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Friday, January 31, 2014

New Study Finds Modest Minimum Wage Hikes Have No Negative Impact on Employment

Posted by on Fri, Jan 31, 2014 at 1:18 PM

One of the main arguments that opponents use against raising the minimum wage (by any amount, let alone a jump to $15) is that it would inevitably reduce employment for low-skill workers, particularly teenagers. Were these arguments put forth by advocates for the young and/or working poor, I might take them more seriously. But coming as they do from corporate-funded propaganda machines like Douglas Holtz-Eakin's American Action Network (which spent $750,000 in Washington State in 2010 running attack ads against Senator Patty Murray), I find their defense of low-wage jobs on behalf of low-skill workers to be rather disingenuous.

But is it true? Holtz-Eakin and other conservatives love to cite a 2012 study by economists Joseph Sabia, Richard Burkhauser, and Benjamin Hansen (pdf) that found that a 31 percent New York State minimum wage hike from $5.15 to $6.75 between 2004 and 2006 reduced employment for those at the bottom of the workforce by over 20 percent compared to neighboring states. Indeed, whenever you hear a minimum wage critic categorize this assertion as an undisputed fact, they are almost always referring to the Sabia, Burkhauser, Hansen (SBH) study.

But a new paper from University of Delaware economist Saul Hoffman (pdf) pretty much tears the SBH study a new one. It's not the methodology that throws the much-cited SBH study off, finds Hoffman, but rather the data. SBH reached their conclusion by analyzing a subset of the federal government's monthly Consumer Population Survey (CPS), resulting in a very small sample size of young, low-skill workers. But when the full CPS was used—the "gold standard" of US employment data—the negative impact on employment disappears.

My re-analysis of the SBH natural experiment yields results that are substantially different than theirs. I find no evidence whatsoever of a negative employment impact for young, less-educated workers in NY following the minimum wage increase. The difference in results reflects the different data sources used. SBH used the CPS-MORG, which are a one-quarter subsample of the full CPS, while I used the full CPS files. In this case, the MORG files yield incorrect estimates of the employment rate changes in NY and in the control states, substantially overstating the apparent impact of the minimum wage change. When the two data sources conflict, there can be no doubt that the full CPS, which is the source of official employment data, is the appropriate one to rely on.

But Hoffman goes further. He also applies the same analysis to CPS data for four other states that raised their minimum wage during the same period (if less steeply than NY), finding a small positive employment impact compared to neighboring states. Hoffman concludes:

My findings of employment effects that are either negligible, as in the case of New York, or positive, as in the case of DC, FL, IL, and NJ, are largely consistent with the newer round of minimum wage employment estimates.

Hoffman cautions that his findings merely support the idea that a modest hike in the minimum wage over two years "may not be problematic in terms of employment." NY's $5.15 to $6.75 minimum wage hike represented a 31 percent increase; the other states he analyzed raised their minimum wage by only 10 to 20 percent. But a $15 minimum wage would represent a 61 percent increase over Seattle's current $9.32 an hour minimum wage. There is little precedent for such a large increase, and as Hoffman notes, the natural experiments he analyzes "are not informative about what the employment consequences might be for much larger increases." But, then, neither is the SBH study that opponents so often cite to argue that a $15 minimum wage would be a disaster.

The point is, while it might seem reasonable to speculate that a large minimum wage hike could negatively impact employment—particularly for young, low-skill workers—there is no data to back this argument up! So there.


Comments (42) RSS

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The employment effect of the minimum wage is one of the most studied topics in all of economics. The evidence from the most recent and sophisticated research points to little or no employment response to modest increases in the minimum wage. Read for yourself here:…
Posted by cloudveil1 on January 31, 2014 at 1:27 PM · Report this
collectivism_sucks 2
Notice the term here: MODEST INCREASE. A 61% increase in minimum wage is NOT MODEST. The closest real wold example of that happening is when FDR created the first minimum wage and causes wages to go up 25% on average. The result? JOBS DIDN'T GROW:

[In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.
Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.
"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."]

