Seattle and the (Methodology of the) Economics of Minimum Wage

Published June 26th, 2017 -  - 06.26.1713

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.

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