Seattle’s minimum wage lesson for Illinois
Author: Jordan Bruneau
Publication Date: August 2017
Newspaper: State Journal Register
Topics: Minimum Wage
A minimum wage increase that reduces wages?
That’s the conclusion of a major new University of Washington minimum wage study, conducted by a research team funded by the City of Seattle. And it couldn’t come at a worse time for Illinois’ minimum proponents who are hoping Gov. Bruce Rauner will sign the $15 legislation currently on his desk.
The study, conducted by a diverse group of experienced economists, found that Seattle’s employees earning less than $19 an hour — roughly Illinois’ median wage — lost $125 per month on average. In other words, the boost in hourly pay was offset by a loss in work opportunities, after the city’s then-$13 minimum wage forced employers to reduce hours worked by 9 percent.
The study also found the wage hike reduced the number of these jobs by 7 percent. This job loss conclusion is in line with the best economic research on the topic, including a 2014 review by the nonpartisan Congressional Budget Office which found a $10.10 federal minimum wage would cost 500,000 jobs. “Basically, what we’re doing is we’re removing the bottom rung of the (career) ladder,” said study author Jacob Vigdor.
This minimum wage study stands out from its peers because its economists had access to private payroll data on all affected employees in the city. This breadth of data provides a far more accurate result than competing studies that use restaurant employees as a minimum wage proxy. David Autor, one of the nation’s leading labor economists, called the study “very credible” with the “statistical power that it can change minds.”
That doesn’t mean the study hasn’t been controversial — among advocates for $15, anyway. Upon learning about its forthcoming results, Seattle’s Mayor and $15 champion Ed Murray requested a report from a team of UC Berkeley researchers. This attempt to try to dull the UW study’s impact backfired as the mayor’s office has come under intense criticism for study shopping and politicizing economics.
For Illinois, whose economy currently lags far behind Seattle’s, a $15 minimum wage would likely do even more harm. A 2015 study by economists from Miami University and Trinity University found 28,500 jobs would be lost in the state at a $12 minimum wage. This job loss would be compounded at a $15 wage floor. This would only worsen job prospects for the nearly one in five young state residents who want a job but can’t find one.
And state residents are already struggling with wage stagnation, recently made worse by a new 32 percent state income tax increase. The potential loss of hundreds of dollars more a year due to a $15 minimum wage would take another painful bite out of residents’ budgets for housing, health care and child care costs.
Chicago, which has already passed a municipal $13 minimum wage, has seen some of these consequences firsthand, with articles reporting that several businesses in the city are closing, reducing hours, or holding off on hiring at least partially because of the costs associated with the wage hike.
Recognizing these consequences, more than three-quarters of Chicago suburbs — at least 100 municipalities — opted out of Cook County’s incoming $13 minimum wage. These decisions mirror a national trend, with states like Maine, Missouri and Iowa recently making minimum wage moves to protect starter jobs and take-home pay. Even left-of-center politicians — including Baltimore’s Democratic mayor, and a majority of Cleveland’s city council (which later voted to put the issue to voters in a ballot measure) — have rejected $15 legislation, citing the impact it would have on city small businesses.
Governor Rauner should follow suit and heed the Emerald City’s lesson for the Land of Lincoln by vetoing the $15 minimum wage.