Will a $15 an hour minimum wage be the end of Seattle?

Rick Moran
Seattle's proposal to adopt a $15 an hour minimum wage has some economic experts asking if it will doom Seattle's economy.

Even Slate's business and economics correspondent, Jordan Weissmann, questions the wisdom of adopting such a precipitous increase:

Yesterday, Murray announced a plan that would gradually raise Seattle’s minimum wage to $15 an hour and tie it to inflation, which won approval from a large committee of business and labor leaders, as well as some city council members. Today, Washington state’s minimum is a comparatively piddly $9.32. The full council still has to consider Murray’s proposal, but should it pass, Seattle might not just have a far higher minimum wage than its surrounding suburbs, where businesses can easily move; it might well have the highest minimum wage in the world.

I generally support a higher pay floor. And I love a good experiment. But I can’t help but wonder if Seattle is poised to take a step too far.

[...]

ut while the fight for $15 has made for great politics—in Seattle, both mayoral candidates only adopted the idea last year after it was popularized by a socialist city council candidate, Kshama Sawant, who ultimately won her race—it’s built on dubious economics. The truth is, nobody has any idea what would happen if the minimum wage jumped that high. But there are good reasons to worry that results would be ugly.

The research literature on whether minimum wage increases kill jobs is decidedly mixed. Some economists have found that hikes lead to small job losses among teens and in industries like fast food. Others have found that losses are nonexistent, or at least negligible. In the end, I tend to argue that even if you assume reasonable job losses, middle-class and poor families come out ahead in the bargain. Though some workers end up unemployed, enough get raises to make the tradeoff worthwhile.

But that assumes we don’t lift the pay floor too high, too fast. Minimum wage studies have typically looked at small increases, somewhere around 50 cents or a dollar. Seattle’s proposal would be far larger. It would also have virtually no U.S. precedent. (Nearby neighbor SeaTac recently upped its own minimum to $15, but the city is little more than an airport and only 1,600 workers are affected.) Adjusted for inflation, the value of the U.S. minimum wage peaked at $10.66 in 1968...

Bottom line: "Any plan that makes hiring a worker more expensive than in France should be cause for concern," says Weissmann. In fact, the proposal would give Seattle the highest minimum wage in the world.

I doubt whether there would be too many workers getting $15 an hour. It makes little economic sense to hire a burger flipper at that rate, which means fast food would probably come close to disappearing in Seattle - or people would be forced to pay $7 for a Big Mac.

In a way, I hope they do it. Then the fallacy would be exposed when businesses pick up and leave town for greener pastures in the suburbs.

 

 

Seattle's proposal to adopt a $15 an hour minimum wage has some economic experts asking if it will doom Seattle's economy.

Even Slate's business and economics correspondent, Jordan Weissmann, questions the wisdom of adopting such a precipitous increase:

Yesterday, Murray announced a plan that would gradually raise Seattle’s minimum wage to $15 an hour and tie it to inflation, which won approval from a large committee of business and labor leaders, as well as some city council members. Today, Washington state’s minimum is a comparatively piddly $9.32. The full council still has to consider Murray’s proposal, but should it pass, Seattle might not just have a far higher minimum wage than its surrounding suburbs, where businesses can easily move; it might well have the highest minimum wage in the world.

I generally support a higher pay floor. And I love a good experiment. But I can’t help but wonder if Seattle is poised to take a step too far.

[...]

ut while the fight for $15 has made for great politics—in Seattle, both mayoral candidates only adopted the idea last year after it was popularized by a socialist city council candidate, Kshama Sawant, who ultimately won her race—it’s built on dubious economics. The truth is, nobody has any idea what would happen if the minimum wage jumped that high. But there are good reasons to worry that results would be ugly.

The research literature on whether minimum wage increases kill jobs is decidedly mixed. Some economists have found that hikes lead to small job losses among teens and in industries like fast food. Others have found that losses are nonexistent, or at least negligible. In the end, I tend to argue that even if you assume reasonable job losses, middle-class and poor families come out ahead in the bargain. Though some workers end up unemployed, enough get raises to make the tradeoff worthwhile.

But that assumes we don’t lift the pay floor too high, too fast. Minimum wage studies have typically looked at small increases, somewhere around 50 cents or a dollar. Seattle’s proposal would be far larger. It would also have virtually no U.S. precedent. (Nearby neighbor SeaTac recently upped its own minimum to $15, but the city is little more than an airport and only 1,600 workers are affected.) Adjusted for inflation, the value of the U.S. minimum wage peaked at $10.66 in 1968...

Bottom line: "Any plan that makes hiring a worker more expensive than in France should be cause for concern," says Weissmann. In fact, the proposal would give Seattle the highest minimum wage in the world.

I doubt whether there would be too many workers getting $15 an hour. It makes little economic sense to hire a burger flipper at that rate, which means fast food would probably come close to disappearing in Seattle - or people would be forced to pay $7 for a Big Mac.

In a way, I hope they do it. Then the fallacy would be exposed when businesses pick up and leave town for greener pastures in the suburbs.