Initial Findings of the Seattle Minimum Wage Study

Transcription

1 Initial Findings of the Seattle Minimum Wage Study Jacob L. Vigdor Evans School of Public Policy and Governance Presentation for the Seattle Economics Council June 7, 2017

2 Acknowledgements > MWS-UW Investigators: Scott Allard, Evans School Mark Long, Evans School Jennifer Otten, School of Public Health Robert Plotnick, Evans School Jennifer Romich, School of Social Work > Participants in the interviews and surveys > Funders: The Laura and John Arnold Foundation The City of Seattle Russell Sage Foundation

3 Overview of this talk > Conceptual Framework How will the minimum wage affect employer, workers, and the local economy? > The Seattle Minimum Wage Study Research activities Early findings > Lessons learned For research on the minimum wage For implementation of the minimum wage For boosting the benefits of the minimum wage

4 Conceptual Framework Mandated higher wages Increased purchasing power for lowest- paid workers Improved living standards for those workers (and possibly further Keynesian benefits)

5 Obstacles on the path from wages to purchasing power Staffing Reductions Among Affected Workers Purchasing Power Increases for some, declines for others. Full translation of wages into purchasing power One- for- one reduction in profit/proprietor income Offsetting reductions in means- tested benefits Mandated Higher Wages Business shutdown decisions Price Increases Possible revenue reductions, price increases threaten impact on purchasing power Worker productivity improves Purchasing power increases unless higher productivity enables staffing reductions

6 Obstacles on the path from higher purchasing power to improved living standards Higher Purchasing Power Accumulated Consumer Debt Changed spending patterns Lower debt, but equivalent living standards. Higher spending promotes health & well- being Higher spending that does not promote health & well being

7 Implications > The traditional research focus on labor market impacts of minimum wage policies is both insufficiently broad and insufficiently deep. Focus on small subsets of the low-wage workforce. Focus on average treatment effects rather than full distributional impacts. Focus on summary labor market measures rather than tracing dollars from consumer to the labor market and from labor market to living standards.

8 Seattle Minimum Wage Study (SMWS) > Executed under contract with the City of Seattle. > Funding (to date): 15% City of Seattle 85% Foundations, including major support from the Laura and John Arnold Foundation. Zero funding from labor or business interest groups. > Contractual features: Periodic reports delivered to the City SMWS retains right to disseminate, revise, publish No contracting on results.

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10 Seattle and Puget Sound Geography

11 Seattle and Puget Sound Geography

12 SMWS: Longitudinal Employer Survey > Sample drawn from Seattle Business License Database > First wave conducted early 2015 > 500+ business respondents > Oversampling of key industries (& nonprofits) > Major follow-up in the field now > Key goal: understand how businesses adapt to higher wages.

13 EMPLOYER SURVEY Raise wages 80% 10% Raise prices on goods or 62% 26% Raise any wages over $11 59% 30% Reduce the number of 30% 58% Add service charges or fees 30% 58% Limit raises or decrease wages 27% 61% Encourage health care plan 25% 63% Add health care benefits 25% 65% Eliminate another benefit 15% 73% Withdraw from Seattle 11% 76% Contract out work 11% 78% Have done or plan to do Figures do not sum to 100% because of item non- response. Do NOT plan to do this Have you made or do you intend to make any of the following changes to accommodate this new policy? Source: The Seattle Minimum Wage Study: Report on Baseline Employer Survey and Worker Interviews, April 2016.

14 SMWS: In-Depth Worker Interviews > Recruited 55 custodial parents earning wages under $15 in Seattle. > minute in-home interviews covering a range of topics. > Interviews audiotaped, transcribed, and coded > Wave 1 in spring 2015; Wave 2 in spring 2016; Wave 3 planned for > Key goal: understand lived experience, whether/how higher wages change lives.

15 Sample Characteristics Mean or % Female 80% Married or cohabiting 58% Age of youngest child 6.2 Immigrant to U.S. 60% FT or more hours 54% Hourly wage wave 1 $11.83 Hourly wage wave 2 $13.64 Employed at wave 2 84% Unemployed between waves 1 & 2 22%

16 Knowledge of the law is vague Percentage of Sample 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 10% 78% 62% 60% 35% 29% 13% 5% 9% None Vague Detailed Full sample Immigrant U.S. born

17 Still vague 1 year later Employed in a position covered by the law Had seen compliance poster at work Knew current minimum wage for employer Talked with community outreach organizations Count Percentage 39 80% 19 49% 8 21% 12 24%

