New study claims large minimum wage increases hurt poorest Americans

Dive Brief:

Economists from the University of Washington think Seattle's minimum wage increase from $9.47 to $15 an hour over a two-to three-year period will leave the poorest workers earning less and working fewer hours over time, Quartz reports.
The report, published through the National Bureau of Economic Research, noted that even with a $13 increase, low-wage earners worked 3.5 million fewer hours a quarter and 5,000 fewer jobs. The economists contend that, given the job and hour reductions, low-wage employees end up earning $120 million less a year, for a monthly loss of $125.
It should be noted that the report is not yet peer-reviewed and leaves out large employers who may hire both inside and outside Seattle. The report also reveals that, ultimately, employers may replace the low-wage employees with higher-skilled, higher-paid workers, signaling trouble for those without proper skills.

Dive Insight:

Proponents of minimum wage increases would argue that the aim is to bring low-paid workers' earnings up to living-wage standards. Concern over the speed of the increase has been well-documented.

The Seattle study doesn't exist in the vacuum. Another study in California's Fresno County predicted no net impact (positive or negative) on job losses as a result of the planned implementation of a $15/hr minimum wage. Researchers from Trefis, have predicted food service workers could be impacted by layoffs in the event of a minimum wage hike. Minimum wage studies contain a slew of variables, including size of employer, that may explain some of the disparate results here.

Higher wages could result in employers opting to hire those who are already skilled, thus leaving untrained workers out in the cold. But the research's note about low-wage job duties being replaced by those with higher skills somewhat aligns with potential outcomes from automation, too. Automation of certain low-wage, low-skill jobs would leave jobs that require a level of interpersonal skills. More importantly: Automation will likely come about regardless of how wages change.

Either way, with little action at the federal level, states and municipalities have increased their minimum wages, either through voter initiatives or state legislation. Conservatives have largely resisted these increases, and some states have passed preemption laws to prevent municipalities from making their own wage and hour laws. The continuation of these trends is likely to leave employers coping with a patchwork of potentially contradictory wage rules across regions.