Did I miss something, or does he basically cite restaurant employment numbers and declare the hike a smashing success? While that's one metric, using only that metric to declare success seems just as arbitrary (& biased) as those who were selectively using other metrics to declare it a failure.
maybe the reasoning is something like more people have money to spend eating out (also would include more shopping) feeding more money into those businesses which causes them to hire more people. this line of reasoning MAY be able to point to a larger systemic effect of raising the min wage
True, this could be used as a sort of indicator for that, but I think a more clear-cut set of metrics to see such an effect would be participation rate and unemployment rate among low-skilled workers ... but I have no idea where one would find such data.
Restaurants drive demand for minimum wage workers and have challenging margins. They print money in good times, and go broke quickly when things go bad. They tend to be a proxy for alot of other consumer facing businesses.
They are also the most desirable low-wage jobs as the hours are more consistent. They're challenging to fill because you have to hustle at restaurants, while the average grocery store employee is much less utilized. Bussing tables is a much better gig than folding pants at the Gap, supermarket or whatever -- you easily lose 25-35% of your hours when weather or other variation reduces foot traffic.
What you missed is that detractors, notably Tim Worstall at Forbes and Mark Perry at AEI, were specifically pointing to this metric to state their case against the wage increase. It isn't arbitrary to use the very metric presented by the detractors to prove their point invalid.
The argument, very strongly made by minimum wage opponents, was that Seattle's restaurant industry would collapse entirely. Hacker News even ran several stories about the impending collapse.
That... didn't happen, and it's important to hold predictors accountable if we want to make better predictions in the future.
It was starting to happen (with research published), and then the general nationwide economy started booming. It's easy to hide local problems when the national economy is amazing. If we hit a recession, the low-skill Seattle workers are going to suffer greatly.
If you carefully pick the start and end points, you can "prove" a lot of things that just aren't so.
The title is overselling it. One paper was wrong. Plenty of other economists didn't see anything wrong with raising the minimum wage to $15/hour. There are figures that are too high, but $15 is not too high for Seattle.
Yes, they changed the title. The original title was "Seattle min wage hike results are opposite of economic dogma's predictions", the same as this HN submission. I guess they realized it was misleading, as I pointed out.
That is key in my view. We should do away with a federally mandated uniform minimum wage all together and instead mandate that states pay a minimum wage that makes sense for their state. Get all the smart economists in a room and figure out what formula makes sense whether its based on the state level GDP (or even county), cost of living in that area, economic opportunity, etc.
While $15 isn't too high for Seattle restaurant workers, it is much too high for a rural North Carolina town with population 15,000 where there are a few restaurants in town and the average plate cost is 9 bucks and the center of the town is the Walmart shopping center.
Depends on what target you want to set. (Mostly, the exact target doesn't matter, as long as you meet it.)
NGDP levels in America have mostly been on a straight line since 2009 or so. (But they had a big change in trend compared to before.)
Still, that doesn't answer anything about the effects of minimum wage. An NGDP target would still make minimum wage laws a bad idea. But since NGDP evolution is fixed, you'd see an RGDP decrease and hence an inflation hike.
The American sort-of Fed fixes inflation instead.
If you are into this kind of thing, do read George Selgin's Less Than Zero. (Eg at https://iea.org.uk/publications/research/less-zero). It gave me an appreciation of the classic gold standard---and how it managed to keep NGDP stable under the right regulatory circumstances, that I was missing before.
Yes, there are some places where price increases are clearly visible - franchise fast food is a big one.
Otherwise, cost of living in the region was already increasing. I've been in Seattle for the last six years and can't really recall many other dramatic price increases.
I think the research as a whole is pretty clear - if you raise the minimum wage a small amount compared to the market rate, it has small positive effect on worker pay, and a small negative effect on business costs (ie costs go up a little bit)
If you have a large increase above market wages, you have a large positive effect on worker pay (for those who continue to be employed) and a large negative effect on costs (costs go up a lot), leading to reductions in employment through businesses closing / increased automation.
A simple thought experiment suggests it is certainly possible to set the minimum wage too high - if that weren’t the case, why not set the minimum wage to $1000 per hour?
