The Laboratory of Economics

Justice Louis Brandeis once characterized the states as “laboratories of democracy”. At Slate Jordan Weissmann writes about Seattle’s experiement in raising the local minimum wage to $15 an hour:

Economists everywhere may soon be thanking Seattle Mayor Ed Murray. Not because of his inspired policymaking, but because Murray seems ready to turn his city into a gigantic laboratory for one of the most ambitious, and quite possibly misbegotten, labor market experiments in recent memory.

The entire article is interesting and I commend it to your attention.

As I see things the real minimum wage peaked around 1970 and, well, conditions were very different then than they are now. The labor market was different. The global economy was different. It was a lot easier to get a job that paid more than minimum wage then that it s now. I think the primary effect of the high minimum wage was to incentivize the mass immigration we’ve seen since then, something only paralleled in our history by the immigration at the end of the 19th century.

It may be that a $15 minimum wage in Seattle will work out just fine. The experiment will soon be under way. Illinois Gov. Pat Quinn wants to raise Illinois’s minimum wage to $10 an hour, something I suspect will be disastrous. Illinois already has the third-highest unemployment rate in the country and a higher minimum wage than Wisconsin, Iowa, Indiana, or Missouri. I don’t think that Illinois is healthy enough to make a good experimental subject.

2 comments… add one
  • PD Shaw Link

    Weissmann points out the biggest problem — cities might not be good laboratories because of the suburbs. I think there is evidence that Chicago has lost retail to the suburbs because of tax differentials, and even allegations of fraud in tax avoidance.

    Illinois’ minimum wage hike appears to be stuck due to lack of support from suburban and downstate Democrats. Some won’t support it due to current economic conditions, but would support it presumably in better times.

  • jan Link

    Last year in CA the state legislature passed a graduated kind of minimum raise, so that by July of ’14 it would be $9/hr, going to $10/hr in 1/16. However, a dem legislator, Barbara Lee, is calling for even more. In response to comments about Seattle’s $15 quest, she is raising the ante even more, saying:

    ““In California — more than likely, from what I remembered — a living wage where people could live and take care of their families and move toward achieving the American dream was about $25, $26 an hour.”

    So, maybe CA will be playing poker with Seattle to see who can pay the most, and get away with it!

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