Minimum Wage: By the Way, Rhode Island Legislators


A study of Seattle’s adventures in minimum wage has been making the rounds in wonky circles, as summarized here, by Ben Casselman on the FiveThirtyEight Web site:

The group’s first major report, released last year, looked at the first big increase under the law, in April 2015, in which the minimum wage went from $9.47 to $11 for large employers. The report found relatively little effect, for good or ill: The policy led to some lost jobs and hours, the report concluded, but those were more or less offset by the increased income enjoyed by workers. For workers who kept their jobs, the higher wage was a clear benefit; for low-wage workers as a whole, the impact was minimal. One reason for the muted impact: In high-cost Seattle, not many workers earned less than $11 an hour even before the law took effect.

Monday’s report looks at the impact of the second wage increase under the law: the January 2016 hike to $13 an hour for large employers. This time, the findings look very different: Compared to a counterfactual in which Seattle didn’t raise its minimum wage, the number of hours worked by low-wage workers (those earning less than $19 an hour) fell by 9.4 percent over the first nine months of 2016, and the number of low-wage jobs fell by 6.8 percent. Cumulatively, those add up to the losses of 5,000 jobs and 3.5 million hours of work. The average low-wage employee, they found, saw his or her monthly paycheck shrink by $125, or 6.6 percent.

So, the first increase, which was roughly comparable (in one year) to what the state budget document now in the Rhode Island Senate would do over two, had little overall effect.  It was essentially a redistribution of wealth from people who lost their jobs to people who kept them.  Whether that’s an improvement, I guess, depends which side you sympathize with.  Personally, when it comes to actions that the government should or shouldn’t take, I’d rather see more people working, with all of the opportunities and dispersed economic activity that entails.

Note, too, that the reason the first change had little effect was that the economics of Seattle meant most businesses had to pay above the new minimum wage anyway just by virtue of the city’s economics.  Lawmakers should just leave these calculations and tweaks alone.  They’re well (well) above their competence.