I read a recent study from the University of Washington that shows the increase in Minimum wage in Seattle did more harm than good. The workers actually earned less total income because their hours were cut.
Here is the link to the article:
https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/?utm_term=.d7a284778d57
So, do you think this new study settles the argument on raising the Minimum wage? Do you agree with this study's conclusions? Why or why not?
Very interesting Paul! Text book economics is under attack here, again. It is a common expectation that minimum wage should raise incomes for low-wage workers. In my view though, a minimum wage is an interference to the market; an interference to a worker's ability to take advantage of the market. Secondly, a minimum wage is a cost to any conventional firm and producer. We can not underscore its (minimum wage) impact in terms of crowding-out jobs and therefore net incomes. In this case, the declining incomes may be an outcome of a rather "bad" economy itself than the increase in minimum wage. I live in a country where minimum wage is yet to be born. Incomes of low-wage workers have equally continued to decline. May be we shouldn't get shocked, overly! Thanks for sharing!
The Economic Policy Institute's review of the U/Washington study makes it quite clear that the study is flawed - http://www.epi.org/press/university-of-washington-analysis-of-seattle-minimum-wage-increase-is-fundamentally-flawed/
I also believe the econometric models that are the primary justification of the elimination of minimum wage laws are flawed. Like all social science, these models make an "all other things being equal" argument, but in the real world, all other things interact within a network of interrelated systems. Distributing higher wages to those with inadequate incomes is an economic stimulus because it increases demand.
But to me that is beside the point. Every employee sacrifices a part of his/her life to work for another. The only fair exchange for this sacrifice is a living wage. Employers who do not or are unwilling to pay a living wage to employees are leeches on the rest of the society because someone (government, charity) will have to provide the additional supports to sustain the low-wage employee's life.
The minimum wage should be at least the level of a living wage. This will eliminate the vast majority of child poverty and the oxymoron "working poor." Then we can begin the policy discussions about attaining full employment.
Thanks for your reply, Peter! I appreciate your thoughts on this topic. But what is a "living wage"? How is it determined? Is it based on the "average cost of living" for a certain geographical area? Is data on the "average cost of living" even available for most areas?
Also, shouldn't a worker be paid based on their skills, talents, productivity, experience, work ethic, etc. (or lack of)?
There is no question of agreeing or disagreeing with a study, unless you conduct another similar study with similar or better rigor.
This study looked only at part time employees of smaller companies. They did not include large companies, like WalMart. They also left out fast food franchise restaurants. Therefore, it is questionable whether we can generalize findings to the larger employers, or to the Seattle economy as a whole.
No lessons can be learned from this study EXCEPT about small non-franchise, non-chain companies which have only a few hourly employees each..
Thanks for your answer, Michael. You make some valid points. Still, the findings are very interesting for part-time workers outside the fast food industry (and Walmart). This study will surely move the debate along on raising the Minimum wage. There must be an upper limit where the cons outweigh the pros and Seattle may have pushed wages above that upper limit. Thanks again.
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