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Mark Long, University of Washington

Local and State Minimum Wage Laws

December 16, 2014 09:00 AM

By Mark Long, University of Washington

A wave of states and cities have recently passed laws raising their local minimum wage requirement above the federal minimum wage of $7.25. Earlier this year, my home city of Seattle passed a new law raising our minimum wage to $15 per hour by 2017, and San Francisco voters this month likewise approved a ballot measure to raise the city’s minimum wage to $15 by 2018. Many commentators were surprised that voters in traditionally “red” states passed minimum wage increases.

Yet, we should not be surprised by these recent state and local efforts given the two facts: (1) the federal minimum wage has not been increased since 2009 and has declined in purchasing power by more than 10% due to inflation in the intervening years; and (2) over the past 45 years, wage growth has not kept pace with growth in labor productivity (Fleck, Glaser, and Sprague, 2011), likely due to a host of factors including declining unionization and globalization.

Seattle’s minimum wage increase is the largest dollar increase that has ever been attempted. In analysis we did for the City this spring, we found that nearly one-quarter of Seattle’s workers earned less than $15 per hour (Klawitter, Long, and Plotnick, 2014), and thus the impact of this policy change will be widespread.

How this policy change, and other similar state and local efforts, will affect employment, business relocation, and family poverty is not entirely clear. While a number of studies have shown quite modest and even zero dis-employment effects, all of the existing literature is challenged to identify the counterfactual – what would have occurred in the area if they had not instituted the policy change. Such policies are not implemented randomly, far from it, and thus comparing the areas that do and do not implement such policies invites some uncertainty. Additionally, the magnitude of the wage increase likely matters, so prior studies focusing on modest increases in state or local wages may not translate to Seattle.

It is very important that we understand the impact of state and local minimum wage ordinances. Given our divided federal government and the political gridlock that seems likely to continue, it seems reasonable to expect that movement on minimum wages will continue to happen piecemeal. I am among a group of scholars at the University of Washington and staff at Washington’s Employment Security Department who have assembled to do a long-term study of the impacts in Seattle. We hope to evaluate the impact on a whole host of outcomes, including: variability in work hours and schedules; family poverty; health quality and health limitations; food security and nutrition; unpaid bills and debt; child well-being; use of federal, state and local social safety net assistance; business closures and relocations; changes in the occupational mix of employment; and changes in prices including consumer goods and housing. I am hopeful that we can maintain humility and caution in our evaluations given the challenges inherent in such research.

Mark C. Long is a Professor of Public Affairs at the University of Washington, serves on the APPAM Policy Council, and is on the Editorial Board of the Journal of Policy Analysis and Management.

 

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