It’s been more than 10 months since Seattle’s $15 an hour minimum wage law went into effect. How’s that working out?
This analysis by the American Enterprise Institute suggests that the answer is “not so good.” In fact, the probability that the most serious jobs loss in the city since the Great Recession is due to the enactment of the radical wage law was predicted by just about everyone who opposed it.
Now that the first Seattle minimum wage increase has been in effect for more than ten months, and as local employers brace for the additional minimum wage hikes that will eventually increase their annual labor costs per full-time minimum wage worker by 61% and by a whopping $11,300 (from the increase in hourly labor costs from $9.32 to $15 an hour), are there any noticeable effects so far on the city’s labor market? Is Seattle’s radical experiment with the highest-ever minimum wage in US history serving as a “model for the rest of the nation to follow”? Or is Seattle serving as an “economic canary in the coal mine” for other cities and states (and the country) considering the “bold action” of imposing higher labor costs on employers by as much as $15,500 annually per full-time minimum wage workers if they enact legislation increasing the minimum wage from $7.25 to $15 an hour?
Early evidence from the Bureau of Labor Statistics (BLS) on Seattle’s monthly employment, the number of unemployed workers, and the city’s unemployment rate through December 2015 suggest that since last April when the first minimum wage hike took effect: a) the city’s employment has fallen by more than 11,000, b) the number of unemployed workers has risen by nearly 5,000, and c) the city’s jobless rate has increased by more than 1 percentage point (all based on BLS’s “not seasonally adjusted basis”). Those figures are based on employment data for the city of Seattle only (not the Seattle MSA or MD), and are available from the BLS website here (data are “not seasonally adjusted”).
How can we be sure that the increase in minimum wage is to blame? Employment rate in the neighboring suburbs of the city have hit a record high:
Update: The chart below shows that while the city of Seattle experienced a sharp drop in employment of more 11,000 jobs between April and December last year (light blue line, BLS data available here), employment in Seattle’s neighboring suburbs outside the city limits (the Seattle MSA jobs less Seattle city jobs) increased over that period by nearly 57,000 jobs and reached a new record high in November 2015 before falling slightly in December.
Bottom Line II: Additional evidence showing that while jobs in the city of Seattle were tanking starting last April, employment in the suburbs surrounding Seattle was increasing steadily to a new record high in November. That departure in employment trends: job declines inside the city limits of Seattle compared to increasing employment outside the city limits suggests the possibility that the difference in labor costs could have been a contributing factor.
If supporters of the $15 minimum wage have an alternate theory, I’m willing to consider it. But the AEI analysis suggests that not only are people losing their jobs, but that the creation of new businesses to take up the slack is also lagging.
No one should be surprised by this. You can’t repeal the laws of economics simply by waving a magic wand. Mandating wages for employees not based on the dollar value they can bring to a company but on an arbitrary notion of “fairness” is ignorant and by the time the city fathers figure that out, the self congratulations for being “progressive” will have faded and a hollowed-out economy will be all that’s left.