 Aloha and welcome to Hawaii Together on the Think Tech Hawaii Broadcast Network. I'm Kaylee Akina, the President of the Grassroot Institute of Hawaii, and I'm your host for this program. The Hawaii State Legislature is considering another raise in the state's minimum wage law, and that's taking place right now in the 2020 session. It's a great time to take a look at the experience of other states and cities, and that's exactly what we're going to do today. My guest today is Professor Jacob Vigdor at the University of Washington in Seattle. He happens to be a Harvard graduate in economics and a professor of public policy and governance. He did something back in 2014. He studied the rise in minimum wage that began to take place in one of the nation's largest cities, and at that time Seattle decided to increase its minimum wage to $15. He's been there for the last six years looking at the data, and he can tell us exactly what the environment experienced. Please welcome to the program Jacob Vigdor. Jacob, thanks so much for being on today's program. Well, thanks for having me, Kaylee. It's great to be here. What's your weather right now? It is in the 40s gray and drizzly. It's just sort of standard Seattle wintertime weather. Well, Jacob, that's why you're wearing a sweater, and I'm kind of sweating here in front of our state capital building. But Jacob, before we dive into the story of Seattle and as well, how that might apply to Hawaii, tell us a little bit about minimum wage. What exactly are minimum wage laws? So minimum wage law just stipulates that an employer in hiring an employee needs to pay them a certain minimum amount per hour. If you take the example of Seattle's minimum wage law, which we've been studying for the past two years, it actually sets different minimum wage levels depending on how large a business is, and typically a lot of minimum wage laws allow some degree of flexibility if a worker has tipped income or receives health benefits. So it can be a little bit complicated, but the basic idea is that if you want to hire someone, you need to pay them at least a minimum amount per hour. What are the arguments generally given in favor of raising minimum wage? The proponents of a higher minimum wage just point to the cost of living. They point to the difficulty that families face in trying to make ends meet on the basis of low wage work. So the idea is if you increase the amount that people are paying per hour, they have bigger paychecks and it becomes much easier for them to afford the necessities of life, whether that's food, shelter, clothing, you name it. And what are some of the arguments that are used against raising minimum wages? Well, I think one of the biggest arguments that you see is that with a higher minimum wage, employers won't want to hire as many people, and if they do hire workers, they'll want to cut back their hours somewhat. A lot of concern is expressed about the least experienced workers, teenagers in the labor market, other people who are looking for their first job for whom that low wage job might be the first rung on a ladder. And the argument is if you take away that first rung on the ladder, then people might not be able to get on the ladder at all. So back in 2014, Seattle made a decision that it would begin raising its minimum wage to $15. What went into it? What were they looking at? And what was the goal of this measure? Yeah, so at the time, back in 2014, there had been a successful initiative to raise the minimum wage to $15 an hour in one of the suburbs of Seattle, actually, a little town known as CETAC, which is most well known for having a major international airport. So there was a movement amongst labor groups in Seattle to try to get a $15 minimum wage in Seattle. There was a municipal election in the fall of 2013 that brought elected officials in on a platform of raising the minimum wage. They got business and labor interests together, and they hammered out a compromise, which was a gradual movement to a $15 minimum wage, but taking place a little bit slowly over time. So at the time, there was a $9.47 minimum, and they raised it to $15 an hour over a period of years with a longer phase in period for smaller businesses. And that proved to be a compromise that could bring at least some business interests and some labor interests together. And the city council passed that ordinance unanimously in June of 2014, and the mayor signed into law. So how did you and your team get involved in researching this topic back then, especially from the inception of the move? It's an interesting story. So there was one member of the Seattle city council who proposed a resolution right after the law passed saying that there should be an academic study of the effects of the minimum wage. This particular city council wanted an independent team of academics to use data to try to determine as best as we could, or better or for worse, what was happening as the minimum wage went up in Seattle. So the city put out a request for proposals for teams of researchers who would look at this. And our team at the University of Washington came together, we looked at this request for proposals and we submitted a bid. And it turned out we were the only bidder for the contract. So we got it. Well, congratulations because it sets you on a research path that has now become quite celebrated. You said that the city wanted to have an academic study. They wanted to have an independent study. Did you find it difficult at all to maintain the that standard or the perception that you were actually independent? Or did you find that the environment was politicized? And so good data sometimes met with opposition. It's a very politicized environment. We operated in an environment where everything that we said was scrutinized very carefully. We would often go into meetings in City Hall where the response was, well, be careful. You don't want to sound like you're editorializing. We did our best to try to just let the data speak for themselves and just report as plainly and as simply as we could. We described ourselves as being like the referees. You had two sort of interest groups that had had vested stakes in this debate on the business side and the labor side. And we conceived of ourselves as being someplace in between. But just like any referee in a sporting event, once the once things start to get