Posted by collectivism_sucks on January 31, 2014 at 1:37 PM · Report this
raindrop 3
Rural small business owners would have more difficulty with the increased labor costs than in the cities.
Posted by raindrop on January 31, 2014 at 1:40 PM · Report this
collectivism_sucks 5
Now this whole fascist notion of the 15/hour unpayable wage, while a thousand very good arguments can be made against it, there is one that sticks out for me:
Let's say a restaurant that, like most restaurants in Seattle, has a 3-5% profit margin. Once hit with a 60% increase in minimum wage the owner calls all the staff together for a meeting. She says she doesn't have that kind of money in the restaurant to pay everyone that much, but she can afford a small raise, say to 10.50/hour, but at 15/hour, she'll have to go out of business and everyone will lose their jobs. The employees agree and understand that 10.50/hour is better than 0/hour and work for that.

What happens when the police find out about this? Does the boss get arrested, the workers thrown in jail and the place shut down despite the fact that it is COMPLETELY VOLUNTARY and that the workers CHOOSE to work for that much? How is that any different from throwing someone in jail for having consensual gay sex or throwing someone in jail VOLUNTARILY smoking weed in the privacy of their own home?

This is a prime example of how "progressives" are just as much a bunch of anti-choice statists as conservatives.

If this does happen, I will loose my job. And if that happens I'm moving to Texas. I would LOVE to see the progressives try to get a socialist elected to anything in Houston, and I would LOVE to see a 15/hour law try to get passed anywhere over there. I better leave soon, because socialists have a habit of building walls to keep people in cities, as anyone who visited Germany in the 70s will tell you...
Posted by collectivism_sucks on January 31, 2014 at 1:48 PM · Report this
collectivism_sucks 6
Ah, the Great Depression ended because of WWII, as anyone who took high school history will be able to tell you. With war production at such heights and the war economy, it is what was needed to lift America out of the Depression...well, avoiding some of the policies of FDR would have also got us out of the depression too.
Posted by collectivism_sucks on January 31, 2014 at 1:51 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 7
Businesses that think they're better off with a low minimum wage should relocate to states with a low minimum wage. What's keeping them? In fact, why have they spent all these years here in the state with the highest minimum wage in the nation, if it's so devastating?
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on January 31, 2014 at 1:51 PM · Report this
Minimum wage hikes alone will not work if there is not additional money to purchase the products and services they provide and to contribute to tax revenues for governmental jobs.

That is why I have proposed upping the salaries of the middle classes as well. That is the only way for the money to trickle down into the pockets of the minimum wage workers who man the malls, provide facilities and so on to the middle class. Billionaires don't buy enough burgers to do so.

Give IT Professionals a Big Pay Raise

Over the past decade we've been treated to vociferous arguments about the misdistribution of goods and assets in our society. The approaches for rectifying this situation focus on the extremes. Boost minimum wages? Add taxes on the wealthy? These answers overlook a third way: doubling the incomes of STEM workers.…
Posted by Supreme Ruler Of The Universe http://_ on January 31, 2014 at 1:54 PM · Report this
collectivism_sucks 10
Why state in a statist, awful place like Seattle?
For one, Washington State, outside Seattle, aside from a high minimum wage and a few other things, is a very business friendly state and one of the most libertarian states in the's just Seattle that's insane.
Second, and the reason I for one have trouble leaving western Washington, is this:…

So beautiful and free a fascist and enslaved a city.
Posted by collectivism_sucks on January 31, 2014 at 2:04 PM · Report this
Fnarf 11
@6, I absolutely believe your claim to have taken high-school history, because that's about the level of understanding you're showing. If you had any real understanding of the desperation at all levels of society leading up to Roosevelt's election, you'd know that the entire banking system of the world came very close to utter collapse, which would have led to mass misery on an unimaginable scale, and you'd also know that his measures were much milder (and pro-business) than what many people wanted. Your idiot assertion that we could have just skipped the New Deal and everything would have gotten better on its own is just ridiculous. We would not have survived as a nation.

