Minimum-Wage Increases and Low-Wage Employment: Evidence from Seattle†

Matthew Notowidigdo was coeditor for this article. We thank the State of Washington's Employment Security Department for providing access to data and Matthew Dunbar for assistance in geocoding business locations. We thank the Laura and John Arnold Foundation, the Smith Richardson Foundation, the Russell Sage Foundation, the Economic Self-Sufficiency Policy Research Institute, and the City of Seattle for funding and supporting the Seattle Minimum Wage Study. We thank other core members of the study team, Jennifer Romich, Scott W. Allard, Heather D. Hill, Jennifer Otten, Scott Bailey, and Anneliese Vance-Sherman. Partial support for this study came from a Eunice Kennedy Shriver National Institute of Child Health and Human Development research infrastructure grant, R24 HD042828, to the Center for Studies in Demography & Ecology at the University of Washington. We are grateful to conference session participants at the 2016 and 2018 Association for Public Policy and Management, 2017 Population Association of America, 2018 Allied Social Science Association, 2018 Institute for Research on Poverty Summer Workshop, and 2018 and 2019 Western Economic International Association meetings; to seminar participants at Columbia University, Massachusetts Institute of Technology, Montana State University, National University of Singapore, Stanford University, Texas Tech University, University of British Columbia, University of California-Irvine, University of Chicago, University of Houston, University of Pittsburgh, University of Rochester, W.E. Upjohn Institute, and the World Bank; members and guests of the Seattle Economic Council, and to the Seattle City Council and their staff for helpful comments on previous iterations of this work. We also thank Sylvia Allegretto, David Autor, Marianne Bitler, Charlie Brown, David Card, Raj Chetty, Jeff Clemens, David Cutler, Arin Dube, Ed Glaeser, Hillary Hoynes, Larry Katz, Kevin Lang, Edward Leamer, Thomas Lemieux, David Neumark, Tyler Ransom, Michael Reich, Emmanuel Saez, Diane Schanzenbach, John Schmitt, Jeffrey Smith, Christopher Taber, and Ben Zipperer for discussions which enriched the paper. We are particularly grateful to three anonymous reviewers for many helpful suggestions. Any opinions expressed in this work are those of the authors and should not be attributed to any other entity. Any errors are the authors' sole responsibility. The Seattle Minimum Wage Study has neither solicited nor received support from any 501(c)(4) labor organization or any 501(c)(6) business organization. Ekaterina Jardim worked on this paper prior to joining Amazon. Any opinions expressed in this report are those of the authors and not those of the University of Washington, the Washington Employment Security Department, or any supporting or contracted entity. Seattle raised its minimum wage to as much as $11 in 2015 and as much as $13 in 2016. We use Washington State administrative data to conduct two complementary analyses of its impact. Relative to outlying regions of the state identified by the synthetic control method, aggregate employment at wages less than twice the original minimum—measured by total hours worked—declined. A portion of this reduction reflects jobs transitioning to wages above the threshold; the aggregate analysis likely overstates employment effects. Longitudinal analysis of individual Seattle workers matched to counterparts in outlying regions reveals no change in the probability of continued employment but significant reductions in hours, particularly for less experienced workers. Job turnover declined, as did hiring of new workers into low-wage jobs. Analyses suggest aggregate employment elasticities in the range of -0.2 to -2.0, concentrated on the intensive margin in the short run and largest among inexperienced workers.