Minimum Wage Effect? January to June Job Losses for Seattle Area Restaurants (-1,300) Largest Since Great RecessionPosted: August 10, 2015
Seattle minimum wage hike is getting off to a pretty bad start.
In June of last year, the Seattle city council passed a $15 minimum wage law to be phased in over time, with the first increase to $11 an hour starting on April 1, 2015. What effect will the eventual 58% increase in labor costs have on small businesses, including area restaurants? It’s too soon to tell for sure, but there is already some evidence that the recent minimum wage hike to $11 an hour, along with the pending increase of an additional $4 an hour by 2017 for some businesses, has started having a negative effect on restaurant jobs in the Seattle area. The chart above shows that the Emerald City MSA started experiencing a decline in restaurant employment around the first of the year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), and the 1,300 job loss between January and June is the largest decline over that period since 2009 during the Great Recession (data here). 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 increased 3.2% and by 2,800 jobs (data here). Read the rest of this entry »
Reid Mene reports: A recent poll conducted by The National Low Income Housing Coalition compared the average renter’s wage in each U.S. state to the wage needed to afford an average two-bedroom apartment.
The Out of Reach study, which came out in May, found that there are a considerable number of states where average workers simply cannot afford to rent two-bedrooms.
City Lab notes:
- The average American needs to earn $19.35/hour to afford a two-bedroom rental unit.
- The average hourly wage earned by American renters is $15.16. That’s 2.5 times the federal minimum wage.
- The median hourly wage of the average American worker is $17.09.
This graph shows the states with the largest gaps between average hourly wages and wages needed to rent two-bedrooms. Read the rest of this entry »
From the Foundation for Economic Education: People don’t like to think that anyone’s labor is worth less than the minimum wage. Someone might end up flipping burgers for $5.00 an hour. You might think the minimum wage is a way of paying some sort of dignity premium–hence language like “living wage.” People with such good intentions look at the direct beneficiaries of these policies, say, burger flippers now making $7.50 an hour. They pat themselves on the back. But they rarely count the invisible costs: willing human beings who never get hired in the first place.
“But $5.00 an hour is not enough to live on!,” they’ll say. For whom? A teenager living at home with his parents? An elderly person who wants simply to stay active? A single mom with three kids? A single woman sharing an apartment with 2 roommates? Of course, not all of these people could live off of $5.00 an hour. But some of them could given the opportunity. Concerns about those who couldn’t don’t justify minimum wages even if we ignored the invisible costs of the policy, which include reduced margins to businesses that might otherwise grow (and hire more people).
In other words, if you take off the bottom two rungs of the income ladder, many will never climb it. That’s the effect of the minimum wage. The more cynical side of me says that’s how many politicians and the overpaid teamsters want it.
Enjoy this great video and some timeless pieces on the minimum wage by some of FEE’s excellent scholars.
The Truth About the Minimum Wage
“While there is a debate over the magnitude of the effects, the weight of research by academic scholars points to the conclusion that unemployment for some population groups is directly related to legal minimum wages. The unemployment effects of the minimum-wage law are felt disproportionately by nonwhites. A 1976 survey by the American Economic Association found that 90 percent of its members agreed that increasing the minimum wage raises unemployment among young and unskilled workers. It was followed by another survey, in 1990, which found that 80 percent of economists agreed with the statement that increases in the minimum wage cause unemployment among the youth and low-skilled. Furthermore, whenever one wants to find a broad consensus in almost any science, one should investigate what is said in its introductory and intermediate college textbooks. By this standard, in economics there is broad agreement that the minimum wage causes unemployment among low-skilled workers.”
“With the money-wage hike and the reduced benefits, workers can be left worse off since the fringes and slack work demands taken away were provided in the first place because workers valued them more highly than the wages forgone for those benefits. Given the findings of his own as well as other researchers’ studies, Wessels deduces that every 10 percent increase in the hourly minimum wage will make workers 2 percent worse off.” Read the rest of this entry »
For National Review Online, Celina Durgin writes: Seattle’s plan to dramatically increase the minimum wage is going to be unsustainable in the long term and is already costing jobs and raising prices, business owners say.
“I am concerned about my business and others in the community, but it isn’t just about any one business. It’s about how the entire economic community will be affected.”
Seattle businessmen lead by Forward Seattle, a non-partisan organization representing independent businesses, collected about 19,500 signatures to put a referendum on the city’s minimum wage ordinance on this November’s ballot. Several of the petitioners have said their businesses cannot withstand the ordinance’s schedule for increasing the minimum hourly wage, which will boost it from $9.25 to $15 in as few as three years for the largest employers.
Some petitioners had tried unsuccessfully to oppose the ordinance when it was passed June 3. They attended meetings, lobbied, and tried to file an amendment to the city’s charter, which they discovered wasn’t possible this year. “We hit a brick wall every single time,” Kathrina Tugadi, co-chair of Forward Seattle and owner of El Norte Lounge, told National Review Online.
“We thought it was interesting that everyone wanted to push this through so quickly.”
For Reason.com, Scott Shackford writes: Our labor participation rate is terrible and our economy shrank by 1 percent in the first quarter of the year. So it’s the perfect time to raise the minimum wage to a degree unseen in America before, right?
That’s what Seattle has done. Yesterday the Seattle City Council unanimously voted to raise the city’s minimum wage to $15 over the next seven years. Labor activists are actually considering forcing a public vote to speed up the process so that it hits the new minimum in three years. The city recently elected its first Socialist council member, Kshama Sawant, so perhaps the move shouldn’t have come as a surprise. The City Council dulled the edge of the new minimum a bit by allowing for a lower training wage for teenagers and disabled workers. This prompted outrage from Sawant and labor supporters, who I guess want to drive teens and the disabled out of the job market entirely.
Franchise owners are planning a lawsuit because the law counts them as big businesses and only gives them three years to phase in the increase. From The Seattle Times:
Local franchisee David Jones, who owns two Subway stores in Seattle, puts his cost of a $15 minimum at $125,000 annually. He pays the stores’ 18 employees $10.50 an hour, on average; he figures he’ll have to raise sandwich prices by a dollar or more to maintain profits… Read the rest of this entry »
Neil Munro writes: A nationwide minimum wage of $12 per hour would shrink government, aid families, curb illegal immigration, spur high-tech investment, and boost GOP support among working-class voters, says Ron Unz, the California libertarian entrepreneur who wiped out his state’s Spanish-only K-12 classes.
The $12 wage would slash the huge taxpayer subsidies now given to companies that hire low-wage immigrants, and move tens of millions of Americans into the middle class and sharply reduce the 47 percent of the population who are now completely or partly dependent on federal handouts, Unz told The Daily Caller.
“Politics would be completely different… what you’re doing is reducing the 47 percent by 10 to 15 points and giving Republicans a chance to make their case about cutting government spending and reducing taxes,” he said.
Unz’s unorthodox proposal is likely to catch fire, partly because he’s working to put it on California’s ballot this year and force Democratic and Republican politicians to take sides by November.
Big Labor wins court battle in Washington State, and now employers in SeaTac, Washington wil have to pay transportation and hotel workers $15 an hour.
The minimum wage was $9.32, but with the new ruling, employers will look to cut jobs, and some are even saying that they will close up shop, because they won’t be able to pay the 60 percent increase in worker pay.
Backers of the $15 minimum wage vow to appeal the ruling up the state Supreme Court. One of the biggest supporters is Kshama Sawant, a socialist who also won her election to the Seattle City Council. She plans on making Seattle the next city to have a $15 minimum wage.