seattle’s minimum wage law: who will be affected and what ......more than 1/3 of minimum wage...

Seattle’s Minimum Wage Law: Who Will be Affected and What Can We Expect?

Prof. Mark C. Long

Presentation to the

2014 Olympia Economic Symposium October 30, 2014

Outline of Presentation Mark Long

1. Report by Klawitter, Long, and Plotnick to the City of Seattle (Spring 2014).

2. Seattle’s Minimum Wage Law.

3. Theory of How Minimum Wage Increase May Affect Seattle.

4. Prior Empirical Studies.

5. Unanswered Questions.

Report by Klawitter, Long, and Plotnick to City of Seattle (Spring 2014) Mark Long

Scope of Work:

1. What are the demographics of Seattle Workers?

2. What do we know about Income and Poverty for Seattle workers?

3. What is the profile of Seattle Businesses?

4. How might a change in the minimum wage affect Seattle

workers and businesses?

Primary Data Sources Mark Long

American Community Survey data 2007:

o Demographics and work characteristics for Seattle residents and workers (not self-employed or unpaid family worker)

o Data from 2012 for poverty and comparison

o ACS represents 1% of all housing units and of all individuals living in group quarters. In Washington, this includes 29,147 out of over 2.9 million households and 1,415 out of an estimated group quarters population of 141,411 in 2012.

WA State Employment from the Unemployment Insurance, 2012:

o Establishment and worker data for Seattle locations. (not self-employed or federal government + others)

Primary Data Sources Mark Long

Most results are from 2007 data because that was the last year in which the ACS queried actual number of weeks worked in the past 12 months (subsequent years ask this in intervals, such as 14 to 26 weeks). This was needed to estimate the hourly wage, defined as:

𝑊𝐴𝐺𝐸 =𝐼𝑁𝐶𝑊𝐴𝐺𝐸

𝑊𝐾𝑆𝑊𝑂𝑅𝐾1 × 𝑈𝐻𝑅𝑆𝑊𝑂𝑅𝐾

INCWAGE is the reported total wage income received as an employee.

Question text: (“Give your best estimate of the total amount during the past 12 months” of) “wages, salary,

commissions, bonuses, or tips from all jobs. Report amount before deductions for taxes, bonds, dues, or

other items.”

WKSWORK1 is the reported weeks worked.

Question text: “During the past 12 months, how many weeks did this person work? Count paid vacation,

paid sick leave, and military service.”

UHRSWORK is the reported average hours worked per week in weeks in which the

person worked.

Question text: “During the past 12 months, in the weeks worked, how many hours did this person usually

work each week?”

Seattle’s Lower-Wage Workers Mark Long

About 42,000 people living in Seattle and about 38,000 people working in Seattle currently earn $9.32 or less.

About 101,000 Seattle residents earn $15 or less (30%)

About 102,000 people who work in Seattle earn $15 or less (24%)

Seattle and Non-Seattle Workers and Workplaces by Wage Mark Long

40% of workers in Seattle earning minimum wage live outside the city.

`

Seattle Residence and work

location<=$9.32

$9.33 -

12.12$12.13 - 15

$15.01 to

$18Over $18 All Workers

Live and Work in Seattle 23,112 19,067 17,871 16,077 133,387 209,514

Live in Seattle, Work outside 18,824 10,717 11,756 9,404 74,243 124,944

Live outside Seattle, Work in

Seattle 14,803 13,753 13,103 18,196 160,899 220,754

TOTAL Seattle Residents 41,936 29,784 29,627 25,481 207,630 334,458

TOTAL Workers in Seattle 37,915 32,820 30,974 34,273 294,286 430,268

Estimated Number of Workers

Seattle and Non-Seattle Workers and Workplaces by Wage Mark Long

Work Region for Seattle Residents

Work Region <=$9.32$9.33 -

12.12$12.13 - 15

All

Workers

Seattle 55% 64% 60% 63%

King County 9% 15% 17% 18%

Outside King County 36% 21% 23% 19%

Totals 100% 100% 100% 100%

B: Percent of Wage Group by Work Region

Family Incomes and Demographics by Wage Mark Long

Median family Income is highest for the highest wage group (about $90,000) and lowest for minimum wage earners (about $17,000).

Poverty rates are 40% for the lowest wage group to 2% for highest group.


