Seattle Minimum Wage Under Fire

Great Debates
21

Using Seattle as an example, If sub 13 dollars an hour was done with minimal negative effects and net positive effects, then going slowly and checking results minimizes harm, once it inches higher and negative results are seen you could dial it back. A maneuver like one of those chemistry lab titrations, drip drip drip until the tipping point is reached.

That allows you to capture the level of extra income that was not offered due to employers wanting to minimize the discretionary level of labor costs they have vs hitting a wall and not being able to handle the increased costs without issues.
still no panacea, with an economic downturn, being right at the discretionary edge of ability to pay would give less wiggle room before outright job losses were triggered, it also moves people closer to the chopping block of where automation would become cheaper.
In my ideal world, minimum wage would be abolished entirely and replaced with a UBI, that way the market would set the value of work wherever it was, but the poor with fewer skills would not be SO desperate for just any shekels tossed their way on the ground.

22

The flaw I immediately see people making in response to the study is extrapolating it into situations that obviously don’t make any sense.

For example, this story has been used a thousand times already to criticize Ontario’s plan to increase the minimum wage to $15.

Now, I am not sold on the brilliance of Ontario’s plan, but there are some really huge, huge differences there, the most obvious one being that the Province of Ontario is just a little big bigger than the City of Seattle. If you’re a business in Seattle, your competitor for both wages and labor may be literally ten minutes away in Kirkland or Shoreline or wherever in King County south of the city - a border that is, in any sense that matters APART from the minimum wage, meaningless. Ontario is a place the size of Egypt with only three borders, two of which are very far from most Ontarians and their businesses; one has very few people living near it, and one crosses into a province that has a completely different official language, which is kind of a big deal. The third border, the one the most people live within a reasonable drive of, is an international border. Moving a job, or your business, from Seattle to Redmond is much easier than moving it from Toronto to Buffalo.

It is strikingly, obviously problematic to raise the minimum wage just in Seattle. In fact, “Seattle” isn’t even, in any sense that matters, Seattle. Like most big cities, the current boundaries of the municipality that bears that name long ago ceased to describe the urban agglomeration that the city really is; if you started at the Space Needle and drive north, you would be driving in unbroken city for quite some time after you left Seattle (which happens at 145th Street) and if you don’t see a sign you’d not even realize you’d done it. The stupidity of saying “This part of Seattle described by an imaginary line has a $15 an hour minimum wage and the other part doesn’t” is obvious, is it not?*

What would have been much more interesting is if the entire State of Washington had adopted a $15 minimum wage. Washington’s a big place. You need a passport to get out of it to the north, so your comparison points would have to be what happened in places that abut other states - Spokane or Vancouver, WA (which is, confusingly, nowhere near Vancouver, BC) which are quite near Idaho and Oregon, respectively.

    • And Seattle isn’t even an egregious case. The borders of Boston appear to have been drawn by a person who was drunk, and Detroit actually has two other, different cities inside its boundaries, like a donut with two holes. The boundaries of Columbus. Ohio were clearly drawn purely to hurt people.
23

Prices are set by the market. Companies can’t just increase prices, or they’d already have done it. You think businesses are just leaving money on the table out of charity or something? No, they’ve already set prices as high as they can go. Raise prices any higher, and they’ll lose money.

No, the only options are to cut costs (by firing workers or cutting hours, and making the remaining employees do more with less time, or else buying cheaper supplies like meat/cheese/fries/etc) or take less profit.

Yes, some businesses are already barely breaking even and taking less profit for them means “go out of business”. But there are also large businesses that have the means to simply move elsewhere.

I toured a transformer manufacturing plant in Austria once. I asked one of the executives how they could afford to keep their large, high-tech factory in-country when American companies were forced to relocate to China or elsewhere to keep costs down. He said, “Simple. We just accept 5% profit, whereas your American companies consider it a dire emergency if profits drop below 10%”.

Which makes sense. Maybe we as a business culture should consider accepting profits that low and simply take pride in employing highly skilled Americans and paying them well, while creating great high-tech products.

But the flip side of that conversation is the realization that American companies will jump ship if profits get low. So by making the business environment such that they are forced to choose between making profits and hiring Americans, they’re going to choose profits every time.

24

Take a look at the borders of Rochester NY sometime – the REAL borders, not the ones that often get thrown onto simplified maps. Besides the “stem” that connects it to Lake Ontario, there’s a one-street-wide thread connecting it to Durand-Eastman Park. There are also a couple of pseudopods thrown off East and West that follow the old route of the Erie Canal, and there are a couple of small chunks to the Southwest hanging on like a couple of ticks.

Boston can’t begin to compare. Its worst sin is the way it threatens to engulf Brookline like a leukocyte.

25

Generally cities would be better for higher minimum wages than rural areas and suburbs because labor productivity is higher in cities. So the difference between the market wage and the minimum wage would be less and the disruption would be smaller.

26

This isn’t anything new. Minimum wage laws screw over the low end wage earners. As the wage goes up, jobs vanish. It’s been happening for decades.