They[0] always look at restaurants. Go look at child care workers and see what happens to them. A restaurant can work with fewer employees, but child care facilities have to maintain a certain number per child. Would be interesting to see research into that aspect of raising wages.
What are the margins on child care? How elastic is demand for childcare?
Not all child care has equally strict limits on the ratio (it depends where care is being provided), increasing wages may drive people to more loosely regulated child care, or just push it into the informal sector, or make more women stay home rather than work.
Are there alternative economic models which correctly predicted this? How high do they think that we can make the minimum wage without affecting employment?
I don't think this an indictment of the typical supply & demand model. The model is pretty flexible since the shape of the various curves will dramatically change what happens.
The real argument isn't about the model, but rather the shape of the demand curve for low skill labor.
I think taking the two versions of this study as separate analysis is interesting, since it shows a shift in employment from individual restaurants to chains. Which itself is a real impact from the rising minimum wage, but one not (itself) impacting labor.
The article says just a decent model would help — it claims there was a glaring flaw in the models that predicted disaster:
> Much of the hand-wringing was based upon a deeply flawed University of Washington study. As we noted in 2017, the study’s fatal flaw was that its analysis excluded large multistate businesses with more than one location. When thinking about the impact of raising minimum wages, one can’t simply omit most of the biggest minimum-wage employers in the region, such as McDonald’s and other fast-food chains, or Wal-Mart and other major retailers. These are the very employers that were the main target of the minimum-wage law; indeed, the law established an even higher minimum wage of $15.45 an hour for companies with 500 or more employees.
I have not read the new paper, but the NYT article that Bloomberg links to summarizes it rather differently.
> A research team including economists from the University of Washington has put out a paper showing that Seattle’s recent minimum-wage increases brought benefits to many workers employed at the time, while leaving few employed workers worse off. (NYT)
> The workers who worked the most ahead of the minimum-wage increase appeared to do the best....The workers who worked less in the months before the minimum-wage increase saw almost no improvement in overall pay — $4 a month on average over the same period, although the result was not statistically significant. While their hourly wage increased, their hours fell substantially....It’s the final group of workers — the potential new entrants who were not employed at the time of the first minimum-wage increase — that Mr. Vigdor and his colleagues believe fared the worst. They note that, at the time of the first increase, the growth rate in new workers in Seattle making less than $15 an hour flattened out and was lagging behind the growth rate in new workers making less than $15 outside Seattle’s county. This suggests that the minimum wage had priced some workers out of the labor market, according to the authors. (NYT)
In addition, the Bloomberg article claims that the original research contradicts "the vast majority research on minimum wages" which holds that "modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way", which is irrelevant, because Seattle raised its minimum wage by 37% in one year--neither modest nor gradual.
> Seattle raised its minimum wage by 37% in one year
This is objectively false.
There is no one year period in which Seattle raised it's minimum wage 37%. The most aggressive increase I can see was 18%, and it only applied to large employers in 2011-2012.
I got the number from the NYT article, which said $9.47 to $11.00 in April 2015, then $11.00 to $13.00 in January 2016. That is a one year period, and a 37% increase.
I'm not sure why there are two different numbers, but it was extremely rapid. I'd be happy to leave it using the more conservative figures from your table that they increased it by 36% in two years, as that's still neither modest nor gradual.
For businesses with 500 or more employees and who do not pay towards their employees' medical benefits, the change was 9.47 (2014) -> 11 (2015) -> 13 (2016).
For businesses with fewer than 500 employees and earn tips the change was 9.47 (2014) -> 10 (2015) -> 10.50 (2016) and is currently $12/hr.
It's important not to mischaracterize the increases as a monolithic uniform increase, because for many, many businesses the increases have been gradual and modest.
If one increase went into effect in April 2015, and another went into effect in January 2016, that means you have employees whose minimum wage was $9.47 one day, and $13 less than 365 days later. Arguably, writing it as three separate years makes it appear more gradual than it was.
So, where does the transition from 2014 to 2016 add up to less than 365 days? I'm confused by your numbers. In 2015 the minimum was was $11 and 2016 it was $13. Not sure where you're getting your gripe from.
