The “Fight for $15” suffered a hit with the release of a study that hints at the negative effect that Seattle’s dramatic minimum wage increase has led to reduced wages for low-income workers.
Besides Seattle, New York, San Francisco, and Los Angeles have all passed laws phasing in a $15 minimum wage, and Bernie Sanders made that benchmark a cornerstone of his campaign. Dozens of cities and states are raising their minimum wage this year, though not all are phasing in wages as high as $15 an hour.
Such dramatic wage increases traditionally have been eyed with suspicion by economists, because basic supply and demand suggests that sharply raising wages is going to lead to fewer jobs and other cutbacks. (The federal minimum wage is $7.25.) Based on the evidence so far, it turns out the laws of supply and demand haven’t changed. Seattle raised the minimum wage for large employers from $9.47 to $11 an hour in 2015 and then to $13 an hour in 2016 as part of a gradual phase-in to $15. A recent study from the National Bureau of Economic Research looked at how this has affected low-wage workers thus far:
A bevy of liberal economists have done research purporting to support minimum wage increases in recent years, and this study was released as a working paper, still subject to peer review. But it is going to be hard to dismiss, according to the Washington Post:
This also isn’t the first study to reach this conclusion. The Seattle Minimum Wage Study Team at the University of Washington looked at the results when the wage jumped to just $11 an hour and they found the following: “[T]he early evidence from Seattle is that a higher minimum wage at the city level doesn’t raise total earnings by much, because low-skilled workers end up with fewer hours on the job,” while also citing that those who were fortunate enough to keep working “were modestly better off as a result.”
Anecdotally, there are plenty of horror stories about the effect of minimum wage increases on small businesses. Some 60 restaurants in San Francisco closed bewteen September and January, others are moving to counter–service models, and owners aren’t shy about appointing blame on wage increases. Further, the Wall Street Journal highlights a Harvard Business School study that “used Bay Area data from the review website Yelp to estimate that a $1 minimum-wage hike leads to a 14% increase in ‘the likelihood of exit for a 3.5-star restaurant.’”
The increase doesn’t even have to be that drastic to have an impact. Watch this video of Obama administration Labor Secretary Tom Perez flailing after he’s asked about the results of an American Enterprise institute study using data from the Bureau of Labor Statistics to show how Washington, D.C. Lost 1,400 restaurant jobs in six months after the city’s decision to raise the minimum wage to $10.50—the biggest loss of jobs from the industry in D.C. for any comparable period since 2001.
How much empirical data do we need before sharp minimum wage increases are recognized as bad policy? Because Democrats have promised a national $15 minimum wage if they take power again.
