Seattle Minimum Wage Under Fire

Great Debates
1

Interesting results so far. Turns out, the data suggests that one the minimum wage hit around 13 dollars an hour (on a path to eventually hit 15) people making under 19 dollars an hour started to lose money by reductions in hours worked and some lost jobs.

This data contradicts previous looks specifically into the restaurant scene (where business is booming in Seattle with the well to do crowd eating out more and more) via a Berkeley study.
The above study is still not perfect, but assuming the data holds up, I think it’s more obvious than ever that higher minimum wages alone are no panacea, and taken too far will actually hurt poor people more. It’s also useful that this result was from Seattle since it’s a developed urban center, not some rural backwater that would not have the same kind of local economy to support higher wages.

More testing for a UBI needs to commence, in different states. I see that as a potential solution more than ever now. The increased demand from lower income tiers might be enough of a boost to the economy on its own to generate higher low end wages by itself, but we need to test it. I’d like to see the effects across an entire city or state.

2

It is interesting, and it speaks to the need for continued research as more states and communities increase their minimum wage. It’s worth pointing out, though, that your link notes many major caveats to the findings of that UW study, which is currently still in working-paper status pending peer review:

Whooo golly. It’s complicated.

3

That article is paywalled for me. Here are two which aren’t: this one saying it’s been good; and this one saying it’s bad.

4

It’s entirely possible that $15 is too high for Seattle and would do more harm than good. I favor a minimum wage, but I believe that increases should be quite slow and gradual with lots of pauses to check and make sure it’s not doing more harm than good.

5

Simple economics, when workers get more, businesses have to pay more, they can choose to either increase prices, fire workers or lower hours.

The Seattle mayor (and most mayors) clearly should have looked at this more closely.

6

Why people can’t just link to the actual fucking study instead of a news article, I do not know. Here is the working paper from the OP:

7

I used to wholeheartedly support a $15 an hour minimum wage. Now I’m starting to wonder whether we should set it at $12 and have the government subsidize workers through a higher Earned Income Tax Credit. That would achieve the same goal of giving workers on the bottom a living wage, without the possible negative effects on employment.

8

It really is Econ 101 that a minimum wage will do more harm than good, even to the people it’s directly targeted at helping, if you raise it too high. Nobody with a brain thinks you can create equality by raising it to $40/hr.

So where does the negative effect of mandating above-market* wages on employment begin to outweigh the benefit of a higher wage for every hour of employment that remains? But also keeping in mind that’s only part of the equation. The negative effect of higher prices for low to middle wage consumers and/or lower returns for middle income small business owners doesn’t disappear because you don’t pay attention to it. You can weigh those latter costs as lightly as you like, but they also exist.

So if at $13 in Seattle the net effect on low wage worker income turns negative (again not counting that the local price increases in their fast food meals and convenience store purchases, nor the downward pressure on the income of small business owners): not exactly a shock. Further studies might duel with it, but at some level relative to local median wages this is obviously going to happen, whereas $15 is pretty much out of the air, or what the workers’ affordable consumption ‘should’ be, same thing. What somebody ‘should’ make doesn’t have much to do with the actual market value of their labor.

I read an article recently on RCP where a case was made for a national $15 min wage by a liberal think tank…but after setting up the scenario ‘say we gain control of Congress and phase in a $15 min wage in the 2020’s (or something)’. IOW by the time the wage was significantly less than $15 in today’s dollars, there wouldn’t be many negative side effects. That’s the best you can do from analytical economic POV to defend an arbitrary number like $15, especially to be imposed nationally, with no regard for local price levels much lower than eg. Seattle’s.

The way to subsidize people whose skills aren’t worth a subjectively determined ‘living wage’ is to subsidize them directly, not distort the labor market with a high minimum wage. And it’s an illusion to think the cost is higher if you explicitly subsidize rather than mandate above market wages. Again unless the min wage doesn’t exceed market by a lot for many workers, then the effect gets lost in the noise, or there are even countervailing positive effects*. But once it’s a big raise for a lot of people/hours over the market value of their labor, expect significant negative effects from the distortion, as in the hours going down.

*for example it might create more incentive to train workers and raise their skills, if you have to pay them more anyway. But that’s going to be less true of a lot of jobs which command low wages than ones which already command higher wages. Better trained and experienced knowledge or skilled craft workers might be many as productive as people with equal potential but no training or experience in that job. Realistically, people can learn all they need to know in many types of low wage/low skill jobs very fast and further training or experience doesn’t raise the value of that labor very much.

9

If it is doing harm, shouldn’t the response be to stop it instead of doing it slower?

10

Well, first things first. The “study” has not been peer reviewed or verified by anyone else.

So here’s a block of salt to take with it.

11

What flaws do you see in it?

12

There’s already an article out saying the opposite.

Let’s wait for more data.

13

It drives me nuts too. Thanks for the good link.

14

Bolding added. You forgot “take less profit.” Not an option for every business, but certainly it would be for some.

15

Chain fast food restaurants have got to be the worst employers to examine for local minimum wage effects. The way those restaurants produce food is more or less determined at the national/corporate level. An individual Burger King in an area with a high minimum wage doesn’t have the flexibility of say cutting a labor intensive menu item because it’s now unprofitable. They are also run about as labor efficiently as they can possibly get. So there’s little wiggle room to cut staff. Nor can you just relocate your franchise to a lower waged area because you have to locate where your customers are.

16

BOOM!

OP: come back when you have something solid to talk about.

17

Whoa WHOA whoa! That’s crazy talk! Let’s all just calm down before somebody says something they can’t take back!
:smiley:

18

Do not threadshit. Suggesting that the topic of a thread is not worthy of discussion, or that a topic is pointless is threadshitting.

[/moderating]

19

Kind of hilarious. It’s a matter of great debate amongst professional economists who argue over a multitude of conflicting factors but to you, it’s simple and most mayors don’t know your simple obvious fact. You don’t think that perhaps you’re being hilariously and undeservingy arrogant?

20

If it isn’t peer reviewed why isn’t it in IMHO?