Acton Institute Powerblog

Seattle’s Minimum Wage Experiment is Already Failing

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Seattle Minimum WageLast year when Seattle announced it was raising the minimum wage to $15 per hour, I made four predictions about how the policy would affect the city over the next three years. One of the predictions was that,

Unemployment will increase for low-wage workers — It’s true that economists disagree about the effects of the minimum wage on employment and the living standards of minimum wage earners. But almost all of the disagreement is about relatively small increases—less than 20 percent. Seattle is about to increase the minimum wage by 61 percent — over three times the detrimental rate. Almost all economists agree that significant increases to the minimum wage or attempts to bring it in line with a “living wage” (e.g., $12-15 an hour) would lead to significant increases in unemployment.

The full effect of the wage increase won’t take effect for two more years. But there is already evidence that this prediction is coming true.

In January the state of Washington increased its minimum wage to $9.47 an hour, the highest in the country. Then on April 1, Seattle’s first increase kicked in, raising the city’s minimum wage to $11 an hour. The result: Seattle lost 1,300 restaurant jobs from January to June. As Mark Perry explains,

The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession. In contrast to the January-June loss of restaurant jobs in the Seattle area: a) restaurant employment nationally increased by 130,700 jobs (and by 1.2%) during that same period (data here), b) overall employment in the Seattle MSA increased 1.2% and by 21,800 jobs (data here) and c) non-Seattle MSA restaurant employment in Washington state increased 3.2% and by 2,800 jobs (data here).

Keep in mind that this decline is only for food service jobs, not all jobs that pay low wages. It’s possible that other minimum wage jobs held steady or even increased. But the most likely outcome is that the wage increase is having a similar impact on other fields and occupations. And that is just job losses—it’s not counting the low-wage workers who will never be hired because the cost of their labor is higher than the value they can produce.

There’s almost no chance that Seattle will reverse their minimum wage policy. City officials and liberal politicians are too wedded to their ideology to repeal the wage increases. They’ll prefer to stick to their concept of what constitutes “economic fairness” no matter how many people have to suffer.

Other cities, though, can still learn from Seattle’s failing experiment in utopian economics. Both voters and elected officials need to recognize that while you vote to change economic policy you can’t vote to repeal the laws of economics. Unfortunately, that’s not a lesson that will be learned anytime soon. In the meantime, low-wage workers and minority youth will suffer from one of the most destructive policies in America.

Joe Carter Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).

Comments

  • Gawd

    Few points worth noting. First, the restaurant employment drop you cite was for the Seattle MSA, which is a much bigger area than the City of Seattle with five times the population of the City itself. The new minimum wage regs only apply to the City. We do not know where these restaurant employment declines occurred — Maybe they were in the City of Seattle, maybe in one of the outlying cities such as Federal Way, Tukwila or Everett which are still struggling to rebound from the Great Recession and where unemployment is much higher than in Seattle itself. Second, we do know that the number of permits for restaurants in the City itself has been increasing at a steady pace all year, which doesn’t suggest that things are not going south in the City. Third, it’s worth noting that Mark Perry chose not to cite Seattle MSA employment data for two other industries that make intensive use of minimum wage employees — retail, and leisure and hospital services. In both of these sectors employment was up over 2% between January and June 2015.

    Quite frankly, I think that Mark Perry (and by extension you) are jumping the gun on this one. You may ultimately be proved correct, but you are certainly reading too much into a few tea leaves. Links to data etc can be found here http://charleswlhill.blogspot.com/2015/08/seattles-minimum-wage-hike-reading-tea.html

  • Cloud Shaman

    Goes to show you restaurants can only open doors with slave labor.