Seattle Surprise! (To No One Who Is A Libertarian Economist)
Minimum wage in Seattle goes up...employment rate goes down.
Andrew Moran writes at EconCollapseNews that the Seattle restaurant industry has suffered the worst job loss since the 2009 recession:
The American Enterprise Institute (AEI) released a report Sunday that showed the unintended consequences of the phasing in of the $15 minimum wage in the city of Seattle. In the month of May, Seattle restaurants shed 1,000 jobs, which is the worst decline since Jan. 2009, when 1,300 jobs were eliminated.The large number of layoffs occurred one month after Seattle increased the minimum wage to $11 on Apr. 1. Last year, city council designed the measure to gradually raise the minimum wage to $15 per hour by the year 2017. Even with the gradual phase-in it's creating havoc in the jobs market.
via @Mark_J_Perry








This consequence is so blindingly obvious that one has to wonder if it was really unintended.
Rex Little at August 10, 2015 11:42 PM
There's the saying "SJWs always lie". The thing is, lying implies that the person is actually aware of the truth.
Progressives always deny reality, when it gets in the way of their wonderful ideas. They lie to themselves first and foremost. Afterwards, they expect understanding and forgiveness, because they meant well.
a_random_guy at August 11, 2015 5:24 AM
Phase in rarely works how politicians want. People aren't stupid. They can see where things are going. After all, it is written down on a piece of paper. So negative future impacts get implemented today and positive future impacts cause people to delay until they happen.
Ben at August 11, 2015 5:32 AM
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
Some dead white guy anticipating a_random_guy's comment. If you want to deceive others, you must be able to deceive yourself.
And that goes along with something Scott Adams put into one of his Dilbert books (paraphrase): it isn't what you've done that matters, it's what you say you've done, and what you say you'll do in the future.
Also, many politicians are idjits who can't do math. I'd give my local example, but it makes me so angry that blood shoots out of my eyes...
I R A Darth Aggie at August 11, 2015 6:24 AM
I live in Seattle and actually the consequences haven't really been felt yet. The reason for this the fact that the city is probably in its biggest boom ever. Starbucks, Boeing, MSFT, bio techs, and particularly Amazon are all on fire. This is masking what's coming.
When we get to the next downturn is when the wage hike will be felt. By then of course the morons who passed the law will be gone not that they'd take responsibly anyway.
We're going to end up with loads of chain restaurants and not much else because no one else will be able to afford the start up and operational costs of supporting that wage. It is very sad.
Some Guy at August 11, 2015 7:02 AM
"I live in Seattle and actually the consequences haven't really been felt yet. The reason for this the fact that the city is probably in its biggest boom ever. Starbucks, Boeing, MSFT, bio techs, and particularly Amazon are all on fire. This is masking what's coming."
I wonder if it's going to wind up like what happened to Birmingham in the 2000s. The area's economy was booming thanks to growth in the medical and finance industries there. (Dr. James Andrews, well-known to sports fans, has his offices in the area.) But Birmingham city and Jefferson County (the county Birmingham is in) had horribly corrupt and incompetent government. Birmingham depopulated while business moved to the suburbs, particularly in adjacent Shelby County, where the residents were smart enough to not vote for "blue model" government. The result: A "hollow core" metro area, with a deserted central city surrounded by wealthy suburbs, some of which have become almost as large as Birmingham itself.
Better government is finally taking root in Birmingham as the last of the die-hard Democrat voters of the previous generation die off, and urban pioneers start to move in. But it's going to be a long haul to put the city back to where it was headed in the 1990s.
Cousin Dave at August 11, 2015 7:24 AM
Oh, and regarding Seattle, there's this "unintended" consequence: Wage workers ask for cut in hours so they don't lose their welfare benefits. The system screamed "game me", so they did.
Cousin Dave at August 11, 2015 7:28 AM
But, they have a "living" wage now! The law says so.
Just like we all have health "care" now with Obamacare.
charles at August 11, 2015 9:33 AM
According to Reaganomics, the people with the $15 jobs will now trickle down the wealth to the suddenly unemployed, right?
Right!
Gog_Magog_Carpet_Reclaimers at August 11, 2015 9:42 AM
According to Reaganomics, the people with the $15 jobs will now trickle down the wealth to the suddenly unemployed, right?
Right!
Posted by: Gog_Magog_Carpet_Reclaimers at August 11, 2015 9:42 AM
Your * argumentum ad snark * gets less rational every week.
Regan wasn't an economist. Milton Freidman was, and the Chicago school has been pretty much spot on in their predictions of what happens when government mandates a high minimum wage.