It’s also worth pointing out that this is Bloomberg Opinion, which is basically junk. Very disappointing what happened over there, it went from a news source I read daily and enjoyed to a url which I use to discount headlines I read elsewhere.
> Seattle raised its minimum wage by 37% in one year--neither modest nor gradual.
How did you come up with this number?
Even for large employers which don't provide health benefits (the group affected with the most aggressive wage increase), the minimum wage increased from $11 to $15 an hour over the course of three years.
Small employers with less than 500 employees can still use tips and health benefits to reach $15 / hour.
I thought the summary was pretty good. The objections you're presenting here are nitpicky, the NYT article is just one of the links provided and the thrust of the article that ideologically motivated opposition to minimum wage hikes was proven to be incorrect, and that is right.
Clearly, there is some minimum wage that would hurt the economy, cause inflation and cost jobs. Is it $15/hr? How about $100/hr? So we shouldn’t be arguing about a principle (“minimum wages don’t hurt the economy”), but rather an amount (“$15/hr doesn’t hurt Seattle’s economy”).
Articles like this irritate me because they’re about proving “the other side” wrong rather than engaging in reasonable debate.
The real increases in quality of life would come from nationwide paid time off minimums, removal of "exempt" employees from overtime, removal of tipped employee exemptions, and removal of health insurance benefits for employers.
That would force employers to hire more people, increase demand, and therefore increase pay, at the same time as giving people a decent quality of life.
I'm not sure that's true. I've lived long enough to see Wal-Mart move into my home town (rural NC, population 5K) and see it obliterate local businesses, in part because it paid it's workers low wages compared to incumbent family businesses that paid employees well.
It really doesn't. Every year, the US does numerous natural experiments as states raise (or don't) their minimum wages while similar states do the opposite. Every time, without fail, the states which raise their minimum wages do better economically. Doesn't matter if they're a rich state or a poor state, coastal or inland, populous or not.
That doesn't answer the question of whether or not it is causal. Usually states that increase their minimum wage do so because of political pressure and that happens when prices have been rising, so they may have been on the upswing to begin with.
Do you believe that the researchers who study these sorts of things are, without exception, complete idiots who never thought of the possibility that there might be other factors changing at the same time as the minimum wage change?
because I've been poor when they increased the minimum wage and it didn't do fuck all for me, I was a contractor, and all it did was increase the cost of living around me.
I don't have an informed opinion on whether or not there's a causal relationship between wage hikes and economic growth, but "This didn't help me" != "This didn't help my city/state".
no the point is that the idea of the goodness of a minimum wage is very much tied to a very middle class idea of what constitutes labor, and the reality is that large classes of people are not necessarily in a situation where it is a useful societal tool. As typical, one of the hidden costs - increased cost of living - hurts the least privileged the hardest.
The parent’s claim was “the states which raise their minimum wages do better economically”, which is not the same as “every person benefits from an increased minimum wage”. You’re arguing a counter-point to a point that nobody has made.
The other important consideration is illegal aliens who are likely working off the books and paid less than minimum wage. Without strict rules regarding employment of illegal aliens, businesses will continue to take advantage of illegal hiring practices.
I think the 'rules' are pretty clear, you cannot hire illegal aliens, and also illegal aliens are not allowed to work. You must mean strict enforcement? Strict enforcement leads to strict deterrence. Absent enforcement, employer and employee have a much reduced set of disincentives.
It's a consideration, but the article claims that reported restaurant employee-hours is increasing, so we can determine that off the book labor is not cannibalizing the restaurant industry's on the book labor.
You are not able to ascertain the degree to which restaurant employment would increase if there was a lot of illegal employment or no illegal employment because the statistics are, by nature, unreported.
Is a system where people getting paid too much to be pulled up in class, out of poverty & struggling really a system people would want to keep?
Does this system require poverty & struggling? Does it require an alternate class of people who still do required work, but will always be living right on the edge?
There was a lot of fearmongering. As other communities are evaluating or adopting a similar strategy to Seattle, I would say it's a relevant article, because now we have better data to rely on.
It's similar to when cannabis was legalized in Colorado. There was a lot of panic and fear. Other communities waited and observed, then embraced.
I also thought the article could have a good purpose in at least asking the other side to consider questioning its assumptions. Too much in economics is considered dogma; those who question it end up effectively committing apostasy.
