Jacob L. VigdorEvans School of Public Policy and Governance
Presentation for the Seattle Economics Council
June 7, 2017
Initial Findings of the Seattle Minimum Wage StudyInitial Findings of the Seattle Minimum Wage Study
Acknowledgements> MWS-UW Investigators:
– Scott Allard, Evans School– Mark Long, Evans School– Jennifer Otten, School of Public Health– Robert Plotnick, Evans School– Jennifer Romich, School of Social Work
> Participants in the interviews and surveys
> Funders:– The Laura and John Arnold Foundation– The City of Seattle– Russell Sage Foundation
Overview of this talk
> Conceptual Framework– How will the minimum wage affect employer, workers, and the
local economy?> The Seattle Minimum Wage Study
– Research activities– Early findings
> Lessons learned– For research on the minimum wage– For implementation of the minimum wage– For boosting the benefits of the minimum wage
Conceptual Framework
Mandated higher wages
Increased purchasing power for lowest-‐paid workers
Improved living standards forthose workers (and possibly further Keynesian benefits)
Obstacles on the path from wages to purchasing power
Mandated Higher Wages
Staffing Reductions Among Affected Workers
Purchasing Power Increases for some, declines for others.
One-‐for-‐one reduction inprofit/proprietor income
Full translation of wages into purchasing power
Offsetting reductions in means-‐tested benefits
Business shutdown decisions
Price IncreasesPossible revenue reductions,
price increases threaten impact on purchasing power
Worker productivity improvesPurchasing power increases unlesshigher productivity enables staffing
reductions
Obstacles on the path from higher purchasing power to improved living standards
Higher Purchasing Power
AccumulatedConsumer Debt
Lower debt, but equivalent living
standards.
Changed spending patterns
Higher spending promotes health &
well-‐being
Higher spending that does not promote health & well being
Implications
> The traditional research focus on labor market impacts of minimum wage policies is both insufficiently broad and insufficiently deep.– Focus on small subsets of the low-wage workforce.– Focus on average treatment effects rather than full
distributional impacts.– Focus on summary labor market measures rather than
tracing dollars from consumer to the labor market and from labor market to living standards.
Seattle Minimum Wage Study (SMWS)
> Executed under contract with the City of Seattle.> Funding (to date):
– 15% City of Seattle– 85% Foundations, including major support from the Laura
and John Arnold Foundation.– Zero funding from labor or business interest groups.
> Contractual features:– Periodic reports delivered to the City– SMWS retains right to disseminate, revise, publish– No contracting on results.
Source: “Immediate Impacts of the City of Seattle Minimum Wage Ordinance” by MC Long, R Plotnick, E Roshchina, J Vigdor, and H Wething. Preliminary working paper presented to the Association for Policy Analysis and Management Conference, November, 2016. Do Not Cite.
Seattle and Puget Sound Geography
Source: “Immediate Impacts of the City of Seattle Minimum Wage Ordinance” by MC Long, R Plotnick, E Roshchina, J Vigdor, and H Wething. Preliminary working paper presented to the Association for Policy Analysis and Management Conference, November, 2016. Do Not Cite.
Seattle and Puget Sound Geography
SMWS: Longitudinal Employer Survey
> Sample drawn from Seattle Business License Database
> First wave conducted early 2015> 500+ business respondents> Oversampling of key industries (& nonprofits)> Major follow-up in the field now> Key goal: understand how businesses adapt to
higher wages.
“Have you made or do you intend to make any of the
following changes to accommodate this
new policy?
EMPLOYER SURVEY
Source: The Seattle Minimum Wage Study: Report on Baseline Employer Survey and Worker Interviews, April 2016.Figures do not sum to 100% because of item non-‐response.
11%11%15%25%25%27%30%30%
59%62%
80%
78%76%73%65%63%61%58%58%
30%26%
10%
Contract out workWithdraw from Seattle
Eliminate another benefitAdd health care benefits
Encourage health care plan …Limit raises or decrease wages
Add service charges or feesReduce the number of …
Raise any wages over $11Raise prices on goods or …
Raise wages
Have done or plan to do Do NOT plan to do this
SMWS: In-Depth Worker Interviews
> Recruited 55 custodial parents earning wages under $15 in Seattle.
> 60-90 minute in-home interviews covering a range of topics.
> Interviews audiotaped, transcribed, and coded> Wave 1 in spring 2015; Wave 2 in spring 2016; Wave
3 planned for 2017.> Key goal: understand lived experience, whether/how
higher wages change lives.
Sample Characteristics
Mean or %Female 80%
Married or cohabiting 58%
Age of youngest child 6.2
Immigrant to U.S. 60%
FT or more hours 54%
Hourly wage wave 1 $11.83
Hourly wage wave 2 $13.64
Employed at wave 2 84%
Unemployed between waves 1 & 2 22%
Knowledge of the law is vague
10%
62%
29%
13%
78%
9%5%
35%
60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
None Vague Detailed
Perc
enta
ge o
f Sam
ple
Full sample Immigrant U.S. born
Still vague 1 year later
Count Percentage
Employed in a position covered by the law
39 80%
Had seen compliance poster at work
19 49%
Knew current minimum wage for employer
8 21%
Talked with community outreach organizations
12 24%
Waiting for $15“[My coworkers] told me that it’s mandatory that they have to pay, after summer, it starts in summer, I don’t remember. They have to pay at least $15.00.”