Food Stamps <=$9.32$9.33 -

12.12

$12.13

- 15

Total

Low

Wage

<=$9.32$9.33 -

12.12

$12.13

- 15

All

Workers<=$9.32

$9.33 -

12.12

$12.13 -

15

Yes 22% 21% 18% 61% 8% 11% 9% 5% 3,398 3,239 2,764

No 12% 8% 8% 29% 92% 89% 91% 95% 38,538 26,545 26,863

Totals - - - - 100% 100% 100% 100% 41,936 29,784 29,627

A: Percent of Food Stamp

group who earn:

B: Percent of Wage Group by

Food Stamp group

C: Estimated Number

of Workers in each

Food stamp and Wage

Group


Education Level <=$9.32$9.33 -

12.12

$12.13

- 15

Total

Low

Wage

<=$9.32$9.33 -

12.12

$12.13

- 15

All

Workers<=$9.32

$9.33 -

12.12

$12.13 -

15

Less Than HS 29% 19% 11% 59% 17% 16% 9% 7% 7,153 4,798 2,684

High School or GED 23% 14% 12% 49% 23% 20% 17% 13% 9,684 5,817 4,912

Some College 19% 13% 12% 43% 40% 39% 36% 27% 16,859 11,702 10,554

Bachelor's Degree 5% 4% 6% 15% 20% 25% 39% 53% 8,240 7,467 11,477

Totals - - - - 100% 100% 100% 100% 41,936 29,784 29,627

C: Estimated Number

of Workers in each

Education and Wage

Group

A: Percent of Educational

Level who earn:


Education Level


Age <=$9.32$9.33 -

12.12

$12.13

- 15

Total

Low

Wage

<=$9.32$9.33 -

12.12

$12.13

- 15

All

Workers<=$9.32

$9.33 -

12.12

$12.13 -

15

under 19 61% 14% 1% 76% 10% 3% 0% 2% 4,129 946 93

19-24 35% 21% 10% 66% 38% 32% 16% 14% 16,112 9,575 4,587

25-44 7% 8% 9% 24% 30% 48% 49% 51% 12,613 14,362 14,467

45-54 9% 6% 9% 23% 13% 12% 20% 19% 5,542 3,574 5,780

55+ 8% 3% 10% 21% 8% 5% 16% 14% 3,540 1,327 4,700

Totals - - - - 100% 100% 100% 100% 41,936 29,784 29,627

A: Percent of Age Group who

earn:


Age

C: Estimated Number

of Workers in each Age

and Wage Group


Gender <=$9.32$9.33 -

12.12

$12.13

- 15

Total

Low

Wage

<=$9.32$9.33 -

12.12

$12.13

- 15

All

Workers<=$9.32

$9.33 -

12.12

$12.13 -

15

Female 15% 10% 9% 34% 57% 54% 49% 47% 23,989 15,962 14,410

Male 10% 8% 9% 27% 43% 46% 51% 53% 17,947 13,822 15,217

Totals - - - - 100% 100% 100% 100% 41,936 29,784 29,627

A: Percent of Gender who

earn:


Gender

C: Estimated Number

of Workers in each

Gender and Wage

Group

Hours and Weeks of Work by Wage Mark Long

More than 1/3 of minimum wage workers work part time.

The vast majority of workers earning $12.13 or more are employed

full time.

3530

129

15

0

10

20

30

40

<= $9.32 $9.33 - 12.12 $12.13 - 15.00 Over $15 All workers

Wage Range

Percent Working Part Time by Wage Range

Hours and Weeks of Work by Wage Mark Long

The median minimum wage earner works 44 weeks and a total of

1,040 hours (0.5 FTE).

The median low wage earner whose wage is between the minimum

and $15 works 50 weeks and about 1,800 hours (0.9 FTE).

1040

17571866

0

500

1000

1500

2000

<= $9.32 $9.33 - 12.12 $12.13 - 15.00

Wage Range

Median Annual Work Hours by Wage Range

Worker Industries

Mark Long

Four industries employ 64% of all minimum wage workers.

The same 4 industries employ 62% of workers earning $15 per hour or less.

55%11%

13%11%

10%

38%8%

15%18%

21%

36%8%

13%17%

25%

0% 10% 20% 30% 40% 50% 60%

All OtherEducational Services

Health & Social AssistanceRetail Trade

Accomm & Food Serv



Accomm & Food Serv



Accomm & Food Serv

Industry Share of Workers

Earn <= $9.32

Earn <= $15.00

All Workers

Establishments and Workers by Establishment Size

Mark Long

75% of establishments have fewer than 10 employees.

But only 12% of employees work in those establishments.

Most employees in Seattle work for establishments with 100+

employees.

