Seattle and the (Methodology of the) Economics of Minimum Wage
Thanks to the many readers who have responded to my post (just now) on the University of Washington minimum wage study. The original post is now updated to include a link to the EPI paper that responds to the UW study and makes a series of important methodological criticisms of that study.
Noam Scheiber also has a good story on the UW paper which lays out a critique worth mentioning here. In sum, the employment effects identified by the UW study might be due, not to Seattle’s minimum wage increase, but to a booming job market in which high-wage jobs are replacing low-wage jobs. On this theory, the employment “losses” in the low-wage sector that the UW study reports would actually just be people moving from low- to high-wage employment. Here’s how Scheiber reports it:
[E]xperts on the minimum wage questioned the methods of the University of Washington researchers.
Most seriously, skeptics argue that the researchers confused the effects of a minimum-wage increase with the effects of a hot labor market. During a boom, which Seattle has experienced in recent years, employers bid up wages, effectively replacing low-wage jobs with higher-paying ones.
Under such a scenario, one would expect to see a decline in the overall number of hours worked in low-wage jobs. In their place would be a significant increase in hours worked at somewhat higher-paying jobs.
Mark Long, one of the authors of the UW study, called this alternative explanation possible.
More to come.