Human Service Sector Responses to Minimum Wage Increases: Evidence from Seattle's Minimum Wage Ordinance

Background: Human services workers are paid less than workers in other parts of the economy, so much so that many frontline human services workers earn wages below or just above the $15-$20 range of recent local minimum wage laws. Research has investigated the effects of minimum wage increases on earnings and employment, but the impact of minimum wage increases on the human service sector have been underexplored.

Conventional economic theory suggests that minimum wage increases reduce employment due to higher labor costs, yet other models suggest the effects may be more ambiguous. The mechanisms by which organizations adjust to wage increases can vary significantly by sector. The human service sector is distinct in that it is characterized by relatively inelastic demand coupled with regulatory constraints on service delivery and workers’ wages. This oversight in research is concerning given that the human services sector plays a critical role in the delivery of services essential to the basic human needs, economic stability, and quality of life of vulnerable and marginalized populations in the U.S.

This study examines the effects of Seattle’s 2015 Minimum Wage Ordinance (MWO) on human service workers' earnings and employment.

Methods: We use the Washington Merged Longitudinal Administrative Data (WMLAD), comprised of linked records from multiple Washington state agencies. WMLAD contains a near-universal count of working-age individuals for 2010-2017, spanning the MWO implementation. Analysis proceeds in two stages. First, we create descriptive statistics about the number of employees, average quarterly work hours, and average quarterly earnings within the human services sector overall and within specific subsets. Second, we employ a difference-in-difference-in-differences (DDD) estimation strategy to assess the MWO’s causal impact. The treatment cohort is composed of employed human service workers located in Seattle in a baseline quarter prior to the MWO effective date. A comparison cohort outside Seattle was created to account for differences in worker characteristics and a pseudo-cohort was introduced from Seattle in a period prior to the MWO to account for factors other than minimum wage.

Results: Descriptive results show that human services employment increased in Seattle after the MWO took effect, but the ordinance may have suppressed growth in the sector. Overall, average quarterly employment within the Seattle human services sector increased 4.5% in the year following the MWO. Employment trends within the larger sector varied with some service areas shrinking in employment (community food and emergency relief services) and others growing. Within individual and family Services, the largest grouping of services, average quarterly employment grew by 4.6% within Seattle but grew faster - at a rate of 12.2% - outside the city.

Implications: Study findings reveal a nuanced picture: human services employment increased in Seattle post-MWO, but growth may have been stifled compared to areas outside Seattle. These results suggest that the MWO may have influenced employment trends within the sector, underscoring the importance of considering sector-specific factors in assessing the impacts of minimum wage increases. We discuss ways that human services leaders ensure equitable wages while maintaining organizational integrity.