Last summer, a paper on the effects of Seattle's minimum-wage increase made national headlines with its conclusion: The change made low-income workers worse off, not better, because it forced employers to cut back on hiring and hours to afford paying higher wages.
Although the finding contradicted years of research showing that the minimum wage had little to no effect on hiring practices, the paper was widely read and generally well regarded because of its reliance on high-quality data and convincing methods. David Autor, an economist at the Massachusetts Institute of Technology who was not involved in the research, told The Washington Post at the time that the study was “very credible” and “sufficiently compelling in its design and statistical power that it can change minds.”
A little more than six months later, and minds have indeed been changed — among them Autor's. He now says that other recent minimum-wage papers have underscored the limitations of the Seattle study.
Chief among those newer papers is a large analysis of the effects of minimum-wage increases that have occurred since 1979. That paper, co-written by Arindrajit Dube of the University of Massachusetts, was recently presented at the American Economic Association's annual conference.
Dube's paper is more in line with conventional economic thinking: On average, minimum-wage increases eliminated jobs paying below the new minimum, but added jobs paying at or above the new minimum. The two changes effectively cancel each other out.
You can see that effect clearly in the chart below.
The decline in jobs paying less than the new minimum wage is offset by an increase in those paying more. Jobs further up the pay scale are largely unaffected, as economists would expect — the minor fluctuations beyond $4 above the new minimum wage are not statistically significant, the study found.
The major benefit of the Dube paper, relative to the Seattle one, is that it incorporates 137 minimum-wage increases, rather than just one.
“If you were just doing that [analysis] in one place, it would be an N [sample size] of 1,” MIT's Autor, who was not involved in the Dube study, said in an interview. “But they have this across a large set of minimum-wage events.”
That larger sample size suggests that the newer paper does a better job of representing how a typical minimum-wage increase might affect a typical community. But the University of Washington's Jacob Vigdor, who co-wrote the Seattle study, says the two findings are not necessarily contradictory.
Seattle's minimum-wage increase, Vigdor says, was a lot steeper than most other increases have been. Minimum wages at large businesses and franchises rose by $3.53, or more than 37 percent, over just nine months. Out of the 137 minimum-wage increases included in the Dube et al. paper, by contrast, that average increase was 10 percent.
It may be the case that “small increases to hourly rates of $11 or less seem to be okay, but a rapid increase to $13 causes more problems,” Vigdor said in an interview. “Our study only raises concerns about an increase from $11 to [as high as] $13 an hour, implemented nine months after a prior increase from $9.47.”
There may be another factor lurking behind the apparently contradictory findings: Neither paper has gone all the way through peer review and been published in an academic journal.
“It's hard for anyone to initially assess whether some work is good or bad, and it takes academics a long time to reach a view on this,” Autor said. “There's a process. It takes us a while to figure that out.”
But in today's political environment, with journalists, policymakers and the public demanding to know the effects of big policy changes right away, that process often doesn't have time to play out. Researchers circulate preliminary results to colleagues, reporters share those results, and the vetting happens in public, in real time.
“Relative to a normal peer-review process, which involves a couple of anonymous reviewers giving comments privately to a journal editor, this paper had all sorts of critical commentary in public from day one,” Vigdor said. “Some were quick to accept the findings uncritically, and some were quick to dismiss them uncritically. Reported on this way, research just turns into that much more noise.”
Autor agrees. “So much economics is so close to policy debate that it goes straight from unrefereed sources into the media, and then gets picked up and editorialized in major papers,” he said.
Both Vigdor and Autor have advice for voters looking to make sense of planned minimum-wage increases in their own communities. “If I'm a voter, I want to ask three questions about a proposed minimum-wage increase: How far, how fast and in what kind of economy?” Vigdor said. The steeper the increase, the steeper the risk — particularly in certain economies and employment sectors.
Autor says that if minimum-wage increases were concentrated in an industry such as manufacturing, where domestic workers face stiff competition from cheaper overseas labor, the negative effects on employment could be significant. On the other hand, modest wage increases affecting primarily restaurant and food service workers in booming local economies might not have many drawbacks.
“You might think, 'Well, this is going to benefit a lot of workers and consumers are going to pay a little more, but it's not going to backfire,' " Autor said.
He noted that the sluggish pace of the federal minimum wage is what has prompted many states and localities to institute increases on their own, creating the conditions for hundreds of “natural experiments” to see what happens in places that raise the wage vs. neighboring locales that don't.
“I think the current generation of [minimum wage] research is better than ever,” Autor said. “And the debate around that research is also better.”
A previous version of this post incorrectly said the Seattle study charted wage hikes in 137 locales. The study scrutinized 137 wage hikes.