a little bit controversial, then some of the spectators might not think that the referee is impartial anymore. And that's definitely some of the phenomenon that we started running into as we started to report out some of the results from our study. Well, tell me a little bit about those results as they began to roll out the program as it began to take as it began to yield the results. What did you find? Well, we found a number of really interesting things. We were able to track the impact of the minimum wage increases on whether people kept their jobs, if they did keep their jobs, whether they still work the same number of hours or whether their hours were cut back. And then at the end of the day, we could look to see whether they were actually taking home more money. And so what we ended up finding is if you had a job to start before the minimum wage started going up, there actually wasn't an increase in the your likelihood of losing your job. So if you had a job to start with, it looks like you had a reasonably good chance of keeping it. But if you didn't have a job before the minimum wage went up, it became harder to find one. So the distinction is between people who have been working in low wage jobs for a longer period of time versus say teenagers or other people who don't have a job yet and they're looking for that first one. And what we were hearing from employers sort of helped us tell the story. Employers were telling us, we really want to hire experienced workers. If we're going to be paying $13, $15 an hour, we want workers that we don't have to train. We want to hire people who can sort of start doing the job and being productive at it on day one. And so if you had that prior experience, that made you a much more valuable employee. If you didn't have any prior experience and you were looking for a situation where you could be trained on the job, a large number of employers would have said, no thanks, we don't want to train someone on the job. Now, while we found that these long-time workers kept their jobs, we did also find that they were losing their hours a little bit. So they might see their hours cut by somewhere around 5% to 10%. So when it comes down to their paychecks at the end of the day, their paychecks were larger as the result of the minimum wage increase, but only by a small amount. So you found that for some who were in the labor market, raising the minimum wage actually made it harder for them to get a job. And so they were not able to take advantage of the minimum wage at all because they couldn't get hired. And yet for others, you found that their hours were being curtailed because employers found it difficult to afford paying the higher wage. So on balance, what was happening in terms of the conditions or the welfare of individuals at the lower end of the economic ladder in the labor market? Well, we definitely heard from quite a few workers who reported that they did feel as though they were better off. On average, workers were not taking home a whole lot more money as a result of this. But of course, there are tens of thousands of low wage workers in our labor market. And for some of them, they discovered that their wage was going up, their hours weren't being cut all that much. And so therefore they really felt like they were getting ahead. But for every worker like that, there would have been another one for whom the experience would have been very different, maybe their hourly wage was going up. But they would discover a few things that employers would do that we heard about. So for example, suppose that you're working a low wage job and you're working a shift that's not very busy. What employers became increasingly likely to do was send people home before the end of their shift. And so that means you're clocking out earlier. It means you're not working all the hours that you were scheduled to work. And so whatever benefit you're getting from a higher hourly wage, that's being at least partly offset because you're not getting as many hours. Well, how did you go about determining the impact of the minimum wage increase on the labor market? What process did you use? So it's kind of a tricky process, because basically what we want to do is we want to observe what's happening in Seattle. But then we need to ask the question, well, what do we think might have been happening in Seattle in a world where the minimum wage hadn't increased? And so that requires us to look outside the city to find some other part of the country that looks like it's revealing to us what might have been the case here in Seattle. We had data for Washington state. And so we were comparing what's going on in the city of Seattle to what's in parts of Washington state, where the economy is also doing fairly well, but the minimum wage is staying constant. And so while you could look around Seattle and say, hey, things can't be all that bad here, because we didn't have a big problem with unemployment and wages were going up, but you look around, you look at other parts of Washington state and you see, okay, well, Seattle's doing fine. But these other locations are doing much better because of the booming economy. And it's when we compare those two sets of observations that we come to the conclusion that Seattle is maybe being held back a little bit. On balance, what were some of the findings you came up with in terms of the impact of minimum wage increase? Yeah, it varied quite a bit. We found a number of things on the business side and on the worker side. So on the business side, we found that employers responded to the higher minimum wage in a number of ways. They did what they could to try to economize on their use of labor. And that means, for example, in a restaurant setting, that the job of prep cook, that's a job where your job description is basically chopping things in the kitchen. An employer can respond to a higher minimum wage by saying, okay, I'm not going to hire someone to do that work anymore. I'm going to instead just have my supplier deliver chopped vegetables or prepared meats and vegetables, whatever it is. Another reaction that we saw from business owners was to say, okay, if I have a restaurant, instead of doing table service, I'll have my customers order at the counter and come pick up their food at the counter. And that way, instead of hiring someone that will be on payroll to do