Seattle’s minimum wage problem

Megan McArdle writes at Bloomberg:

The University of Washington released its second study, this one covering the increase from $11 an hour to $13. And this study found huge effects: For every 1 percent increase in their hourly wage, low-wage workers saw a 3 percent reduction in the number of hours worked. As a result, they lost about $125 in earnings a month, clawing back the entire gain from the earlier hike and more.

The earlier increase from $9.47 to $11 did not see a drop in wages. This larger increase did. This is to be expected.

Take a NZ context. An increase from say $17 to $17.50 will see little impact. But an increase to say $25 would see a huge impact.

The key element appears to be the level of the minimum wage compared to the median wage. And in NZ this is already one of the highest in the world. So the increase this year of 75c will probably see little impact but the $3.50 increase over the next three years will I suspect have a significant impact.

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