@9, as an IT professional myself, you're dumb.
Posted by Fnarf on January 31, 2014 at 2:07 PM · Report this
Can we get a definition of "modest", though? I'm guessing its percent over time? If that, couldn't we still go with a $15 minimum wage but over a period of time so that it remains "modest"?
Posted by Bloated Jesus is Bloated on January 31, 2014 at 2:18 PM · Report this
collectivism_sucks 13
Ah, my link was from two UCLA economists...I guess they too have "only a high school level of understanding" huh?…

And the Depression itself was caused by government in the first place. If the Fed didn't exist, the depression would never have happened.
Posted by collectivism_sucks on January 31, 2014 at 2:19 PM · Report this
collectivism_sucks 14
That would be a reasonable compromise, but the Bollywood Bolshevik Sawant refuses any and all compromise. She even wants this to apply to small, immigrant businesses that can't afford it and doesn't care that it will put them out of business. She'll push a ballot initiative, the hipsters may well vote for it and viola! Seattle is another Detroit.
Posted by collectivism_sucks on January 31, 2014 at 2:21 PM · Report this
collectivism_sucks 15

Oh, and as for Goldy's claim that, and I quote directly: "The point is, while it might seem reasonable to speculate that a large minimum wage hike could negatively impact employment—particularly for young, low-skill workers—there is no data to back this argument up! So there"
That is 100% not true. I found this in all of ten seconds:
"As part of a study from the Employment Policies Institute, Dr. Joseph Sabia, a professor at San Diego State University, analyzed data from the Census Bureau to examine minimum wage increases in instances where the economy is thriving and in a recession. When examining data from 1990 and 2010 — the last three minimum wage increases — Sabia found that a 10 percent increase in the federal minimum wage has a substantial affect on less-educated young workers, with employment reducing as much as 2.3 percent."

Would you like ketchup with those words, Goldy?
Posted by collectivism_sucks on January 31, 2014 at 2:31 PM · Report this
Cascadian 16
Uneducated troll, please postulate the economic mechanism by which government spending on guns and bombs restores the economy but spending on other things does not. Also explain why the economy grew at unprecedented rates in every year of the FDR presidency except the one where he cut government spending.
Posted by Cascadian on January 31, 2014 at 2:39 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 17

Fascist? Well, I guess you win. If only I'd thought of calling somebody fascist or Nazi or Hitler first, then I'd have won! Next time. Next time!
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on January 31, 2014 at 2:41 PM · Report this
*Yawn!* This is just more of the same chicken-little "the sky is falling!" pronouncements we hear every time the Minimum Wage goes up; and yet, each time it does, businesses somehow miraculously fail to close up by the score, people don't flee en-masse, and life goes on pretty much exactly the same way it did before the wage increase.

Sure, raising the MW from the current State-mandated $9.34 per hour to $15 an hour in a single hike is probably too disruptive, but a series of smaller incremental increases over several years shouldn't be that difficult to absorb, even by small business owners who apparently depend on paying poverty-level wages to their employees. They'll simply do the same thing they do when other costs-of-business go up, namely, raise their prices to cover the additional expense and pass it along to consumers; that's how the system works, everybody knows it, and people adjust accordingly.

So, your $8 bowl of pho goes up to $9 or even $10 - is that really so much of a hardship, when the result is that the people making and serving it can actually LIVE on what they earn? Or are we all comfortable living in a society where those workers on the bottom rungs have to go on public assistance (which we all pay for) just to have enough resources to be able to keep working at that shitty, low-paying job for our personal convenience?
Posted by COMTE on January 31, 2014 at 2:44 PM · Report this

Yea... I believe none of those things are true.
Posted by Bloated Jesus is Bloated on January 31, 2014 at 2:49 PM · Report this
Goldy 20
@6 Um, World War II deficit spending was about as powerful an example of Keynesianism as you can find. The problem with the New Deal wasn't the government spending, is that there wasn't enough of it.
Posted by Goldy on January 31, 2014 at 2:56 PM · Report this
@15 You should check your sources. The Employment Policies Institute (EPI) is one of several front groups created by Berman & Co., a Washington, DC public affairs firm owned by Rick Berman, who lobbies for the restaurant, hotel, alcoholic beverage and tobacco industries. It is registered as a 501(c)(3) tax-exempt organization under the name of "Employment Policies Institute Foundation." In its annual Internal Revenue Service return, EPI states that it "shares office space with Berman & Company on a cost pass through basis".…

