UW Study on Seattle’s $15 Minimum Wage: Part 3—UW study head says Seattle’s $15 wage is a double-edged sword that creates “winners and losers”

Apr 22, 2016

The head of the UW research team commissioned by the city of Seattle to track the impacts of the city’s new $15 minimum wage law appears has doubts about whether Seattle’s wage experiment is a good idea:

“Minimum wage is often touted as way to address poverty, and working poverty; my professional opinion is that it is a two edge sword and sometimes it’s the bad edge of the sword that can dominate.”

In an interview on KVI yesterday, Professor Jacob Vigdor says people who simplistically believe a higher minimum wage will help every low-skill and low-income worker don’t fully understand what he calls a “really complicated problem.” Vigdor explains that helping improve the economic and employment opportunities of today’s low skill workers is a bigger picture than simply forcing businesses to pay them more, because many of the jobs that used to provide higher wages and the potential for upward mobility for low skill workers have been “automated out of existence or they’ve been shipped overseas.” 

“It’s a really complicated problem and the minimum wage is not necessarily the right tool to get at the root cause of those problems, but it is something the people grasp at because sometimes they don’t wrap their heads around the fundamental [inaudible]…”

Vigdor, who is also a Research Associate at the National Bureau of Economic Research, explains that while increasing the minimum wage certainly can help some workers and improve their standard of living, others will have their higher wages offset by reduced hours or will be unable to find a job at all.  He says he and his research team have already heard from many business owners who say they will, or already have, cut hours and reduced benefits, while many others say they no longer hire unskilled, inexperienced workers for entry-level jobs. 

“Low paying jobs are the often first step up the ladder and by imposing a minimum wage, we’re basically saying we want people to be higher up the ladder and the way we’re going to do that is we’re going take away the bottom rung.  Some people are going to be able to climb all the way up to that second rung, but there are certain workers for whom if they don’t have a first rung they’re not going to have a job.”

It is those workers—the young with no skills or experience, minorities from underserved communities, immigrants for whom English is a second language, applicants with a criminal record—that will have the hardest time.  These are the workers who need that bottom rung the most, so they can get the skills and experience they need to command better wages in the future.  But employers forced to pay $15 an hour are incentivized to instead hire workers with a proven track record and strong references.

“With the minimum wage, you are going to have winners and losers.  The good workers who are really skilled, experienced and productive will be more valuable than ever, they’ll keep their jobs, work more hours.  Employers need to have the more productive workers if they’re going to be paying that much.  The less productive workers, because they’re inexperienced or they just don’t have the good work ethic or habits that employers are looking for, they’re going to be on the short end of things.”

Vigdor says continuing research by the UW team will help shed light on whom the city’s $15 minimum wage has helped and whom it has hurt. 

“Who are the winners and who are the losers here?  If we’ve enacted a policy that is harming the most vulnerable people in our local economy then I really think we need to stop and think twice about whether this is a good idea."

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