On the contrary, much of modern economic thought is not dogmatic. It only seems dogmatic because the most accessible pieces of the discipline are picked up and refracted through a political lens. It's hard to get access to what economists actually think if your source is e.g. Bloomberg, WSJ, NYT, reddit, HN, etc.
Ok, but I have some formal training in economics and I wholeheartedly disagree. I'm mostly talkibg about macro, public policy and political economy here.
It has always been this way. It took the Great Depression to usher in Keynesian econ--theories riddled with previously crackpot ideas--and that had to be done by a well-connected and- respected insider, with trendy language and trendy, but to be fair elegant and clever, maths.
Most of the John List's in econ really do become truckers. It's not science or engineering where results matter. Almost alll the results dont matter.
And I never was able to question the min wage dogma in undergrad.
"Now of course, we should consider the argument that Seattle’s economic growth has been so strong that it overwhelms any negative effects from the higher minimum wage."
It's possible that without the minimum wage hike, there would have been even more than 150K jobs, and the minimum wage hike limited the number of jobs to only 150K.
I see 0 intellectual honesty from this article. 1. No reputable economists would make outrageous predictions like "if you do A I think B will definitely happen regardless of externalities"; 2. If you are going after a study go after its facts and logic, not the author's affiliation that's just disgusting; 3. It claims this subject cannot be studied with proper control. I don't even know what to say about that.
Yeah, I concluded that after scanning and seeing the "Some Job Killer" graph that essentially shows that the population in Seattle has increased since 1990.
I had a friend that was a manager at a chain restaurant in Seattle, and we had some interesting discussions.
I'm a big fan of paying a living wage. I'm also not a fan of tipping (just raise the prices and pay people fairly). However, I have no experience in the industry.
He has lengthy (20+ years) experience, from server, bartender, cook, and manager. (all from outside of Seattle - he was a recent transplant) He's a fan of tipping and hates the minimum wage increase.
His experiences (+ fears, hard for me to say which is which) were that:
* without tipping, even with the increased base rate, it was hard to get people to show up for the short but intense crunch periods, because with tipping people are used to being able to work a weekend shift and pocket several hundred dollars.
* If you aren't in a university area or someplace that would have people with flexible schedules and a need for short bursts of money, you would have hiring issues in general, because people earning minimum wage would just go to a less demanding job with more convenient hours.
One particular area of disagreement - he felt that the national chain's policies made it very hard for him to adjust to Seattle's quirks - rules made to pay $2-$4/hr didn't work here, but he couldn't change them and blamed Seattle's rules. I argued that if the business model didn't work, the answer was to change the business model, but it sounded hollow and elitist even to me (even while I still believe it).
I've talked with a few other acquaintances that have done server jobs and they all echo similar thoughts - even those that hated tipping agreed that they would use it to get a lot of cash on short notice and were skeptical that the current system would survive a transition into a flat wage. What I've not heard is any ideas on how to DO that transition, or if it's worth doing. (I have beliefs, but not facts)
If the large chain won't adjust, that seems something that would give smaller businesses an advantage, and seems like a positive to my ears.
As for tipping, people don't tend to tip based on quality of service (see Adam Ruins Everything) [https://www.youtube.com/watch?v=q_vivC7c_1k], and instead tends to be based more on attractiveness and ethnicity. A normal wage is fairer.
The argument though is that not all hours are created equal. If you are working during hours where utilization is peak, i.e. lunch and dinner, then you will make more money than if you were working off hours on a tipping system because you serve more customers regardless of the customer tipping criteria. This naturally incentivizes people to work the more difficult hours by compensating them better for those hours. If pay is flat at the minimum wage, then you incentivize the hours of least utilization where people do not have to work as hard for equal pay or worst case drives people into other easier professions.
Right. That's the issue with moving from tipping to flat wages. Yet the US is one of the only countries that does tipping, and plenty of other professions have this issue in the US, so how do they manage ?
I understand the problem, I want the next step of "how do we get to a less crappy system?"
Nurses commonly bid for shifts. Undesirable shifts pay far more than desirable ones. Christmas morning will pay far more than an ordinary Thursday afternoon.