Isab at August 11, 2015 12:08 PM
Here's the thing that everyone always misses in these types of discussions: There are people whose #1, overriding goal in life is to do as little work as possible without starving. In a libertarian, free-market economy, there would be absolutely nothing wrong with that; it would simply be a lifestyle choice. People who value free time above a higher standard of living could choose that, and it would be no skin off of anyone else's nose.
It's when the rest of the economy has to subsidize these people that the problems start. Remember, their goal is to do as little work as possible. Preferably zero. So if they can find a way to do zero work and still live, that's what they will do. Of course, this means that their lifestyle has to be subsidized -- either directly, by welfare, or indirectly, by things line minimum wage (essentially, requiring a private entity to bear the cost of public welfare). They will always game the system to their advantage, and they will be good at it because they have a lot more free time to pursue it than the people who are working to pay the subsidies.
Cousin Dave at August 11, 2015 1:08 PM
Sorry this is so long and rambling:
Liberal economics is based on a demand-side (Keynesian) theory that consumer spending drives economic growth. Raising the minimum wage is an attempt to put more money in the hands of consumers.
Supply-side economics theorizes that the ready availability of investment capital drives job creation and economic growth.
It's not about party affiliation, it's about economic theory.
Hoover [R] and FDR [D] implemented demand-side policies that halted the country's recovery from the Great Depression in its tracks.
Kennedy [D] implemented a mix of demand- and supply-side economics and jump-started the economy - which LBJ [D] subsequently wrecked by ignoring the advent of inflation.
Carter [D] and Nixon [R] were unable to contend with that inflation. Nixon's demand-side wage and price controls (a Keynesian solution to inflation) had only a negative impact. Ford's [R] Whip Inflation Now (WIN) was nothing but a ludicrous feel-good attempt to encourage personal savings and fiscal discipline.
Reagan [R] implemented supply-side policies and drove a strong economic recovery that lasted well into the Clinton Administration (6-8 years after Reagan left office).
Clinton [D] was somewhat agnostic about economic theories. He was mostly a demand-sider, but he had a lot of headwind left over from Reagan and governed with a mix of demand- and supply-side policies.
GW Bush [R] and Obama [D] relied on demand-side infusions of money and the economy during both their administrations was sluggish at best (before anyone jumps in with the 2008 crash, the economy actually grew during the first 6 years of Bush's presidency).
Both theories have their strengths and weaknesses - as well as times and conditions under which they would be the appropriate economic policy or part of the appropriate policy.
Boosting the minimum wage is a demand-side solution that puts more money into the hands of workers. However, it ignores the supply-side problem of coming up with the money to pay the higher wages.
Politicians like it because it sounds good to voters - "higher wages." Unions like it because their contracts are often indexed to the minimum wage. Employers don't like it because they're the ones who actually have to come up with the money to pay for a politician's feel-good program, usually by raising prices or reducing labor costs (layoffs, fewer hours, offshoring, etc.). Voters often fail to understand that higher labor costs drive higher prices and/or higher unemployment.
Progressives compound their errors with arguments of "fairness." Progressives think it is only "fair" that everyone have a certain minimum lifestyle - and they index that minimum lifestyle to the lifestyle of the rich and famous. If Donald Trump can have a TV in his bathroom, Bill the Hamburger Flipper should be able to aspire to that as well. It's not "fair" that some people make more than others, that some people have more advantages than others.
They don't understand that a worker must provide value for the wages received - lest that worker is not worth hiring and keeping. That value the worker provides is in the mix of hard skills (e.g., programming, financial analysis, welding, etc.) and soft skills (e.g., work ethic, creativity, knowledge, salesmanship, interpersonal skills, etc.) that he brings to the employer to meet the employer's needs. Unskilled workers bring very few hard skills to the table - hence "unskilled."
By raising the bar on the value the worker must provide with a limited skill set (by raising the minimum wage the employer is required to pay), higher minimum wages make it next to impossible for the average unskilled worker to clear that hurdle and for the employer to justify hiring someone who can't clear that hurdle.
And yes, there is such a thing as unskilled workers. Granted, there are some skills associated with all jobs, but the unskilled worker's skills can usually be easily and quickly taught to another employee - or done by a machine.
The solution is a supply-side one - to teach graduates of our school systems useful skills instead of graduating them with diminished education levels and telling them the diploma means that they're ready for the world. We're lying to them with social promotions and dumbed-down curricula. We've put graduates of the least rigorous degree program in charge of training our workers and citizens for a rigorous world.
