The Bitter Lesson From Seattle's Minimum Wage Hike
The results of a study of Seattle's recent hike in the minimum wage should be a cautionary tale to anyone advocating a nationwide $15 minimum wage. (AP)
By TERRY JONES
August 10, 2016
Raising the minimum wage is one of those wonderful-sounding ideas that, whenever tried, unfortunately never quite works the way it was promised. To its credit, the Washington Post has noticed.
The Post recently highlighted a new study from a group of economists who were commissioned by the city of Seattle to look at that city's minimum wage hike from $9.96 an hour to $11.14 an hour. What they found was enlightening.
To begin with, the economists said, some of the workers weren't helped at all, since their pay would have likely gone up anyway with experience and tenure on the job.
But the city didn't bargain for what happened to other workers it had sought to help: "Although workers were earning more, fewer of them had a job than would have without an increase," the Post said. "Those who did work had fewer hours than they would have without the wage hike."
Indeed, depending how it's calculated, the economists found that the minimum wage hike that sounded so generous when passed resulted in somewhere between a $5.54 a week raise and a $5.22 a week reduction in pay.
In comments that sounded as if they came straight out of an Econ 101 text, the Post concluded that "Increasing the minimum wage increases the costs of hiring workers. As a result, employers must accept reduced margins or customers must pay steeper prices. If employers cannot stay in business while paying their staff more, they will either hire fewer people or give their workers fewer hours. As a result, even if wages per hour increase workers' total earning could decline."
Dead on. That's exactly what happened. And as University of Washington economist Jacob Vigdor, one of the authors of the Seattle study, noted, some businesses simply avoid paying the minimum-wage tax altogether by automating and letting low-end, unskilled workers go — as is now happening in some fast-food chains and at supermarkets.
Yet, such foolishness seems to have infected the Democratic Party, with its now near-ubiquitous "Fight For $15" campaign. As a piece in IBD highlighted right after the Democratic Party Convention's call for a massive hike in the minimum wage, forcing sharply higher wages on troubled local economies where the median wage is low can have a devastating effect.
"The most absurd plank to appear in either party's platform this year is the Democrats' call to 'raise the federal minimum wage to $15 an hour over time and index it,' " wrote Oren Cass, a senior fellow at the Manhattan Institute and author of "Is A $15 Federal Minimum Wage Appropriate?" "It is policy written for the nation's very wealthiest enclaves, but incoherent for economically distressed regions."
The tragic irony of this is that those who are worst hurt by a higher minimum wage are those with little education or training, mostly minorities, immigrants and the young. They get priced right out of the labor market by the well-meaning nanny-staters who want to impose a one-size-fits-all minimum wage on the entire country — regardless of the damage it does.
It's really a matter of basic logic. Any time someone raises the price of something — anything — those who consume it use less, all things being equal. That also happens when government requires businesses to pay more for labor than the market demands. In doing so, government helps to create unemployment, idleness and long-term dependence on welfare, especially for the most vulnerable people in the workforce.
The folks at the Legal Insurrection blog site really nailed the rancid politics of it: "Yes, Obama and Democrats are aware of this, and no, they do not develop policies that address the reality of minimum wage hikes and their measurable failure; instead, they focus on 'feel good, sound good' policies that appease the masses, harm businesses, and displace workers."
By the way, Jared Bernstein, formerly Vice President Joe Biden’s chief economist, noted Wednesday at the Washington Post that the Seattle study seems to suggest no harm from hiking the Seattle minimum wage from $9.50 to just over $11 an hour.
Well, it’s true that Seattle’s economy has done pretty well in recent years, due largely to the spillover effects of a regional tech boom. And that means some jobs have been created, despite a higher minimum wage.
But the study’s authors themselves say: “We strongly caution that these results show only the short-run impact of Seattle’s increase to a wage of $11/hour, and that they do not reflect the full range of experiences for tens of thousands of individual workers in the City economy.”
Moreover, other studies on a national level suggest that minimum wage hikes can be major job killers. A University of California at San Diego study showed that when the federal minimum wage was lifted to $7.25 from $5.15 in 2013, it cut employment of those earning less than $7.50 an hour by 8%. That’s 1.7 million fewer jobs nationally, and a decline in average monthly income of $100.
So what will happen when Seattle raises its minimum to $15 an hour in 2017? It could be ugly.
