Students who are working in D.C. this summer may be pleased to notice their wallets are a little fuller after a recent increase in the city’s minimum wage. But city officials worry that in the future, the rising cost of labor may make paid summer jobs hard to come by.
In 2016, D.C. passed the Fair Shot Minimum Wage Act, which gradually raises the minimum wage to $15 per hour by 2020. The most recent of the law’s mandated wage hikes came into effect this month – an increase from $11.50 to $12.50 per hour.
Washington is consistently ranked one of the most expensive cities in the U.S., and many of D.C.’s low-wage workers welcomed the extra cash this month. But D.C.’s D.C.’s Office of Revenue Analysis (ORA) warns that by 2026, increases in the minimum wage will cause 2,489 workers to lose their jobs.
The ORA’s Jeffrey Wilkins notes that while job losses will fall squarely on D.C. residents, increased wages will primarily benefit commuters from Maryland and Virginia. “What’s interesting,” writes Wilkins, “is that almost 2/3 of the increased earnings produced by this policy in 2021 go to non-DC residents who work in the District. Yet, over 80% of the job losses are absorbed by DC residents by 2026.”
Already, D.C. residents face a tougher job market than their Maryland and Virginia neighbors. While the counties surrounding D.C. all face below-average unemployment rates, D.C.’s 5.6% unemployment rate comes in at 1.1% above the national average (as of March 2017).
A more recent study from the University of Washington indicates that until now, researchers have underestimated the unemployment effects of increasing the minimum wage. Examining the consequences of Seattle’s move to a $15 minimum age, researchers at the University of Washington were able to take advantage of Washington state’s unusually detailed employment records. They found that while low wage workers did receive higher hourly wages, a corresponding reduction in hours left low-wage workers worse off than they were before the minimum wage hike.
The study concludes, “The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker.” In addition, the study finds the minimum age hike caused the Seattle area to lose 5,000 low wage jobs.
Some of the unemployment effects experienced in Washington state are already being mirrored in Washington, D.C. Mark J. Perry of the American Enterprise Institute says, “DC restaurant jobs fell by 1,400 jobs (and by 2.7%) in the first six months of 2016 between January and July – that’s the largest loss of District food jobs during a 6-month period in 15 years.” Perry notes, “In contrast, restaurant employment outside the city grew at a 1.6% rate in the suburbs (and by 2,900 jobs) during the January to July period.”
Mayor Muriel Bowser, who campaigned on the issue of a $15 minimum wage, celebrated this month’s wage increase. She remarked, “”We’re more prosperous than we’ve ever been in the history of the District of Columbia. But we also want to make sure all of our polices are working toward making sure that each and every Washingtonian has a fair shot at participating in that prosperity.”