
Seattle: Highest Minimum Wage, Lowest Unemployment Rate - MaysonL
http://ritholtz.com/2016/10/seattle-highest-minimum-wage/
======
kardashev
The article is a bit misleading. The minimum wage is $11/hr. in Seattle and
will reach $15 for large businesses by next year, and by 2021 for small
businesses.

Amazon by itself is bringing in thousands of people per year, none at the
minimum wage. To attribute a good economy in Seattle to a minimum wage is a
non-sequitur.

I find it curious though how some can think raising pay by fiat will help the
poor. If this were really so why would there be a schedule to phase it in
slowly over 7 instead of immediately? I think part of the reason is that it is
expected for natural monetary inflation to cancel out the effect of the min
wage increase. If we assume 2% target inflation from the FED then that would
be a 15% reduction in buying power of the dollar, reducing the burden on
businesses for the increase in wage price.

With phased-in increases we tend to see effects that are within the error of
margin. Naturally if there was an overnight price increase on anything there
would be immediate measurable ramifications, which is probably why the phase-
ins are always slow. If people truly thought the effects were positive then
they would push for the changes to be as immediate as possible to leave no
room for doubt about the effect of the policy.

Meanwhile the homeless situation in Seattle is getting progressively worse.
With the increase in minimum wage, some people are paid more, but at the
expense of some poor people not being able to acquire a job at all. Certainly
we could find a better way of handling things.

~~~
gotthemwmds
> I find it curious though how some can think raising pay by fiat will help
> the poor.

Er, I don't know how much time you spend around "the poor", but I can
guarantee giving them piles of cash money will help, regardless of how much
ivory tower logic the average HN reader can spin on it from their $3000/month
condo with a Tesla in the garage.

I will admit I stopped reading your comment after that sentence.

~~~
godd2
There are people whose labor is worth $8/hr but not $11/hr. Raising the
minimum wage will not result in "giving them a pile of cash", it will result
in them no longer having a job.

~~~
Chos89
Like the people who clean your buildings, so I can assume companies will stop
using cleaning services? If some job needs to be done it will be paid.

~~~
MichaelBurge
Grocery stores have something like a 1-2% margin, and people are often price-
sensitive when shopping for food. So they'd have trouble raising prices.
Probably they'd try to depend on self-checkout machines more. I imagine fast
food companies like Taco Bell would lose sales.

High-margin software companies wouldn't care about the cost of their janitors,
like you suggest.

~~~
drakonandor
> High-margin software companies wouldn't care about the cost of their
> janitors, like you suggest.

The CEO might not, but an enterprising facilities manager would certainly try
to cut expenses by replacing the pleb who vacuums the hallway with a plus-size
Roomba.

------
sytse
Correlation is not causation (fighting urge to post XKCD comic). "Unemployment
fell, most recently to less than 4 percent, more than a full percentage point
lower than the national rate." The fall can be explained by an improving
economy. Unemployment was 4.2% on Dec. 31, 2013
[https://ycharts.com/indicators/seattle_wa_unemployment_rate](https://ycharts.com/indicators/seattle_wa_unemployment_rate)
National rate was 6.7% at that time. So the difference between Seattle and
national has been reduced, they are relatively worse off after introducing a
higher minimum wage. EDIT Can't resist anymore
[https://xkcd.com/552/](https://xkcd.com/552/)

~~~
jseliger
Yes. Seattle also has an incredibly strong economy and (sadly) very tight
housing policy: [http://jakeseliger.com/2015/09/24/do-millennials-have-a-
futu...](http://jakeseliger.com/2015/09/24/do-millennials-have-a-future-in-
seattle-do-millennials-have-a-future-in-any-superstar-cities/) that likely
inhibits low-wage workers from living (or moving) there at all.

In the meantime, many Texas cities: [http://time.com/80005/why-texas-is-our-
future](http://time.com/80005/why-texas-is-our-future) are building tons of
affordable housing, even as superficially liberal cities like Seattle
legislate it out of existence.

~~~
shepardrtc
I moved to Seattle a year ago and this is 100% true. Everyone talks about how
liberal the city is, but they sure as hell won't do anything about housing or
rising rents. Could they build more? Sure. But they don't want to spoil their
view of the Space Needle and the mountains.

~~~
techsupporter
I don't mean to sound hostile but you're painting the Seattleites who came
before you with a rather broad brush. I own a free-standing house in Seattle
and I am _very much_ a YIMBY (Yes In My Backyard). So are many of my friends.
We are fighting an entrenched mentality of "this is how it has always been and
this is how it will always be," but we are winning more than we are losing.
HALA, while watered down, is doing things like Mandatory Inclusive Zoning and
requiring upzones around areas of transit infrastructure.

