Could Seattle’s Economy Survive a $15 an Hour Minimum Wage?
May 4, 2014 - 10:33 am
I love this quote from Slate’s business and economics correspondent Jordan Wessmann: “Any plan that makes hiring a worker more expensive than in France should be cause for concern.”
Weissmann is referring to the idea of creating a $15 an hour minimum wage in Seattle. The issue has found support with business and labor leaders as well as well as some city council members. Nearby Sea Tac has already raised its minimum wage to $15 an hour, but that community contains the Seattle airport and the increase affects only 1600 workers.
Weissmann is skeptical — as are some other experts who support an increase in the minimum wage:
We know that businesses in high-wage countries are especially eager to replace workers with software. Fast-food restaurants in Europe, for instance, have been some of the earliest adopters of labor saving technologies like digital kiosks where customers can order. Those innovations are already beginning to make headway in the United States. But by passing a $15 minimum, Seattle would risk speeding the process up within its city limits.
Don’t take my word for it. Listen to Arindrajit Dube, the University of Massachusetts at Amherst economist who is perhaps the foremost advocate for the idea that minimum wage increases don’t kill jobs. “Would I be concerned about possible job losses if there were a $15 minimum wage in the restaurant industry, yes, I’d be concerned,” he told the New York Times in December. “There are concerns that it might lead to the substitution of automation for workers.”
The move is especially risky for a single city, where businesses can easily choose to open or relocate in the suburbs. That fear convinced Washington, D.C. to coordinate its own recent minimum wage increase with some of its surrounding counties. Seattle isn’t taking any such precaution. (Again, SeaTac is barely a city.)
To his credit, Murray’s is trying to implement the idea gradually. Under his proposal, businesses would have between three and seven years to phase in the new minimum, depending on their size and whether employees get health care coverage or tips. Through 2024, some businesses will also be able to count $3 worth of tips or benefits toward the $15 total. By introducing the change over time, the city will give businesses leeway to adjust, if they can.
If they can’t, however, the impact could be vast. Researchers at the University of Washington have estimated that 102,000 workers in Seattle make $15 or less, meaning they would be directly affected by the hike. Murray is running his experiment with a quarter of his city’s workforce.
What happens when you totally disconnect the value of labor from the cost of production? Nothing good. Would people be willing to spend $8-9 on a burger? Not as often as they do now. The whole idea has a kind of surreal detachment to it — as if the normal laws of supply and demand don’t apply and liberals can, simply because their hearts are in the right place, make everything add up in the end.
It’s silly, of course. And perhaps the “experiment” should be tried just to prove how idiotic it is.