Remember that time Seattle’s socialist city council member Kshama Sawant pressed for the city to increase its minimum wage to $15 per hour? I actually debated Sawant on the issue; I asked her if she would be in favor of raising the wage to $1,000 per hour. She misdirected from the issue.
Seattle actually ended up embracing $13 per hour, raising the minimum wage from $9.47 in 2014 to $11 in 2015 to $13 in 2016 under the theory that an increase wouldn’t throw people out of work, wouldn’t encourage part-time hiring, and would inflate salaries enough to allow more affordability in the Seattle housing market.
A new study demonstrates that, as usual, central planning of the economy leads to precisely the reverse of the results the planners seek to achieve.
According to a new paper from the National Bureau of Economic Research:
Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.
In other words, restaurants didn’t fire anybody, they just put them on part-time shifts and cut back their hours. That shouldn’t be a surprise, since that’s precisely what always happens every time the government places an extra burden on employers. One of the great myths of minimum wage movement – and the central planning movement as a whole – is that business owners aren’t operating at a slim margin, but raking in dollars to hide in their Scrooge McDuck moneybins, depleting the potential income of their employees. But that’s not true. Thanks to competition – and competition is fierce in industries that employ minimum wage workers – profit margins are never enormous. Even in 2013, a booming year for the restaurant business, Capital IQ estimated the average profit margin for restaurants at 2.4%. Profitability varies by chain as well, and by local franchise.
Someone should have warned them!