In other words, Berman set up a non-profit that funnels its tax-deductible donations to himself. Don't take my word for it. His son describes Berman as "An exploiter. A scoundrel. A world historical $^@#&*%$ing son of a &!&@#.":…
Posted by cloudveil1 on January 31, 2014 at 3:05 PM · Report this
Fnarf 22
@13, you're a block of wood. Government caused the Great Depression. That's genius-level stupidity. But then, all of you Paultards (just a guess here) want to go back to the days when everyone worked on farms for peanuts and there was a bank panic every seven years, like locust plagues. Assholes, every last one of you.
Posted by Fnarf on January 31, 2014 at 3:23 PM · Report this
Sawant and the $15ers should be pushing for a modern Blue Eagle program to show broad support by businesses, not just low wage workers.... and The Stranger should commit to implementing it internally.…
Roosevelt wanted businesses to do this voluntarily. To that end, the administration created the National Industrial Recovery Act, which Congress passed in 1933.

Businesses that agreed to shorten hours and raise wages could hang special signs in their windows that showed a blue eagle logo and the words "doing our part."
Posted by ChefJoe on January 31, 2014 at 3:31 PM · Report this
Oops, forgot this paragraph in the quote.
Several decades later, Franklin D. Roosevelt was president. To fight the Depression, he wanted to put money in people's pockets. "If all employers will work together to shorten hours and raise wages, we can put people back to work," he said.
Posted by ChefJoe on January 31, 2014 at 3:32 PM · Report this
Clara T 25
It's a pathology, right? In all of them the patterns of thought are the same, the specious arguments, the total lack of ability to relativize, the ignoring new or damning info and plowing ahead to the same extreme conclusions regardless of premise. The constant crossover to conspiracy theory and regular indefensible grand proclamations. I'm convinced it's a context that finds a psychopathology and not actually an intellectual point of view.

And like much psychopathology the thought pattern is motivated subpersonally -- it's not just irrationality born of some sort of self-reported phenomenological belief system -- it's a hardware issue proclaiming to be software.

So arguing/explaining/appealing to reason can't work - the aberrant thought patterns tumble forward on autopilot.

So yeah, not worth arguing.
Posted by Clara T on January 31, 2014 at 4:01 PM · Report this
Clara T 26
@22 btw
Posted by Clara T on January 31, 2014 at 4:02 PM · Report this
fletc3her 27
Theoretically raising the minimum wage would affect the demand curve, but in America today workers are under-pricing their labor.

Workers should price their labor the highest that the market will bear. However, there is no effective way for individual workers to negotiate wages in low-end jobs. Historically unions have performed this negotiation and even non-union employers would feel the pressure to pay higher wages.

It makes sense for the government to negotiate wages on behalf of all workers setting a minimum which helps ensures that workers are closer to the highest possible wage they can achieve. The minimum wage should be increased until the employers can no longer adjust their businesses to absorb the increases.
Posted by fletc3her on January 31, 2014 at 4:21 PM · Report this
Posted by collectivism_sucks on January 31, 2014 at 4:37 PM · Report this
Posted by collectivism_sucks on January 31, 2014 at 4:39 PM · Report this
collectivism_sucks 30
The economy grew during FDR because he spent money. No denying that. The issue is, what was the cost of economic growth? It cost us more freedom and liberty, all of which could have been avoided. He could have just ended prohibition and done a few reforms and sit back and wait for things to naturally balance out. It would have been painful, but better in the long term. Instead he laid the ground work for the military industrial complex and all the evils that followed it, along with the imperial presidency.

There is a direct line from the New Deal to the creation of the CIA, NSA, etc.
Posted by collectivism_sucks on January 31, 2014 at 4:42 PM · Report this
collectivism_sucks 31
@20 The government can't its spend money, because it has no money. Few governments in history ever had money. They don't earn money, they steal it. They still it from you, from me, and from everyone else. If I were to see you buying a burger and punched you and stole a dollar from you, leaving the rest for you to pay for your burger with, that would be theft. Government does it and it's called sales tax, which has most impact on poor people.

