Blue Model Blues
Early Data Undermine Minimum Wage Romanticism

Over the last two years, a handful of liberal American states and localities embarked on an unprecedented experiment: They passed laws that will gradually increase their minimum wages to $15 dollars per hour, a far higher wage floor than the country has ever seen. Champions of #Fightfor15 cast their cause as a moral crusade on behalf of low-wage workers and against big business, brushing aside concerns (including from a number center-left economists) that such a radical hike could increase unemployment.

The national experiment is still in its infancy, so it’s impossible to draw final conclusions. But reliable early data out of Seattle, the city that brought the $15 minimum into the mainstream, suggest that the measure is not exactly the panacea that its righteous advocates had promised. Though the city’s increase is not even close to complete—it went up to $11 from $9.47 last year, and won’t hit $15 until 2021—it has already knocked workers out of the labor force. And for low-wage workers who kept their jobs, the effect on compensation was trivial. The Washington Post reports:

The actual benefits to workers might have been minimal, according to a group of economists whom the city commissioned to study the minimum wage and who presented their initial findings last week. […]

[T]he average increase in total earnings due to the minimum wage was small, the researchers concluded. Using their preferred method, they calculated that workers’ earnings increased by $5.54 a week on average because of the minimum wage. Using other methods, the researchers found that the minimum wage hike actually caused total weekly earnings to drop — by as much as $5.22 a week. […]

Those figures do not include workers without jobs. The economists estimated that the minimum wage decreased the share of workers with jobs by about 1.2 percentage points.

Seattle is a bustling urban center with a high cost of living and a strong economy, and even a modest minimum wage hike meaningfully slowed job growth. How many jobs will be lost when the city’s minimum goes up to $12, and then $13.50, and then $15? And more importantly: What will happen to states like California and New York, which are set to impose $15 wage floors not only in their major urban centers, but on their entire states—including vulnerable regions where jobs are far less plentiful and median incomes are far lower? The damage to certain local economies could well be devastating.

The $15 minimum movement may be a reckless experiment on less-skilled workers, but at least the City of Seattle has commissioned a team of respected economists to track the results. Hopefully other states and localities do the same, and are prepared to change course if things don’t go as planned. But seeing as this movement was always based more on wishful ideology than empirical evidence, we aren’t holding our breath.

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