Earning

Seattle is experimenting with a $15 minimum wage — here are the results so far

Sam Becker@smbecker
Twenty/20

The federal minimum wage, $7.25 per hour, hasn't been changed since 2009. Some workers earn as little as $2.13 per hour, plus tips.

As the cost of living has risen dramatically over the years, low- and minimum-wage workers have found it hard to make ends meet. That has led to a push in recent years to increase the minimum wage, in some places as high as $15 or $16 per hour.

Still, the idea of raising the minimum wage remains contentious. Here's what people on both sides of the issue say, what research has found about the real-world pros and cons, and what it all could mean for you.

Supporters want to help workers; opponents worry about cost

Supporters of raising the minimum wage have argued that forcing employers to pay more would help low-wage workers struggling to get by, as well as further stimulate the economy as people would have more money to spend. Opponents, on the other hand, have warned of potential consequences, including higher prices for goods and services, businesses being forced to close or move, and fewer jobs.

While many employers have taken it upon themselves to raise their own pay floors, and some cities and states have done likewise, the federal government hasn't made any progress on the issue until recently. Earlier this year, the House passed a bill to raise the federal minimum wage to $15 per hour, but it's stalled in the Senate.

Minimum wage varies by state
Twenty-nine states and Washington, D.C., have set their minimum wage higher than the federal level of $7.25. Twenty-six have changed their minimum-wage law since the start of 2014.
Social chart title
Note: As of July 12, 2019.
kiersten schmidt/grow Economic Policy Institute

What prompted Seattle's experiment with the minimum wage

In 2014, Seattle's City Council approved a plan to increase the city's minimum wage to $15 per hour incrementally over seven years — a 61% increase over the $9.32 per hour, the state minimum wage at the time. As of 2019, employees for the city's largest employers, or those with more than 500 workers worldwide, must pay $16 per hour. By 2021, all employers in the city will need to pay their employees at least $15 per hour.

The primary driver behind the policy was that the Puget Sound region had become largely unaffordable for working- and middle-class families. The area has seen rapid population growth in recent years, thanks in part to abundant and attractive white-collar job opportunities. Washington now routinely ranks near the top of the lists of "best states for business," and Seattle has been called one of best places to live if you want to earn $100,000 or more.

The growth of local companies like Starbucks, Microsoft, and Amazon created tens of thousands of high-paying jobs — for people with the right qualifications. The economic boom also led to a considerable rise in the cost of living, mostly driven by high housing prices. Many low-wage workers were pushed out to the more affordable suburbs and, in some cases, left the metro area entirely.

"The cost of living is leading to a labor shortage," says Jacob Vigdor, professor of public policy and governance at the University of Washington, who also leads a team of UW researchers in studying the effects of raising the minimum wage. "As housing prices rise, the lower-wage workers get squeezed out."

As housing prices rise, the lower-wage workers get squeezed out.
Jacob Vigdor
Professor at the University of Washington

Geography and conservative zoning laws made it difficult to build more homes, limiting supply and driving prices through the roof. Today, the median rent price in the city is $2,700, compared to $1,566 for the U.S. at large, according to Zillow.

With so many low-wage workers struggling, city leaders decided to increase the minimum wage. And now, with Seattle's $15 minimum wage having been in effect for a couple of years, researchers from the University of California, Berkeley and the University of Washington in Seattle have released concurrent studies to try and decipher the ramifications.

Studies show mostly good news for Seattle's workers

So far, studies show that Seattle's workers are largely benefiting from a higher minimum wage.

The research from UW, which used other cities in Washington as a control group to measure the effects of a larger minimum wage in Seattle, found that wages went up for low-wage workers, but those employees often worked fewer hours, so their take-home pay remained about the same.

"Seattle's low-wage labor market shrank overall," says Vigdor. "Employers didn't necessarily adjust by laying people off. They adjusted by sending people home early." The law, overall, he says, "didn't really have an impact on the unemployment rate."

Research from UC Berkeley compared the earnings of Seattle's food service workers to food service workers in other cities with high minimum-wage laws, including Chicago and Washington, D.C. There were little, if any, negative effects on employment in Seattle, the study found, and the minimum-wage policy "achieved its goal" of raising wages for low-wage workers.

It's unclear if it prevented low-wage workers from moving away, however, or helped them afford local rents. People are still moving to the region in droves, which may keep housing prices up, though census data shows that the numbers are dwindling from record highs. And increasing household incomes, coupled with some declines in home prices, has made the city modestly more affordable for middle- and working-class families.

We have a lot of evidence that [Seattle] has benefited the low-wage workforce with little change in employment.
Ben Zipperer
Economist at the Economic Policy Institute

Some economists are touting the experiment's success. "We have a lot of evidence that [Seattle] has benefited the low-wage workforce with little change in employment," says Ben Zipperer, an economist at the Economic Policy Institute.

But Zipperer says that these studies need to be read with the understanding that Seattle's economy was, and remains, incredibly strong, with low unemployment and brisk wage growth. That's critical to understanding why there have so far been so few negative effects of such a significant minimum wage increase.

It's hard to tell, then, exactly how big of an impact a higher minimum wage has had, because so many workers were already benefiting from the city's booming economy.

Key takeaways, and what all this could mean for you

The city's economy is still showing continued strength with no signs of slowing down, so it's hard to say with any certainty that increasing the minimum wage had any measurable negative effects. But on a national scale, the story would likely be different. While millions of people would get a pay increase, millions more might lose their jobs, or at least see their hours cut back.

A $15 minimum wage implemented across the U.S. could lead to a loss of 1.3 million jobs, according to a study published earlier this year by the Congressional Budget Office, but it could also increase wages for 17 million workers and effectively lift over 1.3 million people out of poverty around the country.

Perhaps the key takeaway at this point is that regions with booming economies may be able to increase their pay floors without creating problems — though there may be more unintended side effects that become apparent with time.

Another important takeaway is that Seattle's minimum wage may actually still be too low to help many workers. A full-time employee in Seattle with a salary of $18 per hour, two dollars more than the current minimum wage, would earn roughly $37,000 a year, for example. That's significantly less than the average Seattle worker, who makes more than $31 per hour.

And with median rents in the city at $2,700, or more than $32,000 per year, a worker earning $18 per hour could end up spending more than 85% of their income on housing. The average Seattle-area household also spends more than $12,000 per year on transportation and nearly $6,000 per year on food, according to the Labor Department.

What this means for you will likely depend on where you live, and if federal or local leaders decide to push through with any increases to the minimum wage. A significant increase, say to $15 per hour, might lead to more profound effects, such as job losses, in smaller cities and rural areas. But large, bustling cities like Seattle may absorb it with relative ease.

In all, an improvement to the minimum wage may not do much to change the grim reality that living in expensive cities can be challenging even for some people making six figures. As Vigdor puts it, "Good luck living here on an $18-an-hour job."

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