Fallout from higher minimum wage

Seattle was the first major city to experiment with a vastly-higher minimum wage, earlier this year. The results are starting to become apparent, and are rather interesting. I daresay, however, that they will be surprising only to liberals.


Economists and conservatives keep telling liberals that labor is not immune to economic laws–and the liberals keep insisting that they know better.

On the other hand, it’s Fox News

Do we know if these aid programs have sharp or graded cutoffs?

Here’s an update, with some hard numbers.


It is both interesting and instructive to note that the minimum wage increase is not fully phased in–it’s “only” $11 currently, as opposed to the final target of $15.

Washington already had the highest minimum wage in the country, so I don’t think Seattle is a very good example. They also did a poor job of smoothing the wage increase curve; it’s jumping $2 at a time. I am strongly in favor of a minimum wage increase, but not necessarily to $15/hour and not like this.

This article cites a plot created by a public official in Pennsylvania and illustrates the “welfare cliff” problem pretty clearly. I don’t know whether the benefits illustrated in this plot were federal or Pennsylvania-specific. If the former, then the plot is applicable to the situation in Seattle.

OTOH, you only need gauge workers’ behavior in Seattle to guess at the incentives: if they’re asking for less hours, then it’s likely that they are financially better off with less hours, which I can only imagine to be due to welfare cliffs like the ones in that plot.

Thanks. I suspect we’ll see similar, if differently shaped, plots for most states. Now I have a term to search for.

I would like to suggest, as a rebuttal to the OP, that the reported downstream impact does not indict a higher minimum wage in and of itself. Instead it points out that the execution of increasing the minimum requires addressing related issues. This is useful information and instructive for other states moving in the same direction.

Baby/bathwater and all that.

I would also suggest that this impact serves to illustrate more support for raising the minimum wage - in that we have fallen so far behind by not keeping up with raising the minimum wage over the years that now those at the minimum wage qualify for support. This was not the intent when the minimum wage was first introduced.

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[I would also suggest that this impact serves to illustrate more support for raising the minimum wage - in that we have fallen so far behind by not keeping up with raising the minimum wage /SIZE]

[SIZE=“3”]Icarus, I think you’re right, we’ve fallen behind, but we’ve fallen behind at keeping the family together and teaching our children to respect authority ,respect females, and be honest. If an adult is still trying to get along on minimum wage something else is wrong. How many of the people that are raisin a stink over raisin the minimum wage are asking how can I get some education? “Oh, I’m sorry, does that take some effort on their part?” Surprise, surprise.

Phu Cat

Well this should not come as a shock. I’ve worked with people on AID for over 20 years and this kind of things goes back to when the minimum wage was far, far less. I’ve had people earning minimum wage cut back hours because of housing allocation issues.

My problem with raising the minimum wage is different, as I find it hurts people making between the old minimum and the new. For instance, say minimum is $8/hr where you live. If you raise it to $12/hr the people currently making $12/hr now aren’t likely to get a raise.

Suddenly these jobs that are valued at $4/hr more than the $8/hr minimum are now equal. This causes more problems than anything else I’ve seen.

You raise some salient points, but it isn’t only about education or training. It’s about showing up for work on time, every day, and working while you are there. I live in a low-cost area, and even here there are very few minimum wage jobs. People at stores or fast food restaurants might start at MW, but if they are even remotely diligent about showing up and actually working, they get pay bumps very quickly.

My son is working a summer factory job, in a pretty crummy factory, and he makes $1.25 more than MW, as does everyone else who works there. Now, the company fires people who repeatedly show up late or don’t show up on time, which is eminently fair. Most other places who have menial labor pay more than MW once someone has been there for a few months and is productive.

Another anecdote: a friend’s son worked at a distribution center while waiting for a permanent job in his chosen field. He signed on as a laborer. Within a month, he got a promotion and a raise. Employees there got bonuses for showing up on time and not screwing up orders. He ended up making $200 a week in bonuses just for showing up on time every day and not screwing up his orders, but there were lots of guys who simply couldn’t be bothered with meeting those minimal hurdles to get the bonuses.

From my experience, if an adult makes minimum wage for very long, they are doing something wrong. And screw-ups should not count on minimum wage legislation to create “value” in the labor market for them.

I’ve noticed that this is an idea often trotted out by conservatives. In rebuttal:

260,000 graduates in minimum wage jobs

Just because someone is working a minimum-wage job doesn’t mean that he’s lazy, or doesn’t want to ‘take some effort on [his] part’. I knew people with degrees and a ton of experience whose jobs were eliminated because the company decided it was better for the shareholders to have the Indians do it. And this was before the Bush Recession.

In my opinion it’s not a lazy person who swallows his pride and takes the only job available despite his degree. That guy handing you your burger just might have a PhD.


How do you recommend we address the issues raised by the OP and subsequent posts?

There was mention of several related issues.
[li]Prices are going up in restaurants.[/li][li]There was a net loss of a thousand restaurant jobs.[/li][li]People are not getting off welfare - indeed, they are requesting that they work fewer hours so they can stay on welfare.[/li][/ul]Do we raise the limit of what people can earn before losing welfare benefits? That defeats one of the purposes of a MW raise - it was supposed to make people self-supporting and reduce welfare rolls.

We could compel people to work a certain number of hours a week and leave the limits alone - that would achieve the goal. Is that a recommendation you would support?

What do you suggest be done about the loss of restaurant jobs, or the loss in income to wait staff mentioned in the article? Should Seattle simply impose a tax and give the money to waitresses? How will that affect prices?


I would start by adjusting aid programs so that they don’t have cliffs where marginal gross income results in negative net income.

There may be some reasons why this would be very difficult to administer. If don’t know.

I don’t think it would be difficult to administer. It would, however, kind of defeat one of the purposes of an increase in MW.


A newer article from three days ago reports that Seattle restaurants are shedding jobs:


Wendy’s explains that job losses follow minimum wage hikes:


Some of those at the top of the chain have severe doubts about not only the moral danger of any minimum wage, but are concerned about the existence of ‘safety nets’ since these prevent people from giving their all to their employer and making themselves wealthy.
Andy Puzder, CEO of CKE Restaurants, Inc., a lawyer, claims that they choose to remain poor “for fear of losing public assistance.”

He claims that the social safety net needs to go, because “these programs have the unintended consequence of discouraging work rather than encouraging independence, self-reliance and pride.”
Fast Food CEO: It’s Low-Wage Workers’ Faults They Live In Poverty (VIDEO)

The underlings get around $9 an hour: he deserves every penny of his $4.4 million a year, since without him these people would be dead. Or doing something else. Or something.
Other CEOs in this field are paid commensurately with their talents: the problem is that when their talents are so very high, and people who do the work’s talents are so very low, it’s difficult to share it all out.
• Chipotle co-CEO Montgomery Moran: $13,489 an hour
• Chipotle co-CEO Steven Ells: $13,471 an hour
• Starbucks CEO Howard Schultz: $10,285 an hour
• Dunkin’ Brands CEO Nigel Travis: $4,889 an hour
• Yum! Brands CEO David Novak: $4,795 an hour
• Wendy’s CEO Emil Brolick: $3,645 an hour
• Domino’s CEO Patrick Doyle: $3,571 an hour
• Dine Equity CEO Julia Stewart: $2,766 an hour
• Panera Bread CEO Ronald Shaich: $1,292 an hour

[‘Hourly’ Pay for Fast-Food CEOs Is Astonishing](‘Hourly’ Pay for Fast-Food CEOs Is Astonishing)

Maybe. My preference leans toward aid programs over MW, but that’s without having performed an analysis that I feel is adequate.