75%

14%

6% 3% 2% 0% 1% 0%

12% 12% 11% 11% 12%

3%

10%

30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

<10 10-24 25-49 50-99 100-199 200-249 250-499 500+

Number of FTE Employees in Establishment

Percent of Seattle Establishments and FTE Employees by Size

% of Establishments % of FTE Employees


Mark Long

Share of Seattle Establishments with 30% or More of Their FTE Employees Who Earn:

Industry

WA minimum

wage or less

130% of WA min. wage or

less

$15 per hour or less

Accommodation & Food Services 17.2% 58.7% 82.0% Retail Trade 5.7% 40.8% 58.8% Arts, Entertainment & Recreation 2.3% 26.4% 40.0% Other Services (except Public Admin) 2.0% 20.7% 33.7% Manufacturing 2.0% 15.9% 31.4%

All Industries 3.0% 16.6% 27.4%

In 3% of establishments, 30% or more of the FTE employees earn the

WA minimum wage.

In 27%, 30% or more of the FTEs earn $15 or less.


Mark Long

2-Digit NAICS Industry Name Share of Total Wages Paid in 2012

Share of Workers

Difference

GOVERNMENT 14.2% 14.6% -0.4%

Health Care and Social Assistance 12.5% 13.8% -1.3%

Professional, Scientific, and Technical Services 16.7% 11.4% 5.3%

Accommodation and Food Services 3.4% 9.5% -6.1%

Retail Trade 7.7% 9.2% -1.5%

Manufacturing 6.0% 5.6% 0.4%

Administrative and Support and Waste Management and Remediation Services

3.1% 4.4% -1.2%

Finance and Insurance 7.2% 4.4% 2.9%

Wholesale Trade 4.9% 4.0% 1.0%

Information 6.0% 3.9% 2.1%

Construction 3.8% 3.6% 0.2%

Other Services (except Public Administration) 2.4% 3.6% -1.2%

Transportation and Warehousing 2.6% 2.7% -0.1%

Real Estate and Rental and Leasing 1.8% 2.1% -0.3%

Arts, Entertainment, and Recreation 1.1% 2.1% -0.9%

Educational Services 1.3% 1.9% -0.6%

OTHER INDUSTRIES 5.1% 3.1% 2.0%

Total 100.0% 100.0% 0.0%


Mark Long

We would like to give a special thanks and acknowledgement to

the Employment Security Department of Washington State for

sharing data and particularly Scott Bailey for doing the coding

required to generate these statistics on Seattle’s businesses.

Earnings Simulation Mark Long

Our simulations are static – Assume no changes in labor or housing market. Highly unlikely!

Firms may increase the wages of their other employees.

Firms may increase their demand for higher-skilled workers.

Labor turnover may decrease and productivity increase.

Businesses may close or relocate.

Seattle may become a more attractive place to live, driving up housing costs.

Ignores workers employed in the “informal economy.”

Earnings Simulation Mark Long

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$9.32per hour@ 1,040

hours

$10.80per hour@ 1,757

hours

$13.50per hour@ 1,866

hours

$9.32per hour@ 2,000

hours

$10.80per hour@ 2,000

hours

$13.50per hour@ 2,000

hours

$15.00minimum wage

$12.12minimum wage

$9.32minimum wage

Poverty Simulation Mark Long

Poverty Rate Given an Increase of

Minimum Wage to:

Sample

Baseline Poverty

Rate

12.12 per hour

15.00 per hour

All Seattle residents 13.6% 11.5% 11.1%

Seattle residents who earn wages 10.7% 8.5% 7.9%

Seattle residents who earn wages in Seattle 7.6% 4.3% 3.4%

Washington residents who earn wages in Seattle 5.7% 3.4% 2.9%

Food Stamp Simulation Mark Long

1 person 2 person 3 person 3 person

$9.32 @ 1040 hours $808 $183 $341 $491

$12.12 @ 1040 hours $1,050 $126 $284 $434 23%

$15.00 @ 1040 hours $1,300 $48 $224 $374 24%

$9.32 @ 2000 hours $1,553 $15 $163 $313

$12.12 @ 2000 hours $2,020 $0 $15 $157 33%

$15.00 @ 2000 hours $2,500 $0 $15 $0 33%

Monthly food stamp benefit

for household size:

Implied

Marginal

"Tax" Rate:Monthly

IncomeWage and Annual Hours

Seattle’s Minimum Wage Law Mark Long

Four Types of Employers:

A. Employers with more than 500 employees in the U.S. and not including medical benefits.

B. Employers with more than 500 employees in the U.S. that pay toward an individual employee’s medical benefits.

C. Employers with 500 or fewer employees in the U.S. D. Employers with 500 or fewer employees in the U.S. with

minimum compensation -- can meet the applicable hourly minimum compensation requirement through wages (including applicable commissions, piece-rate, and bonuses), tips, and money paid by an employer towards an individual employee’s medical benefits.