Yes, it's very slow going. But this is also a case of every time we "win,"
another 5,000 people show up with mountains of cash who can outbid everyone
else in the region. Seattle is very popular as a place to live so we're trying
to outrun both normal demand _and_ the demand for housing that doesn't cost
multiple thousands of dollars. It is a tough slog.

(By the way, Seattle has some of the most far-reaching renter protections in
the state. Rent control is barred by state law but Seattle requires landlords
to do a lot of things, provide a lot of notice, and limit rent increases a lot
more drastically than any of our surrounding suburbs. Oh, and those suburbs
aren't exactly building their own capacity, either. Good luck getting a large
multi-residence project approved on Mercer Island or in Bellevue outside of
the downtown core. Redmond is right out. Shoreline and Renton are doing better
than most; Shoreline even pushed back against its own citizens to say "look,
light rail stations deserve density around them so we're doing it, sorry
nearby single-family homeowners.")

------
terravion
If you click on the link to Bloomberg you can read the conclusion:

"Some time ago, I suggested that we would eventually learn whether higher
minimum wages were going to kill jobs. The early data is in, and so far it
doesn’t look like they do."

This seems like an awfully broad conclusion to draw.

It is indisputable that minimum wage kills or exports some jobs (I know this
is a fact because my company is planning to add fewer low wage employees and
contractors in our local area based largely on minimum wage changes). The
question is whether the people who benefit from the supply restriction (people
in low, but not minimum wage jobs) benefit and then spend enough to cancel out
the aggregate cost of the distortion. It may be possible that in Seattle's
unique situation this was/is true, but even this conclusion seems like a
"politically motivated economic analysis, this was what the [pr]opponents
hoped would happen because it fit with way they think world should work."

One of the questions that these pieces skirt around is how inefficient is the
"unregulated" labor market? Clearly some intervention in the labor market,
like banning non-competes, makes is closer to efficient, but the question is
what inefficiency is the minimum wage solving, and what is it creating?

~~~
pm24601
Sounds like your company runs a pretty marginal business. A worker that is
making $10/hr ($20K / year ) now makes $15 / hr or $30K /year doesn't add the
$10+K in extra value.

When I hear about companies that are not "adding jobs because of minimum
wage", I go back later and look in the news reports.

Invariably:

1\. the company was doing badly already and use the minimum wage, tax
increases, etc. to excuse their internal business difficulties.

2\. the companies competitors are some how immune to the minimum wage increase
and those competitors are expanding and hiring,

3\. OR the company in question quietly really did hire more people because
surprise, surprise, higher pay resulted in more discretionary income to spend
and business was up.

~~~
tropo
In a properly functioning free market, the company should be doing badly! They
might like to earn a nice fat profit, but that isn't what the rest of us like.
Competition should get rid of that. Having business difficulties is the
expected norm.

So point #1 should normally be true, and any change that makes business more
difficult should normally cause business failures and resulting job loss.

------
awinter-py
If you assume that (a) most manufacturing has moved to cheap-labor countries
and (b) rent is a more important input than labor for restaurants / starbucks,
then it's not surprising that raising the wage floor doesn't hurt employment.

The wage floor imposed by cost of living is already in effect in most major
cities.

A bolder move would be to impose a tariff on goods and services that use sub
minimum wage labor.

------
michaelkeenan
This doesn't affect the overall point, but the "lowest unemployment rate" part
of the headline is annoyingly unsupported. Googling "lowest unemployment city
in the usa" shows a Google featured snippet listing Sioux Falls as the city
with the lowest unemployment rate at 2.1%, which is lower than Seattle's rate.

Edit: turns out the "highest minimum wage" part is also wrong. Seattle's
minimum wage is currently $11/hour, and Washington DC's minimum wage is
$11.50. (If this is confusing after reading the article, it's because the
article didn't mention that the $15/hour rate doesn't start until 2021.)

------
jandrewrogers
Any adverse signal from changes to the minimum wage are going to be buried
below the noise floor of a Seattle economy that is extremely hot right now.
You have to account for the fact that (1) the drop in unemployment has nothing
to do with minimum wage jobs and (2) there is a general labor shortage in
Seattle that is driving up wages at all tiers regardless of the minimum wage.

If the Seattle economy was flat and they could demonstrate no impact on
employment of minimum wage workers that would be one thing, but they aren't
demonstrating that here. Given the economic conditions in Seattle, the article
is arguing from a dubious correlation.

------
todd8
According to the Washington Post the results of raising the minimum wage from
$9.96 to $11.14 per hour are mixed [1], [2]:

> Yet the actual benefits to workers might have been minimal, according to a
> group of economists whom the city commissioned to study the minimum wage and
> who presented their initial findings last week.

> The average hourly wage for workers affected by the increase jumped from
> $9.96 to $11.14, but wages likely would have increased some anyway due to
> Seattle's overall economy. Meanwhile, although workers were earning more,
> fewer of them had a job than would have without an increase. Those who did
> work had fewer hours than they would have without the wage hike.

