Friday, July 29, 2016

As I Predicted, Seattle's Minimum Wage Rise Is Reducing Employment

As I Predicted, Seattle's Minimum Wage Rise Is Reducing Employment - Forbes
"...My claim was, by the standards of basic and conventional economics, entirely uncontroversial.
A rise in the price of something will lead to people purchasing less of that thing. 
So a rise in the price of low-skill labor will lead to employers purchasing less of low-skill labor.
The claim is not (and never has been) that raising Seattle’s minimum wage will cause the economy to become some howling wasteland of huddled masses desperately looking for a job.
It is that with a higher minimum wage there will be less low-skill employment than without a raise in that minimum wage.
And yes, of course the effects of a minimum wage are going to be marginal when laid against all the other things that can happen to a labor market. (But remember that all economics happens at the margins.)
Image result for price elasticity cartoonThis is, as I said, conventional economics.
And yet I’ve been pilloried as “not getting it” by those who believe in some alternative universe where the simplicity of economics do not hold.
But now we have a report on exactly what has been happening in Seattle’s labor market.
Seattle’s labor market has thrived since the city became the first major metropolis in the country to pass a law setting its minimum wage on a path to $15 per hour.
The city’s job-growth rate has been triple the national average, for example.
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, according to a new report that University of Washington researchers presented to the City Council on Monday.
I have no problem with any of that. Employment is up, unemployment is down.
But those other factors entirely swamp the effects of a minimum wage change.
The report also notes:
Pay for low-wage workers climbed more in real Seattle than in synthetic Seattle, while their employment rate and hours climbed slightly less.
That’s the important finding here.
Employment rates and hours climbed because the 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..."

No comments: