Seattle’s minimum wage hike leads to job losses

Seattle is supposedly now the beacon for attempts at socialism. With Kshama Sawant leading the charge, Seattle may be a hipster’s (sporting a Che Guevara of course) paradise as its lawmakers are portraying themselves as the crusaders of social and economic justice. How’s it working out so far?

Well, the first step was to raise the minimum wage to $15. The second step was to create a lot of wealth for everybody. Has the second step been achieved? We’ll let you figure that out.

According to a new chart from the American Enterprise Institute, Seattle has lost jobs since gradual hike to the minimum wage went into effect. The increase in Seattle’s unemployment rate between April and December 2015 was the greatest over any other nine-month period since the economic collapse. With the minimum wage hike in effect as of April 2015, the loss of jobs was the highest over a nine-month period since the Great Recession.

Here is the chart:

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The minimum wage, and any subsequent increases, only leads to despair for society’s most vulnerable. It hurts the uneducated, the inexperienced, youth, blacks, immigrants and the list goes on. The only people who benefit from a higher minimum wage are the unions, the corporations and the social welfare workers.

Henry Hazlitt explains it quite nicely in “Economics in One Lesson“:

“The first thing that happens, for example, when a law is passed that no one shall be paid less than $30 for a forty-hour week is that no one who is not worth $30 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.”

Or, as economist Murray Rothbard succinctly puts it, the minimum wage is compulsory unemployment.

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Comments

  1. Studies have shown minimum wage increases do not cause wide scale unemployment.

    The buying power of the minimum wage reached its peak in 1968 at $10.97, adjusting for inflation in 2015 dollars. The unemployment rate went from 3.8% in 1967 to 3.6% in 1968 to 3.5% in 1969. The next time the unemployment rate came close to those levels was after the minimum wage raises of 1996 and 1997. Business Week observed in 2001, “Many economists have backed away from the argument that minimum wage [laws] lead to fewer jobs.”

    Numerous states raised their minimum wages higher than the federal level during the 1997-2007 period the federal minimum wage remained stuck at $5.15. Research by the Fiscal Policy Institute and others showed that states that raised their minimum wages above the federal level experienced better employment and small business trends than states that did not.

    When the minimum wage increase was on the MT ballot in 2007 you had all the business owners on the news saying it would cost jobs and businesses would close their doors. It did not happen. Now 8 years later the minimum wage in MT is $8.05, so low paid workers have a few more dollars and the rich business owners have happier workers.

    A series of rigorous studies by the Institute for Research on Labor and Employment at the University of California, Berkeley, significantly advanced the research on minimum wage employment effects. Minimum Wage Effects Across State Borders compared all neighboring counties in the U.S. located on different sides of a state border with different minimum wage levels between 1990 and 2006 and found no adverse employment effects from higher minimum wages.

    In a 2013 report, Why Does the Minimum Wage Have No Discernible Effect on Employment?, the Center for Economic and Policy Research spotlighted two recent meta-studies analyzing the extensive research conducted since the early 1990s; they conclude that “the minimum wage has little or no discernible effect on the employment prospects of low-wage workers. The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms’ overall costs and only modest relative to the wages paid to low-wage workers.” The Center report explores varied means of adjustment by employers such as increased worker productivity and diminished wage gap between lower and higher paid employees, noting, “But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.”

    In the 2015 report, Minimum Wage Policy and the Resulting Effect on Employment, the research institute Integrity Florida observes, “Economists cite several reasons why increases in the minimum wage, which raise employers’ cost, generally do not cost jobs. Increased pay adds money to workers’ pocketbooks and allows them to buy more goods and services, creating higher demand, which in turn requires hiring more workers. The higher wage may make it easier to attract applicants and results in less turnover of workers, lowering costs of employers.” They report, “Our examination of employment statistics in states found no evidence of employment loss in states that have increased the minimum wage and more evidence that suggests employment increases faster when there is an increase in the minimum wage.”

    • Minimum wage increases may have a temporary effect on already employed individual, but this is temporary until inflation has a chance to catch up. Also, in effect, minimum-wage laws/ price controls basically substitute unemployment for otherwise entry level jobs.

      You can cherry pick studies, but the BULK of Economists DO NOT believe Minimum Wage mandates benefit poor people. But its GREAT for Politicians.

