By: Jonathan Sosnay
A new study by the Evans School of Public Policy and Governance shows Seattle’s minimum wage increase has also increased unemployment. No surprise there given what happened in Puerto Rico. Basic economics states the higher the price of something, the less that something will be purchased. In the case of Seattle’s experiment of increasing their minimum wage to $15 an hour, it seems that something was low-skilled jobs.
Admittedly, Seattle has experienced an economic boom since the city first instigated its stair-stepped wage increase. One of the city’s biggest growth sectors is in the labor market. However, according to the Seattle Times, “Much of that success, though, can be attributed to trends separate from the minimum-wage law itself, such as the growth of Seattle’s tech sector and its construction boom.”
Getting to the real impact of the minimum wage increase required analysts to exclude all other economic factors that would offset the inevitable job loss. To do this, the study created a fake or “synthetic” Seattle with “aggregated ZIP codes outside the city that had previously shown numbers and trends similar to ZIP codes inside the city.”
When employment numbers were compared from the “synthetic” to the real Seattle, there was a difference in employment numbers. According to the Seattle Times:
Pay for low-wage workers climbed more in real Seattle than in synthetic Seattle, while their employment rate and hours climbed slightly less.”
The difference points to the economic realities of bypassing the market and artificially controlling prices through government. According to Forbes, the difference in the findings between the real and fake Seattle prove the point:
Employment rates and hours climbed because [Seattle’s] economy is booming. But they climbed less in areas where the minimum wage was raised than they did in areas where it was not. The difference between those two is the employment lost to the higher minimum wage.”
The point here is not to paint Seattle as having a labor market on the edge of collapse because of the minimum wage. Rather the study’s findings are proof that minimum wage increases do negatively affect employment rates.
As Peter Schiff explains in The Real Crash:
So, what effect does the minimum wage have on employment? It eliminates from the job market any job that an employer thinks is worth less than minimum wage. For a few borderline cases, it will mean slightly higher wages, but their benefit comes at the cost of the millions who are out of work because the job they would have is now illegal.”
There are long term consequences that Seattle is likely to face in the future. Outlawing entry-level, low-paying jobs dries up opportunities for on-the-job training. This is exacerbated by recent regulations and forced paid internships. The road to the middle-class via hard work and sacrifice is full of regulatory potholes, put there by an over-regulating government penalizing employers.
Increasing low-earning jobs also forces employers to seek cheaper technological solutions. Simply put, if employers can’t afford to hire low-paid workers, they will look to replace them all together. This does nothing but punish the very people minimum wage laws purport to protect. According to U.S. A. News and World Report:
Raising the minimum wage is not the best way to fight income inequality because it will increase the rate of job automation that already disproportionately affects people with less education and lower incomes.”
Seattle’s economic boom is something the city should appreciate. Not every section of the country is so lucky.