-‐-‐ Svetlana, caregiver
“I know they say it was last year or this year, I’m not really sure...I heard they say it, but I never seen what exactly happened…No one’s getting what they say last year, like $15,00 should be the minimum wage of work.”
– Sharifa, child care provider
“I heard about people talking about the minimum wage law in Seattle, $15 an hour, but it wasn’t me. Me, I work for $11 and some, and also my two sons, they work for somewhere less than $15. But I heard about people were talking, but I don’t know specifically when and where.”
–Hani, janitor
The law is viewed as fair…
> Vast majority had positive opinion of the law.
> Fair for 2 reasons:– High cost of living in
Seattle– Value of workers’
time and work
“I think it’s a great idea because if you really think about it, especially in Seattle, rent is high, and by getting $10.00 if you calculate it, you work forty hours per week, what you're getting is not enough.”
–Edris, caregiver
“… I think it will affect me like positively, you know what I mean? Like of course it’s going to be more income. My time will be worth more, you know what I mean?”
-‐-‐Alisha, food prep assistant
…but unlikely to improve living standards.
> Common belief that “everything will go up”– Price increases– Benefit reductions
> Belief comes from:– Public information about the law– Life experience – The reality of high marginal tax rates
“I think that, as soon as it all goes up, everything else is going to go up. Our gas is going to have to go up again. My rent is not going to be as cheap. With making that much you might not even need Section 8 or food stamps, supposedly.”
—Nina, food service worker
“Maybe they are going to increase the salary but maybe they are going to increase the electricity bill or the gas bill, I hope I’m wrong. So in that case we are going to be in the same situation”
--Carlo, custodian
“[My life will be] probably the same because the rate increase and then the living expenses increase as a result…More pay, but I have to pay more for stuff.”
–Binh, assembly line worker
Simulated income: Earnings + taxes+ SNAP
SMWS: Administrative Data Analysis
> UI system records 2000-2016, with periodic updates.> Washington one of four states that collects hours
data, permitting imputation of hourly wages and direct study of low-wage workers across all sectors.
> Links forthcoming to other admin datasets:– Licensing data: age, gender– Voter registration: address– Business gross receipts tax records: revenue– DSHS: Program participation
Preliminary. Please do not cite without permission
31
Figure 4: Estimated impact of minimum wage on average wage rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries
Note: Vertical axes scaled in percent.
Preliminary. Please do not cite without permission
32
Figure 5: Estimated impact of minimum wage on the number of beginning-of-quarter jobs rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries
Note: Vertical axes scaled in percent.
Preliminary. Please do not cite without permission
33
Figure 6: Estimated impact of minimum wage on the number of hours worked rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries
Note: Vertical axes scaled in percent.
To be released later this month
> Analysis of labor market impact through 3rd quarter of 2016– Incorporates 1st and 2nd minimum wage increases.– Results not yet cleared for distribution by ESD.– Comparison of all-industry low wage job analysis with more
traditional focus on restaurant industry.– General findings:
> Increase to $11: roughly balanced income gains due to wage increases against income losses due to reduced work.
> Increase to $13: losses exceed gains. Workers might make up income losses with work outside the City, contract work, etc.
SMWS: Price data collection
> On-foot collection: grocery stores, restaurants, retail> Web scraping: gas prices, apartment rents, more
information from restaurants.> Presentation by Jennifer Otten yesterday afternoon.
PRICE COLLECTIONRetail and Restaurant Prices
Source: Hill, Otten, van Inwegen, and Vigdor. “Early Evidence on the Impact of Seattle’s Minimum Wage Ordinance.” January 2016.
90%95%100%105%110%
RETAIL AND RESTAURANT PRICES % CHANGE FROM BASELINE
Seattle Restaurants Seattle Retail Rest of King County Retail
Future Directions
> SMWS: extend study activities, build out rich data resources.
> Extend study to other locations.– Seattle an outlier: strong high-skilled job growth coupled
with severe housing affordability problems.> Extend the University-Government partnership
model– The Applied Public Policy Lab (APPL)
Recommendations for research
> “Big data” opens a world of possibility for understanding the impacts of policy interventions.
> Data by themselves accomplish little.> Analytical challenges complex.> Complementing administrative data with other
methods and techniques helps build a more complete, more robust portrait of the lived impact of policy change.
Recommendation for designing and implementing a minimum wage law
> Political compromise tends to yield complexity.> Complexity threatens to undermine effectiveness of
the law.– Increases business costs of compliance.– Reliance on workers to self-report compliance problems
rests on workers’ confidence that they understand the law and what they are owed.
> Immigrants, non-English speakers require special outreach to improve awareness and understanding.
Recommendations for boosting the benefits of the minimum wage
> Think carefully about how increased earnings will interact with the existing safety net (including Cal EITC).
> Consider Seattle-style incentives to provide health benefits.
> Consider Seattle-style regulations on hours and scheduling.
> Be aware of tradeoffs: is it better to have a smaller number of economically sustainable jobs, or larger number of jobs for which employees will require supplemental assistance?