We warned that Seattle would see problems due to its minimum wage law.
The simple fact, one which many have a hard time understanding, is that just because a city council says that a job by law must pay $15.00/hour (or whatever) does not mean that the value of the work done in a particular job, a job which paid less than $15.00/hour before is now suddenly worth $15.00/hour. The city council can’t just upend reality by decree. It just screws things up.
The question is not – and this is key – whether we WANT people to earn $15/hour. I think most of us want people to work for a “living wage.” Of course. Who doesn’t want that? The question is whether reality, the market, can bear a $15/hour wage for unskilled labor? That’s the question. And unfortunately, reality being what it is, at this point the answer in most places is “no.”
As such there is disruption in the marketplace when such a decree is handed down. Jobs evaporate. Other jobs go from full time to part time. Some businesses operate on such thin margins that they disappear all together. Other jobs are automated. (This is a fast growing trend.)
Depart from economic reality and there are ramifications.
As we all know Seattle brought in a staged rise to a $15 an hour minimum wage a while back. And back then some of us said that this wouldn’t work out well. We predicted, I certainly did, that the result of this would be fewer jobs than there would have been in the absence of such a significant rise in the minimum wage. Please note that I did not say that it would turn that fair ‘burb into a howling wasteland, nor that it would destroy the economy. Only that I agree that modest changes in the minimum wage have modest effects, that this is not a modest change and we would expect to be able to see, to measure, the unemployment effect of setting the minimum wage that high. It is, after all, significantly above 50% of the median hourly wage, the rate at which even some supporters of a higher minimum wage (Dube, Krueger perhaps) think is about as high as the market can support.