      The REAL minimum wage is always ZERO. Just because you arbitrarily affix a price to something, it does not increase its value or demand.. as in this case it relates to value in productivity vs. cost.. aka “Trade-offs”. The basic laws of supply and demand apply to labor, just like any other commodity. You raise the price beyond the current market value.. supply goes up and demand goes down. (but now the price doesn’t go down.. as it should, so demand stays stagnated). The bottom line of economics is, value is only determined by what someone is willing to pay you for something. It doesn’t matter what you think its worth in $.. that would be called “Perceived Value”. Don’t confuse the two.

      By the most basic economics.. a price artificially raised, tends to cause more to be supplied and less to be demanded than when prices are left to be determined by supply and demand in a free market. The result is a surplus.. whether the price is set artificially high as that of farm produce, lumber… OR LABOR. Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount..and if it is not, that worker is unlikely to be employed.

      Yet price controls on wages.. “Minimum Wage” OR any initiative.. these laws are almost always discussed politically in terms of the benefits to workers/people receiving those wages. The FACT is in this world, regardless of what we want to believe is.. The REAL Minimum Wage is always.. ZERO- $0.00 regardless of the laws, and what we want.. And that is the wage ($0.00) that many workers receive after of the creation of a government-mandated wage law, because they either lose their jobs or fail to find jobs when they enter the labor force.

      An examination of the EMPIRICAL EVIDENCE from various countries around the world is overwhelming on this fact. Except in the failed policies of Socialism, or the head of Paul Krugman.. As well as institutions left leaning academia and government.. were ideas and philosophy can continue to survive without having to actually work. Business, Industry and legitimate Economists have never had this luxury. It works, or it doesn’t.

      Academia also has the luxury of revising history and left leaning bureaucrats/ Politicians can “spin” the results.

      An economy exists to make trade-offs, and a market economy makes the terms of those trade-offs plain with price tags representing the relative costs of producing different things. To have politicians arbitrarily change the price tags, so that prices no longer represent the real costs, is to defeat the whole purpose. Reality doesn’t change when the government changes price tags.

      For example- Talk about “bringing down health care costs” is not aimed at the costly legal environment in which medical science operates, or other sources of needless medical costs. It is aimed at price control, which hides costs rather than reducing them. Hidden costs continue to take their toll… and it is often a higher toll than when these costs are freely transmitted through the marketplace. Less supply, poorer quality, and longer waits have been the consequences of price controls for all sorts of goods and services, in all sorts of societies, and for thousands of years of human history.

      “For the government to make some things more affordable is to make other things less affordable, and to destroy people’s freedom to make their own trade-offs as they see fit, in the light of economic realities, rather than political visions. Trade-offs remain inescapable, whether they are made through a market or through politics. The difference is that price tags present all the trade-offs simultaneously, while political “affordability” policies arbitrarily fix on whatever is hot at the moment. That is why cities have been financing all kinds of boondoggles for years, while their bridges rusted and their roadways crumbled. ” -T Sowell .

      If price controls worked… The former Soviet Union would be the greatest country in the world today. (Not to mention, The unions are always pushing it, which is no surprise… Globally/ historically unions have always used this tool to raise their own wages, even though they make well above the minimum wage. Most union contracts have a clause that permit them to renegotiate contracts or increase wages when the minimum wage is raised. And who is beholden to the Labor Unions???)

      The over whelming fact of economics is, productivity generates material wealth and human capital period. A preoccupation with the distribution of wealth in a free market economy… Or in socialism does little to change the individuals material wealth or standard of living but infract reverses it over time.

      • I have not seen any change in the ability to get a job in MT since the minimum wage has been indexed to inflation.
        There are many more things that go into job loss and creation than the minimum wage. In 1975 right out of high school with no skills I made $9.10 per hour loading trucks for Gallo Wine, in Commerce, CA. When many of my friends were making $2.10 per hour minimum wage. A friend of mine knew the supervisor and got me the job. That is how it works in the real world.

      • Yes But it still does not change the fact that here in MT before the minimum wage law was passed the business owners were crying it will cost jobs and businesses will close. It did not happen. Our unemployment rate followed the nation in the up and down swing through the recession staying 1 to 2 points below the national average.

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