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Thursday, March 13, 2014

Higher Minimum Wage Wasn't a Job Killer

Posted by on Thu, Mar 13, 2014 at 11:21 AM

Credit where credit is due: Seattle Times reporter Lynn Thompson, who I've criticized plenty in the past, has a helpful story that dispels a common myth about raising the minimum wage. San Francisco raised its minimum wage from 6.75 to $10.74 over the last decade, and researchers examined wage hike:

What have the effects been on employment?

Almost none, according to economists at the University of California, Berkeley, who have studied San Francisco, eight other cities that raised their minimum wages in the past decade, and 21 states with higher base pay than the federal minimum.

Businesses absorbed the costs through lower turnover, small price increases at restaurants, which have a high concentration of low-wage workers, and higher worker productivity, the researchers found. The average increase among cities raising the minimum wage was 40 percent. The average step increase for a phased-in pay hike was 17 percent.

“Our data show that an increase up to $13 an hour has no measurable effect on employment,” said Michael Reich, a Berkeley economics professor with the Institute for Research on Labor and Employment.

Brace yourself. During Seattle's discussion about raising the minimum wage to $15 an hour later this year, we're going to hear this a lot more: Pretty much any policy that helps workers will hurt "job creators" and "kill jobs."

Of course, we've heard hat providing sick days would kill jobs—jobs actually went up. We've heard taxes on the rich are a job killer—also bogus. We're told that providing better health care is another job killer—yeah, a tiny number of jobs people didn't want and held to pay for overpriced health care. In San Francisco, small businesses were given a couple years to phase in the policy, something that's also on the table in Seattle.

Professor Reich didn't make the promise that Seattle's proposed jump to $15 would have an equally low impact as San Francisco, but research from Reich and others makes a pretty strong case: When people reflexively claim that raising the minimum wage is a wholesale job killer, it's a talking point from conservative business lobbies, not necessarily a fact.


Comments (33) RSS

Oldest First Unregistered On Registered On Add a comment

Seattle needs to get expensive, real fast.

All this easy living for in-grown locals, paying little or no of their fair share, and relying on Home Teams, High School Allegiances and decades old cultural references has to stop.

Let's not only pay people what their worth, let's price things accordingly as well.
Posted by Supreme Ruler Of The Universe http://_ on March 13, 2014 at 11:50 AM · Report this
"....raised its minimum wage from $6.75 to $10.74 over the last decade."

To me this is the key thing to focus on. It's not the absolute amount of the increase that could be damaging (at least up to point). It's the speed with which the increases are phased in. They didn't raise the minimum down there from $6.75 to $10.74 all at once. They did it over a period of time.

It's not $15/hr that is inherently a problem for small businesses. It's "now" that could be.

Posted by j-lon on March 13, 2014 at 12:03 PM · Report this
Urgutha Forka 3
I long ago came to the conclusion that most republicans/conservatives know almost nothing about business and economics.
Posted by Urgutha Forka on March 13, 2014 at 12:09 PM · Report this
San Francisco seemed considerably more expensive than Seattle -- I was continually surprised by how much stuff cost in grocery stores and restaurants. I don't think I imagined it; cost of living in SF vs SEA is higher in those categories:

To anybody who has visited SF, your argument is not persuasive in the way you want it to be.
Posted by wxPDX on March 13, 2014 at 12:10 PM · Report this
Ipso Facto 5
Corroborated by this article.

Highest Minimum-Wage State Washington Beats U.S. in Job Creation
Posted by Ipso Facto on March 13, 2014 at 12:17 PM · Report this
treacle 6

Posted by treacle on March 13, 2014 at 12:31 PM · Report this
@4: The problem is, which came first: the above average cost of living or the higher pay rate?

I don't have data....just that old enemy anecdote.

SF in the early to mid-80s it was unbelievably expensive. Rents were already going through the roof and most other things seemed more expensive than elsewhere. One of the main reasons I moved from SF to Seattle, was that you could live so much larger on the same wage.

My guess is the wage increases in SF are an attempt to address/redress the very high living costs there.
Posted by gnossos on March 13, 2014 at 12:35 PM · Report this
@1, what's with the slam against people like me who have lived in Seattle my entire life? I was here first. Take your elsewhere mentality back to wherever you transferred from. Grunge was great, this city has changed in some really bad ways, the bluest skies are here, and I still miss Uncle Fran and J.P. In fact, you and your kind might be the real problem.
Posted by paulus22 on March 13, 2014 at 12:36 PM · Report this
keshmeshi 9

San Francisco has been punishingly expensive for *years*, long before they instituted a higher minimum wage. To anybody who has *visited* SF and has never lived there or anywhere nearby, your argument is not persuasive in the way you want it to be.
Posted by keshmeshi on March 13, 2014 at 12:36 PM · Report this
@4 Let me see if I got your argument straight... the minimum wage is the only thing that contributes to a higher cost of living.

