New Minimum Wage Study Doesn’t Say What Everyone Says it Says


Right wing economists and smug libertarians are having a fun day.

The University of Washington released a study this week supposedly showing that minimum wage increases in Seattle have resulted in a loss of wages and hours for low-skilled workers.  Their work, supported by a more comprehensive survey of wages and hours worked than has previously been available, analyzed data from companies in Seattle (with only one location within the city limits) who pay into unemployment insurance.  The study shows a decrease of hours worked (and wages paid) to people earning under $19/hour that coincides with the wage increase.  They isolated those jobs which would be most affected by the change – those earning below the new minimum of $13, and those earning $19 or less – and compared them with historicals, nearby counties, and other studies.  This finding is being touted as a victory for supply-side economists who say wage floors reduce employment for the poor.

But the new methodology used in this report points at the central lie behind opposition to a higher minimum wage.

Unlike previous studies, which looked only at a traditionally low wage job like restaurant work, and used it as a proxy for the entire low wage labor market, this study had both raw wage and hours data, allowing the researchers to identify jobs across industries that earned under their self defined threshold.  This means the main factor they analyzed was hours worked, and they concluded, incorrectly, that because people in these jobs experienced a negative differential between wage increases and hours worked, that their lives have become poorer somehow and the impact of the legislation is net negative for the poor.  May some have taken home less money, sure?  But that had to work less, and that is a good. thing.

After the first phase-in, naturally the majority of jobs paying under the new minimum ($11 at first, then $13) dried up.  Wages were increased for those workers, as well as for workers who earned more than the minimum.  Workers earning under $19 saw their wages increase by 3.1%, while their hours were ‘cut’ by 9.4%, giving the market an elasticity of about -3.  This means as the price of labor was increased, bosses cut hours, netting an average loss of $125 per worker per month.

So it’s possible that bosses who hire minimum wage workers saw the 30% increase in wages as unaffordable and slashed hours for his employees, opting to either leave that work undone or assign it to higher paid workers.  Indeed, job growth in Seattle has been very strong throughout this exercise, and wage growth is also better than most US metros.

Maybe someone else is doing the work?  Maybe it never needed to be done?

Both of these are true, and both of them are good.  Measuring the well being of any worker as a function of the number of hours she works demonstrates a degrading and functional model for a human being in any system.  Even if you take the study’s methodology as sound, as plenty of economists do not, you have to see the practical effect of such a decrease in hours as having beneficial impacts to workers at all wage levels.  Some folks work fewer hours for more pay, and the differential may be negative.  But if that’s because higher paid workers are picking up the slack and giving more flexible time to the poorest people, who now make more for the hours they do put in, how could that be a bad thing?

Bosses hire minimum wage workers because they can.  When you raise the floor on wages, you force employers to make a choice – pay a living wage for work, leave the menial work undone, or give it to other employees.  More living wage jobs is good.  More hours for higher wage employees is good for them, and nets more wages paid in general.  Less menial work done just because the employer owns your time is also good.  Even if less skilled workers net a lower payroll total in the new circumstances, their load is being shared by people higher on the wage scale and their time is more valued.  Shit, the dip in hours is might be partly voluntary, since no one wants to scrub toilets more than they have to, and by paying people more per hour, they can make a choice to enjoy their life a little more!  What a concept!

This study will be used as a hammer against all Fight for 15 efforts in the country.

The reasons it doesn’t say exactly what Reason Magazine and the Wall Street Journal say it does is is complicated and annoying to explain. It’s because economists and pundits see work as a commodity and any drop in its total utilization as equivalent to poverty and waste.  They believe workers must not be idle and must be paid the lowest possible sum so that owners can maximize their gains.  But working people don’t believe them, and they shouldn’t.

Ask a fast food worker if she wants a higher wage or just more hours, she’ll tell you.


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