those tasks, I'll just have the customers do them. I can have the customers bust their own tables. That's another way to save money on labor. Jake, I'm going to cut you off there for a moment and we'll come right back. We're going to take a one minute break. But that's fascinating to see how the behavior of business has changed with the increase in minimum wage. I'm Keely Akina interviewing Jacob Victor on the subject of minimum wage. We'll be right back after the short message on Think Tech Hawaii's Hawaii together. Don't go away. My name is Mitch Ewan. I'm from the Hawaii Natural Energy Institute. I'm the host of Hawaii, the State of Clean Energy. We're on every Wednesday at four o'clock, and we hope that we have interesting guests who talk to us about various energy things that are happening in Hawaii all the way from PV to windmills to hydrogen, most of my heart, electric buses and electric vehicles. So please dial in every Wednesday at four o'clock on Hawaii, the State of Clean Energy. Aloha. Welcome back to Hawaii together on Think Tech Hawaii Broadcast Network. I'm Keely Akina. We've been talking to Jacob Victor, Professor of Public Policy and Governments at the University of Washington in Seattle, and he's done a fascinating thing in his study of the minimum wage laws that was rolled out from 2014 up to the present in Seattle. We're talking about some of the impacts. Going into this discussion, Jacob described how the minimum wage law was rolled out, what its impact has been, how his group studied it, and now we're talking about the overall impact on business and on the labor market. But back to Jacob now in terms of talking about business. So you described some interesting examples of business behavior that changed. Do you want to go on? Sure. So a lot of times when people talk about the low wage labor market, they tend to think about restaurants a lot. And it's true that restaurants do use a lot of low wage workers. But there are lots of other sectors of the economy where you find low wage labor. One of them is manufacturing. I heard from one owner of a manufacturing business here in Seattle who made the decision to take their business to Nevada where the wages are lower. This is a business owner who manufactures products that compete with products made overseas in places like China where the wages are much lower. And while this business owner was really interested in maintaining a made in the USA brand, it's just really hard to compete with some of these overseas competitors at a $15 an hour wage. And that is a particular decision to try to find some place where it was still in the United States, but the wages were lower. So there's a combination of reactions. There are some businesses that choose to relocate. There are some businesses that choose to sort of economize on their use of labor. And the other really prominent reaction that we heard was a real emphasis on trying to find experienced workers. If you're paying $13 or $15 an hour, the idea is you're really interested in hiring people who know the job already, who don't have to be trained on the job. Because for a lot of these employers, training someone on the job, you're keeping them on the clock while they're being trained. You're also paying someone to do the training. And you never know how long that employee is going to stay with you if you're going to ever recoup your investment in the training. And so those were the really dominant patterns that we saw on the business side. Now you're talking not only about the impact that the minimum wage increase had on businesses, but what was the impact it had on laborers themselves? That's right. And so the impacts on workers were very mixed. There were some workers we discovered who were enjoying the higher wages and they managed to keep their jobs. They managed to keep their hours. And as a consequence, they enjoyed an increase in take-home pay. Now, what's interesting is that when we went and talked to a lot of these workers, they expressed a lot of concerns to us. On the one hand, they were happy to have higher paychecks, but they were also worried about prices. They were worried that businesses were going to react to a higher wage by raising the prices of everything. And of course, Seattle is an expensive city. It's a high-cost place to live and it's only been getting more expensive. So that's one concern that we heard voiced on the part of a lot of workers. And we actually found that the higher minimum wage, it might raise prices in restaurants to some extent. But when we looked at other factors, if we looked at the price of gas, if we looked at the price of rent and those sorts of things, there didn't seem to be much impact. So even the workers who came out the best were expressing concerns to us. Then at the other end of the spectrum, you have workers who were discovering that, hey, you know, maybe my hourly wage went up, but I've had my hours cut back. Or you might have some workers who didn't have a job to start. They need some training. It would be employable. And you have employers that are no longer as willing to train them. And so for these workers, it actually became a little bit more difficult to make a living in the labor market. And so when we did our best to try to sort of sort out, okay, how many people are coming out ahead and how many people are coming out behind, we actually found that the number of people who look like they are coming out ahead is a minority of the low wage workforce, that most of the people we were tracking were showing evidence that they were coming out a little bit behind. Have Seattle's leaders taken a look at your research and responded to it in any way? Well, I'd say that while we had one elected official in Seattle who was really committed to this idea of having academic research that would just tell the truth, let the data speak no matter what it found. There were quite a few other people in City Hall that didn't really want to have a study like that. And so when we released some of our findings, we found opposition from a lot of the elected officials in City Hall. The mayor at the time, Mayor Ed Murray, went so far as to find another team of researchers who did their own analysis. They came to very different conclusions. So our conclusions were that there seemed to be a lot of workers who were coming out behind and there's definitely some cut