June 27, 2017

UM… DON’T? Seattle’s Painful Lesson on the Road to a $15 Minimum Wage.

Megan McArdle:

Leading labor economist David Autor told the Washington Post that “This strikes me as a study that is likely to influence people,” saying the study is “very credible” and “sufficiently compelling in its design and statistical power that it can change minds.” In other words: if you thought it was settled science that raising the minimum wage is good for workers, be prepared to think again.

And particularly be prepared to rethink very high minimum wages, like those supported by the “Fight for $15” folks. For as the authors note, the first round of hikes had relatively small impacts, while the second round had huge ones, suggesting that the effects may be nonlinear. And that makes sense. Relatively few people in this country make the minimum wage, so a small increase doesn’t make that much difference to most workers, or most employers. But a large jump affects more people, and the wage increases are much bigger for the lowest-paid staffers. If you make $9 an hour, but generate $10.50 in revenue for your boss, a law that raises the wage to $10.45 may cause her to shrug and decide it’s easier to keep you on as long as she’s making something. But a wage that forces her to pay you far more than you bring in…. Continuing to employ you would just be bad business.

Bad luck, that.

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