Seattle’s groundbreaking minimum wage hike hurt the low-income people that it was meant to help, according to a report prepared for the city council.
Seattle became one of the largest cities to embrace the $15 minimum wage—double the federal minimum of $7.25—in 2014, adopting an ordinance that would achieve the hike by 2017 for major employers and 2019 for small businesses. The new base rate pleased labor activists and the politically powerful Service Employees International Union, but it has dealt a blow to the take-home pay of workers even before the hike has been completed.
Researchers from the University of Washington found that low-income workers saw their pay fall drastically when the city moved to the $13 mark in 2015. Companies reduced the number of hours that employees worked to cope with the increased labor costs.
“The lost income associated with the hours reductions exceeds the gain [in hourly rates],” the report says. “The average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker.”
The study also found that the baseline wage did not help as many low-wage workers as bill supporters expected it to because “most affected low-wage workers were already earning more than the statutory minimum at baseline.”
The minimum wage hike has been the centerpiece of the Democratic Party’s economic agenda over the last several years. Democrats put the $15 minimum wage on its 2016 party platform, despite the fact that nominee Hillary Clinton had misgivings about the drastic hike’s effect on hiring; she initially backed a $12 rate during the primary.
“Democrats believe that the current minimum wage is a starvation wage and must be increased to a living wage. No one who works full time should have to raise a family in poverty. We believe that Americans should earn at least $15 an hour and have the right to form or join a union,” the platform said.
Labor watchdogs said that the study should serve as a “wake-up” call to those who have led the campaign to drastically overhaul the minimum wage.
“This important study ought to be a big wake-up call that the ‘Fight for $15′ minimum wage effort is actually hurting those they say they want to help—reducing incomes and eliminating economic opportunities for low-income Americans who need them most,” America Rising Squared spokesman Jeremy Adler said in a statement.
Michael Saltsman, research director for the pro-free-market Employment Policies Institute, said that the results of the study were not surprising and fell in line with previous research that has linked drastic minimum wage hikes to jobs and earnings losses. He said that the report shows that the push for the wage hike is “colliding with economic reality” and that policymakers should approach future bills with caution.
“Similar to members of the flat earth society, some true believers in the labor movement may be unmoved by this body of evidence, but sensible policymakers on the left and the right should feel very comfortable opposing $15 knowing that it hurts employees rather than helps them,” Saltsman said.
The $15 hourly range has spread from Seattle to other major metropolitan areas. New York and California, as well has numerous deep blue cities, including Washington, D.C., and Boston, have passed legislation to eventually raise wages to $15 an hour. Not all of those laws are guaranteed to take effect; the California law allows lawmakers to opt out of future hikes if they are found to hinder job creation or hurt the economy.