From Starbucks to More Bucks
New report shows that Seattle is eliminating low wages, not low-wage jobs.
Just last week, I told you about a report from UC Berkeley indicating that food service wages increased after Seattle raised its minimum wage to $15 — and with no negative impact on employment! Today, a working paper published by the National Bureau of Economic Research confirms that report’s findings.
Titled “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle,” this new working paper is authored by a team including Mark C. Long and Jacob Vigdor, who published a report with the University of Washington’s Seattle Minimum Wage Study Team last July which found that wages increased, low-wage employment increased, and the number of hours worked increased after Seattle raised the minimum wage.
This time around, the UW team says that “analysis focusing on restaurant employment at all wage levels, analogous to many prior studies, yields minimum wage employment impact estimates near zero.” This is great news! Before Seattle increased its minimum wage, any number of restaurant owners and conservative writers threatened that Seattle would see a spate of restaurant closures. One restaurateur predicted that “we would lose maybe a quarter of the restaurants in town.” Now, in the span of one week, two separate studies from different study teams have found that the minimum wage isn’t negatively affecting restaurant workers’ wages or hours worked. It seems that we might finally be able to declare this issue effectively settled.
The report delivers some more great news about what’s happening in Seattle, too: Thanks to the $15 minimum wage, Seattle is eliminating low wages without eliminating work. We’re rebuilding the idea of what a livable wage should be for all workers, and we’re reimagining the old, unsustainable concept of low-wage jobs.
Of course, you wouldn’t know it from reading this working paper. The abstract — in other words, the only piece that most journalists will read — sounds pretty damning. The study team argues that the second phase of wage increases, which saw the minimum wage rise to $13 per hour, saw a nine percent decrease in hours worked, and they say they found data “implying” that the minimum wage increase cut low-wage worker pay by $125 per month. That sounds pretty bad.
Except! There are a whole bunch of caveats in this working paper, most of which won’t get any attention in the conservative press. And the caveats are important.
- First of all, for reasons I’ll explain presently, the study doesn’t directly address multi-location establishments, so workers who got raises at Target, Starbucks, and other large employers aren’t included in the study.
- Second, the working paper’s sample incorporates workers who earn up to $19 per hour, which stretches the definition of the words “low-wage worker.”
- And most importantly: those declines in pay and hours are in relation to Synthetic Seattle, an imaginary city in which the minimum wage didn’t increase.
I’ve written about Synthetic Seattle at length, but the short version is that the UW study team have frankensteined together a bunch of ZIP codes from around Washington state that, when taken in aggregate, supposedly resemble Seattle’s pre-$15 economy. For purposes of confidentiality, the data that goes into Synthetic Seattle is not available to anyone but the study team, so it’s not replicable by any other economists. And due to collection issues, the employment data doesn’t include multi-location employers.
So let’s look at real Seattle. At 2.6 percent, we have our lowest unemployment rate ever recorded — damn near full employment. Our city’s median household income gains skyrocketed well beyond the rest of the state and the United States last year. Restaurants added more than 3,000 jobs in 2016. Of the nation’s ten largest counties, King County, which includes Seattle, saw the largest over-the-year percentage increase in employment in 2016 (3.3 percent), and was the only large county to show an over-the-year gain in average weekly wages (3.5 percent). Employment is up overall and in nearly every key low-wage industry.
And then there are the effects you can see on the streets of the city. Since the $15 minimum wage passed into law, we have more hotels in Seattle, and more restaurants, and more coffee shops — but you can still buy a banh mi sandwich for $3.75.
The only way you can make Seattle’s exceptional growth look bad is by comparing it to a fake Seattle where everything is even better — a meticulously fashioned, tightly controlled city that only this team can examine. So what’s the deal with Synthetic Seattle? Why is it showing greater growth than our booming city? It’s hard to say without actually being able to access the model.
But turning back to real Seattle: one table in the working paper — “Table 3: Employment Statistics for Seattle Single-Site Establishments” — demonstrates how Seattle’s low-wage jobs are disappearing.
If you look at the charts, you’ll see the number of jobs under $13 an hour steadily decreases. This is to be expected, given that the minimum wage has been steadily climbing. You’ll notice, too, that the jobs under $19 per hour start decreasing in the second half of 2015. This is where the UW team claim the jobs are disappearing entirely. However, if you look at the next column over, under “all,” those numbers keep increasing.
So the working paper assumes that these jobs between $13 and $19 per hour are just disappearing — poof — from the face of the earth, that they’re leaving town or managers have somehow found a way to make coffee or provide customer service without employees.
But all of the numbers here in real Seattle, and the evidence in front of our eyes, indicates that this work is still being done — that Seattle’s offices are still being cleaned and our front desks are being staffed and our food is still being delivered. So are there really fewer workers after the minimum wage? All those food service jobs in the above graph that now pay more than $19 per hour — are restaurants somehow hiring more highly educated middle managers, all of a sudden?
That doesn’t seem very likely to me. So here we come to a very important distinction. The working paper assumes that low-wage jobs pay low wages because of the skills involved — that a barista, say, is a particular kind of job that will always pay a certain amount. But in reality, low-wage jobs are low-wage jobs for no other reason than the workers are being paid low wages. Take a look at this sign that circulated on social media a few months ago:
These Jimmy John’s drivers wouldn’t be included in the working paper’s study because they’re making $20 per hour. In other words, they’re not low-wage workers anymore, even though their responsibilities haven’t changed. Jimmy John’s hasn’t switched to hiring more workers the study team would define as highly skilled; Jimmy John’s is paying its workers higher wages to stay competitive in a high-wage market.
I’d argue that those disappearing jobs from the working paper haven’t gone anywhere; they just got better. We haven’t lost jobs. We just lost a poverty wage and replaced it with a living wage. (Hell, the fact that this paper has to define low-wages as $19 per hour tells you how much the window has shifted in Seattle in just a few short years.) We have more jobs and more workers in Seattle; it’s just that fewer traditionally low-wage jobs still pay low wages. That’s terrific news — and it’s exactly why we implemented the $15 wage in the first place.
Look, nobody’s claiming that the $15 minimum wage will solve all of Seattle’s problems. Rising housing and rent costs continue to imperil workers and small business owners in this city. Middle class people need a raise, too. Transit is in dire need of more attention. Our homelessness populations continue to grow.
But we started something huge here in Seattle when we raised the minimum wage to $15. We’ve ensured that every worker is an active participant in the economy. We’ve decided that no worker is unworthy of a dignified life. We’ve declared that every job deserves the respect of a decent wage. And in the years since we made that decision, many states and cities across the nation have followed us, with many more yet to come. We are raising America’s wages and growing a stronger economy for all.