facts, especially when we look in terms of hours. And then this other study that came out from researchers at Berkeley came to the conclusion that everything's just fine. That study was different. That study only looked at the restaurant industry. Okay, so you've answered my question by describing the limitations of that other study because what I was going to ask you is what should the public do or what should public policymakers do when you have two studies whose findings differ? How is that reconciled? How did you respond in defense of your own study? Yeah, well, I guess it was relatively easy in our case because there was a straightforward reconciliation between the two studies. The Berkeley study looked at the restaurant industry and only the restaurant industry. And it counted up the number of jobs in the restaurant industry regardless of what wage they paid. So it wasn't really a study of the low wage labor market. It was a study of the restaurant labor market. When we released our analysis, we actually did it both ways. We tried one analysis looking at the low wage labor market, looking at all low wage jobs, whether they were in restaurants or manufacturing or healthcare or education. And we also did a separate restaurant industry study. And so we found the exact same thing that if you just look at the restaurant industry, it makes it look like everything's fine. But it's when you do the more specific, clear focus on the low wage labor market that you start to see, okay, things are not all peachy keen here. And in particular, there is this cutback in hours that is offsetting the wage increase for a large number of workers. How do you compare your findings of minimum wage increases in Seattle with what has been learned across the country? You know, one thing that really made our study unique was the ability to track workers' hours. A lot of the prior studies of the minimum wage, whether they are national in scope or whether they're looking at specific states or localities, they're using data sources that count up how many jobs there are. So much low wage work is part-time rather than full-time work, that it's really critical to understand well, not just what's happening to how many people are on payroll, but what is happening to their hours. In Washington state, as it turns out, is one of only four states across the country that collects data on how many hours workers spend on the job. So we had a pretty rare opportunity to really study this extensively. And I think that if you look at a lot of the prior studies of the minimum wage, they come to this conclusion that hey, the total number of jobs in the economy remains about the same, so this can't be all that bad for workers. And I think that one of the perspectives you get from looking at our studies is to say, okay, looking at jobs is one thing, but you also have to pay some attention to hours, because you could still have a job, but if your hours are being cut back, then it might mean that your income is increasingly staying back, be decreasing. And I understand, Jacob, from our prior discussion with each other, you had the privileged access to this data because you actually are working in a state university and had a state agency relationship with the data sources. That is correct. So the Washington state law says that the state's data can only be shared among state agencies within the state of Washington. So the University of California can't access it, think tanks can't access it, and so we have this pretty exclusive access to the Washington state data. We've got a couple of minutes left, Jacob. We've been talking a bit about the Hawaii situation offline. What are your thoughts as to how relevant your study is to what we're dealing with here in the state of Hawaii in contemplation of increasing our minimum wage? It's a great question. So the one caution that I'd really apply to comparing Seattle to Hawaii, Seattle is 84 square miles. Right across the border, you've got suburban areas where the minimum wage was much lower. We heard from business owners like, for example, the owner of a catering company who said, I'm moving my kitchen outside the city. And so any of the prep work that I do for my catering jobs, even my catering jobs in the city of Seattle, if I do the prep work outside the city, I'm not subject to the minimum wage. So when you have a minimum wage that just affects one municipality and you can easily escape it by just moving across the city limits, that may lead to more significant reductions in employment and say an economy like Hawaii's because you're geographically isolated. It's a lot harder to just sort of say, oh, well, I'll just move my catering kitchen right across the state line and then I'll do catering jobs in Hawaii from an out of state location. It's just not feasible. So while we definitely found some adverse employment impacts that looked large compared to a lot of prior studies, you might want to take that with a grain of salt in Hawaii just because the greater isolation of your state economy means that employers don't quite have the same options to relocate. Any last word you'd leave for our legislators, maybe 30 seconds of wisdom as they contemplate their decision? Yeah, I'd say one of the things that we learned in Seattle was that timing matters. So the adverse impacts that we saw in Seattle largely happened when the city went from $9.47 an hour to $13 an hour over the space of nine months. So they raised the minimum wage, but they actually ended up doing it pretty rapidly. And what the evidence suggests is if you just take a little bit more time and allow businesses a little bit more time to adapt to higher wages, but maybe you don't see quite the same kinds of adverse impacts. So and if you look at the way that other states and localities have been raising the minimum, they do it more of $0.50 a year or a dollar a year, which is a lot more manageable than a law that says we're going to go up by more than $3 less than a year. Well, Jacob, thank you. At least we should look at moderation. My guest today, Jacob Vigder. Thank you so much, Jacob, for being with us. He's professor of public policy and governance at the University of Washington and gave us a fascinating review of the story of the minimum wage increase in Seattle. Until next time, I'm Keely Akina on the Think Tech Hawaii broadcast network. Aloha.