Jacob L. VigdorEvans School of Public Policy and Governance

Presentation for the Seattle Economics Council

June 7, 2017

Initial Findings of the Seattle Minimum Wage StudyInitial Findings of the Seattle Minimum Wage Study

Acknowledgements> MWS-UW Investigators:

– Scott Allard, Evans School– Mark Long, Evans School– Jennifer Otten, School of Public Health– Robert Plotnick, Evans School– Jennifer Romich, School of Social Work

> Participants in the interviews and surveys

> Funders:– The Laura and John Arnold Foundation– The City of Seattle– Russell Sage Foundation

Overview of this talk

> Conceptual Framework– How will the minimum wage affect employer, workers, and the

local economy?> The Seattle Minimum Wage Study

– Research activities– Early findings

> Lessons learned– For research on the minimum wage– For implementation of the minimum wage– For boosting the benefits of the minimum wage

Conceptual Framework

Mandated  higher  wages

Increased  purchasing  power  for  lowest-­‐paid  workers

Improved living  standards  forthose  workers  (and  possibly  further  Keynesian benefits)

Obstacles on the path from wages to purchasing power

Mandated  Higher  Wages

Staffing  Reductions  Among  Affected  Workers

Purchasing Power  Increases  for  some,  declines  for  others.

One-­‐for-­‐one  reduction   inprofit/proprietor   income

Full  translation  of  wages  into  purchasing  power

Offsetting reductions  in  means-­‐tested  benefits

Business shutdown  decisions

Price  IncreasesPossible  revenue  reductions,  

price  increases  threaten  impact  on  purchasing  power

Worker productivity  improvesPurchasing  power  increases  unlesshigher  productivity  enables  staffing  

reductions

Obstacles on the path from higher purchasing power to improved living standards

Higher Purchasing  Power

AccumulatedConsumer  Debt

Lower  debt,  but  equivalent  living  

standards.

Changed  spending  patterns

Higher spending  promotes  health  &  

well-­‐being

Higher  spending   that  does  not  promote  health  &  well  being

Implications

> The traditional research focus on labor market impacts of minimum wage policies is both insufficiently broad and insufficiently deep.– Focus on small subsets of the low-wage workforce.– Focus on average treatment effects rather than full

distributional impacts.– Focus on summary labor market measures rather than

tracing dollars from consumer to the labor market and from labor market to living standards.

Seattle Minimum Wage Study (SMWS)

> Executed under contract with the City of Seattle.> Funding (to date):

– 15% City of Seattle– 85% Foundations, including major support from the Laura

and John Arnold Foundation.– Zero funding from labor or business interest groups.

> Contractual features:– Periodic reports delivered to the City– SMWS retains right to disseminate, revise, publish– No contracting on results.

Source: “Immediate Impacts of the City of Seattle Minimum Wage Ordinance” by MC Long, R Plotnick, E Roshchina, J Vigdor, and H Wething. Preliminary working paper presented to the Association for Policy Analysis and Management Conference, November, 2016. Do Not Cite.

Seattle and Puget Sound Geography

Source: “Immediate Impacts of the City of Seattle Minimum Wage Ordinance” by MC Long, R Plotnick, E Roshchina, J Vigdor, and H Wething. Preliminary working paper presented to the Association for Policy Analysis and Management Conference, November, 2016. Do Not Cite.

Seattle and Puget Sound Geography

SMWS: Longitudinal Employer Survey

> Sample drawn from Seattle Business License Database

> First wave conducted early 2015> 500+ business respondents> Oversampling of key industries (& nonprofits)> Major follow-up in the field now> Key goal: understand how businesses adapt to

higher wages.

“Have  you  made  or  do  you  intend  to  make  any  of  the  

following  changes   to  accommodate  this  

new  policy?

EMPLOYER  SURVEY

Source:  The  Seattle  Minimum  Wage  Study:  Report  on  Baseline  Employer  Survey  and  Worker  Interviews,  April  2016.Figures  do  not  sum  to  100%  because  of  item  non-­‐response.

11%11%15%25%25%27%30%30%

59%62%

80%

78%76%73%65%63%61%58%58%

30%26%

10%

Contract  out  workWithdraw  from  Seattle

Eliminate  another  benefitAdd  health  care  benefits

Encourage  health  care  plan  …Limit  raises  or  decrease  wages

Add  service  charges  or  feesReduce  the  number   of  …

Raise  any  wages  over  $11Raise  prices  on  goods  or  …

Raise  wages

Have  done  or  plan  to  do Do  NOT  plan  to  do  this

SMWS: In-Depth Worker Interviews

> Recruited 55 custodial parents earning wages under $15 in Seattle.

> 60-90 minute in-home interviews covering a range of topics.

> Interviews audiotaped, transcribed, and coded> Wave 1 in spring 2015; Wave 2 in spring 2016; Wave

3 planned for 2017.> Key goal: understand lived experience, whether/how

higher wages change lives.

Sample Characteristics

Mean or  %Female 80%

Married  or  cohabiting 58%

Age  of  youngest  child 6.2

Immigrant  to  U.S. 60%

FT or  more  hours 54%

Hourly  wage  wave  1 $11.83

Hourly  wage  wave  2 $13.64

Employed  at  wave  2 84%

Unemployed  between  waves 1  &  2 22%

Knowledge of the law is vague

10%

62%

29%

13%

78%

9%5%

35%

60%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

None Vague Detailed

Perc

enta

ge o

f Sam

ple

Full sample Immigrant U.S. born

Still vague 1 year later

Count Percentage

Employed in  a  position   covered  by  the  law

39 80%

Had  seen  compliance  poster  at  work

19 49%

Knew  current  minimum  wage  for  employer

8 21%

Talked  with  community  outreach  organizations

12 24%

Waiting for $15“[My  coworkers]  told  me  that  it’s  mandatory  that  they  have  to  pay,  after  summer,  it  starts  in  summer,  I  don’t  remember.  They  have  to  pay  at  least  $15.00.”

