Remember those warnings of an economic apocalypse in Seattle as the minimum wage was raised up to $15-16 per hour? Mark J. Perry was at the forefront of this (faulty) thesis. Having to teach Contemporary Public Affairs this semester, I was moved to return to this debate.
Here’re two figures to refresh memories about what happened.
Figure 1: Minimum wage per hour in Seattle for Schedule 1 (dark blue) and for Schedule 2 (tan), and Federal (green). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, and City of Seattle, NBER, and author’s calculations..
Figure 2: Minimum wage in 2020$ per hour in Seattle for Schedule 1 (dark blue) and for Schedule 2 (tan), and Federal (green). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, BLS, City of Seattle, NBER and author’s calculations.
Seattle raised its minimum wage to as much as $11 in 2015 and as much as $13 in 2016. We use Washington State administrative data to conduct two complementary analyses of its impact. Relative to outlying regions of the state identified by the synthetic control method, aggregate employment at wages less than twice the original minimum—measured by total hours worked—declined. A portion of this reduction reflects jobs transitioning to wages above the threshold; the aggregate analysis likely overstates employment effects. Longitudinal analysis of individual Seattle workers matched to counterparts in outlying regions reveals no change in the probability of continued employment but significant reductions in hours, particularly for less experienced workers. Job turnover declined, as did hiring of new workers into low-wage jobs. Analyses suggest aggregate employment elasticities in the range of −0.2 to −2.0, concentrated on the intensive margin in the short run and largest among inexperienced workers.
Previous post on this subject, here.