If there's anything that will get a healthy dinner conversation going (or get people fighting), it's the idea of the $15 minimum wage. A better wage for core entry-level workers is hard to argue against as a reasonable person. I want it to be true as a moderate, but my business focus always makes me wonder - is it actually a good idea?
This is the problem being a moderate. I'll get 5-7 emails from each side on this post just crushing me for even daring to be in the middle. Only the polar extremes get the oxygen and attention these days.
Fortunately, there's some research pouring in on the minimum wage that seems to be based on reality, not theory.
There’s bad news from Seattle for advocates of a $15-an-hour minimum wage law. Turns out the measure’s costs to the city’s low-wage workers have outweighed benefits by 3 to 1, according to a new city-commissioned study by University of Washington researchers. The average low-wage worker has lost $125 a month because of the higher-wage decree, the study found — even before it is fully phased in.
David Autor, a leading labor economist at MIT, told The Post the study seemed “very credible” and suggested that it might have enough “statistical power” to “change minds” in the perennial argument over the minimum wage.
Autor was wrong — not about the study’s credibility, but about its potential for moving people off their “priors.” The Seattle study met a furious counterattack from proponents of a $15 minimum. Defenders of the law came armed with a much rosier assessment of its impact by economists at a pro-labor University of California at Berkeley think tank, produced a few days before the more skeptical one came out.
It seems that Seattle’s mayor, a big advocate of the $15 minimum, had gotten a heads-up on the impending negative study and asked the Berkeley group to weigh in. Seattle Weekly called it “an object lesson in how quickly data can get weaponized in political debates like Seattle’s minimum wage fight.”
Woof. Go dig in if you dare, but the UW study found that businesses react to the $15 wage by contracting total work hours, which results in low-wage workers in the area losing $125 per month due to the law. That's interesting. But if you go look at the Berkley study, you'll see the opposite.
If you really want to geek out, see this article at 538. It talks about limitations of both studies.
My gut tells me this. Businesses probably will restrict total hours to low-wage workers when minimum wage hikes hit because the margins for success are so thin. The left and anyone else can shake their fist and wax poetic about evil owners trying to stay cost-neutral on labor expense.
But the critics don't risk their capital or their livelihood. Add more labor costs to any business with limited margins and one of two things is going to happen - prices are getting raised or labor cost is getting scrutiny. Prices are hard to raise from a competitive perspective.
I believe the UW study. Sucks to be an owner when laws get passed by people who don't have to live with the consequences.