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Interview with Jacob Vigdor on Minimum Wage

March 26, 2015

Jacob Vigdor, a professor of public affairs at the University of Washington and head of a team of researchers studying the impact of the new 15$ minimum wage, talks with Deborah Wang about what they hope to discover in the new study.


Deborah Wang: So, there are still many questions about the new law but the good news is there may be some answers eventually. The new law set aside money for a five-year study. Researchers will look at what affects the law has on employment numbers, on prices, and on the quality of life for low-income families.

Jacob Vigdor is a Daniel J. Evans Professor of Public Affairs at the University of Washington and he's the head of the research team that will be looking at the effect that the new law. Professor thanks for joining me.

Jacob Vigdor: Thanks for having me. It's great to be here Deborah.

Deborah Wang: What's the central question that you're trying to answer here?

Jacob Vigdor: There's really a series of questions. You can break it down and say: What is the impact on employment? What is the impact on earnings? On hours worked? But you take it to the family level. What is the impact on the well-being or the quality of life for families in Seattle or the area who are trying to survive on low wage work. We're looking at the employer level and asking what do employers have to do to adapt to this new ordinance? We're looking at prices. We're also trying to figure out what happens to families that are receiving some sort of public assistance benefits. Are those benefits reduced? Are they offsetting some the income gains?

Deborah Wang: So let's break this down a little bit. For low-income families, the idea I suppose is that when you raise the minimum wage you improve the lives of people who are making the minimum wage. Is that not… I mean, what needs to be proven there when you're when you're looking at that?

Jacob Vigdor: Well the question is by how much, and to what extent are the improvements in terms of higher wages being offset by other things, if at all.  You might have concerns that when your wages go up, employers are cutting back on shifts or cutting back on hours. Which means you may not be bringing home as much pay, even though you're hourly wages have gone up if your hours go down. We might also be concerned that if you're receiving benefits such as food stamps or other kinds of things where your benefit depends on your income level. When your income level goes up, your benefits go down.

Deborah Wang: Okay, so there could be unintended consequences.

Jacob Vigdor: Potentially, and that's what we're keeping an eye out for.

Deborah Wang: For businesses, I mean there’s been a lot of concern raised by specifically small businesses who are saying that this law could have really devastating effect. Put some businesses out of business. How do you approach the study of what happens with businesses in the city?

Jacob Vigdor: Well one thing that we're going to do is want to keep track. We have data that tells us how many businesses are opening, how many are closing, are they expanding their workforce, are they cutting back. So we'll be able to keep track, administratively, of every business in the city. We are also reaching out we've reached out to a couple thousand individual businesses in the city of Seattle and asked them to help us by completing a survey. We're going to be surveying those businesses over time to see what decisions they are making to try to adapt to the new reality of a higher minimum wage.

Deborah Wang: To what degree is this research new? I mean, because we heard during the whole minimum wage debate that this--the minimum wage has been studied endlessly. There have been hundreds and hundreds of studies in cities and states and countries that have raised the minimum wage. Haven't many these questions been answered already?

Jacob Vigdor: There are three things that make what we're trying to do different than the many studies that have been done before. Most of those studies have looked at state level minimum wages or the federal minimum wage. It may be very different when a city adopts a minimum wage. There's no large city that is gone all the way to fifteen dollars an hour. And most of the studies that we know about in the labor economics literature about the minimum wage have just stuck with the data, the big data part, and they haven't gone that extra step of actually talking to workers, surveying businesses, and getting the extra information in richness of detail to figure out not just do employers cut back hours, but what difference does this make for families? What difference is it making for businesses? What difference is it making for consumers? So we're trying to go deeper and we think we have a slightly different situation here in Seattle.

Deborah Wang: During the debate over the minimum wage, the city sponsored a study that was sort of a meta study of all the studies that have been done, and it was done by researchers at the University of California at Berkeley. And their conclusion was that minimum-wage increases don't have or haven't had a negative effect on economies when they've been done before. Is that a conclusion that you would come to as well?

Jacob Vigdor: What's interesting about the work that's been done before about the minimum wage is that there have been a few scholars out there who have done many studies. And their studies always seem to the come to the same conclusions. And they always seem to be conclusions that disagree with one another. These are researchers that were using different methods. They're looking at things slightly differently, and they're disagreeing with one another. And so while you can talk to folks who were in one camp or one school of thought, and they'll come away with the conclusion that everything we've ever done says that the minimum wage is benign, you have another school of thought that wasn't consulted for the purposes of the studies that Seattle commissioned before implementing the ordinance that has come to very difficult conclusions.