That's ridiculous. Anyway, the difference between the minimum wage in Seattle and San Francisco is less than a dollar/hour.

Really nice try though.
Posted by ANOPRAX on March 13, 2014 at 12:42 PM · Report this
@2 I agree. I'm strongly in favor of raising the minimum wage and believe it will have benefits for workers and employers. But phasing it in is critical for small businesses.
Posted by politickling on March 13, 2014 at 12:43 PM · Report this
The damage to businesses is not random. Labor intensive businesses that have close substitutes that are not labor intensive will struggle and fail, while businesses that are not so labor intensive and have close substitutes who are will benefit. Examples: florists versus floral departments at large grocery stores, small shops versus big boxes, table service versus conveyor belt sushi. Fortunately though, many of the prospective losers already pay quite a bit more than their rivals which tend to be bigger and can deal with very high turnover better. So the relative wage increase difference could potentially offset some of the risk, but this also makes it impossible to extrapolate from a 30% increase to a 60% one, since all of that difference would affect big and small alike.
Posted by kinaidos on March 13, 2014 at 12:45 PM · Report this
There are studies that show negative employment effects as well, including the American Samoa experience.

But for sure, just saying increasing the minimum wage kills jobs seems untrue. But we all agree that at some point, say $20 immediately it would. So what's that point?

What does seem to be clear is that phasing in to $15 won't have a net negative impact on jobs. Some jobs might be lost. Some will be gained. Especially in Seattle where we'll be adding a ton of job anyhow.

So do we phase in at 17% per year - so 4 years? Maybe it's quicker for large businesses, a little longer for small biz and non-profits?

Posted by Meinert on March 13, 2014 at 12:50 PM · Report this
keshmeshi 14

I generally agree with you, but I'll be damned if I've ever encountered a florist that had more than one employee (not including the owner).
Posted by keshmeshi on March 13, 2014 at 12:51 PM · Report this
Will in Seattle 15
Certainty is more important than the amount.

I'd recommend a 2015 phase in for large employers, a contract renewal or extension date phase in (or 2016, whichever first) for unionized employers over official small business size limits (city standard), and a 2018 phase in for small business (not chains) which means $12 in 2015, $13 in 2016, $14 in 2017, and $15 in 2018.

No exemptions. No benefits or tip "credit"

We paid $20/ hour minimum wage in the 60s, during our period of greatest US growth. In today's dollars.
Posted by Will in Seattle on March 13, 2014 at 1:35 PM · Report this
@15 - the high point of the minimum wage was in 1968, in today's dollars that would be about $10.37. Not $20.

Posted by Meinert on March 13, 2014 at 1:40 PM · Report this
@1 could you provide an example of what I’m paying less for by growing up here? Because I’ve never encountered this magical pricing for people who grow up in Seattle, the advantages are I don’t have to travel during the holidays to visit my family and I live in the best city ever.
Posted by lem on March 13, 2014 at 2:03 PM · Report this
Credit where credit is due?

I miss Goldy. Y'all are keeping his pet topics alive. $15 minimum wage, guns keeping us safer, etc. How long til we get a report on Dan Savages gardening?
Posted by JAT on March 13, 2014 at 2:07 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 19
Brutal news for Keck and Meinert and Douglas. You guys are getting hammered aren't you? Even the Seattle Times is kicking you square in the balls.

That's what happens when you declare war on reality. Facts come right back and kick your ass.

I'd bet ten thousand dollars business owners commissioned your own poll hoping it would say $15 NOW was doomed and you got back the answer you didn't want to hear and you buried it, hoping the truth would never see the light of day.

You need a more dirty polling agency.

I think Murray and Burgess are going to give you the "business friendly" Swiss cheese wage increase you want, and then a solid $15 is going to go up for a vote and win huge. And Seattle's feckless Democrats will suffer another defeat and be all the weaker going into the next battle. Socialists could even win a second seat on the Council in a year or three.

