I’ve reported before on studies that showed the change in minimum wage has little affect on employment. But, a new study appeared this week, using the data from Seattle, which just recently raised it’s minimum wage from $ 9.47 to $11, and then subsequently to $ 13 an hour.
The reports that I read discussing a new study, authored by Drs. E Jardim, M.C.Long, R. Plotnick, E. van Inwegen, J. Vigdor, and H. Wehting, (MINIMUM WAGE INCREASES, WAGES, AND LOW-WAGE EMPLOYMENT: EVIDENCE FROM SEATTLE ) seem to indicate that the wage change dramatically affected the labor market, contrary to all the other scientifically developed studies. (This means no studies involving Rick Berman and his minions; his organizations are paid by the minimum wage industry majors and always skew the data to demonstrate that a change in minimum wages is bad. Even if the data doesn’t so demonstrate.)
Upon examination of the data (and the authors so admit), multisite employers were excluded from their analysis. So, for example, if ABC Corporation owned three McDonald’s restaurants, the odds are that data was excluded. And, these (about 15000) firms were significantly larger- with 68 employees per entity (compared to the 123,180 surveyed firms that had an average of 12 employees per site.) One can expect better resilience to a change in minimum wage for the larger firms, with perhaps a higher level of management capabilities, due to their larger size. (This exclusion is why only 60% of employee data was included in the study.)
When the first wage increase hit, the number of jobs paying $ 13 an hour or less for all firms dropped (there is a lag, as the firms realize how much more that increase was costing them) from some 40,000 to about 30,000. But, for the food industry those jobs dropped from 12,000 to about 10,000. Once the second wage hike occurred, the number of low wage food jobs dropped almost 40% to 6500, and that drop manifested 2/3 of the total loss of all jobs in this lower pay echelon.
But, what about those jobs that paid more? Well, the number of jobs that paid $ 19 or less (which, of course, includes those paying $ 13 or less) seemed pretty stable- until right before the last hike. (The drop in jobs occurred the quarter BEFORE that last hike to $13- which could mean the firms were first recognizing the impact of the first hike- or anticipating the next one.) but, the food jobs have been pretty stable. And, the data indicated that the average wages paid averaged between $13 and $14 an hour (so many folks paid less than $ 19 an hour were bunched just over the $ 13 level).
I also massaged the data, beyond what the authors discussed (not what they thought; just what they published). One of the key facts that I don’t find discussed at all in this report was the total number of food jobs paying better wages (around $ 20 an hour on average) INCREASED as the minimum wage changed, albeit not in a 1:1 relationship. (This was determined by subtracting the number of jobs that paid $ 19 or less from all jobs, over the course of 2 or 3 quarters..)
I also wanted to know were job hours cut- or just total employment. For all jobs, the average employed hours was generally stable (there were ups and downs, that I believe were seasonally related, even for the dramatic shift during the 1st quarter of 2016.)
And, that was true for all the $ 13 or less jobs- for all industries or the food related businesses. When one looked at the higher paid jobs, the number of hours was also pretty stable. And, since this all single establishment firms, it won’t surprise you one bit, that most of these folks were part-time (an average around 30 hours of work a week).
The data I wanted to see? (Besides the data for the larger firms, which would be most useful.) How many of the firms ceased operating during the study period? That data was not part of the study. (Dr. Vigdor intimated that may be added to the research, as the study progresses.) I believe this is most important, since previous research has indicated that the marginal (albeit food related) businesses tended to fold as the wages increased.
All told, it is not clear that this study contradicts the one I reported about last May. We don’t know how many establishments failed. Yes, it’s clear that the lowest paid employees in the food industry decreased by 40%. EXCEPT…
We don’t know if those folks LOST their jobs or had their pay increased. After all, looking at the graph above, you can see that the number of jobs paying more than $ 19 an hour more than compensates for the loss of jobs at $ 13 an hour, over the course of time- while not immediately as the pay raise occurred.
It’s my supposition that there was a shift in pay; since the overall employment stayed constant (again, NOT during Q1 2016, but it quickly recovered), it seems that there was just a shift in wages upward, so the individual demographic of lower paid job decrease is less of an issue. Because overall employment increased, wages increased, hours weren’t cut, and many of those folks made more than $ 19 an hour.
I want to thank Dr. Jacob Vigdor (University of Washington) for taking the time to respond to my queries and to aid my comprehension of his data.