Deborah Wang: Is it just a question a methodology, or are these different scholars coming with different biases when they do these studies?

Jacob Vigdor: I’d say that there are really two different visions of the way the labor market works and the way the minimum wage has an impact, and you just have people who subscribe to different views. There are some people who take what you might call a “free market” view of things, and the free market views says people are paid what they're worth. People are paid an amount that reflects the value that they create for their employer. And raising the minimum wage does not automatically increase the value that an employee provides their employer, and therefore it's a dangerous policy. You have another school of thought that says wages are determined by negotiation between labor and management. And when you think about this, negotiation, bargaining power matters. And what the minimum wage does is that it gives more bargaining power to the workers relative to management and therefore can be a good thing. There's some plausibility to both stories

Deborah Wang: So you're the head of the study which may be groundbreaking, and the biggest study of its kind ever done, so I suppose a lot of people want to know--what's your bias? What position do you come from?

Jacob Vigdor: I've never actually done work on the minimum wage before which I think of as an asset, because I'm not associated with either one of these camps. I see some validity in both ways of looking at the world, and I think that it if you think about this problem from a theoretical perspective you don't get very much guidance. What you actually have to do to figure out what a policy like this does, there is no substitute for going out there in the field and collecting data and analyzing it. And that's what we're intending to do.

Deborah Wang: One of the arguments made by proponents at the middle minimum wage hike is that if you put more money in the pockets of low wage workers or the middle class, that money will rather than trickle down from the top, it will sort of serve seep up from the bottom and lift the entire economy. That it will have a positive impact on businesses, on local businesses, and on the entire economy. Do you accept that theory?

Jacob Vigdor: You don't hear a lot of macro economist talking about that theory. The way that economists think is that there are dollars that flow through the economy and when you give a dollar to one person it had to come from somewhere. And so the question is always-- is that dollar making a more of a difference in the hands of one person than another person. And really the most important consideration when you thinking about would rather have this dollar in the hands of a low-wage worker or the employer whose responsible for the business that's creating that job, that's a situation where there's a lot of value judgments involved and our research will only take you so far in determining, you know, whether the minimum wage is a good idea. We're not here to tell the people of Seattle that this minimum wage is a good thing or a bad thing. We are here to say—these are the affects that it has had and you as the people need to decide, or you as the leaders of Seattle need to decide are we comfortable with this or not.

Deborah Wang: How much will people be watching your study? How important is this to through the entire body of literature?

Jacob Vigdor: I'm a person who has done a lot of research on a lot a controversial topics over the years and what has always amazed me is the extent to which it's really hard to predict which studies get picked up and the people pay a lot of attention to them, and which studies sort of fall by the wayside. My gut sense is that people are going to pay a lot of attention to this study. People are already paying a lot of attention to the study, and we haven't even done much yet.

Deborah Wang: Well this will be so interesting to watch as it unfolds. Professor Jacob Vigdor with the UW's Evans School of Public Affairs, thanks for joining me.

Jacob Vigdor: Thanks for having me Deborah, it's been a real pleasure.



Made possible in part by

Deborah Wang

Deborah Wang is host of IN Close, the weekly public affairs program on KCTS 9 that features in-depth stories from across the Pacific Northwest.

She is also a news and feature reporter for KUOW Public Radio in Seattle. She covers a range of subjects, but mainly focuses on politics.

Deborah is an award–winning radio and television journalist whose career spans close to three decades. A long–time network foreign correspondent, she has reported from close to two dozen countries, including China, Vietnam, Cambodia, India, Saudi Arabia, Somalia, Rwanda, Kuwait, and Iraq.

Deborah's first reporting job was at public radio station WFCR in Amherst, Massachusetts, where she filled just about every role at the station, from newscaster to reporter to show host to news director. In 1988, she transitioned from radio to public television, working as a reporter and fill-in host at “The Ten O’Clock News” on WGBH-TV in Boston. In 1990, Deborah went to work for National Public Radio, serving as NPR's Asia correspondent based in Hong Kong. In 1993, ABC News hired Deborah to be a television correspondent based in Beijing, where she covered, among other things, Hong Kong's handover from British to Chinese rule. In 1999, she set up the network's first news bureau in Seattle.

Deborah has also worked as a news anchor for CNN International, and as a fill-in host for the nationally syndicated public radio show “Here and Now.”

Deborah has won numerous awards for her reporting, including the Alfred I. DuPont Silver Baton for coverage of the first Gulf War, and the Overseas Press Club's Lowell Thomas Award for best radio documentary on Cambodia.

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