27

Wrong. It’s exactly the opposite:

28

You’d think the Republicans would support it then.

29

That only applies to a really modest increase in the minimum wage, not a really huge increase which is the case with Seattle.

30

This is what “corporatists” :rolleyes: in the Democratic party tried to point out to the Bernie Sanders wing – you can’t just force companies to give everyone a 100% wage and expect them to eat the costs. Most businesses, especially on a local level, are small or barely medium size. They don’t have that kind of capital to just absorb the labor costs and the payroll taxes. And you can forget employer-sponsored health benefits. Minimum wage is a somewhat inefficient scheme.

A better scheme would be a combination of focus on minimum livable income paid out through higher taxes on the rich – that and maybe medicare for all.

31

Correct me if I’m wrong, but isn’t the minimum wage more like 8 or 10 dollars in most of the country? And less if you’re a food service worker?

So the takeaway from this study doesn’t at all seem to be “minimum wages are bad for workers.” The takeaway would be"raising the minimum wage is good up to a certain point, and that point is higher than where we currently are, so let’s raise it to there."

32

No, food service workers are paid at least the same minimum wage as other workers, the higher of federal or state minimums, by law.

33

Really?

So if I walked over to the Texas Roadhouse down the street and asked the bartenders and servers who worked there if they were paid ten dollars an hour they’d say yes and all the stories about them depending on tips for their living was bullshit they’d nod their heads vigorously in agreement instead of laughing their asses off at me?

34

Do you have any evidence that a corporate chain like Texas Roadhouse is not following federal law? CITE, please.

35

It’s kind of a gotcha. While tipped employees can be paid less than minimum wage (they have their own schedule to follow) if their total hourly wage + tips is less than the minimum wage the employer is required to make up the difference so effectively they have the same minimum wage guarantee. Some of that just comes from assumed tips.

36

You seem to be responding to a different question than I asked.

I asked if I were to go over to the local Texas Roadhouse and ask what their bartenders and servers made they’d say “ten dollars” an hour and if the stories about them depending on tips was bullshit.

I’ve no idea if they’re violating federal law or not.

Here is what the average wages are according to the people who work for Texas Roadhouse.
https://www.glassdoor.com/Hourly-Pay/Texas-Roadhouse-Hourly-Pay-E18664.htm

server: 3.75 an hour

hostess: 5.58 and hour

server/bartender: 3.27 an hour.

That doesn’t sound like what you claimed that “food service workers are paid at least the same minimum wage as other workers”?

Are you saying these employees are lying?

37

And if they don’t report enough in tips to cover this amount are they deemed inferior servers and fired?

38

That’s the old Card and Krueger paper from the 1990’s endlessly quoted to defend the idea that minimum wage increases don’t cause employment declines. But it’s one paper, and you can see right in the abstract it studied the effect of increased the min wage from $4.25 to 5.05 (in 1992 's anyway ~18%) in one region. It did not study the effect of more than doubling the min wage in a whole country with highly varying local price levels, $7.25 to $15 as some people would nationally in the US. It didn’t even study an increase nearly as large as Seattle’s from $9.47 to $13 so far. The study commissioned by Seattle (before the mayor didn’t like the results) said the first ~16% increase in Seattle’s min wage increased total wages for the targeted workers. It was the second ~18% increase from $11>$13 where the effect turned strongly negative.*

The C&K paper can’t be validly used as a refutation of any case where a higher min wage decreases the income of min wage workers. Again, does anybody claim it wouldn’t backfire if the number was $40? At some point the increase is going to emerge from the mist of noise and market imperfections, classical economics will take hold, and a mandated above market price for labor will reduce demand for it. It’s just a question of where the edge of that gray area is.

But again that’s also ignoring the increase in cost to consumers of the products and services of low wage workers, and such products and services are a bigger part of the budget of other lower wage people than higher wage people. Plus it’s treating the interests of small business owners as unworthy of consideration. Why exactly? IOW even the set up premise that a min wage increase is ‘good’ if it increases the income of min wage workers contains seriously debatable judgment calls. It’s not as if the gain to low wage workers, if there even is one, comes at nobody’s else’s expense, or even just the expense of the ‘rich’.

*and note the Seattle study found an income decrease, IOW employment decrease more than offset the increased pay per employed hour. Even with an income increase you have to judge if more $'s for some people is worth others not having a job. But C&K found no employment decrease. That’s a big difference in findings…but from a big difference in the min wage % increas, and the min wage starting point in C&K would be ~7.19 in 2015 's at CPI v Seattle’s $9.47 starting point. The two areas aren’t equal in cost, but northern NJ is not a low cost area.

39

Why would there be a threshold effect?
The more likely explanation is that the minimum wage is bad at every level but that it is very hard to measure the effects of small increases because the effects are small enough to be swamped by other trends in employment data.

40

Why the relatively high taxes on cigarettes and alcohol ? The often cited reason by politicians is that that the government wants to discourage the use of both. In other words raising the cost lowers the consumption of cigarettes and alcohol by a certain amount.

Now we come to the minimum wage and they increase the cost of an hour of work and then are surprised there is now less hours worked ?