> Accounting for these factors, the average increase in total earnings due to
> the minimum wage was small, the researchers concluded. Using their preferred
> method, they calculated that workers' earnings increased by $5.54 a week on
> average because of the minimum wage. Using other methods, the researchers
> found that the minimum wage hike actually caused total weekly earnings to
> drop -- by as much as $5.22 a week.

It seems to me that the results when the $15/hr minimum are reached are hard
to predict.

[1] the minimum wage will eventually reach $15/hr however at this point it is
only $11.14/hr

[2]
[https://www.washingtonpost.com/news/wonk/wp/2016/07/29/study...](https://www.washingtonpost.com/news/wonk/wp/2016/07/29/study-
raising-the-minimum-wage-did-little-for-workers-earnings-in-seattle/)

------
zw123456
One thing that I did not see mentioned in the thread or in the article was the
human side of things, we don't want to lose site of the fact that we are
talking about human beings who need to get a living wage. I am not saying
economic issues don't weigh in, but also there is just a moral factor that I
think should always be included in these types of discussion. I live in
Seattle and, at least most of the people I know, see that as a significant
consideration.

------
partiallypro
Seattle is also a very wealthy city already so the absorbsion of higher labor
costs is a more elastic. However, you have to look at the greater trend, the
U.S. unemployment rate has fallen quite lot since this law was ever enacted,
and Seattle already had a lower than average unemployment rate.

The full effects of the law will not be felt until it is fully enacted anyhow,
but it's important to remember that Seattle isn't some isolated economy, and
it is experiencing big economic growth from two of the largest and most
successful (and most valuable) companies in the world, Microsoft and Amazon;
not to mention just the national aggregate of economic growth.

It would be a lot more interesting to see a sector by sector breakdown of
labor slack. Restaurant closings after the law began to hike wages to the
eventual $15 spiked well above the national average. I doubt that's a
coincidence. I honestly don't think you will be able to see a significant
effect until after a recession and we can see the effects of sticky wages with
a much higher price floor.

My guess is that it will still be fairly muted, because....Microsoft and
Amazon are both based in the Seattle area; but the effects could perhaps be
better measured. Anyone doing a victory lap now is definitely jumping the gun.

------
lph
The reporting on Seattle's minimum wage hike aligns suspiciously well with
news outlets' ideological biases, almost to the point that the articles could
have been written before the wage hike even happened.

Which suggests that maybe the data are inconclusive or muddled and so everyone
is finding what they expected to find. It's a complicated situation, with many
factors that aren't touched on in this article:

1\. Seattle had relatively few minimum wage workers to begin with. The raise
doesn't directly affect most of Seattle's workforce.

2\. Seattle's booming economic numbers probably overlook the fact that the
working poor and chronically unemployed can't afford to live within city
limits. It's expensive here.

3\. The tech boom continues to flood the market with high-paid jobs, and
prices for everything are steadily raising across the board. This could be
masking effects, positive or negative, of the minimum wage hike.

4\. Meanwhile, there is a massive increase in homelessness and homeless tent
encampments. A lot of people are being left behind by the boom.

------
misterbishop
In case others are inspired by the Seattle example: you should know that their
$15 minimum wage experiment was not a result of technocratic liberalism.

It was a political fight by self-conscious socialists working in conjunction
with SEIU fast food workers.

Winning that fight required a combination of "outside" activism, and "inside"
political campaigning. The organization involved (Socialist Alternative)
actually was able to get a member named Kshama Sawant onto city council. Like
many cities, Seattle is Democrat dominated, who totally opposed $15 until they
were forced to vote on it in public.

Like so many critical political issues, the institutional technocrats will not
initiate working class reforms. They must be imposed from below, with working
class people organizing themselves.

More info here: [http://www.socialistalternative.org/2015/03/14/seattle-
won-1...](http://www.socialistalternative.org/2015/03/14/seattle-won-15/)

------
helthanatos
This article is quite biased without much proof. Clearly, doomsayers aren't
exactly correct, but who is more correct?
[https://www.dol.gov/featured/minimum-
wage/mythbuster](https://www.dol.gov/featured/minimum-wage/mythbuster) that
government page is pretty biased, with proof in small samples. Some workers
should be paid more than others, but why should the minimum wage be more than
$7.00? [http://thesovereigninvestor.com/us-economy/why-raising-
the-m...](http://thesovereigninvestor.com/us-economy/why-raising-the-minimum-
wage-will-increase-inflation/) \- that link is pretty biased, but it shows
another side of thought that is lacking, with many wage increase proponents
ignoring inflation completely. I want everyone to be able to survive, but at
what point does a high minimum wage lead to a bigger gap between the employers
and workers?

