Conflicting Studies Reignite Minimum Wage Debate

After taking a backseat to other hot topics — namely health care — in the months since the presidential election, minimum wages are back in the news this week. If you’ll recall, the subject was one pushed by Democratic candidate Hillary Clinton in her 2016 campaign, with the former Senator and Secretary of State speaking in favor of a $12 federal minimum wage (her primary opponent, Senator Bernie Sanders, called for a $15 wage). Meanwhile fast-food workers and other low-wage earners have hosted Fight for $15 rallies and protests throughout the nation on multiple occasions. But that latest controversy comes from one early adopter of the $15 living wage initiative: Seattle, Washington.

Back in 2014 Seattle passed a bill that would raise their minimum wage from $9.47 to $15. Now, as Mic notes, new reports are assessing the impact of that decision. However each of these studies came to a seemingly different conclusion, only adding fuel to both sides of the argument.

In one corner, a University of Washington-conducted study found that the wage hike actually hurting a number of low-wage earners. In fact the study claims that the lowest income workers in Seattle are making an average of $125 less per month as a result of the latest minimum wage increases. This, they say, is the result of workers getting fewer hours at their low-skill jobs. As University of Washington professor Jacob Vigdo stated, “The page in the playbook that businesses really went to was to cut back on labor.”

At the same time another study conducted by University of California at Berkeley claims to have found no evidence that Seattle’s wage hike had any negative effect on employment or earned wages. The report even concluded that the city’s plan had “achieved its goal,” which is to say it increased wages for a number of restaurants and retail workers.  

It should be noted that both the University of Washington and UC Berkeley studies have drawn criticism from various groups and individuals. For example, the Berkeley study being commissioned by the mayor of Seattle makes it an easy target for skeptics. On the other hand Michael Reich of UC Berkeley says that UW study counted some workers moving to higher-paid positions as job losses. This is because that particular report only looked at single-location employers and did not account for some of those workers perhaps finding employment at larger companies. 

Speaking of small businesses, they’ve been another point of contention in the minimum wage debate. As noted, Seattle’s law effectively gave smaller employers more time to catch up to the new wage presumably since they’d be the hardest hit under the new law. Unfortunately neither of the new studies focused much on the $15 wages effect on these businesses, although the UW report would suggest they are being hurt as well.

If we’ve learned anything this week it’s that the political tension and economic debate over the minimum wage is as fierce as ever. While many presumed Seattle would serve as a test case for other cities looking to significantly increase their minimum wages (some of which have already passed similar laws), it’s now clear that the data coming out of that experiment can’t even be agreed upon. Because of this it will be a while before we truly have a clear picture of how living wage initiatives are affecting workers, small business, and consumers at large.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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