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New study of Seattle's $15 minimum wage says it costs jobs

Seattle Councilwoman Kshama Sawant spearheaded rallies for a $15 minimum wage in Seattle Seattle Councilwoman Kshama Sawant spearheaded rallies for a $15 minimum wage in Seattle. Credit KUOW File
Kelley Robertson | 27 June, 2017, 08:01

Under the city's law, the minimum wage will continue to be raised even higher in the future. Several cities and states have followed suit, including Los Angeles, as its main daily notes today while reporting on a study that calls that assumption into serious question. All employers will be required to pay at least $15 per hour in 2021.

The next development in the Seattle Minimum Wage Ordinance will happen on January 1, 2018, when large employers whose employees receive tips or health benefits will hit the $15 per hour mark.

But, a new study released on Monday by a team of economists at the University of Washington suggests the way hike led to a major decline in employment for low-wage workers, and a drop in hours for those who kept their jobs.

The current minimum in the city is $11, increasing to $13 on December 31.

In other words, exactly what conservatives and those who understand basic supply and demand predicted.

Raising minimum wages force businesses operating on tight budgets to increase the workload on more highly-skilled and salaried employees and to rethink new hires and the amount of hours employees work. It also determines that the minimum wage hike has resulted in there being 5,000 less low-wage jobs in the city, reports The Seattle Times. These estimates are robust to cutoffs other than $19.45.

The study has found that since 2014, low-pay wages have gone up by 3%. In particular, they mischaracterize it as implying that papers tend to show minimum wage hikes do not affect employment. The minimum wage is now $11 per hour for small businesses that offer either medical benefits or tips.

"My view of the research is that [the minimum wage] seems to work", Ben Zipperer, an economist at pro-minimum wage Economic Policy Institute, told WaPo. You do this because excess labor costs massively cut into relatively thin profit margins at places like grocery stores and fast food joints; increasing the hourly cost of labor only exacerbates this problem. It becomes too expensive for employers to take their chances on those unskilled employees because they are being forced to pay more than what their labor is worth.

The study estimated that the typical low-wage worker in that city lost $125 a month.

It's not just the scope of the losses, but the losses themselves which are remarkable for the public debate. As the opportunities for unskilled workers dry up, they have fewer opportunities to earn any living, while the labor market shifts to better-skilled workers who already had an advantage in the marketplace.

Neither study has yet been formally peer-reviewed, the New York Times reports. A downturn in the economy could mean a loss of more jobs and more hours.

The report, which used data from the State of Washington to make its analysis, does come with a caveat. If this is confirmed in subsequent studies, it suggests that a minimum wage of, say, $12 per hour, has a minimal effect on low-skill employment.

"I would agree with that conclusion", Long said.

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