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

Abstract

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. (JEL J22, J23, J24, J31, J38, R23)