The Washington PostDemocracy Dies in Darkness

The early results from America’s experiments with higher minimum wages

Labor activists Ginger Jentzen (C) and Jeremy Thornes (L) listen during a Seattle City Council meeting in which the council voted on raising the minimum wage to $15 per hour in Seattle, Washington June 2, 2014. REUTERS/David Ryder
Placeholder while article actions load

In June, Seattle voted to gradually hike its minimum wage to $15 an hour, the country’s highest — but that didn’t stop it from being challenged in court. This labor market experiment comes a decade after San Francisco and Santa Fe, New Mexico became the first cities to adopt their own minimum wages, separate from California and New Mexico.

So, how have these localities changed? And what happens next? It’s tough to definitively say, despite hundreds of studies on minimum wage. The Post’s Tina Griego hunted for impact in Santa Fe, where everyone seems to have a different opinion:

“In this historic capital city of 68,000 people, 10 years has brought a stalemate. Has the city’s living wage – now at $10.66 an hour — been an overall benefit? Absolutely. Not at all. Sometimes. Maybe. It depends. It’s complicated.”

Let’s examine just how complicated.

1. Many cities are passing higher minimum wages than the suburbs

The data: In June, Wonkblog’s Emily Badger noted that a host to of cities had raised or planned to raise their minimum wages to levels that were considerably higher than their surrounding neighbors.

The story: “The landscape of minimum wage increases points to a significant but seldom-discussed trend that has been taking place across the country: The poor who would benefit most from higher wages increasingly live in the suburbs. And a lot of the kinds of jobs they do have been moving out there, too,” Badger wrote.

2. Cities will drive the future of minimum wage — for better or worse

The data: About 120 cities and counties have instituted living wage laws, many in the $12 to $15 range.

The story: The New Republic’s Taylor Malmsheimer writes it’s easier to pass legislation at the city level — and cities, with higher costs of living, have more incentive to raise pay. Critics, however, say a higher minimum wage could damage a local economy:

“Opponents of minimum wage hikes have highlighted potential downsides of varied city-specific minimum wages. These policies could create a ‘patchwork’ of different minimum wages, says Shannon, leading to distortions along city borders. This could be especially detrimental in large metropolitan areas, where satellite cities could have much lower wages than the nearby central city. Employers with businesses in multiple cities, or even in the city and its suburbs, might need to pay their employees different wages, and businesses across the street could fall under different wage regulations. City minimum wages could also incentivize businesses to move to areas with a lower minimum wage or workers in neighboring communities to commute to the city, increasing competition among low-wage workers within city limits.”

3. Santa Fe contractors fear they’re losing business to Albuquerque contractors, who can work for less pay

The data: It’s unclear just how many workers have been directly affected by the city’s wage ordinance. But in 2004, the Bureau of Business and Economic Research at the University of New Mexico found that 38 percent of Santa Fe’s workers, or 28,000 people, worked in occupations — retail, food, hospitality — where entry-level pay was less than $8.50 an hour.

The story: Griego caught up with the Mayor of Santa Fe, who still catches both praise and criticism about the city’s decision to lift minimum wage:

“Mayor Gonzales, new to the office, sits in the art-filled lobby of the La Fonda hotel, describing the living wage as both a moral obligation and an economic imperative. The chairman of the board of the hotel passing by, greets him cordially and says: ‘The living wage hurts business in Santa Fe. I know you don’t want to hear that, but it does.’ She tells him of a multi-million dollar renovation project at the hotel which went to contractors from the larger city of Albuquerque 60 miles south. Local contractors, saddled with higher labor costs, couldn’t compete, she says, and dashes off to a meeting.
After she leaves, he shakes his head.  ‘There is a still a belief among business that, ‘oh, it’s the higher labor rate that’s making us lose business to Albuquerque.’ It’s an easy thing to say and a hard thing to prove.”

4. Seattle companies say they might raise prices, or lay off employers, or limit expansion, or take business elsewhere

The data: Seattle’s minimum wage will increase from $9.32 to $15 by 2018. The hike will lift pay for 24 percent of the local workforce, or about 102,000 people.

The story: Michael Saltsman, a researcher at the Employment Policy Institute, wrote a column in the Seattle Times about how local businesses could absorb the extra costs.

“In Seattle, 42 percent of surveyed employers were ‘very likely’ to reduce the number of employees per shift or overall staffing levels as a direct consequence of the law. Similarly, 44 percent reported that they were’“very likely” to scale back on employees’ hours to help offset the increased cost of the law. That’s particularly bad news for the Seattle metro area, where the unemployment rate for 16- to 19-year-olds is already north of 30 percent — due in part to Washington state’s already-high minimum wage.
Perhaps most concerning about the $15 proposal is that some businesses anticipated going beyond an increase in prices or a reduction in staffing levels. More than 43 percent of respondents said it was ‘very likely’ they would limit future expansion in Seattle in response to the law. One in seven respondents is even “very likely” to close a current location in the city limits.”

5. But with higher wages, workers may be more likely to stay at the same company — and save the company money

The data: Restaurants employ a big chunk of all minimum wage workers: 29.9 percent of those paid within 10 percent of the state or federal minimum wage.

The story:Wonkblog’s Emily Badger lays out how a wage hike could benefit, say, McDonald’s:

“Most of the jobs we’re talking about here are in sectors like retail, hospitality and restaurants. Those businesses spend a lot of money on employee turnover. But with better wages, Reich says, employees are likely to stay longer, meaning they become more experienced and productive, and the costs of replacing them and retraining workers declines. Those benefits offset some of the higher costs of labor. The rest of the costs, Reich says, may be passed onto consumers in barely perceptible ways — a few cents on the dollar in restaurants.”

6. The former governor of Ohio tried to live on minimum wage. He failed.

The data:Seventy-three percent of Americans surveyed by Pew say the current federal minimum wage is too low. They support increasing it to $10.10 an hour.

The story:Campaigning for widespread wage hikes, Ted Strickland attempted to spend a week on a low-wage worker’s budget and recorded his experience in Politico:

“For all of last week, I worked hard to live on the budget of a minimum wage worker. That meant I had $77 to spend on food, transportation, activities and other personal expenses for the week. I didn’t make it. Most mornings started with eggs and toast, bought last Sunday during a grocery trip costing more than $15. Lunches were normally leftovers, macaroni and cheese or McDonald’s. There were no big dinners or coffee stops on a whim. But the challenges were beyond food.
Wednesday morning, I had a meeting about a mile from my apartment, but in the opposite direction of my office. I would normally take a cab, but this time, I took off my jacket and walked the mile in 90-degree heat, then walked back almost 2 miles to my office.”