In a delicious bit of irony, a study done by the University of Washington and supported and partially funded by the city of Seattle, found that city’s recent minimum wage hike to have disastrous dis-employment effects on minimum wage earners.
The multi-year study comes on the heels of a University of California Berkeley study finding, interestingly enough, exactly the opposite results, claiming that no jobs were lost due to the hiked wages, though the study did limit its study to food service jobs. Minimum wage supporters were quick to tout the success, including Seattle mayor Ed Murray.
“When we passed the $15 minimum wage, we were warned the economy would tank, jobs would dry up, and employers would flee,” Murray said. “Today, Seattle’s economy is the strongest it has ever been, unemployment is at a historically low rate, and employers are competing for employees.”
The city of Seattle’s minimum wage, depending on the size of the business, was around $10/hour in 2015. That amount has been raised twice since then, with the most recent hike on January 1, 2017 to $15/hour if the employer doesn’t pay towards medical benefits or $13.50 if they do pay towards medical benefits. In comparison, the federal minimum wage is $7.25 in 2017.
Specifically, the University of Washington study found the following (nicely summarized here):
- The number of hours worked by low-wage employees was reduced by 3.5 million hours per quarter. This is both by the thousands of jobs lost, as well as by the reduced hours of those lucky enough to remain employed.
- The large wage increase had the effect of reducing total income paid to low-wage employees over $120 million per year at “single location Seattle businesses”. These are small businesses with small margins that can scarcely afford to see their labor costs rise so dramatically.
- The unfortunate end result is that on average, low-wage earners made $125 per month less in total income.
As I’ve said before and has been repeatedly borne out in practice, wage and price controls do not work. Not only do they not work, they target and hurt the very people they are intended to help: minorities, the young and unskilled, and the working poor.