------
bko
You don't need advanced economics to understand that setting a price floor
will reduce quantity supplied and increase quantity demanded. It's evident
from logic. What other good does not respond to changes in price? Everyone
earns some amount of marginal revenue, say X, and they are paid Y where X > Y.
Is there absolutely no-one where the marginal revenue that they earn their
employer is between the old minimum wage and the new, higher minimum wage?

If you throw a rock in a lake, you probably can't reasonably measure the
impact it had on the height of the lake. But you're certain that it had an
impact. Similarly, you must use logic and reason to deduce that putting a
mandated price floor on labor will reduce the amount of labor demanded.

~~~
RangerScience
> Similarly, you must use logic and reason to deduce that putting a mandated
> price floor on labor will reduce the amount of labor demanded.

Ehhhhhh. First, according to a simple theory, yes, you are correct. This means
that if the evidence points in another direction (and the article is
suggesting it is pointing in another direction), then clearly your simple
theory is missing something.

Second, the situation is definitely more complicated than that. It's not like
the ONLY effect raising minimum wage has is on the cost of employing people;
if you're only paying attention to that one effect, sure, I'd expect your
conclusion. _But_ \- I say - _apparently_ \- I note - _in this situation_ ,
your conclusion is not occurring, so -

How do you tell whether this is due to the other, unexamined effects of
raising minimum wage, or whether it is due to other causes?

Finally:

> You don't need advanced economics to understand that setting a price floor
> will reduce quantity supplied and increase quantity demanded

...No, I wouldn't necessarily expect that. Let's say I mandate that corn costs
$10 a cob. What are effects I might expect to see?

\- Some farmers switch to making more corn, because it's now worth more (they
may not be thinking about whether people will buy it at the new price, just
that any sold is sold at $10)

\- Corn moves to be seen as a more "luxury" resource, a la the "keeping up
with the joneses" effect.

\- Some farmers switch to making less corn, because they anticipate fewer
people buying it at the higher price, since fewer people can get $10 worth of
value out of one cob. (The nominal price of corn may then rise to $10, due to
a reduction in supply moving to match demand at the new price).

Let's reverse the situation. Let's say I mandate that corn now costs $0.01 a
cob. What effects might I expect to see?

\- Only shitty corn gets made \- People find uses for cheap as shit corn, that
weren't economical before. Demand for corn rises as there are more economical
uses for it

I'm not saying that "price floor for employees" is the same as "price floor
for corn", I _am_ saying that _clearly they are not the same_ , so you
_definitely_ can't apply the same model to both and expect to predict reality.
Setting a price floor on a good is definitely different than setting a wage
floor on people.

And, I'm saying: this is more complicated than such a simple model can
predict.

Here's a question: Why are you even trying to explain economic cause and
effect through logic, rather than through statistical correlation? It's not
like you're ever going to be able to understand enough of each situation to
actually model everything* "clockwork-universe style", and that's if you can
even derive solid laws with which to run the model. Statistical tendencies
seems like a much more reasonable way to try to model everything.

* Well, maybe with mass adoption of AR.

~~~
bko
I'm explaining it through logic because statistical correlation is especially
complicated and difficult to tease out in social science. You can't take a
snapshot of one city, pre and post minimum wage and definitely conclude that
the change (or lack of change) in unemployment is due to the minimum wage.
Here's a few things to consider:

There are more people being paid under minimum wage than there are being paid
minimum wage [0]. The unemployment effect of a price floor could be partially
offset by a larger number of people being pushed to below-minimum wage jobs
(presumably under-the-table). The minimum wage isn't changed randomly, often
hire minimum wages get imposed on higher income cities. There are other
factors that happened between pre-min wage increase and post-min wage
increase. Expectations of wage increases are often implied in current
conditions. For instance, if you do that math that you can open a business and
make 10% profit margin with 50% of your expenses coming from min wage labor,
you would know that your profit margin is complete wiped out with a 20%
increase in labor cost. You know that it is likely that min wage will go up
rather soon, you will not bother opening the business. And so on...

In your corn example, sure, we don't know what would happen if a price floor
of corn at $10 were mandated (assuming the market price is less than $10). But
I think we can be pretty certain that the amount of corn demanded would drop.
Similarly, at a price ceiling below the market price, the quantity demanded
will rise, although the quantity supplied will drop, causing a shortage. Look
at Venezuela where price ceilings exist for many products.

[0] [http://www.bls.gov/opub/reports/minimum-
wage/archive/charact...](http://www.bls.gov/opub/reports/minimum-
wage/archive/characteristics-of-minimum-wage-workers-2014.pdf)

~~~
RangerScience
This is well explained, thank you!

I'd think the logic is harder to tease out than the statistical correlation;
isn't the latter more-or-less intended for situations where you can't
determine (let alone measure) all the variables?

------
VOYD
You forgot it's also 4th most expensive place to live in the US.

