October 17, 2018
In 2019, the state minimum wage will increase to $12.00 (from $11.50 in 2018). This rate was established in I-1433, which voters approved in 2016. The minimum wage will then increase to $13.50 in 2020, and after that it will be indexed to inflation.
The minimum wage in three cities is higher than the statewide minimum. All three are indexed to inflation (or will be as soon as the statutory step increases are reached).
- Seattle’s minimum wage depends on employer size and benefits offered. The minimum for all large employers (with more than 500 worldwide employees) will be $16.00 an hour in 2019. The minimum for small employers (500 employees or fewer) will be $15.00 an hour. Small employers that pay at least $3.00 an hour in medical benefits or whose employees earn $3.00 an hour in tips will have to pay wages of at least $12.00 an hour.
- Tacoma’s minimum wage will be $12.35 in 2019—up from $12.00 an hour in 2018.
- SeaTac’s minimum wage for hospitality and transportation industry employers will be $16.09 an hour in 2019, up from $15.64 an hour in 2018.
Economist David Neumark gets at this in a September National Bureau of Economic Research (NBER) working paper: The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns. It is an overview of the literature that tries to illuminate how different studies find different effects from minimum wages and considers how to “narrow the range of uncertainty about the likely effects of the large minimum wage increases becoming more prevalent in the United States.” The paper includes a handy table with estimates of minimum wage effects from various recent papers, along with their approaches.
Some other interesting papers this year include:
The Short-Run Employment Effects of Recent Minimum Wage Changes: Evidence from the American Community Survey, by Jeffrey Clemens and Michael R. Strain. Published in Contemporary Economic Policy in February, this paper finds,
. . . relatively large minimum wage increases (defined as those exceeding $1) reduced employment among low-skilled population groups by just over 1 percentage point. Smaller minimum wage increases, as well as increases linked to inflation indexation provisions, appear to have had much smaller (and possibly positive) effects on employment over our sample period.
As Clemens and Strain point out,
The evidence is thus suggestive that the employment consequences of forecastable minimum wage increases differ from those of one-time or multi-phase statutory minimum wage changes. As highlighted by Strain and Brummund (2016), any negative employment effects of indexation provisions may be concentrated over the years immediately following their implementation. The responses of forward looking firms should not be expected to coincide with each year’s modest and forecastable inflation adjustment.
Additionally, “Further analyzing such non-linearities will be important in coming years, as states’ scheduled minimum wage increases significantly exceed historical increases.”
The Minimum Wage, Fringe Benefits, and Worker Welfare, by Jeffrey Clemens, Lisa B. Kahn, and Jonathan Meer. This NBER working paper from May considers whether there are tradeoffs between higher wages and fringe benefits—specifically health insurance. For example, “firms may optimally shift compensation from non-cash attributes to wages in the presence of a minimum wage increase. This force impacts worker welfare, even absent any effects on employment.”
The paper finds “robust evidence that state-level minimum wage changes decreased the likelihood that individuals report having employer-sponsored health insurance. Effects are largest among workers in very low-paying occupations, for whom coverage declines offset 9 percent of the wage gains associated with minimum wage hikes.” Further, because firms often provide the same health benefits to all workers, “minimum wage increases may alter the compensation packages offered to both minimum wage and non-minimum wage workers.” Ultimately, “Welfare gains and losses will depend on the initial mix of compensation and benefits, as well as on which types of workers are further distorted by firms’ responses to the minimum wage.”
Because this paper only considers health insurance and not other non-wage benefits (e.g., flexibility), the findings “can be viewed as a lower bound on the extent to which adjustments of non-wage job attributes shape the welfare affects of minimum wage increases.”
A Database on the Passage and Enactment of Recent State Minimum Wage Increases, by Jeffrey Clemens, Michael R. Strain, and Duncan Hobbs. This August American Enterprise Institute working paper compiles a database of state minimum wage increases from 2011 to 2018. It calculates “the number of days between the date the legislation was passed and the date the first and last increase associated with the legislation came into effect.” These are termed the “lag to first increase” and the “lag to last increase.”
It finds, “minimum wage increases enacted through legislation tend to have longer lags to the first increase, longer lags to the last scheduled increase, smaller initial increases, and larger total increases than minimum wage increases approved by ballot initiative.”
The Minimum Wage and Search Effort, by Camilla Adams, Jonathan Meer, and Carly Will Sloan. This NBER working paper from earlier this month notes, “Labor market search-and-matching models posit supply-side responses to minimum wage increases that may lead to improved matches and lessen or even reverse negative employment effects.”
On the contrary, the paper finds
Categories: Categories , Economy , Employment Policy.
. . . no evidence that the minimum wage has persistent effects on search effort; the likelihood of searching does not increase in the aftermath of minimum wage increases. However, there is a large yet transitory increase in the intensive margin of search effort, concentrated in the month of the minimum wage increase, that fades almost immediately.
Tags: minimum wage