Economists of all schools tend to agree that a higher minimum wage leads to job losses (SEE: Paul Krugman on the minimum wage: 1998 vs. 2005), whether it’s in the short-term (hey, Seattle) or in the long-term (look at McDonald’s rapid automation). It wasn’t much of a surprise then to see a new report that showed the Seattle restaurant industry lost the biggest number of jobs since the 2009 Great Recession.
The American Enterprise Institute (AEI) released a report Sunday that showed the unintended consequences of the phasing in of the $15 minimum wage in the city of Seattle. In the month of May, Seattle restaurants shed 1,000 jobs, which is the worst decline since Jan. 2009, when 1,300 jobs were eliminated.
The large number of layoffs occurred one month after Seattle increased the minimum wage to $11 on Apr. 1. Last year, city council designed the measure to gradually raise the minimum wage to $15 per hour by the year 2017. Even with the gradual phase-in it’s creating havoc in the jobs market.
“Perhaps Seattle’s restaurant employment will recover, or perhaps it will continue to suffer from the upcoming full 58% increase in labor costs for the city’s restaurants that will be phased in during the coming years – time will tell,” wrote AEI’s Mark Perry. “What we know for sure is that there are now 1,300 Seattle area restaurant workers who were employed in January who are no longer employed today, so it looks like the Seattle minimum wage hike is getting off to a pretty bad start.”
Seattle’s restaurants are facing intense ramifications over rising mandated labor costs. But it should be noted that the restaurant industry has been recovering in cities and states where there isn’t a $15 minimum wage.
Despite the vast evidence of negative consequences regarding hiking the minimum wage (SEE: 8 key arguments against raising the minimum wage to $15 per hour), anti-poverty organizations and union activists continue to endorse a $15 minimum wage. They say it will lead to economic prosperity and assist the impecunious. However, it leads to a larger number of problems for millions of people: job losses, slash in hours, qualifications enhancement, rising cost of living and pricing the unskilled, uneducated and youth out of the labor market.
Here is what economist Milton Friedman wrote in a Newsweek column 43 years ago:
“The true minimum wage is zero—the amount an unemployed person receives from his nonexistent employer.”