Lessons from Seattle’s courageous minimum-wage experiment

Seattle Times ^ | 6/28/17 | Mark C. Long and Robert D. Plotnick

[Renkluaf]

U.S. Supreme Court Justice Louis Brandeis wrote: “a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” Seattle’s Minimum Wage Ordinance, passed in 2014, exemplifies courageous experimentation by a local government.

The ordinance aims to increase earnings of low-wage workers as one response to the troubling rise in income inequality and stagnant wages of low-wage workers. There is national and international interest in knowing how it is working. Unfortunately, not all social experiments work entirely as planned.

On April 1, 2015, the ordinance raised the minimum wage for Seattle employees from the state’s minimum of $9.47 to $11 for large employers. On Jan. 1, 2016, the second phase-in period started, when the minimum wage reached $13 for large employers — 37 percent higher than the state minimum wage at that time. Since January of this year, the minimum wage for large employers has been $15.

. . . Our research found that during the second phase-in period, hourly wages paid to low-wage employees increased, as intended by the ordinance. However, our estimates also suggest that the higher wages led to the elimination of more than 5,000 low-wage jobs. Standard economic theory predicts that employers will reduce their demand for labor given a higher wage. In percentage terms, the loss of jobs was significantly larger than the gain in hourly wages. As a result, while some low-wage workers may have earned more, we estimate that the net earnings per low-wage job in Seattle fell by an average of $125 per month. For low-wage workers, this is a substantial loss.

[Renkluaf]

This should be required reading for everyone carrying a Fight for $15 sign.

[Lorianne]

They would never understand.

[Mr Ramsbotham]

Standard economic theory predicts that employers will reduce their demand for labor given a higher wage.

If you knew that, dummy, why did you have to experiment?

[clamper1797]

Courageous? More like foolhardy

[Gay State Conservative]

So when $15 arrives you'll be ordering at Burger King through a computer screen,you'll insert payment into the slot,your change will come down a chute and your burger will come down a different chute.

So that Burger King goes from 8 people working the lunch hour shift to 2...both of whom will be making $15/hr.

[Mr. Mojo]

However, our estimates also suggest that the higher wages led to the elimination of more than 5,000 low-wage jobs. Standard economic theory predicts that employers will reduce their demand for labor given a higher wage.

Leftists just can't seem to comprehend this fact, no matter how many times it's proven in the real world.

I'm surprised the Seattle times published this.

[samtheman]

Unfortunately, not all social experiments work entirely as planned.

---

Unfortunately, NO social experiments work as ADVERTISED!!!

They often do work as panned. But the plan is kept secret.

[marron]

If you want to help low-wage workers, its not that complicated.

Do things that increase the demand for workers, such as encouraging manufacturing and business expansion.

And, shut off the supply of illegal workers.

Do that, and it won’t matter what the legal minimum wage is, because demand will drive the wage above that.

[mrsmel]

I wonder how many of them are either paid protesters, or generational welfare recipients (not mutually exclusive of course) who didn't even have a stake in this. They wouldn't care about the consequences anyway, because it doesn't affect them. They're still going to get paid.

[paint_your_wagon]

Uh. That wasn’t an exoeriment, and the end results were all too predictable based on the history of similar endeavors.

In reality it was much more akin to the imposition of a state religion on a segment of the population.

[Vlad The Inhaler]

Unfortunately, not all social experiments work entirely as planned.

But someday one of these liberal fantasies might work.....

Well - it COULD happen.

[ColdOne]

The left always wants to raise the min wage is to have more people unemployed and on the gov dole.

[Billthedrill]

Political activists are relearning some simple business principles, one of which is that hiring decisions are based on future expectations as well as present conditions. So if you've fine-tuned your mandated wage increases by incrementing them over time, you haven't actually eased anybody's pain, you've merely prolonged it. Businesses don't hire in the face of declining margins, especially if those declines are mandated by the state and outside their control. If they do they'll go broke.

This is the last paragraph of this "nonpartisan" evaluation:

Third, just because one social experiment appears to be yielding disappointing effects to date is no reason to stop experimenting. Seattle, the state of Washington, and the nation face many challenging, long-standing social problems. Only by trying new ideas and carefully assessing their impacts can we hope to improve the social well-being of the nation.

Rah rah and all that, but are these results not also suggestive that this particular experiment is a bust and they ought to end it? Because they're not going to. The answer to hitting yourself on the head with a hammer is to stop hitting yourself, not to try to redefine pain.

[ColdOne]

Yup..this plan is to get as many people on the government dole, which in turn makes them have to vote for them so they can kept on being on the dole. More unemployed, more EBT cards handed out.

[Islander7]

Gee whizz!! No one could have guessed that outcome.

[samtheman]

Yup..this plan is to get as many people on the government dole, which in turn makes them have to vote for them so they can kept on being on the dole. More unemployed, more EBT cards handed out.

---

Interesting that it’s basically the same plan for all these social schemes.

[rigelkentaurus]

Wow - I read the article, actually, and tried to avoid losing IQ points during the process. They are under the impression that jobs simply moved outside of their jurisdiction inside of being permanent job losses. By saying this, they claim this is still a great idea if implemented statewide or nationally!

They cite no evidence of any kind to support this hypothesis. None. I would content, the more likely result was permanent job loss, not relocation. Business layoff - those are permanent. Business close - those are permanent.

No evidence that businesses shut-down and then spent the money to built a new location outside the jurisdiction. None.

[factoryrat]

Coming from the city that has a statue of lenin in one of its parks.

“We pretend to work, and you pretend to pay us”.

Something in the water along the west coast must turn otherwise rational people into flaming socialist idiots.

If someone here can refute that, I would like to hear their argument.

[William Tell]

The article points out that the difficulty that a business might have in leaving the state or leaving the country may result in a different outcome for state-wide or nation-wide minimum wages.

Since we are not yet the equivalent of the Soviet Union and, for the most part, do not hold our citizens as prisoners of the state, the reluctance of businesses to move will slow but not eliminate the loss of jobs due to socialist experiments.

Unfortunately, the article failed to say that. Few probably can envision a day when a fast-food hamburger is labelled "Made in China" but I wouldn't rule out the possibility completely. I have ordered electronic parts that cost two dollars including shipping directly to me from China.

[Cboldt]

The problem is that they didn't raise the minimum wage high enough. According to my optimizing calculator, the rate should have been $23.42 for Seattle. Other cities have higher or lower optimal minimum wage.