I guess that isn't exactly flat wages, but it isn't tips either. I think it beats both.
So at the restaurant, early evening on Valentine's Day would pay a lot more than the late afternoon on an uninteresting day.
Total agreement on the fairness. In this case, the tipping issue is that, since it's per table, busy times result in more tip money than non-busy times, which a flat per-hour wage doesn't account for. With tips, a restaurant can get someone to come in for 2-3 hours because they'll be making quite a bit more per hour (even with the unfairness of tips) than if they had a flat wage. At slower times, a shift might be 4-8 hours and not make nearly as much, but the place doesn't need as many staff then.
> If you aren't in a university area or someplace that would have people with flexible schedules and a need for short bursts of money, you would have hiring issues in general, because people earning minimum wage would just go to a less demanding job with more convenient hours.
In other words, without tips you'd have to pay people more. But didn't we already know that?
I think the key is you’d have to pay them very significantly more. I have a buddy that can earn $200 in tips in 5 hours on a busy night. Nobody is going to pay a waiter $40/hour.
Sounds like the value being extracted from employees was much less than the stress and obligation being put on them. If these periods are very high value to the restaurant owner then over time they'll develop a higher hourly pay for these crunch periods. Another way to implement is a small bonus per table served. These are all solvable problems. But I agree it sounds like his largest argument is "some things will be different" and a bit of fear of the unknown.
I have many friends in the restaurant business in Seattle, both on the business and employee side, and mostly not in the national chains (and the national chains that do well in Seattle usually defer employment practices to their Seattle sites). The labor situation has a lot of similarities to software engineers in the big tech cities actually.
The reality is that there is an extreme shortage of restaurant labor in Seattle, so employees have all the leverage right up to the point where it breaks the business. The employees I know have told me that if you want to take three weeks off etc, at this point you just tell the manager because they can't say no or even negotiate really -- they won't fire you because they won't be able to replace you, and they know the employees will quit if they don't say yes and would be employed equally well within an hour of looking.
To make matters even more crazy, there are investors running around Seattle offering buckets of capital to the employees at restaurants to start their own restaurants. I know a few former-employees-now-restauranteurs that have taken the money, and had very tech startup-like learning curves which has been fun to talk about. (Like I said, oddly analogous to tech boom craziness.)
These things ebb and flow. At some point in the not-too-distant future, the businesses will have all the leverage again.
>The entirety of these
gains accrued to workers with above-median experience at baseline; less-experienced workers
saw no significant change to weekly pay. Approximately one-quarter of the earnings gains can be
attributed to experienced workers making up for lost hours in Seattle with work outside the city
limits. We associate the minimum wage ordinance with an 8% reduction in job turnover rates as
well as a significant reduction in the rate of new entries into the workforce.
Thank you! I found that very enlightening, regarding systemic thinking about the American economy, especially this paragraph:
> How did we get here? Our analysis shows there have been two major regimes since 1960. Before 1980 too much money was being injected into the Labor loop. Consumers had more demand than investors could supply, and inflation was on the rise. After 1980, we entered a new regime that favored investors. The change in regime was likely due to tax changes implemented during the Reagan presidency, cutting taxes on investments. We see that this change was a good idea, but it went too far and has remained in place for too long.
The big question then is how do we escape the capture of tax policy by investors who individually like being able to save but who collectively are extracting rent from consumers, at the cost of human development?
Seattle's minimum wage hike has as a massive confounding factor the most extreme economic boom in Seattle's history. The wage hike could have significant adverse effects and you'd never notice in the current economic environment in that city. It should lead to serious doubt that this is replicable in most other cities or even Seattle in other times.
The assertion that this demonstrates anything useful about minimum wages, rather than the fact that the city has a severe labor shortage and is swimming in money, is dubious. Show me the data from a city with median economic growth and median unemployment statistics and I would find it more convincing.
That's acknowledged in the second-to-last paragraph from the article:
> Now of course, we should consider the argument that Seattle’s economic growth has been so strong that it overwhelms any negative effects from the higher minimum wage. No one should ignore that possibility and we will be among the first to acknowledge that this could be the case. We may never know for sure, because in economics you don’t get a chance to run control experiments; you only have the facts at hand.
