Just because one social experiment appears to be yielding disappointing effects to date is no reason to stop experimenting. Only by trying new ideas and carefully assessing their impacts can we hope to improve the social well-being of the nation.
U.S. Supreme Court Justice Louis Brandeis wrote: “a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” Seattle’s Minimum Wage Ordinance, passed in 2014, exemplifies courageous experimentation by a local government.
The ordinance aims to increase earnings of low-wage workers as one response to the troubling rise in income inequality and stagnant wages of low-wage workers. There is national and international interest in knowing how it is working. Unfortunately, not all social experiments work entirely as planned.
On April 1, 2015, the ordinance raised the minimum wage for Seattle employees from the state’s minimum of $9.47 to $11 for large employers. On Jan. 1, 2016, the second phase-in period started, when the minimum wage reached $13 for large employers — 37 percent higher than the state minimum wage at that time. Since January of this year, the minimum wage for large employers has been $15.
We are part of a multidisciplinary team of researchers at the University of Washington commissioned by the city of Seattle to study the impacts of the ordinance. The team has also received support from several nonpartisan foundations. This week, we released a paper containing some of our early findings.
Our research found that during the second phase-in period, hourly wages paid to low-wage employees increased, as intended by the ordinance. However, our estimates also suggest that the higher wages led to the elimination of more than 5,000 low-wage jobs. Standard economic theory predicts that employers will reduce their demand for labor given a higher wage. In percentage…