June 26th, 2017

The law of diminishing returns hits the Seattle minimum wage law

Just about everyone seems to have agreed that Seattle’s very liberal minimum wage law would be a good test of when enough is enough in terms of hiking the minimum wage. And the first studies indicate that $13 seems to be counterproductive—just as the right had predicted:

In January 2016, Seattle’s minimum wage jumped from $11 an hour to $13 for large employers, the second big increase in less than a year. New research released Monday by a team of economists at the University of Washington suggests the wage hike may have come at a significant cost: The increase led to steep declines in employment for low-wage workers, and a drop in hours for those who kept their jobs. Crucially, the negative impact of lost jobs and hours more than offset the benefits of higher wages — on average, low-wage workers earned $125 per month less because of the higher wage, a small but significant decline…

The paper’s findings are preliminary and have not yet been subjected to peer review. And the authors stressed that even if their results hold up, their research leaves important questions unanswered, particularly about how the minimum wage has affected individual workers and businesses. The paper does not, for example, address whether displaced workers might have found jobs in other cities or with companies such as Uber that are not included in their data.

Still, despite such caveats, the new research is likely to have big political implications at a time when the minimum wage has returned to the center of the economic policy debate.

I wonder whether it actually will affect liberal decision-making, however. For example, in Seattle the law was due to increase the wages to $15 over time; will that be changed in response to this research? I’m not at all sure, because there are enough caveats, and the idea of raising minimum wages is so appealing to so many liberals, that the results of the research might be ignored.

It wouldn’t be the first time.

This National Review article is worth reading as well. It provides more details, such as this:

Economists at the University of Washington were given access to administrative data that include the earnings and hours of individual workers in Washington State, allowing them to precisely identify workers by the wages they made. (Previous studies usually relied on more roundabout methods, like looking at stereotypical low-wage workers such as teens or those in the retail or restaurant industries.) They were able to see what happened to low-wage workers — defined as those making up to $19 an hour — as Seattle’s minimum wage grew from $9.47 to $11 in 2015 and then to $13 the next year.

So the methods used by the researchers were different, because they had access to a different—and more direct—data set.

15 Responses to “The law of diminishing returns hits the Seattle minimum wage law”

  1. Griffin Says:

    ‘I wonder whether it actually will affect liberal decision-making’

    Not in Seattle that’s for sure. These people are so invested in socialism that they will never change and they are able to paper over the problems because of Amazon and Starbucks and a few others which just like the SF Bay Area cover up the very real downsides to socialist policies.

    They are really not that different in thinking from The Evergreen State College students that have been in the news lately.

  2. J.J. Says:

    Neo: “I wonder whether it actually will affect liberal decision-making, however. For example, in Seattle the law was due to increase the wages to $15 over time; will that be changed in response to this research? I’m not at all sure, because there are enough caveats, and the idea of raising minimum wages is so appealing to so many liberals, that the results of the research might be ignored.”

    It will be ignored. Seattle has an openly communist member on the city council and most of the other council members are closet commies.
    They have a lot of wealth creators in King County. A lot of OPM to play with. Eventually they will run out of OPM, but not for a while. They are trying very hard to outdo San Francisco. Like San Francisco it has become so expensive that only the rich can afford to live there. Sad! But it is what the Seattleites have voted for.

  3. parker Says:

    Nothing affects liberal decision making, unless it causes deep, gut level harm to progressives, and when that happens, if it happens, they will keep quiet about it and move onto the newest trendy cause of the day. They do not care about the destruction their cause of the moment harms to those they wish to ‘save’ from the evil conservatives. They only care about strutting and preening their imaginary virtue.

    Hence their desire for illegal aliens to provide cheap labor as nannies and gardeners, and so forth.

  4. Sean Says:

    ‘I wonder whether it actually will affect liberal decision-making’

    The $15 minimum wage was a scam thought up by their union cronies to force businesses to unionize. AFAIK most cities that have implemented the $15 rate have exemptions for unionized businesses. It’s also an end-run around right to work legislation.

    So no, they’ll just blame the usual oppressor groups for their policy’s failure, like they do with all their policy failures. Sort of like how high black youth unemployment wasn’t caused by the establishment of the minimum wage (again, dreamt up by unions), but by white racism.

    The Pelosis of the world knew all along that this would happen, they’re not stupid, the economics on this have been established for decades; they expected this outcome. And they’re glad it’s turning it out this way, it means all those Seattle baristas who are out of work will now have more time to devote to their local Antifa circle jerks.

  5. Sean Says:

    The $15 minimum wage is a long play. The idea isn’t to have baristas making $15/hr, it’s to have Starbucks unionize. It’s to force everyone to unionize.

  6. om Says:

    Idiots abound around the Sound, J. J. being a notable exception.

  7. Harry the Extremist Says:

    ‘I wonder whether it actually will affect liberal decision-making’

    Oh, no. We’ve passed that Rubicon decades ago. Its full speed ahead to the Venezuelan utopia.

  8. T Says:

    One would expect that the solution to progressives is clear. If $15/hr doesn’t put enough money in the pockets of workers, then clearly $15/hr isn’t high enough. Raise the minimum wage to $20/hr; that’ll do it! (/sarc off)

  9. Brian E Says:

    The minimum wage in the state is $11.00/hr. What is does is compress the wage scale between entry level low skilled jobs and the next tier of workers.

  10. AesopFan Says:

    The Left once again destroys the people it claims to be liberating (cf. Neo’s Russian post).

  11. CapnRusty Says:

    The minimum wage keeps raising the bottom rung on the ladder of success. Of course, it only harms those who want to climb.

  12. n.n Says:

    I wonder if they can inflate doctors and nurses to match.

    Money does grow on trees as a fungible media for exchange. Resources, however, are finitely available and accessible.

    So, who gets the beachfront property in Hawaii?

  13. Mel Williams Says:

    My own 88 year old mother, who grew up poor in the 30s and 40s and knows the value of hard work, agrees with these minimum wage hikes. She feels for the working man, sees that so many have more than enough, and thinks it’s a nice thing to give them a livable wage if they’re willing to work. And you’re pretty mean spirited if you don’t agree.

    Nothing deeper than that. And I think that’s about the level of thinking of many well-intentioned folks out there.

    I agree with Sean, though, that for those who do know some economics, the unintended consequences of coerced wage hikes has been long established, and that other motives are at play.

  14. I R A Darth Aggie Says:

    thinks it’s a nice thing to give them a livable wage if they’re willing to work. And you’re pretty mean spirited if you don’t agree.

    Wouldn’t be the first time I’ve been accused of being mean spirited. I would ask your dear mom what the road to hell is paved with? alternatively, why shouldn’t the minimum wage be $50? $100? per hour.

    n.n. is on to something: there are relatively fixed amount of resources available, such as durable goods, housing and various other services. What happens when you have more dollars chasing a relatively fixed amount of, let’s say housing because everyone needs a place to live? right, melting snowballs.

    The price goes up because someone will be willing to pay for it because they have more money. Except now after paying rent they may have less than they had before after paying rent. And if they have to hold two or three part time jobs because their first job cut their hours, then they’ll have to juggle a couple of different schedules, maybe not have days off. Oh, fun!

    And at some point, those who where/are making more than minimum wage will want to see their advantage restored. Prices also went up for them, resulting in a decrease in their standard of living. That will be tolerable only so long. Then we’ll inject even more money into the system, further raising prices.

    And then The Fight for $25! will start. Ultimately, however, one has to acknowledge that while there is a de jure minimum wage of $X, the de facto minimum wage is $0.

  15. Baklava Says:

    I do feel sorry for the elderly on fixed income.

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