The Earned Income Credit is also a way of lifting a worker's lifestyle without unduly burdening the economy and the taxpayer.
Progressives think the answer is to use government to smooth any bumps in the road for the less-advantaged, not seeing that this is actually making it more difficult for them to get ahead by raising the obstacles to an unsurmontable height and giving them no experience in surmounting obstacles.
Easy money in the student loan system has driven college tuition to stratospheric levels, putting even a vocational college education all but out of reach for the average poor person.
Higher starting wages make companies unwilling to train workers on anything but company procedure, so getting trained on-the-job is out of the question. Unions rarely offer training to non-members, so that's not an avenue for betterment.
Government welfare has done nothing but trap recipients in a vicious cycle of dependency. The reason so many minimum wage workers in Seattle want fewer hours to keep their benefits is that even with a $15 minimum wage, government dependency pays better. We've made striking out on your own financially impractical.
Government mandates and programs will not alleviate poverty. We've been fighting a government-sponsored "War on Poverty" since 1964 and poverty's winning.
All the minimum wage does is use a government mandate to pass part of the burden of paying for social programs onto companies so politicians can pat themselves on the back for increasing social welfare and not raising taxes. The politicians never mention that they forced companies to raise prices or reduce labor costs instead and that the economy is equally or more burdened by that than it would have been by higher taxes.
Conan the Grammarian at August 11, 2015 1:40 PM
"Higher starting wages make companies unwilling to train workers on anything but company procedure, so getting trained on-the-job is out of the question."
Correct.
At my Federal contractor, "we operate by procedure".
Except, we don't. Lying is the routine, and operators are left wondering just why anyone in management has a job when workaround after workaround is necessary to keep a task going.
The expenses are horrible, because we just plain do not LOOK at what we are doing before we do it - and those implementing procedure have no field experience.
Thank you, taxpayers: last November, five of us got put in plastic suits because of mercury concerns - which were never addressed with a sample! - and then we did it a SECOND time because somebody didn't recognize we would only be inserting a camera another 1.5 inches in a clear liquid on the second try.
Got an engineering degree, but have no aptitude for the field? Come to SRS, where management will believe you even as you leave records of your own mistakes everywhere!
Radwaste at August 11, 2015 2:25 PM
"Regan wasn't an economist."
Which is Reagan's fault for choosing Regan as Secretary of the Treasury.
As for Reagan, no, definitely not an economist. But he could read that teleprompter like nobody's business, eh? Eh?
Gog_Magog_Carpet_Reclaimers at August 11, 2015 2:59 PM
At least Reagan had the balls to discuss stuff in over 1,000 radio addresses from '75 to '79) w/to the public.
You can't hide too much when you are out there showing what you've got.
Bob in Texas at August 11, 2015 5:11 PM
The Seattle city council is now preparing to enact a $25 tax on all firearms and a 5-cent per round tax on all ammunition sold in the city.
The council members believe the new tax will decrease gun violence in Seattle in a few different ways:
1. It will make the city safer from gun violence by making it too expensive for violent criminals (who can't pass background checks, are usually not employed, and would be averse to acquiring guns that could easily be traced to them) to buy new guns and ammunition from licensed dealers within the city limits.
2. They can use all that extra revenue to fund programs to counteract gun violence in the city.
3. It puts the cost of the anti-gun violence programs on the people the council members perceive as being most responsible for the violence: law abiding, gainfully employed citizens who can pass criminal background checks and afford new firearms.
This is no shit.
Can anyone predict any unintended or "unintended" consequences?
Ken R at August 11, 2015 5:19 PM
It reminds me of the old challenge: If these ideas are so wonderful, perhaps you can point out where they are successful?
And you missed something: the law-abiding citizen will use lots of ammo, legally.
The thug only needs a few rounds.
Radwaste at August 12, 2015 6:52 AM
I was reading an op-ed by a gun control advocate who took umbrage with the argument that Chicago has strict gun control laws and a high crime rate so gun control is ineffective.
The advocate argued that it wasn't accurate to judge gun control's effectiveness with Chicago as the yardstick since gun sales and ownership in the surrounding cities was legal and crooks simply drove to the suburbs to get their guns, came back to Chicago, and committed crimes with guns.
I guess Seattle's criminals won't drive to the suburbs to get a gun, so the denizens of Seattle will be safe.
Conan the Grammarian at August 12, 2015 8:27 AM
About the minimum-wage issue: how many of you object to my article now that the minimum wage hike's effects are occurring as I predicted?
Radwaste at August 12, 2015 9:42 AM
Leave a comment