Whenever someone tells you an increase in the minimum wage doesn’t cost jobs, just point to the nation’s capital in 2016.
In the first six months of 2016, leading up to a $11.50 per hour minimum wage, Washington, D.C., lost 1,400 restaurant jobs, according to the Bureau of Labor Statistics. This is a full 2.7 percent decline in food service jobs in two quarters, the largest such drop since the 2001 recession 15 years ago. In fact, this is the first time since 1991 that restaurants lost jobs in five of the first six months of a year. Even the 2008 recession pales in comparison to this loss of employment.
The new minimum wage took effect on July 1, a $1.00 increase from 2015. Further increases will continue in the future, as the minimum wage will be determined by the Consumer Price Index starting July 1, 2017. The $15 per hour minimum wage will be reached by 2020, according to a city council ordinance. That’s more bad news for the restaurant service industry.
The decline in such jobs appears limited to the confines of the district. In the Maryland and Virginia suburbs surrounding D.C., restaurants added 2,900 jobs during the first six months of this year. In Virginia, the state minimum wage is only $7.25 per hour, 37 percent below D.C.’s, and in Maryland the state minimum wage is $8.75 per hour (although two counties, Montgomery County and Prince George’s County, have scheduled increases to bring their local minimum wage up to $10.75 per hour).
As Mark Perry, a scholar at the American Enterprise Institute (AEI) and a professor of economics and finance at the University of Michigan, explained, the circumstances provide “a natural experiment to test for the employment effects of DC’s minimum wage law,” and those seem 100 percent negative.
If the restaurant industry in the nation’s capitol, with one of the highest costs of living in the country, is stumbling on the road to a full $15 an hour minimum wage in 2022, just imagine the troubles lower-cost cities like Minneapolis and Cleveland would have adjusting to a $15 an hour wage. Further, if the DC restaurant industry can’t easily absorb an $11.50 an hour minimum wage without experiencing the greatest job losses over the last six-months than in any comparable period in 15 years, just imagine the troubles adjusting to further labor cost increases of more than 30% (and $3.50 an hour) for minimum wage workers in the coming years to the full $15 an hour.
“While it might take several more years to assess the full impact, the preliminary evidence so far suggests that D.C.’s minimum wage law is having a negative effect on staffing levels at the city’s restaurants,” Perry wrote. Classic understatement.
Here is a graph to help visualize the minimum wage effects in Washington, D.C.
— AEI (@AEI) August 24, 2016
Conservatives have long argued that increasing the minimum wage would actually hurt the very workers such a measure is intended to help. Businesses would be unable to hire as many workers, and many would instead opt to replace costly employees with automated equipment.
A recent study by the Heritage Foundation’s James Sherk found that a nation-wide minimum wage hike to $15 per hour would cost 9 million jobs across the country. Some states would be harder hit than others. Populous states would suffer more: California, for instance, would lose 981,000 jobs, while Texas would lose 986,000, and Florida would lose 727,000. Even less populous states , such as Colorado (111,000 jobs) and Louisiana (214,000 jobs), would suffer a great deal. Washington, D.C., would lose 11,000, as would Vermont. Virginia would lose 221,000 jobs, while Maryland would lose 115,000.
But don’t take Sherk’s word for it — look at what’s already happening in the nation’s capital. The next time you see “Fight for $15,” think of the 1,400 restaurant workers out of a job. That’s the kind of change I don’t want to believe in.