18 Waiting for $15 [My coworkers] told me that it s mandatory that they have to pay, after summer, it starts in summer, I don t remember. They have to pay at least $ Svetlana, caregiver I know they say it was last year or this year, I m not really sure...i heard they say it, but I never seen what exactly happened No one s getting what they say last year, like $15,00 should be the minimum wage of work. Sharifa, child care provider I heard about people talking about the minimum wage law in Seattle, $15 an hour, but it wasn t me. Me, I work for $11 and some, and also my two sons, they work for somewhere less than $15. But I heard about people were talking, but I don t know specifically when and where. Hani, janitor

19 The law is viewed as fair > Vast majority had positive opinion of the law. > Fair for 2 reasons: High cost of living in Seattle Value of workers time and work I think it s a great idea because if you really think about it, especially in Seattle, rent is high, and by getting $10.00 if you calculate it, you work forty hours per week, what you're getting is not enough. Edris, caregiver I think it will affect me like positively, you know what I mean? Like of course it s going to be more income. My time will be worth more, you know what I mean? - - Alisha, food prep assistant

20 but unlikely to improve living standards. > Common belief that everything will go up Price increases Benefit reductions > Belief comes from: Public information about the law Life experience The reality of high marginal tax rates

21 I think that, as soon as it all goes up, everything else is going to go up. Our gas is going to have to go up again. My rent is not going to be as cheap. With making that much you might not even need Section 8 or food stamps, supposedly. Nina, food service worker Maybe they are going to increase the salary but maybe they are going to increase the electricity bill or the gas bill, I hope I m wrong. So in that case we are going to be in the same situation --Carlo, custodian [My life will be] probably the same because the rate increase and then the living expenses increase as a result More pay, but I have to pay more for stuff. Binh, assembly line worker

22 Simulated income: Earnings + taxes+ SNAP

23 SMWS: Administrative Data Analysis > UI system records , with periodic updates. > Washington one of four states that collects hours data, permitting imputation of hourly wages and direct study of low-wage workers across all sectors. > Links forthcoming to other admin datasets: Licensing data: age, gender Voter registration: address Business gross receipts tax records: revenue DSHS: Program participation

24 Figure 4: Estimated impact of minimum wage on average wage rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries Note: Vertical axes scaled in percent.

25 Figure 5: Estimated impact of minimum wage on the number of beginning-of-quarter jobs rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries Note: Vertical axes scaled in percent.

26 Figure 6: Estimated impact of minimum wage on the number of hours worked rate in the 2nd quarter after enforcement, by wage rate cutoff, all industries Note: Vertical axes scaled in percent.

27 To be released later this month > Analysis of labor market impact through 3 rd quarter of 2016 Incorporates 1 st and 2 nd minimum wage increases. Results not yet cleared for distribution by ESD. Comparison of all-industry low wage job analysis with more traditional focus on restaurant industry. General findings: > Increase to $11: roughly balanced income gains due to wage increases against income losses due to reduced work. > Increase to $13: losses exceed gains. Workers might make up income losses with work outside the City, contract work, etc.

28 SMWS: Price data collection > On-foot collection: grocery stores, restaurants, retail > Web scraping: gas prices, apartment rents, more information from restaurants. > Presentation by Jennifer Otten yesterday afternoon.

29 PRICE COLLECTION Retail and Restaurant Prices 110% 105% 100% 95% 90% RETAIL AND RESTAURANT PRICES % CHANGE FROM BASELINE Seattle Restaurants Seattle Retail Rest of King County Retail Source: Hill, Otten, van Inwegen, and Vigdor. Early Evidence on the Impact of Seattle s Minimum Wage Ordinance. January 2016.

30 Future Directions > SMWS: extend study activities, build out rich data resources. > Extend study to other locations. Seattle an outlier: strong high-skilled job growth coupled with severe housing affordability problems. > Extend the University-Government partnership model The Applied Public Policy Lab (APPL)

31 Recommendations for research > Big data opens a world of possibility for understanding the impacts of policy interventions. > Data by themselves accomplish little. > Analytical challenges complex. > Complementing administrative data with other methods and techniques helps build a more complete, more robust portrait of the lived impact of policy change.

32 Recommendation for designing and implementing a minimum wage law > Political compromise tends to yield complexity. > Complexity threatens to undermine effectiveness of the law. Increases business costs of compliance. Reliance on workers to self-report compliance problems rests on workers confidence that they understand the law and what they are owed. > Immigrants, non-english speakers require special outreach to improve awareness and understanding.

33 Recommendations for boosting the benefits of the minimum wage > Think carefully about how increased earnings will interact with the existing safety net (including Cal EITC). > Consider Seattle-style incentives to provide health benefits. > Consider Seattle-style regulations on hours and scheduling. > Be aware of tradeoffs: is it better to have a smaller number of economically sustainable jobs, or larger number of jobs for which employees will require supplemental assistance?