You should cut your losses while you still can.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on March 13, 2014 at 2:40 PM · Report this
So your example is from a city with a significantly higher cost of living than Seattle, with a far lower minimum wage than what is being proposed here, and a wage that was phased in over time rather than imposed immediately, as the 15now folks insist has to happen.

OK then. What reasonable person could see a problem with that?
Posted by bigyaz on March 13, 2014 at 2:40 PM · Report this
@16: Your insipid opinions are one thing, but don't go making up data and passing if off as fact. At no time was the minimum wage the equivalent of $20/hour in today's dollars:…
Posted by bigyaz on March 13, 2014 at 2:44 PM · Report this
keshmeshi 22
@16 and 21,

Are you two expecting actual facts from Will in Seattle?
Posted by keshmeshi on March 13, 2014 at 3:22 PM · Report this
Sean Kinney 23
Dave: why use American Samoa as an example? Their economy is not analogous to ours. In a comparative sense the models that can be drawn are dissimilar.
Posted by Sean Kinney http:// on March 13, 2014 at 4:01 PM · Report this
seatackled 24

Because he needs it to claim that there's a study that supports his point.
Posted by seatackled on March 13, 2014 at 10:41 PM · Report this
Side note: today in Ballard $15/now thugs were harassing people on the street who wouldn't agree with them that anything less than $15/hour is not a living wage. When asked for details on that statement, I was told that you simply can't support a family while making $15/hour. Is "a living wage" supposed to mean enough to feed a family? If so, then no you do not have my support. Entry level job positions really aren't intended to be the end goal for employment to care for a family. Shouldn't people be encouraged to pursue education, experience, and skills before popping out babies they do not have the resources to care for?
Posted by bealereale on March 14, 2014 at 3:13 AM · Report this
collectivism_sucks 26
"A report last year by the U.S. Government Accountability Office said employment in American Samoa has declined because of the minimum wage increases that began in 2007. The 142-page report said the decrease in employment was a result of losing a tuna cannery in American Samoa. Employers blamed the minimum wage increase for layoffs, work hour reductions and hiring freezes."

But I guess the Huffington Post is a "right wing rag"?
Posted by collectivism_sucks on March 14, 2014 at 4:10 AM · Report this
The report cited vis-a-vis SF increase in minimum wage is very misleading.

1) Min wage levels are historically about 45% to 50% of the "average hourly wage".

2) As minimum wage levels increase beyond 50% of the "avg. hourly wage", negative economic effect being to appear:

--crowding out of less skilled workers or those entering the job market
--less hiring
--price increases

3) Small incremental wage increases (5% to 10%) phased in over time in predictable amounts are more easily absorbed without significant adverse impacts on the economy as a whole

4) The average hourly wage in SF in 2004 was $19.93...or well in excess of $17.00, thus an increase to $8.50 had no adverse economic impact. In fact most businesses were already paying employees ($8.86/hour -the mean avg) or more than $6.50/hour before the min. wage adjustment was made.

5) The average minimum wage in SF in 2012 is $31.77, thus an increase to $10.74 would not be disruptive. fact $15/now in SF might very well be worth considering.

6) Seattle is not SF and the compensation and costs are very different. By way of comparison, here are the most recent rates published:

--The avg hourly rate for a graduate with a college degree is 2013 $36.73
--The aggregate avg hourly wage (mean avg) in 2012 $27.68

The average hourly rate of pay in Seattle is significantly higher (26% higher) as we have a great number of bio-tech and hi-tech workers. Thus the avg hourly rate is skewed due to a highly educated work force. In short, a segment of well educated, highly productive workers are pulling up the average hourly rate paid as a whole.

7) Target Min Wage Level at historical levels would be computed as follows:

45% of $27.68 = $12.45
50% of $27.68 = $13.84

A target rate of 45% might be better suited due to the distortion of the mean average as affected by the the anomaly of the hi-tech & bio-tech component which skews the mean avg.

8) In short, efforts my be well directed in achieving incremental increases to achieve these target levels and would not appear to be disruptive or have negative effects on the overall economy.

9) Some care should be given to temper these proposed target levels with the economic recovery which is in progress. A sharp increase or "jolt" could prove counter productive, whereas a well thought out phased in approach, wherein businesses and employers know what to expect and would be able to adjust would prove more desirable.

Posted by mistral on March 14, 2014 at 10:54 AM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 28

Why didn't you call the police?
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on March 15, 2014 at 10:17 AM · Report this
Washington State already has the highest minimum wage in the country. All that this study does is demonstrate what happened when other cities raised their minimum wage to be less than our already is. What is the point of promoting this study, when we could have just looked out our back door for the same information?

