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UNITED STATES DEPARTMENT OF LABOR

Minimum-wage increases and low-wage employment: Evidence from Seattle (Jardim et al., 2022)

Review Guidelines

Causal Evidence Guidelines

Absence of conflict of interest.

Citation

Jardim, E., Long, M. C., Plotnick, R., van Inwegen, E., Vigdor, J., & Wething, H. (2022). Minimum-wage increases and low-wage employment: Evidence from Seattle. American Economic Journal: Economic Policy, 14(2): 263–314. https://doi.org/10.1257/pol.20180578

Highlights

  • The study's objective was to examine the impact of the Seattle Minimum Wage Ordinance on employment, earnings, and wages.
  • Using state administrative employment data, the authors conducted a nonexperimental study to estimate the impacts of the Seattle Minimum Wage Ordinance on employment, earnings, and wages. Using a combination of matching and statistical methods, the authors compared the outcomes of low-wage workers in Seattle to a matched comparison group of low-wage workers in other parts of Washington State. 
  • The study suggested that the minimum wage ordinance was associated with higher wages, higher quarterly earnings, and lower hours worked per quarter for Seattle workers but was not associated with employment. 
  • The quality of causal evidence presented in this report is low because the authors did not ensure that the groups being compared were similar before the intervention.  This means we are not confident that the estimated effects are attributable to the Seattle Minimum Wage Ordinance; other factors are likely to have contributed.

Intervention Examined

Minimum Wage Ordinance

Features of the Intervention

In June 2014, Seattle, Washington passed a minimum-wage ordinance phasing an increase to $15 per hour with inflation indexing. The minimum wage increased from $9.47 to $11 on April 1, 2015 and to $13 on January 1, 2016. 

Features of the Study

The authors used matching and a difference-in-difference-in-difference design to examine the impact of the Seattle Minimum Wage Ordinance on employment, earnings, and wages. The study used administrative employment microdata from Washington's Employment Security Department (ESD), which collects quarterly payroll records for all workers covered by unemployment insurance in Washington. Employers are required to report actual hours worked for employees paid by the hour and either actual hours worked or 40 times the number of weeks worked for salaried employees. 

The treatment group included people who worked for Seattle businesses for wages less than $11 per hour in the first calendar quarter of 2015 (baseline quarter). The comparison group included workers employed in low-wage jobs in Washington State outside of King County at baseline. The authors used a nearest-neighbor matching strategy to match treatment and comparison group members. Individuals were matched based on quarterly hours worked in the baseline period, hourly wages in the baseline period, number of employers in a quarter, number of quarters working with their current primary employer, and the number of quarters since they first appeared in Washington State data. 

To account for differences in labor market conditions between the treatment and matched comparison group, the authors examined the impact of a pseudo-minimum-wage ordinance on pre-policy data. The pseudo-treatment group included workers from the first quarter of 2012 who earned less than $11 per hour and worked entirely for firms in Seattle. The authors matched them with pseudo-comparison workers from Washington State outside King County during the same period. The authors tracked both groups for six quarters and estimated a difference-in-difference effect using the same methodology. Finally, the authors presented a difference-in-difference-in-difference estimator equal to the difference between the true difference-in-difference estimate and the pseudo-difference-in-difference estimate computed for the 2012 cohort.

Findings

Earnings and wages

  • The study suggested that the Seattle Minimum Wage Ordinance was associated with higher wages and quarterly earnings.

Employment

  • The study suggested that the Seattle Minimum Wage Ordinance was associated with lower hours worked per quarter. 
  • The study suggested that the Seattle Minimum Wage Ordinance was not associated with employment.   

Considerations for Interpreting the Findings

The authors tested possible anticipatory effects of the policy and found that they were small.

Causal Evidence Rating

The quality of causal evidence presented in this report is low because the authors did not ensure that the groups being compared were similar before the intervention. This means we are not confident that the estimated effects are attributable to the Seattle Minimum Wage Ordinance; other factors are likely to have contributed.

Reviewed by CLEAR

January 2024