Seattle's Minimum Wage Experience 2015-16

Abstract

Author(s): Reich, Michael; Allegretto, Sylvia A; Godoey, Anna | Abstract: This brief on Seattle’s minimum wage experience represents the first in a series that CWED will be issuing on the effects of the current wave of minimum wage policies—those that range from $12 to $15. Upcoming CWED reports will present similar studies of Chicago, Oakland, San Francisco, San Jose and New York City, among others. The timing of these reports will depend in part upon when quality data become available. We focus here on Seattle because it was one of the early movers.Seattle implemented the first phase of its minimum wage law on April 1, 2015, raising minimum wages from the statewide $9.47 to $10 or $11, depending upon business size, presence of tipped workers and employer provision of health insurance. The second phase began on January 1, 2016, further raising the minimum to four different levels, ranging from $10.50 to $13, again depending upon employer size, presence of tipped workers and provision of health insurance. The tip credit provision was introduced into a previously no tip credit environment. Any assessment of the impact of Seattle’s minimum wage policy is complicated by this complex array of minimum wage rates. This complexity continues in 2017, when the range of the four Seattle minimum wages widened, from $11 to $15, and the state minimum wage increased to $11.We analyze county and city-level data for 2009 to 2016 on all employees counted in the Quarterly Census of Employment and Wages and use the “synthetic control” method to rigorously identify the causal effects of Seattle’s minimum wage policy upon wages and employment. Our study focuses on the Seattle food services industry. This industry is an intense user of minimum wage workers; if wage and employment effects occur, they should be detectable in this industry. We use county level data from other areas in Washington State and the rest of the U.S. to construct a synthetic control group that matches Seattle for a nearly six year period before the minimum wage policy was implemented. Our methods ensure that our synthetic control group meets accepted statistical standards, including not being contaminated by wage spillovers from Seattle. We scale our outcome measures so that they apply to all sectors, not just food services.Our results show that wages in food services did increase—indicating the policy achieved its goal—and our estimates of the wage increases are in line with the lion’s share of results in previous credible minimum wage studies. Wages increased much less among full-service restaurants, indicating that employers made use of the tip credit component of the law. Employment in food service, however, was not affected, even among the limited-service restaurants, many of them franchisees, for whom the policy was most binding. These findings extend our knowledge of minimum wage effects to policies as high as $13.