Seattle’s Minimum Wage Law Mark Long

Theory for How Minimum Wage Law May Affect Seattle Mark Long

Labor Demand

Labor Supply

We

WMinimum

LMinimum Demand

Le

LMinimum Supplied

Unemployment Caused by Min. Wage

Theory for How Minimum Wage Law May Affect Seattle

Mark Long

Labor Demand

Labor Supply

We

WMinimum

LMinimum Demand

Le

LMinimum Supplied

Unemployment Caused by Min. Wage

Theory for How Minimum Wage Law May Affect Seattle

Mark Long

Reasons that labor demand might be inelastic:

If labor turnover decreases and productivity increases, this would cause labor demand to be inelastic. o That is, firms wouldn’t change their demand for labor much

even with the higher wage.

Firms could pass the costs along to consumers if demand for their product is inelastic.

Prior Empirical Studies Mark Long

Bottom-Line: No Clear Consensus in Literature.

Results are sensitive to methods, time period examined, type of minimum wage (e.g., state versus federal), sector of employment (e.g., retail, fast food), age of workers (teens versus older workers), skill level of workers, etc.

Biggest challenge in this literature: Identifying the counterfactual – what would have happened in the absence of the change in law.


2014 Congressional Budget Office Study

Raising the federal minimum wage would reduce total employment by 500,000 workers or 0.3 percent. o “there is about a two-thirds chance that the effect would be in the

range between a very slight reduction in employment and a reduction in employment of 1.0 million workers”

o 16.5 million workers would get a pay raise.

Would lower the number of people under the poverty threshold by 900,000 (out of 45 million poor persons). o Yet: “19 percent of the [increase in wages] would accrue to

families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold”


Reich, Jacobs, and Bernhardt (UC-Berkeley) Study for the City of Seattle “To date, three rigorous studies have examined the employment impacts of

San Francisco’s and Santa Fe’s local minimum wage laws. Each finds no statistically significant negative effects on employment or hours (including in low-wage industries such as restaurants).

A larger body of economic research investigates the effects of state and federal minimum wage increases. These studies compare employment trends for states or counties that have different minimum wages. The best studies make comparisons to nearby states or counties to control for regional economic trends. These studies also find no statistically significant negative effects on employment or hours at an aggregate level or for low-wage industries such as restaurants and retail stores, or for specific groups of workers such as teens.”


“it is important to emphasize that existing research is necessarily limited to the range of minimum wage increases that have been implemented to date. While these studies are suggestive, they cannot tell us what is likely to happen when minimum wages are increased significantly beyond current local, state, or general mandates.” Seattle’s minimum wage increase from $9.32 to $15 is the largest increase in dollar amount of any local minimum wage law.

This 61% increase is only bested by the 65% increase in Santa Fe (from $5.15 to $8.50).

Unanswered Questions

Mark Long

Will this large increase in the Seattle’s local minimum wage have larger disemployment effects than found in existing studies?

Will it have a greater effect on: o Poverty rate, o Use of social services and state and federal safety net, o Prices of goods sold, o Housing costs, and o Labor productivity, turnover, and firm profits?

Unanswered Questions

Mark Long

Team of researchers at UW and ESD plan to study these questions.

Main empirical methods: (1) Interrupted Time Series:

(2) Difference-in-Difference:

Policy impact = (Seattle_Post - Seattle_Pre) - (Comparison_Post - Comparison_Pre)

Level of the

Outcome

Year Ordinance in

Force

Level of the

Outcome

Year Ordinance in

Force

Questions? Comments?

Thank you!

Links to Studies: University of Washington, Evans School of Public Affairs http://evans.uw.edu/sites/default/files/public/Evans_School_Min_Wage_report.pdf UC-Berkeley http://murray.seattle.gov/wp-content/uploads/2014/03/UC-Berkeley-IIAC-Report-3-20-2014.pdf

http://evans.uw.edu/sites/default/files/public/Evans_School_Min_Wage_report.pdf

http://evans.uw.edu/sites/default/files/public/Evans_School_Min_Wage_report.pdf

http://murray.seattle.gov/wp-content/uploads/2014/03/UC-Berkeley-IIAC-Report-3-20-2014.pdf

http://murray.seattle.gov/wp-content/uploads/2014/03/UC-Berkeley-IIAC-Report-3-20-2014.pdf

seattle’s minimum wage law: who will be affected and what ......more than 1/3 of minimum wage...

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