Minimum wage workers in Seattle, after celebrating their pay increase to $15 an hour, may be wondering what hit them.
A recently released study shows a modest increase in weekly earnings as a result of the wage increase to $11 an hour, eventually climbing to $15 by 2020. But the study also shows that those workers are working fewer hours. And many of them lost their jobs.
I have one word to describe that: duh.
So what did they find? People are getting paid a higher wage -- and yet, earnings didn’t rise much, because people are also working less. People who made less than $11 an hour before the law took effect saw, on average, a modest bump in their paycheck (about $72 every three months). The median number of hours worked fell by about four hours per quarter.If you can make slightly more money by working slightly fewer hours, who wouldn’t take that deal? The trouble is that this is the average effect. If the cutbacks in hours worked are "lumpy" -- if some people saw big reductions, while others saw little or none -- then the people whose hours were reduced a lot could well be worse off, while the people who got the wage hikes and the same number of hours might be substantially better off. This is particularly true if one of those “lumps” consists of people who become unemployed entirely.Which it seems to. According to the study, the share of those low-wage workers who were still employed after the law took effect fell by 1.2 percent. That’s not Great Depression-level unemployment by any means. And some of it could consist of people who would, say, rather be home with their kids, and who no longer need to work because their partner just got a substantial raise thanks to Seattle’s higher minimum wage. However: 1.2 percent is not nothing. And given that it’s not really all that easy to support a family on $11 an hour in Seattle, I’m pretty skeptical that this represents a lot of voluntary unemployment. There’s also evidence that about 3 percent of previous workers had to look for work outside the city of Seattle.
IBD puts the issue into stark relief:
In comments that sounded as if they came straight out of an Econ 101 text, the Post concluded that "Increasing the minimum wage increases the costs of hiring workers. As a result, employers must accept reduced margins or customers must pay steeper prices. If employers cannot stay in business while paying their staff more, they will either hire fewer people or give their workers fewer hours. As a result, even if wages per hour increase workers' total earning could decline."Dead on. That's exactly what happened. And as University of Washington economist Jacob Vigdor, one of the authors of the Seattle study, noted, some businesses simply avoid paying the minimum-wage tax altogether by automating and letting low-end, unskilled workers go — as is now happening in some fast-food chains and at supermarkets.
Expect that trend to accelerate as chain stores and franchises are forced to deal with this nonsense across the country.
Decoupling the minimum wage from the reality of the marketplace leads to the kind of delusional thinking that the "Fight for 15" crowd is experiencing. As the gradual increases in the minimum wage approach $15, all of these trends will worsen until eventually, the workers who were as happy as a 5-year-old with a new pony when the wage was won will come out of their stupor long enough to ask, "How could this happen"?
It's the market, stupid.