> The problem occurs when these folks are confronted by facts that are at odds with their belief systems. The options are to either rethink your ideology or alternatively ignore the data. Most participants seem to have done the latter.
Especially with politically charged studies there will be conflicting data reported. It's hard to tell which data accurately collected and reported.
From the chart, it showed employment rising in the region overall, which probably erased any effect from only Seattle raising its minimum wage. I wouldn't describe the economic principal of Supply/Demand as "dogma", more like an established model. It states, all things being equal, rising costs will result in less demand. Here, the region overall is expanding jobs (Amazon, Microsoft, etc). So, this does not disprove Supply and Demand and the economic fact that artificially rising wages artificially lowers demand for jobs.
I'm curious to how US economists (or perhaps reporters) are able to ignore most of western-Europe when talking about labour costs. Shouldn't these countries be head deep in unemployment for the last 60 years or so if this was strictly true?
What also always seem to go unmentioned is the wage share. Surely it can go up, not just down?
I wonder if negative results would be present had the economy been worse off. When your business has grown 10% because of a booming economy it’s easier to cover extra expenses. Will Seattle fair as well in a recession than other economies? I really doubt it.
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[ 0.25 ms ] story [ 175 ms ] threadThey are also the most desirable low-wage jobs as the hours are more consistent. They're challenging to fill because you have to hustle at restaurants, while the average grocery store employee is much less utilized. Bussing tables is a much better gig than folding pants at the Gap, supermarket or whatever -- you easily lose 25-35% of your hours when weather or other variation reduces foot traffic.
example: http://www.aei.org/publication/seattles-new-minimum-wage-law...
That... didn't happen, and it's important to hold predictors accountable if we want to make better predictions in the future.
If you carefully pick the start and end points, you can "prove" a lot of things that just aren't so.
That is key in my view. We should do away with a federally mandated uniform minimum wage all together and instead mandate that states pay a minimum wage that makes sense for their state. Get all the smart economists in a room and figure out what formula makes sense whether its based on the state level GDP (or even county), cost of living in that area, economic opportunity, etc.
While $15 isn't too high for Seattle restaurant workers, it is much too high for a rural North Carolina town with population 15,000 where there are a few restaurants in town and the average plate cost is 9 bucks and the center of the town is the Walmart shopping center.
I don't see how they couldn't. It seems to me raising minimum wage is just pouring gasoline on the inflation fire.
NGDP levels in America have mostly been on a straight line since 2009 or so. (But they had a big change in trend compared to before.)
Still, that doesn't answer anything about the effects of minimum wage. An NGDP target would still make minimum wage laws a bad idea. But since NGDP evolution is fixed, you'd see an RGDP decrease and hence an inflation hike.
The American sort-of Fed fixes inflation instead.
If you are into this kind of thing, do read George Selgin's Less Than Zero. (Eg at https://iea.org.uk/publications/research/less-zero). It gave me an appreciation of the classic gold standard---and how it managed to keep NGDP stable under the right regulatory circumstances, that I was missing before.
Otherwise, cost of living in the region was already increasing. I've been in Seattle for the last six years and can't really recall many other dramatic price increases.
If you have a large increase above market wages, you have a large positive effect on worker pay (for those who continue to be employed) and a large negative effect on costs (costs go up a lot), leading to reductions in employment through businesses closing / increased automation.
A simple thought experiment suggests it is certainly possible to set the minimum wage too high - if that weren’t the case, why not set the minimum wage to $1000 per hour?
[0] Journalists
Not all child care has equally strict limits on the ratio (it depends where care is being provided), increasing wages may drive people to more loosely regulated child care, or just push it into the informal sector, or make more women stay home rather than work.
The real argument isn't about the model, but rather the shape of the demand curve for low skill labor.
I think taking the two versions of this study as separate analysis is interesting, since it shows a shift in employment from individual restaurants to chains. Which itself is a real impact from the rising minimum wage, but one not (itself) impacting labor.
