Making Omelets (Updated)

There’s has been quite a bit of controversy over raising the minimum wage to $15 per hour. It’s even spawned a movement: “Fight for 15”. Proponents insist that employment effects are nominal and wage effects largely positive. My position, consistently, has been that we should be cautious that we don’t hurt more people than we help. While in some places the labor market will readily absorb a $15/hour minimum wage, in others it could be disastrous. Five Thirty Eight reports a study of Seattle’s rising minimum wage:

As cities across the country pushed their minimum wages to untested heights in recent years, some economists began to ask: How high is too high?

Seattle, with its highest-in-the-country minimum wage, may have hit that limit.

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.

That’s a sizeable decrease. It may be the case that other ways for helping low wage earners, like eliminating onerous zoning ordinances that prevent the building of inexpensive housing, should be considered.

Update

Kevin Drum suggests that Seattle’s minimum wage should be $12/hour:

There’s a mountain of evidence that modest increases in the minimum wage have little effect on low-wage jobs, but the key word here is modest. We’ve never tested how high the minimum wage can go before it starts to have a serious impact on low-wage jobs, because no one has ever raised the minimum wage more than modestly. This means that the question of how high the minimum wage can go is an empirical one—and there’s no special reason to think it’s $15. It could be higher or lower. And if this study holds up, the answer at the moment is around $12.

That will vary from place to place. In some places “modest” will be more than $13. In others it will be less than $11.

16 comments… add one
  • Andy Link

    The thing is, most proponents of the fight for 15 don’t really believe that employment effects are nominal and wage effects largely positive. If they did, they wouldn’t exempt small employers. Instead I think they believe that large employers are “rich” enough to just eat the extra costs.

  • steve Link

    The Berkley study showed no loss of employment, but it had different methods. The initial raise had little effect. I would suggest not making decisions based upon one study, but I also think that most people who advocated for a raise were also leery of large raises. Small increases have not seemed to have much negative effect, but larger ones were uncertain. Looks like some caution is merited.

    Steve

  • Jan Link

    For every action there is a reaction. Usually said reaction will reflect how positive or negative the action taken was received by those it was directed towards. In the case of minimum wages, the arguments have merit that most minimum wage earners struggle to make ends meet. But, again, when progressives force wages upward, with undertones of moral rightuousness, the pragmatics of business profit margins will decide the viability of such moral indulgences.

    Case in point are the number of businesses flirting with replacing humans with robotic workers – no minimum wage, pension, healthcare provisions to worry about in making such changs. Even leftist idolized​ Elon Musk is considering such a work force when he takes over Whole Foods.

  • Presumably, you mean Jeff Bezos.

  • Janis Gore Link

    Right, Jan. Keep those cliche talking points straight.

    Dave, you mentioned zoning restrictions as a burden on low wage earners. Mother Jones has an article on how they also increase greenhouse gases:

    http://www.motherjones.com/environment/2017/06/climate-change-housing-berkeley/

  • Yes, NIMBY is an extremely potent force. IMO people who worry about climate change frequently haven’t thought out the implications of their policy preference. A really efficient community would be more like a village than like New Canaan, CT. You’d either telecommute or walk to work. Your nanny, your gardener, all the people who worked for you or performed services for you would either live with you or nearby, within easy walking distance.

  • Jan Link

    Janis,. “cliche talking points?” Hmmm, so all the talk about robotic kiosks, check-outs, driverless cars/Trucks, robotics infused in manufacturing, computer software decreasing the need for a human workforce has nothing to do with real options being considered for a future workforce?

  • Janis Gore Link

    “leftist idolized”

  • Janis Gore Link

    Musk is Tesla. Bezos is Amazon and Whole Foods.

  • Jan Link

    Bezos contributes heavily to dems, and owns the notorious WAPO, who openly is a protagonist to the current administration.

    Musk is *idolized” and subsidized by the green ideological movement, which is deemed a signifcant part of the social progressive agenda in what it promotes. Furthermore, Musk withdrew from consulting with WH tech giants primarily because of the WH’s decision to opt out of the Paris Climate Accord, where it is said he lost a lot of subsidized funding he could have benefited from should the US had remained in the Accord.

  • Janis Gore Link

    Being antagonistic to this administration is not necessarily leftist, for one. Plenty of conservatives, social and otherwise object this particular president. Many leftists do not like Amazon or Bezos because of the way he treats the employees he does have.

    Musk is most lionized by libertarians as far as I know. His desire for funding is not necessarily leftist. It’s pure self-interest, which those on the right seem to think is perfectly fine in their own cases.

    There’s no need to cast everything as a battle between left and right. It’s a waste of good brain cells, which you have plenty of.

  • Jan Link

    Good points, Janis.

  • Guarneri Link

    The gardener living with a New Canaan -er. Now that’s a good one. Not even in Silvermine.

  • We must have our priorities.

  • Janis Gore Link

    Zuckerberg built his own wall in Hawaii:

    http://westhawaiitoday.com/news/state-wire/some-kauai-residents-unhappy-about-wall-being-built-facebook-billionaire

    The jerk cut off the view and the breeze to the other nearby inhabitants. Sound mitigation is the offered reason. Snotwad.

  • Janis Gore Link

    A real “man of the people” that.

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