Days Before Minneapolis Council Vote on $15 Minimum Wage, Study of Seattle Wage Increase Confirms Positive Impacts of $15

Less than a week before the Minneapolis City Council is due to vote on a $15 minimum wage with no tip penalty, a new study confirms that Seattle has seen none of the negative impacts predicted by business lobbyists. The same scare tactics are being used in Minneapolis ahead of the vote, which would make the city a leader in the midwest in addressing inequality, especially important when considering the drastic, and growing, racial and economic disparities currently plaguing the city.

A new report from the University of California at Berkeley’s Institute for Research on Labor and Employment shows the Seattle minimum wage law has increased pay for restaurant workers without costing jobs.

According to a national AP story, “The report is the first in a series of reviews in which the institute is examining jurisdictions that have raised their minimum wages. It focused on food service jobs, which some critics said could be disproportionately affected if increased wages forced restaurants to cut workers’ hours. Author Michael Reich said that hasn’t been the case.” Reich said, “We were surprised. The results were so much clearer than is often the case.”

The findings mirror the expectations that were laid out in the official report from the City of Minneapolis late last year when the City Council commissioned a study on raising wages. Over 71,000 workers would be affected by the current proposal being discussed in city council. The city’s study also found that “firms that currently pay the $9.50 minimum wage in Minneapolis often eligible to pay the current lower minimum wage of $7.75 as a small business, face lower employee turnover after an increase in the minimum wage.”

“Raising the wage for servers has never ended tipping or caused any of the apocalyptic outcomes the restaurant lobby claims, and there’s no reason to believe this time would be any different” said Alex Doebler, a bartender at Buca di Beppo in Downtown Minneapolis. 

The current proposal being discussed by city council, based on a staff recommendation and over 12 listening sessions with workers and business groups, proposes businesses with 100 or more employees phase-in $15 over 5 years, with the first increase going into effect on January 1, 2018. Workers at the biggest employers in Minneapolis would get a larger raise during the first year of the phase-in period, immediately putting money into circulation in the local economy. Smaller businesses would initially experience smaller increases, but all workers would reach the $15 minimum wage by 2022, which would then be tied to inflation.

As the National Employment Law Project reported in testimony submitted to Minneapolis city council, “The most rigorous research over the past 20 years—examining scores of state and local minimum wage increases across the U.S.—demonstrates that these increases have raised workers’ incomes without reducing employment. This substantial weight of scholarly evidence reflects a significant shift in the views of the economics profession, away from a former view that higher minimum wages cost jobs. As Bloomberg News summarized in 2012: [A] wave of new economic research is disproving those arguments about job losses and youth employment. Previous studies tended not to control for regional economic trends that were already affecting employment levels, such as a manufacturing-dependent state that was shedding jobs. The new research looks at micro-level employment patterns for a more accurate employment picture. The studies find minimum-wage increases even provide an economic boost, albeit a small one, as strapped workers immediately spend their raises.”

The Berkeley study contradicts a recent study by the University of Washington, which claims increased rates of unemployment as a result of raising the wage. As the Economic Opportunity Institute, based in Seattle, writes:

"The UW’s counter-intuitive findings underscore several methodological flaws:

  • They limit their study only to single-site establishments, because their data could not distinguish whether employees of multi-site chains – think Molly Moon’s, Mud Bay, Mod Pizza, Starbucks – actually worked inside or outside the city limits. That leaves 40% of workers excluded from their study. It also means that leaving a job at small business for a job at a larger company counts incorrectly as a job loss.

  • The UW team created a control by comparing Seattle’s employment statistics with other parts of the state. But there is no place in Washington that has a similar economy to Seattle. Seattle has an economy more like San Francisco or New York than Everett or Spokane. The Berkeley team used the more accepted methodology of generating a control from similar areas across the country, rather than just the state. Moreover, the Berkeley team compared numbers for the previous 5 years, while the UW only looked at the previous 9 months.

  • The UW study focused on jobs paying $19 an hour or less, making the assumption that fewer jobs in this bracket meant lost opportunity for workers who used to be in this pay range. But what we’re seeing in Seattle is that jobs that used to pay $18 an hour now pay $20 due to competition for employees. In the UW study, this was unaccounted for and incorrectly counted as job loss."

After years of advocacy from low wage workers and their allies, and many months of listening sessions, hearings and Council meetings, the Minneapolis City Council is poised to vote on Friday to pass a $15 minimum wage with no tip penalty, phased in by 2022.