That this destructive policy is a plank in a major political party's platform is nothing short of a national disgrace.
http://www.investors.com/politics/commentary/...wage-hike/
The results of a study of Seattle's recent hike in the minimum wage should be a cautionary tale to anyone advocating a nationwide $15 minimum wage. (AP)
By TERRY JONES
August 10, 2016
Raising the minimum wage is one of those wonderful-sounding ideas that, whenever tried, unfortunately never quite works the way it was promised. To its credit, the Washington Post has noticed.
The Post recently highlighted a new study from a group of economists who were commissioned by the city of Seattle to look at that city's minimum wage hike from $9.96 an hour to $11.14 an hour. What they found was enlightening.
To begin with, the economists said, some of the workers weren't helped at all, since their pay would have likely gone up anyway with experience and tenure on the job.
But the city didn't bargain for what happened to other workers it had sought to help: "Although workers were earning more, fewer of them had a job than would have without an increase," the Post said. "Those who did work had fewer hours than they would have without the wage hike."
Indeed, depending how it's calculated, the economists found that the minimum wage hike that sounded so generous when passed resulted in somewhere between a $5.54 a week raise and a $5.22 a week reduction in pay.
In comments that sounded as if they came straight out of an Econ 101 text, the Post concluded that "Increasing the minimum wage increases the costs of hiring workers. As a result, employers must accept reduced margins or customers must pay steeper prices. If employers cannot stay in business while paying their staff more, they will either hire fewer people or give their workers fewer hours. As a result, even if wages per hour increase workers' total earning could decline."
Dead on. That's exactly what happened. And as University of Washington economist Jacob Vigdor, one of the authors of the Seattle study, noted, some businesses simply avoid paying the minimum-wage tax altogether by automating and letting low-end, unskilled workers go — as is now happening in some fast-food chains and at supermarkets.
Yet, such foolishness seems to have infected the Democratic Party, with its now near-ubiquitous "Fight For $15" campaign. As a piece in IBD highlighted right after the Democratic Party Convention's call for a massive hike in the minimum wage, forcing sharply higher wages on troubled local economies where the median wage is low can have a devastating effect.
"The most absurd plank to appear in either party's platform this year is the Democrats' call to 'raise the federal minimum wage to $15 an hour over time and index it,' " wrote Oren Cass, a senior fellow at the Manhattan Institute and author of "Is A $15 Federal Minimum Wage Appropriate?" "It is policy written for the nation's very wealthiest enclaves, but incoherent for economically distressed regions."
The tragic irony of this is that those who are worst hurt by a higher minimum wage are those with little education or training, mostly minorities, immigrants and the young. They get priced right out of the labor market by the well-meaning nanny-staters who want to impose a one-size-fits-all minimum wage on the entire country — regardless of the damage it does.
It's really a matter of basic logic. Any time someone raises the price of something — anything — those who consume it use less, all things being equal. That also happens when government requires businesses to pay more for labor than the market demands. In doing so, government helps to create unemployment, idleness and long-term dependence on welfare, especially for the most vulnerable people in the workforce.
The folks at the Legal Insurrection blog site really nailed the rancid politics of it: "Yes, Obama and Democrats are aware of this, and no, they do not develop policies that address the reality of minimum wage hikes and their measurable failure; instead, they focus on 'feel good, sound good' policies that appease the masses, harm businesses, and displace workers."
By the way, Jared Bernstein, formerly Vice President Joe Biden’s chief economist, noted Wednesday at the Washington Post that the Seattle study seems to suggest no harm from hiking the Seattle minimum wage from $9.50 to just over $11 an hour.
Well, it’s true that Seattle’s economy has done pretty well in recent years, due largely to the spillover effects of a regional tech boom. And that means some jobs have been created, despite a higher minimum wage.
But the study’s authors themselves say: “We strongly caution that these results show only the short-run impact of Seattle’s increase to a wage of $11/hour, and that they do not reflect the full range of experiences for tens of thousands of individual workers in the City economy.”
Moreover, other studies on a national level suggest that minimum wage hikes can be major job killers. A University of California at San Diego study showed that when the federal minimum wage was lifted to $7.25 from $5.15 in 2013, it cut employment of those earning less than $7.50 an hour by 8%. That’s 1.7 million fewer jobs nationally, and a decline in average monthly income of $100.
So what will happen when Seattle raises its minimum to $15 an hour in 2017? It could be ugly.
That this destructive policy is a plank in a major political party's platform is nothing short of a national disgrace.
http://www.investors.com/politics/commentary/...wage-hike/
