New and preliminary research examines how the first two steps of the Seattle minimum wage increase affected low-income residents.
by Mark Long, Elizabeth Pelletier, and Jennifer Romich | August 27, 2019
Advocates who support raising minimum wages base their position in part on claims that higher wages will improve the material well-being of low-income workers and their families. This brief presents new and preliminary evidence on the effect of the initial two phase in steps of the Seattle minimum wage on the hourly wages, employment, and earnings of workers who lived in households served by the Washington State Department of Social and Health Services (DSHS) or Health Care Authority (HCA). We examine overall effects on state clients. Then, using a DSHS-created household poverty measure based on client-reported income, we examine how short-run longitudinal outcomes varied by income level relative to the federal poverty line.
The study population consists of two overlapping cohorts of state program clients: the group of clients who were employed and earning less than $11 in the first quarter of 2015 (prior to the first step-up to $11 in April 2015) and the group of clients earning less than $13 in the final quarter of 2015 (prior to the second step-up to $13 in January 2016). Replicating the approach of Jardim and colleagues (2018), we use a difference-in-differences-in-differences (DDD) approach in which those who work in Seattle (“treated”) are matched using a nearest-neighbor approach to those outside the county containing Seattle (“untreated”). We compare these cohorts to a placebo cohort from an earlier period to further account for enduring Seattle-specific trends. Appendix 1 details our data and methods. This work is preliminary and based on the heterogeneous group of workers from households that come into contact with a set of state programs, most, but not all of which, target lower-income workers.
The strongest effects are found when we follow a cohort of workers who earned less than $11 per hour before the wage ordinance took effect. For this group, we find initial gains in income following the April 2015 increase to $11 per hour. Over the three quarters following that increase, results suggest that the policy increased quarterly earnings by $257 for this group. The subsequent increase to $13 per hour in January 2016 had smaller effects on earnings due to decreases in hours worked. The wage policy did not affect this group’s overall employment rate.
For the second cohort, those who were working and earned less than $13 per hour prior to the January 2016 increase, we find that wage gains offset reductions in hours, leading to no net change in quarterly earnings. Again, the policy did not affect the cohort’s employment.
State programs serve clients both below and above the federal poverty line. The minimum wage law increased wages for clients at all income levels. However, in the first cohort clients below the poverty line experienced smaller increases in wages and larger decreases in quarterly employment relative to those above the poverty line.
This work provides a first look at how the Seattle Minimum Wage Ordinance affected a population of workers from low-income households. Future iterations of our merged dataset will allow us to examine effects for households using specific programs commonly used by working poor households, such as food assistance, as well as allow us to test different household income measures.
While preliminary, we believe this trajectory analysis shows that the Seattle Minimum Wage raised hourly wages of workers who live in households served by state programs without decreasing the likelihood of being employed. Decreases in hours worked offset these wage gains, leading to no significant change in quarterly earnings. Clients with household income both below and above the poverty line experienced wage increases, and workers above the poverty line saw gains in earnings.
Mark Long and Jennifer Romich are co-principal investigators at the University of Washington Minimum Wage Study. Elizabeth Pelletier is a graduate student at the University of Washington Evans School of Public Policy. Their new work was published this month in the ESSPRI Working Paper Series.