> Much of the hand-wringing was based upon a deeply flawed University of Washington study. As we noted in 2017, the study’s fatal flaw was that its analysis excluded large multistate businesses with more than one location. When thinking about the impact of raising minimum wages, one can’t simply omit most of the biggest minimum-wage employers in the region, such as McDonald’s and other fast-food chains, or Wal-Mart and other major retailers. These are the very employers that were the main target of the minimum-wage law; indeed, the law established an even higher minimum wage of $15.45 an hour for companies with 500 or more employees.
> A research team including economists from the University of Washington has put out a paper showing that Seattle’s recent minimum-wage increases brought benefits to many workers employed at the time, while leaving few employed workers worse off. (NYT)
> The workers who worked the most ahead of the minimum-wage increase appeared to do the best....The workers who worked less in the months before the minimum-wage increase saw almost no improvement in overall pay — $4 a month on average over the same period, although the result was not statistically significant. While their hourly wage increased, their hours fell substantially....It’s the final group of workers — the potential new entrants who were not employed at the time of the first minimum-wage increase — that Mr. Vigdor and his colleagues believe fared the worst. They note that, at the time of the first increase, the growth rate in new workers in Seattle making less than $15 an hour flattened out and was lagging behind the growth rate in new workers making less than $15 outside Seattle’s county. This suggests that the minimum wage had priced some workers out of the labor market, according to the authors. (NYT)
In addition, the Bloomberg article claims that the original research contradicts "the vast majority research on minimum wages" which holds that "modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way", which is irrelevant, because Seattle raised its minimum wage by 37% in one year--neither modest nor gradual.
In short, this is not a summary to be trusted.
This is objectively false.
There is no one year period in which Seattle raised it's minimum wage 37%. The most aggressive increase I can see was 18%, and it only applied to large employers in 2011-2012.
https://www.seattle.gov/Documents/Departments/LaborStandards...
Here is another source that mentions $9.32. https://www.natlawreview.com/article/seattle-minimum-wage-in...
I'm not sure why there are two different numbers, but it was extremely rapid. I'd be happy to leave it using the more conservative figures from your table that they increased it by 36% in two years, as that's still neither modest nor gradual.
For businesses with fewer than 500 employees and earn tips the change was 9.47 (2014) -> 10 (2015) -> 10.50 (2016) and is currently $12/hr.
It's important not to mischaracterize the increases as a monolithic uniform increase, because for many, many businesses the increases have been gradual and modest.
How did you come up with this number?
Even for large employers which don't provide health benefits (the group affected with the most aggressive wage increase), the minimum wage increased from $11 to $15 an hour over the course of three years.
Small employers with less than 500 employees can still use tips and health benefits to reach $15 / hour.
1. the second study claimed a significant negative impact, when the Bloomberg article omits that
2. the first study did not contradict economic orthodoxy, when the Bloomberg article claimed it did
The first is an essential claim of the article. The second is also likely to mislead.
Articles like this irritate me because they’re about proving “the other side” wrong rather than engaging in reasonable debate.
That would force employers to hire more people, increase demand, and therefore increase pay, at the same time as giving people a decent quality of life.
We don't have minimum wage laws where I live, and it's one of the most affluent societies on the planet. So perhaps I am missing something.
https://en.wikipedia.org/wiki/Motivated_reasoning
You might want to ask yourself "why was it important for me to try to find some reason why this information was wrong?"
Does this system require poverty & struggling? Does it require an alternate class of people who still do required work, but will always be living right on the edge?
It's similar to when cannabis was legalized in Colorado. There was a lot of panic and fear. Other communities waited and observed, then embraced.
It has always been this way. It took the Great Depression to usher in Keynesian econ--theories riddled with previously crackpot ideas--and that had to be done by a well-connected and- respected insider, with trendy language and trendy, but to be fair elegant and clever, maths.
Most of the John List's in econ really do become truckers. It's not science or engineering where results matter. Almost alll the results dont matter.
And I never was able to question the min wage dogma in undergrad.
It's possible that without the minimum wage hike, there would have been even more than 150K jobs, and the minimum wage hike limited the number of jobs to only 150K.
I'm a big fan of paying a living wage. I'm also not a fan of tipping (just raise the prices and pay people fairly). However, I have no experience in the industry.
He has lengthy (20+ years) experience, from server, bartender, cook, and manager. (all from outside of Seattle - he was a recent transplant) He's a fan of tipping and hates the minimum wage increase.