Government can only spend what it steals. So the government didn't spend its money during the Depression, it stole money and spent it.

As for the war, yes, it was good for the economy...and also bad for the slaves sent to fight in it. WWII involved a massive draft, where the government forced men into uniforms and sent them to die. Was WWII a just war? It was. But it should have been fought by volunteers, not slaves. So, what you're saying is tantamount to justifying slavery and theft.

It is okay, in your opinion, for government to steal from everyone, including the poor, and use it to fund programs that only help a few and end up helping corporations the most. It is okay, in your opinion, for government to declare someone willing to work for less pay as opposed to no pay at all a criminal and put him/her and his/her employer in jail for refusing to comply with the minimum wage. It is okay, in your opinion, for government to force people to fight and die for whatever cause the corporate overlords want this week.

Theft, violence and slavery are okay with you...but we voluntaryists and libertarians are "sociopaths" because we believe in a welfare society as opposed to a welfare state.…
Posted by collectivism_sucks on January 31, 2014 at 4:53 PM · Report this
collectivism_sucks 32
What does that have to do with anything I said?
Posted by collectivism_sucks on January 31, 2014 at 4:55 PM · Report this
collectivism_sucks 33
That would make sense. Give businesses in Seattle a tax incentive and a other programs to encourage them to pay the highest wage they possibly can. But alas, Sawant has made it clear that "compromise" if a four letter word for her. She's essentially the left wing version of a Tea Partier.
Remember Herman Cain, and how he got all kind of support with his IDIOTIC "9,9,9" plan? Well, Sawant is the same thing, on she has a "15" plan.

Bottom line is that NOT ALL BUSINESSES can afford to pay people 15/hour starting salary. A big corporation can, but the little Pho house up the street from me doesn't have a chance at affording that and will be priced out of the Seattle market. That is the logical reality...but logic very rarely wins elections these days.
Posted by collectivism_sucks on January 31, 2014 at 5:06 PM · Report this
@32 You cited a publication from a PR firm (one funded in part by the restaurant industry) to back up a spurious claim about the minimum wage hurting employment. I pointed that out. That's all.
Posted by cloudveil1 on January 31, 2014 at 7:08 PM · Report this
collectivism_sucks 35
Here is ANOTHER STUDY, from a institute affiliated with a George Mason University, a PUBLIC COLLEGE. They even show how they crunched the numbers from the Department of Labor:…

And if studies from any organization that has any connection with business are not honest sources, than in all fairness any studies from any organization that has any ties to big labor should also be not considered an honest source.

And that all misses the point: the author of this poor excuse for an article claimed that there is no data that says raising the minimum wage hurts low skilled workers. I just provided two studies that show just that it does. Hence, the author of this article is either uninformed or a liar, take your pick.
Posted by collectivism_sucks on January 31, 2014 at 10:54 PM · Report this
SchmuckyTheCat 36
@31. You called taxes theft. You lost any reason for anyone here to engage you. Go away.
Posted by SchmuckyTheCat on January 31, 2014 at 11:15 PM · Report this
@collectivism_sucks, remember a few days/threads ago I said, "you're funny please do continue".

You can stop now.
Posted by Machiavelli was framed on January 31, 2014 at 11:51 PM · Report this

You'll always be able to find some economists who believe increasing the minimum wage hurts employment. But when you look at the totality of minimum wage research - and in particular the more recent and sophisticated studies since 2000 or so - it points to little to no measurable effect on employment due to a modest minimum wage increase. (…)

BTW, "big labor" probably isn't your best stalking horse anymore, given that the share of the US workforce in a union is at a 97-year low (11.3%):…
Posted by cloudveil1 on February 1, 2014 at 1:19 AM · Report this
collectivism_sucks 40
Actually, the link I provided showed how they crunched the numbers using the department of labor's own statistics. And all studies that show minimum wage having little effect apply only to MODEST INCREASES. No study has ever seen what happens when you have a 60% increase in labor.

