Earlier this year, a group of business school researchers from the University of Washington and NYU, as well as Amazon, published an influential paper claiming that the rising Seattle minimum wage had decreased take-home pay for workers by 6% due to cuts to work hours — the paper was trumpeted by right-wing ideologues as examples of how "liberal policies" hurt the workers they are meant to help.
But a new paper by the same authors (Sci-Hub mirror) shows that the rising minimum wage generated major increases for the workers who had the most hours, whose hours were only cut a little, but still came out ahead thanks to the wage increase; workers with fewer hours saw no financial harm from the rising minimum wage, working fewer hours and bringing home the same sum; and they found some harm to people who had the smallest number of hours) (which may actually reflect stronger demand for workers and fewer workers in this category of very-low-hour work).
The study's authors explain that their findings are all consistent with one another, but people who found methodological flaws in the first study say that the reversal is inevitable. Here's Barry Ritholz (previously) in Bloomberg:
When thinking about the impact of raising minimum wages, one can’t simply omit most of the biggest minimum-wage employers in the region, such as McDonald’s and other fast-food chains, or Wal-Mart and other major retailers. These are the very employers that were the main target of the minimum-wage law; indeed, the law established an even higher minimum wage of $15.45 an hour for companies with 500 or more employees.
There were two other glaring defects in the first study that are worth mentioning. The first is that its findings contradicted the vast majority research on minimum wages. As was demonstrated back in 1994 by economists Alan Krueger and David Card, modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way. Ignoring that body of research without a very good reason made the initial University of Washington study questionable at best.
Second, there potentially is a problem with having a lead researcher — economist Jacob Vigdor, whose affiliations among others include the right-leaning Manhattan Institute — whose impartiality is open to question. I don’t wish to suggest people cannot have opinions, but researchers need to be open-minded. This especially true in fields like economics and public policy, where belief systems and political affiliations can have an outsized impact on objectivity.
What Minimum-Wage Foes Got Wrong About Seattle [Barry Ritholtz/Bloomberg]
(via /.)