-­‐-­‐ Svetlana,  caregiver

“I  know  they  say  it  was  last  year  or  this  year,  I’m  not  really  sure...I  heard  they  say  it,  but  I  never  seen  what  exactly  happened…No  one’s  getting  what  they  say  last  year,  like  $15,00  should  be  the  minimum  wage  of  work.”  

– Sharifa,  child  care  provider

“I  heard  about  people  talking  about  the  minimum  wage  law  in  Seattle,  $15  an  hour,  but  it  wasn’t  me.  Me,  I  work  for  $11  and  some,  and  also  my  two  sons,  they  work  for  somewhere  less  than  $15.  But  I  heard  about  people  were  talking,  but  I  don’t  know  specifically  when  and  where.”  

–Hani,  janitor

The law is viewed as fair…

> Vast majority had positive opinion of the law.

> Fair for 2 reasons:– High cost of living in

Seattle– Value of workers’

time and work

“I  think  it’s  a  great  idea  because  if  you  really  think  about  it,  especially  in  Seattle,  rent  is  high,  and  by  getting  $10.00  if  you  calculate  it,  you  work  forty  hours  per  week,  what  you're  getting  is  not  enough.”  

–Edris,  caregiver

“…  I  think  it  will  affect  me  like  positively,  you  know  what  I  mean?  Like  of  course  it’s  going  to  be  more  income.  My  time  will  be  worth  more,  you  know  what  I  mean?”

-­‐-­‐Alisha,  food  prep  assistant

…but unlikely to improve living standards.

> Common belief that “everything will go up”– Price increases– Benefit reductions

> Belief comes from:– Public information about the law– Life experience – The reality of high marginal tax rates

“I think that, as soon as it all goes up, everything else is going to go up. Our gas is going to have to go up again. My rent is not going to be as cheap. With making that much you might not even need Section 8 or food stamps, supposedly.”

—Nina, food service worker

“Maybe they are going to increase the salary but maybe they are going to increase the electricity bill or the gas bill, I hope I’m wrong. So in that case we are going to be in the same situation”

--Carlo, custodian

“[My life will be] probably the same because the rate increase and then the living expenses increase as a result…More pay, but I have to pay more for stuff.”

–Binh, assembly line worker

Simulated income: Earnings + taxes+ SNAP

SMWS: Administrative Data Analysis

> UI system records 2000-2016, with periodic updates.> Washington one of four states that collects hours

data, permitting imputation of hourly wages and direct study of low-wage workers across all sectors.

> Links forthcoming to other admin datasets:– Licensing data: age, gender– Voter registration: address– Business gross receipts tax records: revenue– DSHS: Program participation

Preliminary. Please do not cite without permission

31

Figure 4: Estimated impact of minimum wage on average wage rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries

Note: Vertical axes scaled in percent.

Preliminary. Please do not cite without permission

32

Figure 5: Estimated impact of minimum wage on the number of beginning-of-quarter jobs rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries

Note: Vertical axes scaled in percent.

Preliminary. Please do not cite without permission

33

Figure 6: Estimated impact of minimum wage on the number of hours worked rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries

Note: Vertical axes scaled in percent.

To be released later this month

> Analysis of labor market impact through 3rd quarter of 2016– Incorporates 1st and 2nd minimum wage increases.– Results not yet cleared for distribution by ESD.– Comparison of all-industry low wage job analysis with more

traditional focus on restaurant industry.– General findings:

> Increase to $11: roughly balanced income gains due to wage increases against income losses due to reduced work.

> Increase to $13: losses exceed gains. Workers might make up income losses with work outside the City, contract work, etc.

SMWS: Price data collection

> On-foot collection: grocery stores, restaurants, retail> Web scraping: gas prices, apartment rents, more

information from restaurants.> Presentation by Jennifer Otten yesterday afternoon.

PRICE  COLLECTIONRetail  and  Restaurant  Prices

Source:  Hill,  Otten,  van  Inwegen,  and  Vigdor.  “Early  Evidence  on  the  Impact  of  Seattle’s  Minimum  Wage  Ordinance.”  January  2016.

90%95%100%105%110%

RETAIL  AND  RESTAURANT  PRICES  %  CHANGE  FROM  BASELINE

Seattle  Restaurants Seattle  Retail Rest  of  King  County  Retail

Future Directions

> SMWS: extend study activities, build out rich data resources.

> Extend study to other locations.– Seattle an outlier: strong high-skilled job growth coupled

with severe housing affordability problems.> Extend the University-Government partnership

model– The Applied Public Policy Lab (APPL)

Recommendations for research

> “Big data” opens a world of possibility for understanding the impacts of policy interventions.

> Data by themselves accomplish little.> Analytical challenges complex.> Complementing administrative data with other

methods and techniques helps build a more complete, more robust portrait of the lived impact of policy change.

Recommendation for designing and implementing a minimum wage law

> Political compromise tends to yield complexity.> Complexity threatens to undermine effectiveness of

the law.– Increases business costs of compliance.– Reliance on workers to self-report compliance problems

rests on workers’ confidence that they understand the law and what they are owed.

> Immigrants, non-English speakers require special outreach to improve awareness and understanding.

Recommendations for boosting the benefits of the minimum wage

> Think carefully about how increased earnings will interact with the existing safety net (including Cal EITC).

> Consider Seattle-style incentives to provide health benefits.

> Consider Seattle-style regulations on hours and scheduling.

> Be aware of tradeoffs: is it better to have a smaller number of economically sustainable jobs, or larger number of jobs for which employees will require supplemental assistance?