Initial results of UW minimum wage study: fewer hours, staff

Dori Monson is not a fan of Seattle’s move toward a $15 and hour minimum wage. So he was happy to hear initial results of a University of Washington study.

“I think it’s fair to say, there’s no wondrous benefit yet, on average,” UW Economics Professor Jacob Vigdor told Dori.

Related: Supreme Court denies hearing minimum wage arguments

Vigdor is among the team studying Seattle’s minimum wage raises. The study is part of a resolution passed by the city council when it originally approved the $15 minimum wage — Seattle wanted to know how the hike effected workers and businesses. So far, Seattle is not at $15. Most businesses are paying around $13. The city aims to have all businesses paying $15 by 2017. The data that UW has looked at so far is for 2015, provided by the state’s Employment Security Department. So their initial observations are only for that time frame.

“We raised the minimum wage by $1.53,” Vigdor said. “If you multiply that by 20 and 40 hours a week, we might have expected to see more. But we are thinking that cutbacks in employment and hours are taking that away.”

“Our most optimistic assessment is that your paycheck is going up about $5.54 a week as a consequence of the minimum wage increase,” he said.

As for businesses, so far it doesn’t seem like they have been affected too much, according to the study.

“Businesses are doing fine,” Vigdor said. “We found there’s not really much action going on in terms of businesses closing.”

“The draw back to this is that one way they are making things work is cutting back on staffing,” he said. “Seattle is doing pretty well because of the strong economy but we didn’t think any of that good performance was because of the minimum wage. We think the minimum wage is actually putting a little bit of a drag on the Seattle economy, and holding back growth and jobs and hours. When it comes to incomes, at the end of the day we are finding effects that are pretty small, and we are not sure if they are negative or positive.”

And that’s important to note, Vidgor said, that only initial observations can be made. There is lot more data to go through to determine the entire picture of how the minimum wage is effecting Seattle businesses and jobs.

“All this information we are reporting is what happened on average,” he said. “When it comes to the minimum wage, there’s a lot more to it than what happened on average. Maybe something that happened is that low-income families relying on these jobs had a good experience and they found their hours didn’t get cut and they got more take home pay. And that could be off set because, say, teenagers living with their parents have had cuts. If that is what’s happened, we are delivering support to those who need it, you could look at these results and say ‘I don’t mind, this is a good policy.’”

“But the shoe could be on the other foot,” Vigdor said. “We could be in a world where the teenagers are doing great. And we don’t have the data on that yet. That’s the data we will be producing next. So stay tuned, there’s a lot more to this.”

Vigdor also pointed out a side effect that isn’t entirely related to the data. It seems that the rise in labor costs could be providing an incentive for employers to look at technology to replace employees. That’s something different than in the 1990s when a lot of cited minimum wage studies were done.

“There were no iPhones in the 1990s, when you couldn’t order food using an app rather than talking to a person,” Vigdor said. “There are new innovations all the time introducing opportunities for businesses to save on labor costs. The more of these innovations come along, the greater the threat is to a lot of these jobs.”

The study is far from complete, UW researchers will continue to monitor Seattle’s $15 move. But for Dori, it won’t matter. The initial news is not good for city policy makes, in his opinion.

“What are they going to do with this? My guess is that they will ignore it,” Dori said.

“The truth is, it’s doing almost nothing to lift lives collectively,” he said. “There might be an individual who benefits, but for every person who benefits, there’s certainly another person who has lost hours or their job because of it.”

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