Well not quite gravity, but close enough for post-modernist work. You know how liberals like to attach taxes on cigarettes so we’ll buy fewer of them, and on alcohol so we’ll drink less, etc? Funny, though, how the basic lesson of supply and demand and price sensitivity falls by the wayside when it comes to the minimum wage.
We’ve commented on this invincible ignorance repeatedly (such as here, here, here, here, and here), but can’t resist doing so again. The Washington Post reports today on the results of the mandated minimum wage hikes in Seattle:
By Max Ehrenfreunde
When Seattle officials voted three years ago to incrementally boost the city’s minimum wage up to $15 an hour, they’d hoped to improve the lives of low-income workers. Yet according to a major new study that could force economists to reassess past research on the issue, the hike has had the opposite effect.
The city is gradually increasing the hourly minimum to $15 over several years. Already, though, some employers have not been able to afford the increased minimums. They’ve cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found.
The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city. The study, published as a working paper Monday by the National Bureau of Economic Research, has not yet been peer reviewed.
On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum.
Congratulations Seattle—you’ve managed to lower wages by $1,500 a year for the people who can least afford it. But I’m sure you feel good about how you’re fighting again inequality.
Before heading off, let’s note that subtle little dig at the end of the second to last paragraph: “. . . has not yet been peer reviewed.” I’ll bet this is the last you hear of this complaint. First, it will hold up under peer review just fine. Second, NBER is the gold standard organization for this kind of economic work. They don’t publish crap. Third, Seattle picked these researchers themselves to look into the matter; it’s not a study from the American Restaurant Association or something. Finally, one additional witness from the story:
“This strikes me as a study that is likely to influence people,” said David Autor, an economist at the Massachusetts Institute of Technology who was not involved in the research. He called the work “very credible” and “sufficiently compelling in its design and statistical power that it can change minds.”
Autor is one of the leading figures in this domain.