Reality Check – Initial Data On Seattle's $15 Minimum Wage Hike

Well, it’s been over a year since Seattle implemented its $15 an hour minimum wage so enough time has gone by to start seeing what, if any, effects on prices and employment that change has made. Back in March, 2014, Kshama Sawant, a socialist recently elected to the city council began promoting the $15 an hour minimum wage. With the support of also newly elected Mayor Ed Murray, that proposal passed in June, 2014 and the first of the phased-in increases went into effect in April of 2015, when the minimum was raised to $10 or $11, depending on the size of the business.  At the beginning of this year, the second phase kicked in moving the minimum to between $12 and $13, again depending on the type and size of business. In fact, it won’t be until 2021 that the $15 wage goes fully into effect.

As is the case anytime there is a discussion of raising the minimum wage, businesses raised their usual objections. The response from businesses primarily focused on three areas – they would have to reduce staff, raise prices, or cut back on other worker benefits.  In order to stay in business, firms would have to use any or all of these three strategies.  Proponents of the increase said that many studies have shown that a modest increase in the minimum wage has a minimal, if any, impact on those three areas.

One year into Seattle’s experiment, we now have some preliminary data to look at. An initial study mandated along with the enactment of the law was just released by the University of Washington.  And it shows that the feared price increases have just not materialized. The study states, “Our preliminary analysis of grocery, retail and rent prices has found little or no evidence of price increases in Seattle relative to the surrounding area”.  Additionally, in an interesting twist, some employers were actually encouraging their employees to enroll in health plan or even adding health care benefits because Seattle’s law allows the employer’s contribution to workers’ health care coverage count as part of employee compensation.  The study will provide further updates relating the employment effects later in the year.

Initial indications on the law’s impact on employment have been mixed. One study by the American Enterprise Institute showed a 1% increase in Seattle’s unemployment rate, with the city’s total employment reduced by 11,000 jobs and its unemployed up by about 5,000 workers. The team at the University of Washington took issue with the methodology in that study and a recent report showed that restaurant employment actually increased 5.4% since the new law started going into effect. Right now, it seems, it is just too early to tell what the employment impact has been – we will just have to wait for the UW study to come out later this year.

It is clear that the initial fears that businesses had about rising prices and rampant job cuts has just not come to pass.  So far, prices have remained fairly stable and the employment impact is still be determined.  The increase in businesses offering health care seems to be an additional positive. On the other hand, Seattle is barely only half way there to reaching the $15 minimum wage level so we really have no idea quite yet what the long-term impacts will be. That’s just a fact.