Seattle Maxes Out The Minimum Wage, Ctd

Earlier this week, Seattle’s city council approved a measure to raise the city’s minimum wage to $15 over the next seven years. Jordan Weissmann revisits the debate over whether this is a good idea:

The economics literature suggests that moderate increases in the minimum help workers more than they hurt them, because the raises outweigh the cost of lob losses. At $15, the effects might well be different. Some businesses may cut jobs. Others simply might not choose to open or expand in Seattle. Others could try to find ways to automate jobs. But, as Reihan Salam has written, the effects may also be more subtly damaging. As wages rise, businesses could simply seek to hire better educated and skilled employees, some of whom may well live outside the city limits but suddenly find themselves happy to commute for a fatter paycheck. … The upshot: the $15 minimum doesn’t have to turn Seattle’s labor market into a flaming wreck for it to cause harm.

Kevin Roose calls the minimum wage hike “a Kennedy School study in shifting the Overton window on contentious issues”:

Supporters of the bill are hoping it will spread. Already, labor activists in cities like Milwaukee, Providence, Chicago, L.A., San Francisco, and New York City are calling for similar wage hikes.

And crazier things have happened — even though economists warn that raising the minimum wage by such large amounts could wreak havoc in the labor markets, it’s still a political slam-dunk for progressive politicians hoping to play up their populist bona fides.

But taking the $15 minimum wage nationwide won’t be easy. Seattle’s experiment had a lot of factors in its favor: a progressive voter base; an already-high minimum wage above $9 an hour, which made $15 seem like a lesser jump; the timing of a mayoral race in which both candidates found it politically advantageous to back the wage hike. Not every city can replicate that. And on a federal level, the minimum wage seems stuck in the single digits — Congress and big business have so far successfully fought President Obama’s attempt to phase in a $10.10 minimum wage.

In the short term, it appears that the minimum-wage battle will be fought on a city-by-city basis. Which makes it much more interesting to watch.

Paul K. Sonn is hoping for that trend:

Looking abroad, Australia has a minimum wage of more than $15 per hour yet enjoys low unemployment and strong growth. Closer to home, Washington, D.C., instituted a substantially higher minimum wage and benefits standard for security guards in 2008, successfully transitioning an $8 occupation to one where guards now earn $16.50 in wages and benefits without evidence of ill effects on the commercial real estate industry, which pays the guards’ wages.

Similarly, Los Angeles, San Jose and St. Louis have all phased in minimum wages and benefits of more than $15 for airport workers without adverse effect. And San Francisco already requires all employers to provide minimum wages and benefits that together total $13.18 per hour for large employers, yet the restaurant industry has seen stronger growth in the city than in surrounding counties. Equally significant, it is not just workers but also growing numbers of business voices that are backing the need for transitioning our economy to a $15 minimum wage.

But Scott Shackford doesn’t approve:

There’s … already some information about how a $15 minimum wage may affect the area. Voters set a minimum wage for jobs at hotels and parking garages serving the Seattle-Tacoma International Airport to $15 last fall. The change went into effect with the new year. The Seattle Times looked at some of the impact in February. While acknowledging that it’s still too soon to truly evaluate the consequences, the paper noted some price increases and “casualties” …  Several business leaders in Seattle’s Asian community submitted a commentary to the weekly warning about the terrible impact of the wage increase on immigrants and minority-owned small businesses. Read it here.

Scott Sumner, who prefers a low minimum wage supplemented with wage subsidies, explores some counterintuitive outcomes that may arise from the wage hike:

Liberals tend to argue that low wages are a huge problem for the poor.  Thus a $15 dollar wage would offer significant improvements in living standards (BTW, I agree with this, although I’d prefer the government paid the bill.)  Let’s say liberals are correct, and that the Seattle policy is a huge boon to the poor.  In that case low wage workers from other cities should flood into Seattle looking for one of those precious jobs.  Yes, the cost of living is high, but no higher than some other bigger affluent cities with minimum wage rates that are far lower.  The low-skilled workers will park themselves in the informal economy, or live off welfare, until they find one of those jobs.  Thus we have the odd situation where the law will be a boom to low wage workers if and only if it leads to a large rise in Seattle’s unemployment rate.

“But in the longer run,” John Aziz writes, “I highly doubt that a higher minimum wage is the right policy to ensure a decent standard of living for the poor”:

The key factor is the emerging economic phenomenon of robotics. Robots have already taken over many roles in the manufacturing industry, and are now moving into roles including food servers, bank tellers, telephone operators, receptionists, mail carriers, travel agents, typists, telemarketers, and stock market traders. The higher the minimum wage goes, the lower the threshold will go for robots to replace humans in many minimum wage roles.

While there are sure to remain many jobs that still require a human touch — think personal assistants, janitors, home health aides, and security personnel — and while lots of new human professions will likely emerge, the automation revolution is already putting lots of people out of work. To me, this suggests a better approach is universal basic income, a version of which was first advocated in America by Thomas Paine.

Previous Dish on Seattle’s minimum wage hike here and here.