Again, anyone who thinks the average little pho joint, owned by barely middle class immigrants, can possibly survive a 60% increase in labor has got to be on crack.

As for big labor, just because they represent 11% of the population doesn't mean anything:UNIONS ARE GETTING PAID AND HAVE MASSIVE LOBBIES! That, and why don't "progressives" ever talk about union bosse's pay the way they talk about CEO pay?

For example, at that dumb rally Sawant had, one of her speakers included SEIU president Mark Kay Henry. What is her salary from the union? Nearly 300,000 a year!…

Say what you will about CEOs, but at least their salary comes from profits, same as workers, and not directly from essentially extorting workers like unions do. Union bosses make money on the backs of workers. Those poor people, some of whom make barely 40,000 a year, have to give money to a high paid boss, and no "progressives" ever say anything?

More and more I'm happy I'm no longer a Marxist: now I can feel free to question everything.
Posted by collectivism_sucks on February 1, 2014 at 1:11 PM · Report this
venomlash 41
That is not a study in a peer-reviewed journal; that is an opinion column in a newspaper, and a pretty shoddy newspaper at that. One of the guys who wrote it is loosely affiliated with George Mason University through the Mercatus Center, which has a strong and well-documented anti-regulatory slant and is funded substantially by the Koch Brothers. Hell, Mercatus Center scholars claimed that the ACA would worsen the deficit, which the (wholly non-partisan) Congressional Budget Office said was untrue. If you're looking for unbiased evidence, what you linked to wasn't it, dumbass.
Furthermore, raising the minimum wage by 60% will not raise labor costs by 60% EXCEPT for businesses that pay all of their employees minimum wages.
Finally, when you claim that union bosses steal from workers, it may interest you to know that Richard Trumka, President of the AFL-CIO, makes about $300k a year in salary and benefits. Compare that to CEO pay for any large company, I dare you.

You, sir, are a blithering idiot. Go elsewhere.
Posted by venomlash on February 1, 2014 at 4:35 PM · Report this
collectivism_sucks 42
The author of this article didn't say he wanted peer reviewed journals, just studies. I provided two. And that newspaper cited a study, it was NOT an opinion piece.

And yes, 15 is about 60% higher than 7.25. In restaurants, where most of the employees make minimum wage plus tips (which ends up being about 20-30/hour) that will mean all front of house people get 60%, which means the restaurant goes out of business.

And I'm not comparing Union Mob boss pay to that of the highest paid CEOs, I'm comparing it to the average worker. If they're so "pro-worker" than why do they invest so much of the worker's money on their own pay? Why not just take what their average worker makes?

Posted by collectivism_sucks on February 2, 2014 at 1:06 AM · Report this
mkyorai 44
@43 Holy shit. That was amazing.
Posted by mkyorai on February 2, 2014 at 1:33 PM · Report this
venomlash 45
@42: The article you cited IS an opinion piece. It says so right at the top of the page, as well in the URL!
It does not cite a single published study; it references an as-yet unpublished study by, surprise surprise, the Mercatus Center which as I mentioned is heavily funded by the Kochs. There's no author or DOI listed, nor are the raw data available. The claim made cannot, in fact, be verified. You don't understand what a citation is.

You can't do math either. 15 is actually about 107% higher than 7.25, and I'm not sure what you were trying to prove.
Regardless, your ignorance extends to issues of the minimum wage. Workers who regularly receive tips are only guaranteed $2.13/hr from their employer, so long as their wage plus tips meets the $7.25/hr rate. (If not, their employer must cover the difference.)

With regard to union officer pay, it does take a lot of skill and expertise to run a nation-wide union with 11 million members. I think $200-300k isn't unreasonable compensation for a top-notch executive in such a position. It's a complicated job and you're not going to get good candidates unless the pay scales accordingly. Note that top union officials might make 10x the average union worker, but top CEOs commonly make 273x the average worker. Not sure where you're going with all this.
Posted by venomlash on February 2, 2014 at 2:00 PM · Report this

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