When I was growing up I had a buddy—let’s call him “Bob”—who was constantly asking, “What happens if we do . . . ?” Bob’s curiosity, however, only led him to wonder about foolish actions. He never pondered, for example, what would happen if we all volunteered at the senior citizens center. Instead, his thinking ran more along the lines of what would happen if we jumped off the senior citizens center.
The reaction of me and the rest of my friends was always, “Let’s find out!” But we were more prudent than Bob (or maybe just more cowardly) so we’d encourage him to try whatever reckless idea he had in mind so we could learn from his experience. We learned, for instance, that if jump off the 3-story senior citizens center, a stack of cardboard boxes will not be enough to sufficiently break your fall.
Bob’s shenanigans would daily provide for us what social scientists would call a “natural experiment.” A natural experiment is a study of the effect of an independent variable, which has not been planned or manipulated by the researchers, on a dependent variable. (The word ‘natural’ in the term natural experiment therefore refers to an event that is not planned by the researchers.)
The city of Seattle is about to pull a Bob, by foolishly raising the minimum wage to $15 per hour. The effect on the citizens of Seattle will be almost entirely harmful. But it will provide a natural experiment on the effect of raising the minimum wage laws that the rest of American can learn from. Anyone who isn’t already convinced that increasing the minimum wage has a detrimental impact on employment and harm minority workers will, in a few years, have solid proof. We will all be able to look to Seattle to see the difference between good, albeit naive, intentions and sound economic policy.
Here are some of the effects I predict the policy will have in the next three years:
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.
Employers will discriminate against low-skill workers — Milton Friedman once described the minimum wage as a requirement that “employers must discriminate against people who have low skills.” As Anthony Davies explains, “the minimum wage prevents some of the least skilled, least educated, and least experienced workers from participating in the labor market because it discourages employers from taking a chance by hiring them. In other words, workers compete for jobs on the basis of education, skill, experience, and price. Of these factors, the only one on which the lesser-educated, lesser-skilled, and lesser-experienced worker can compete is price.”
Young African Americans will have a harder time getting jobs — Employment among African American males between the ages of 16 and 24 is disproportionately responsive to the minimum wage. A ten percent increase in the minimum wage would reduce employment by 2.5 percent for white males between the ages of 16 and 24, 1.2 percent for Hispanic males between the ages of 16 and 24, and 6.5 percent for African American males between the ages of 16 and 24. Professors Even and Macpherson estimate that in “the 21 states fully affected by the federal minimum wage increases in 2007, 2008, and 2009,” young African Americans lost more jobs as a result of minimum wage hikes than as a result of the macroeconomic consequences of the recession.
Seattle will learn why you don’t elect Socialists — Imagine someone really despised the city of Seattle and wanted to dream up the best ways to destroy the city’s economy. If they were really clever they would try to find a way to get Seattleites to elect Kshama Sawant to the city council.
Sawant, a member of the Socialist Alternative party, tends to support any policy that has been proven to ruin cities (e.g., rent-control). After she was elected, one of her first actions was to attempt to get workers at Boeing to “take-over” the Everett Boeing plant. Once they illegally seized the property they could, she said, build things everyone can use: “We can re-tool the machines to produce mass transit like buses, instead of destructive, you know, war machines.”
Like most Socialists in America, Sawant lives in a very different reality than the rest of us. Not surprisingly, she is the main instigator of the new wage increase. Perhaps once Seattle realizes Sawant led the revolution to ruin their economy they’ll be more hesitant in the future about electing clueless radicals to run their city government. If nothing else, they’ll know exactly who to blame for getting them into this mess.