The Minimum Wage Carnage Hasn’t Started Yet

Maybe conservatives who warned against the potential downsides of unprecedented minimum wage hikes weren’t just shilling for big business and the wealthy after all. A reputable new working paper from researchers at the University of Washington shows that the latest round of minimum wage hikes in Seattle has slowed hiring and measurably reduced the economic well-being of the city’s most vulnerable workers. The Washington Post reports:

When Seattle officials voted three years ago to incrementally boost the city’s minimum wage up to $15 an hour, they’d hoped to improve the lives of low-income workers. Yet according to a major new study that could force economists to reassess past research on the issue, the hike has had the opposite effect.

The city is gradually increasing the hourly minimum to $15 over several years. Already, though, some employers have not been able to afford the increased minimums. They’ve cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found. […]

On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum.

To be sure, this is just one study (even if it is by most accounts an especially rigorous one). Another recent paper from UC Berkeley, which looked only at the effects on the Seattle restaurant industry, did not find a comparable drop off. Economists will almost certainly produce further dueling studies as the great minimum wage experiment moves forward.

But if the findings hold up, they suggest that the minimum wage could devastate regions less wealthy than the Emerald City, which has one of the highest median incomes in the country, strong economic growth, and an unemployment rate hugging three percent.

Both California and New York, for example, are in the process of phasing in $15 minimum wages statewide. Many regions in inland California and upstate New York are economically depressed and struggling to attract business investment. If a $13 minimum forced layoffs in a place as expensive and prosperous as Seattle, what will a $15 minimum do in Merced, California, whose median income is less than half of Seattle’s and whose unemployment rate is more than three times as high? It will be a tremendously disruptive change, essentially implementing a command-and-control wage-setting system for the entire bottom half of the labor market.

Incremental minimum wage increases, tailored to specific cities’ needs, may be a viable anti-poverty tool in some cases. But radical and arbitrary hikes (the $15 benchmark seems to have been chosen at least partly for its alliterative value in the “FightForFifteen” slogan) increasingly appear to be mostly counterproductive, pushing large groups of people out of the labor force without achieving big enough wage gains to compensate.

That’s the verdict even from studies on wealthy cities with relatively few workers earning less than the minimum wage and enough economic momentum to survive regulatory headwinds—and that haven’t even been exposed to the full $15 minimum yet! When this experiment is attempted with an even higher floor in struggling regions further away from the coasts, the results are likely to be much uglier. In light of the Seattle study, the California and New York laws seem like a plan to pummel poor localities and consign thousands to permanent welfare status on behalf of a utopian ideological design that has failed even in an ideal testing ground. Hopefully the “evidence-based” policymakers in Sacramento and Albany will reconsider.

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