Since 2015, Seattle has incrementally increased their mandated entry-level wage—first to $11 an hour in 2015 and then to $13 an hour in 2016. (It’s scheduled to go all the way to $15 an hour by 2018). Economists and politicians have long argued about the economic impact of the policy and to what extent it would affect the average worker.
In Seattle the results are in. According to a recently released study from the University of Washington, as a result of the $13 entry-level wage, employers were forced to reduce employee hours who earned the new government mandated wage by 9 percent. To put those lost working hours into perspective, it’s a loss of 3.5 million hours every 3 months for hourly minimum wage workers in Seattle.
The conclusion is not surprising. Small businesses like restaurants usually operate within tight budget constraints and low profit margins. So if the price of labor goes up, a business owner must make the difficult choice to reduce staff or cut hours.
Supporters of the higher wage have predicted that increases in pay would offset lost working time. But this study shows that in reality the math doesn’t add up. While average wages did increase by 3 percent, the average earnings for low-wage workers still decreased by $125 per month.
This realization does not bode well for ‘Fight for $15’ advocates. If a $13 entry-level wage negatively impacted workers to this extent, a move to $15 an hour will only exacerbate the problem.
Increasing the entry-level wage has been proven to have a negative impact on the very people the policy intends to help. So instead of fighting for mandated wage increases, let’s equip people with the skills to acquire good-paying careers under their own fortitude.