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This paper evaluates the wage, employment, and hours effects of the first and second phase of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees' earnings by an average of $125 per month in 2016. Evidence attributes more modest effects on the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.

The increase in the minimum wage may cause workers to work more OR work less. Explain using the income and substitution effect why? (HINT: The price of the good is work, and the alternative good is leisure€, which is anything but work).

Workers choose, simply, to work, earn income, and consume, or leisure (i.e., not work). Explain how relative preferences for consumption or leisure can impact the work-no work decision after a minimum wage increase.

The article explains how, even with the minimum wage increase, employment has not fallen. Utilizing the substitution effect, explain how the firm may choose to minimize its costs increases elsewhere. Discuss 3 potential mechanisms instead of firing workers that an employer may use.

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Joshua Stredder
Joshua StredderLv10
29 Sep 2019

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