His experiences (+ fears, hard for me to say which is which) were that: * without tipping, even with the increased base rate, it was hard to get people to show up for the short but intense crunch periods, because with tipping people are used to being able to work a weekend shift and pocket several hundred dollars. * If you aren't in a university area or someplace that would have people with flexible schedules and a need for short bursts of money, you would have hiring issues in general, because people earning minimum wage would just go to a less demanding job with more convenient hours.
One particular area of disagreement - he felt that the national chain's policies made it very hard for him to adjust to Seattle's quirks - rules made to pay $2-$4/hr didn't work here, but he couldn't change them and blamed Seattle's rules. I argued that if the business model didn't work, the answer was to change the business model, but it sounded hollow and elitist even to me (even while I still believe it).
I've talked with a few other acquaintances that have done server jobs and they all echo similar thoughts - even those that hated tipping agreed that they would use it to get a lot of cash on short notice and were skeptical that the current system would survive a transition into a flat wage. What I've not heard is any ideas on how to DO that transition, or if it's worth doing. (I have beliefs, but not facts)
As for tipping, people don't tend to tip based on quality of service (see Adam Ruins Everything) [https://www.youtube.com/watch?v=q_vivC7c_1k], and instead tends to be based more on attractiveness and ethnicity. A normal wage is fairer.
I understand the problem, I want the next step of "how do we get to a less crappy system?"
I guess that isn't exactly flat wages, but it isn't tips either. I think it beats both.
So at the restaurant, early evening on Valentine's Day would pay a lot more than the late afternoon on an uninteresting day.
In other words, without tips you'd have to pay people more. But didn't we already know that?
That's not obviously true.
The reality is that there is an extreme shortage of restaurant labor in Seattle, so employees have all the leverage right up to the point where it breaks the business. The employees I know have told me that if you want to take three weeks off etc, at this point you just tell the manager because they can't say no or even negotiate really -- they won't fire you because they won't be able to replace you, and they know the employees will quit if they don't say yes and would be employed equally well within an hour of looking.
To make matters even more crazy, there are investors running around Seattle offering buckets of capital to the employees at restaurants to start their own restaurants. I know a few former-employees-now-restauranteurs that have taken the money, and had very tech startup-like learning curves which has been fun to talk about. (Like I said, oddly analogous to tech boom craziness.)
These things ebb and flow. At some point in the not-too-distant future, the businesses will have all the leverage again.
>The entirety of these gains accrued to workers with above-median experience at baseline; less-experienced workers saw no significant change to weekly pay. Approximately one-quarter of the earnings gains can be attributed to experienced workers making up for lost hours in Seattle with work outside the city limits. We associate the minimum wage ordinance with an 8% reduction in job turnover rates as well as a significant reduction in the rate of new entries into the workforce.
http://necsi.edu/research/economics/steeringecon
> How did we get here? Our analysis shows there have been two major regimes since 1960. Before 1980 too much money was being injected into the Labor loop. Consumers had more demand than investors could supply, and inflation was on the rise. After 1980, we entered a new regime that favored investors. The change in regime was likely due to tax changes implemented during the Reagan presidency, cutting taxes on investments. We see that this change was a good idea, but it went too far and has remained in place for too long.
The big question then is how do we escape the capture of tax policy by investors who individually like being able to save but who collectively are extracting rent from consumers, at the cost of human development?
The assertion that this demonstrates anything useful about minimum wages, rather than the fact that the city has a severe labor shortage and is swimming in money, is dubious. Show me the data from a city with median economic growth and median unemployment statistics and I would find it more convincing.
> Now of course, we should consider the argument that Seattle’s economic growth has been so strong that it overwhelms any negative effects from the higher minimum wage. No one should ignore that possibility and we will be among the first to acknowledge that this could be the case. We may never know for sure, because in economics you don’t get a chance to run control experiments; you only have the facts at hand.
https://evans.uw.edu/sites/default/files/w25182.pdf
https://perfect-free.typepad.com/the-perfect-and-the-free/20...
Especially with politically charged studies there will be conflicting data reported. It's hard to tell which data accurately collected and reported.
What also always seem to go unmentioned is the wage share. Surely it can go up, not just down?