New Study Proves How $15 Minimum Wage Clobbers the Working Poor

New Study Proves How $15 Minimum Wage Clobbers the Working Poor

New Study Proves How $15 Minimum Wage Clobbers the Working Poor

A new study of Seattle's $15-an-hour minimum wage law says it costs jobs, contrary to another new study released last week. The City of Seattle is increasing its minimum wage to $15 over several years. So has Seattle been able to defy all conventional economic wisdom and raise a greater number of individuals out of poverty with its mandatory minimum wage hike? An author of that report, Michael Reich, criticized the University of Washington team's methodology.

"I think there is a common-sense argument that all economists would agree upon", adds AEI's Mathur, "which is that having a higher wage is likely to lead to some negative effects on employment - and you're lucky if you keep your job and have your higher earnings".

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The report, by members of the University of Washington team studying the law's impacts for the city of Seattle, is being published Monday by a nonprofit think tank, the National Bureau of Economic Research.

He said the UW researchers' "synthetic" Seattle model draws only from areas in Washington that are nothing like Seattle, and the report excludes multisite businesses, which employ a large percentage of Seattle's low-paid workforce. This is partly because government employees sometimes have their pay set as a multiple of the minimum wage, meaning they don't have to be poor to benefit from a minimum wage increase. As Henry Schmid noted in The Wall Street Journal, "the tax implications of going from a $10- to a $15-an-hour minimum wage" would wipe out much of the benefit of any increase to the affected workers.

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Jacob Vigdor, a public policy professor and one of the authors of the new report, stood by the team's findings. By comparing the "synthetic Seattle" where no minimum wage increase took effect with Seattle itself, the researchers tried to figure out the minimum wage law's effect on Seattle's economy. Single-site businesses, though - which are counted in the report - could include franchise locations that are owned separately from their corporate headquarters. "For a family of four with both spouses making the minimum wage, their federal tax will increase from $4,106 to $7,219, payroll tax will increase from $2,579 to $3,869, their earned-income tax credit (EITC) will be reduced from $596 to zero ... and the $2,400 food-stamp credit will be lost". "Data is pointing to: Since we have to pay more, employers are looking for people with experience who can do the job from Day 1".

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