This gives us no data to rely on for a straight 60% increase.
Posted by StrangerThingsHaveHappened on March 15, 2014 at 5:57 PM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 30

Not so fast: Washington Restaurants Already Weathered
an 85 Percent Minimum Wage Hike (and Apparently Survived)

In 1988 I-518 increased the tipped employees wages from $2.30 to $3.85 (January 1, 1989) -- that's 67% jump! - and then a 10% bump to $4.25 the following year. That's 85% in two years.

There's your data. Restaurants here in Washington have already survived -- and gone on to thrive -- with wage increases greater than the current jump to $15/hr.

There is no evidence to support the hypothetical claim that business is harmed or jobs are lost by minimum wage increases, and the current proposal is not unprecedented. That's why 68% of Seattle supports $15 now, and that's why the business moguls attacking the living wage are not citing any facts. They're just spreading doom and gloom and fear, but they give us no facts.
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on March 15, 2014 at 7:26 PM · Report this
@29 There was no impact because in 1989, as most employers were already paying at or above the min. wage which was enacted in I-518.

So, since employers were already paying at or above the min wage increase enacted in I-518


Today we are discussing min wage rates which exceed 50% of the Avg hourly wage.

It is a very different landscape.

There is mountains of evidence to indicate increasing the min wage above 50% of the avg hourly rate does indeed cause significant economic harm.


--loss of jobs for those entering the job market
--less hiring
--general price increases, which in turn decrease demand for goods and services.

Sadly, the 1988 example quoted below isn't revealing or topical as it doesn't even remotely describe the situation we are facing currently.

In the SF study, it is telling that Professor Reich stayed clear of indicating he supported $15/hour or that it would not have an adverse impact. (Food for thought!)

But if neither of these point suffice, then, raise it to $15 and you'll find out first hand.

Posted by mistral on March 16, 2014 at 7:19 AM · Report this
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn 32

What "avg hourly wage" are you citing, specifically? What "mountains of evidence" are you referring to? There's whole mountains of it, yet you don't name one bit of evidence.

Keep in mind that in the late 60s the Federal, not Washington, minimum wage was above $11/hr. Current worker productivity is $22/hr. $15 is well in line with where we should be to address poverty and the disappearing middle class. The only reason paying less than a living wage even works is that these businesses are subsidized through pubic assistance to underpaid workers.

Cite your evidence. And is any of these threatened restaurant empires going to open their books?
Posted by Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn on March 16, 2014 at 11:09 AM · Report this

1) Washington State prepares regular reports (most recent 2012 & 2013) where the avg. hourly wage rate is cited. Its on the web and easily located.

2) There are many, many reports on the adverse effects which result when one raises the min wage beyond 45% to 50% of the avg. hourly rate. The key point in these reports and studies discusses productivity and I would suggest you focus your attention on this key element of wage /price relationships. (again these are easily located on the internet. ...I suggest you read them before commenting further)

3) The avg. hourly rate is most favorably increased through increased productivity. The higher the avg. hourly rate, the greater latitude exists to raise the min wage.

The keys to greater productivity are:

--WORK EXPERIENCE ....which will be very hard to get when the entry rate is $15/hour. Those entering the work force for the first time without an education, better job skills or experience will be "closed out" .

--EDUCATION--thankfully tax dollars paid, by lets see businesses which are used to support these valuable programs are available. But I guess these are "subsidized" benefits that accrue only to business owner in your closed world of thought. Those who get an education, better skills, medical care, buy homes ...through Fannie Mae etc are all "puppets of big business".

INow, then raising the min wage beyond 50% of the avg hourly wage is most likely to result in the following:

--loss of jobs for those entering the job market
--less hiring and actually layoffs
--general price increases, which in turn decrease demand for goods and services.

None of these outcomes will accrue to the benefit of the poor, middle class or those trying to enter the job market. (Incidentally, they won't be good for business owner either.)

If this is the utopia your camp seeks, then by all means, vote $15/hour.

It will be interesting to see how the city copes with lower business taxes, sales tax, b&o tax, payroll taxes to pay for those out of work and needing assistance.

But I'm sure you have already thought of that and will come up with a new plan ...maybe socialism or communism. Those were very successful as we saw in Russia, Eastern Europe and China.

Posted by mistral on March 17, 2014 at 9:30 AM · Report this

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