01 July 2017

About that Minimum Wage Study in Seattle

The weepy table
The state of Washington commissioned a study of Seattle's minimum wage, and found that low wage workers lost money as a result.

This comes as a surprise, since all the other studies found no effect, but this has not stopped the economic journalist community from touting this as conclusive evidence that raising the minimum wage does now work.

What the study concluded was that for low wage workers, the number of hours worked decreased, resulting in a loss of wages, but the devil is in the details.

The study appears to have been deliberately structured to deliver this results:
  • They did not include any multi-location employers, about 40% of the data set.
  • It defines "low wage" as earning less than $19 an hour, in a labor market where wages have increased by 18% over the period in question, so if a worker's pay goes from $16.50/hour to $19.25/hour, (a 16% increase), this would be counted as lost low wage hours. (Bracket creep)
  • Downplays the fact that employment at the single site employers that they survey increased total hours worked at all wage levels by 18% as well. 
  • Assumes that increases in higher wage jobs NEVER involved lower wage employees making more.
This is complete crap:
Words cannot describe the torment experienced by the data before they confessed what the University of Washington team got them to confess. I can only urge readers with an open mind to study Table 3 carefully. The average wage increase, from the second quarter of 2014 to the third quarter of 2016, for all employees of single site establishments was 18 percent. Eighteen percent! That is an annual increase of almost 8 percent. For two and a quarter years in a row. Not bad. And the number of hours worked of ALL employees of single site establishments? Up 18 percent in a little over two years. That too is an increase of almost 8 percent per annum.

Now multiply that wage by those hours and the total payroll for all employees rose 39.5 percent over the course of nine quarters. An annual rate of increase of 17.5 percent. These are BIG numbers. They are freaking HUGE numbers.

It must have taken a team of at least six academics to extract a 9.4 percent decline in hours from the 86,842 workers (out of a total of 336,517) earning under $19 dollars an hour at these single-site establishments. Look at the Table and weep.
(emphasis original)

Sources as diverse as the Economic Policy Institute and the Financial Times have excoriated the methodology here as well for much the same reasons.

Since the study has not yet been peer reviewed, I'd like to see the results, because I think that the the authors had a conclusion, and then cherry picked data to confirm their desired outcome.


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