Financial ServicesPrice signalMixed

Seattle Minimum Wage Study

University of Washington · Seattle, WA, United States · 2016

Summary

The University of Washington study of Seattle's minimum wage increase found a counterintuitive result: average earnings for low-wage workers fell as employers reduced hours faster than wages rose. The finding was disputed by a UC Berkeley study using a different methodology that found no employment or hours reduction. The methodological debate — how to construct the counterfactual for Seattle — illustrates the difficulty of causal inference from policy rollouts, and why pre-specified synthetic control designs and randomized variation (when available) are superior to retrospective observational studies.

Research question

"How did Seattle's minimum wage increase from $9.47 to $13/hour affect low-wage workers?"

Methodology

Intervention

Seattle raised minimum wage in two steps; study used administrative payroll data to track affected workers

Assignment

Difference-in-differences with synthetic control (not randomized)

Sample size

All covered workers in Seattle (~4.6 million quarterly worker-employer observations)

Primary outcome

Hours worked; total earnings; employment

Effect estimate

Hours worked fell 9%; average earnings fell $125/month for low-wage workers at $13 level; employment effect near zero

Decision

Ongoing policy debate; findings contested by subsequent studies using different methods

Result

Mixed

Hours worked fell 9%; average earnings fell $125/month for low-wage workers at $13 level; employment effect near zero

Evidence strength

Moderate

Quasi-experimental design; causal interpretation requires care.

Replication status

Open for replication

Institution

University of Washington

Location

Seattle, WA, United States

Year

2016

Policy area

Financial Services

Mechanism

Price signal