Several years after various cities passed laws significantly increasing the local minimum wage, data shows both workers and the economy are better off.
Earlier this year, the Seattle Times reported on a group of researchers at the University of California-Berkeley who analyzed the results from several cities where voters approved hikes in the minimum wage and how fast food workers (most of whom are paid the minimum wage) were affected. Their conclusion was that the fast food industry wasn’t hemorrhaging jobs as detractors predicted, but rather that jobs were stable and workers’ paychecks saw a decent boost.
Scholars looked at data from Seattle, San Francisco, Oakland, San Jose, Chicago, and Washington, DC, in which wages at the end of the period studied (December 2016) ranged anywhere from $10/hour to $13/hour. The study found that, for low wage employees (defined as less than $19/hour in Seattle) working food service jobs, increasing the minimum wage by 10 percent leads to an increase in a worker’s paycheck anywhere from 1.3 and 2.5 percent.
“We find that they are working just as the policymakers and voters who enacted these policies intended,” Allegretto told the Times. “So far they are raising the earnings of low-wage workers without causing significant employment losses.”
Allegretto additionally claimed that the higher-performing economies in those six cities were due to the minimum wage, when comparing those cities to other large American cities that experienced private sector growth but no minimum wage increase, like Dallas, Denver, and Philadelphia. Allegretto argued that this data proves that a city can significantly increase the minimum wage without having to throw a local economy into chaos.
Economist Jacob Vigdor of the University of Washington made the opposite argument after he and a separate team of researchers replicated the same numbers used by the UC-Berkeley team and analyzed the entire low-wage labor market as a whole, rather than just the fast food industry. Vigdor’s study found that while wages may have increased, the number of hours actually worked went down, amounting to a net decrease in paychecks.
However, Vigdor’s study was criticized for treating the economic boom in those cities as happening in a vacuum, rather than being potentially influenced by local minimum wage increases. As more money circulates in a local economy from more workers having more money to spend, more jobs are created as a result of the increased demand. Bill Phelps, CEO of Wetzel’s Pretzels, made this same argument in a 2016 Forbes column praising California’s decision to raise the minimum wage to $15/hour across the entire state:
When California increased the state minimum wage from $8 to $9 an hour in July 2014, our same-store sales doubled in the next two weeks and stayed that way for six months. When the minimum increased again in January of this year to $10, the same thing happened; our same-store growth rate more than doubled. In fact, I recently received an email from a multi-unit Wetzel’s Pretzels franchisee who said his business has never been better and he’s convinced the minimum wage increase has a lot to do with it.
The minimum wage is now set to gradually increase to $15 an hour over the next six years. As a business owner, am I worried about this increase, you ask? No, I have seen two increases in the past 24 months and our business has never been better.
Of course, it could also be argued that even at $15/hour, the minimum wage is still too low in many major metropolitan areas right now, let alone years down the road when the wage finally kicks in (California’s won’t kick in until 2023). ThinkProgress crunched the numbers nationwide and found that, even for a single adult with no children to support as early as 2015, $15/hour — or $31,200/year before taxes — isn’t considered a living wage in 30 states, meaning someone earning that much still struggles to meet their needs.
While cities and states have taken the initiative to raise their minimum hourly wage, the federal minimum still remains a paltry $7.25/hour. As the National Low-Income Housing Coalition has reported, that isn’t enough to rent a two-bedroom home at fair market rent in any city, county, or state in the entire country in 2018.
Carl Gibson is a politics contributor for Grit Post. His work has previously been published in The Guardian, The Washington Post, The Houston Chronicle, Al-Jazeera America, and NPR, among others. Follow him on Twitter @crgibs or send him an email at carl at gritpost dot com.