush, there are some encouraging data in year one. Employers reported raising wages above the mandated $11, suggesting a trickle up. Two out of five employers said the higher wage would increase worker morale and lead to more job applicants.
But this is not free money. The UW research shows the march to $15 prompted 11 percent of businesses to consider or plan a move out of Seattle.
And that’s before bigger wage jumps coming in the near future: Employers with more than 500 workers had to pay $13 an hour as of last January and must pay $15 an hour by next January. Smaller employers phase in slowly to $15 by 2019. Benefits packages can be counted toward some of the wage.
Many impacts are unknown. In fact, workers reported that the real impact of the 2015 jump from $9.47 an hour — the statewide minimum wage then — to $11 was only about $1, because the Seattle market already paid more than the state minimum.
But anxious employers are looking ahead. Overall, 85 percent of food service and hospitality businesses planned to raise wages, and 30 percent said they planned to reduce the workforce.
Vigdor said upcoming studies would track the hours of workers — testing the assumption by critics that employers would cut back shifts — and the impact that higher wages had on social safety-net supports (such as housing subsidies) for low-wage workers.
One “potential area of concern” for Vigdor is teenage-employment rates. “One message we’ve been hearing from businesses is, when they’re hiring now, they’re placing a big emphasis on workers with experience,” said Vigdor.
In the case of $15, the jury is still out.
