In June 2014, Seattle became the first city in the nation to increase its minimum wage to $15 per hour.
The increase, pushed for by the “Fight for 15” movement, is designed to be implemented in phases over the course of seven years (to be completed by 2021).
Seattle’s minimum wage is currently at $13, and we’re already seeing the negative effects. According to a University of Washington report, low-level workers are taking home less money than they were before the wage hike.
Employers have dealt with the 3% increase in minimum wage by reducing the number of employees and cutting the hours of those still employed. On average, minimum wage workers are now making $125 less per month than they were before the increase. Meanwhile, Seattle has lost a whopping 5,000 jobs.
“This is a two-edged sword,” explains Jacob Vigdor, a researcher currently studying the effects of the wage hike. “If you raise this minimum wage the way Seattle did you run the risk of actually taking money away from the people you are trying to help.”
Seattle saw an abrupt increase in the number of workers making over $19 an hour following the hike; this is because some businesses responded to the increase by hiring more skilled workers in hopes they could generate more revenue.
This is bad news for less experienced workers trying to find a job.
“Basically, what we’re doing is we’re removing the bottom run of the ladder,” says Vigdor.
We’re seeing similar effects in New York, which lost 1,000 restaurants last year following an increase in minimum wage.
Restaurants in the Big Apple are forced to pay employees $12 an hour, which is $1 more than other minimum wage employers.
Employment growth at fast-food restaurants in New York City shrank to just 3.4% in 2016, compared to 7% from 2010-2015. The number of jobs available for servers, cooks, and dishwashers grew by a measly 1.4% in 2016, compared to a 4.4% annual growth between 2010 to 2015.
Jillian Henze, a member of the Seattle Restaurant Alliance, says the “business model is evolving” thanks to the wage increase. “Some of our members are reducing the number of employees or hours,” said Henze. Others are adding fees and service charges to checks to make up for the increased labor cost.
Seattle Mayor Ed Murray, who supports the Fight for 15 movement, denies the hike is a problem and insists that “Seattle’s economy is booming, with wages increasing and restaurants and retail among our fastest growing job sectors.”
When you look at the data, you see that job growth is strong only for those making more than $19 per hour.
Editor’s note: The whole notion that every job has to provide a “living wage” is wrong headed and dangerous. From a practial standpoint, one doesn’t support a family of four working at entry level at McDonald’s, there is not enough value there. However, these jobs can be very useful for teens and college students and provide entry level responsibility. We are about to take that opportunity away from them. Remember the real minimum wage is $0.
From a philosophical point of view, individuals and families should be allowed and required to take care of themselves. A minimum wage designed to take entry level jobs and make them into career positions interferes with businesses, but also signals a false “entitlement” message, that if you bother to show up at work, then you are automatically entitled to more than you produce. This disconnect between value provided and wage returned is a very socialist idea. And you know how we feel about socialism.