Wonderful OpEd piece from the Wall Street Journal today:
Seattle Workers Pay for the Minimum Wage
A new study says the $13 wage is a killer for lower-wage workers.
Some laws of economics are so obvious that they require hundreds of papers to prove, and a classic example is the minimum wage, which increases the cost of labor and in most cases prices some workers out of jobs. Fresh evidence comes from Seattle’s minimum-wage climb to a $15 an hour.
A study from researchers at the University of Washington published in the National Bureau of Economic Research looked at how Seattle’s minimum-wage increase in 2016 to $13 an hour from $11 affected low-wage workers. The results? Hours worked fell 9%—3.5 million hours a quarter—and low-wage employees lost $125 a month on average.
Let that sink in: A campaign predicated on giving workers a raise lowered paychecks. The increase to $13 from $11 also “yielded more substantial disemployment effects” than an earlier jump to $11 from $9.47, the study found.
Note that Seattle’s minimum will continue to rise to $15, with varying deadlines for small and large businesses. Later increases will almost certainly be more damaging, as businesses try to absorb costs by automating more tasks or raising prices for consumers. As for workers, some may even ask for reduced hours: Benefits like Medicaid phase out as income rises, which means a worker’s next dollar of income can be taxed above 100%.
The labor unions underwriting the Fight for $15 campaign have activated the phone trees to impugn the study’s credibility. Proponents of the increase point to a report released last week from the University of California-Berkeley that purported to find no adverse effects from Seattle’s move. Yet the Washington study relied on sophisticated and detailed data about hours and earning, while Berkeley deployed the restaurant industry as a proxy.
One political subplot: Last week wage and employment expert Michael Saltsman wondered why Seattle Mayor Ed Murray’s office was pumping the Berkeley report when the city had commissioned its own studies from the Washington researchers. According to reporting in the Seattle Weekly, the mayor’s office knew the damning report was coming. Berkeley scholars were offered an advance copy to rebut the claims. This looks more like coordinating press releases than honestly addressing the Seattle evidence.
Other attempts to avoid reality include complaints that the study did not adequately control for Seattle’s booming labor market, which liberals say is displacing low-wage jobs for better opportunities. The study did include a control, and this is the tension for the left: Wages are growing so fast in Seattle that the government needs to intervene to increase them?
Still another progressive impulse is to say that perhaps $15 an hour is too disruptive to the labor market, but with more data the government can pinpoint the precise wage that benefits workers. That would certainly raise the demand for labor consultants and Berkeley professors, if not for waiters. The real and eternal lesson is that political wage-setting hurts the least skilled and lowest-paid workers, as the evidence in Seattle shows.