How Seattle's Wage Hikes Cost Workers Roughly $125/Month

  • Sam Mire
  • Jul 1, 2017 10:28AM

It was inevitable. A fairly dramatic rise in the minimum wage has, in fact, led to less money in the hands of minimum wage workers. Sometimes, such predictable realities must be reported as if they were truly news.

Even if just to say ‘I told you so’. Or, more accurately, to say that countless Ph.D.-level economists told you so.

One cannot reasonably expect that the reality which has unfolded in Seattle, the truth that a dramatically higher minimum wage will lead to lower employment and less money overall for minimum wage workers, to open the eyes of those whose remain closed.

Yet, we can now confidently say that what was once only an air-tight model is now a manifested reality. Seattle’s politicians are to blame for this willful obstinance.

According to statistics published by the National Bureau of Economic Research, the gradual increase of Seattle’s city-wide minimum wage has resulted in various forms of economic decline for the low-wage workforce. The study evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016.”

Before laying out these damning statistics, let us take a moment to review the thinking that led to these minimum-wage hikes in the first place. As it goes, minimum wage workers saw an increase in hourly wages as nothing more. A pay raise would be a development that, as they saw it, would inevitably lead to more money in their pocket by both hourly and annual metrics.

Little thought or credence was given to the fact that minimum wage work garners such little pay for a reason. It is work that most often requires little skill, no qualifications, and can be done by virtually anybody who needs the meager paycheck to survive. As is the case with non-governmental jobs in a capitalist society, the market dictates the value of the employee. In the case of burger flippers, field workers, janitors, and other minimum wage positions, the market has dictated that their set of skills is worth approximately $7.25 per hour, if not slightly more. In Seattle, that number was significantly higher- $9.47 - before these drastic policy changes.

With respect to these professions, these employees tend to be interchangeable with the countless citizens and non-citizens perpetually looking for work of any kind. This is the reason that minimum wage paychecks have remained relatively static compared to other professions.

Quite simply, employers are willing to pay a person what they are worth, depending on the rarity of the person’s skillset when surveyed against the professional marketplace. When wages are artificially increased, honest economists have long held, employers do not simply accept the reality of increased cost. They can’t afford to.

Instead, employers will make the necessary cuts to payroll to reach their previous, sustainable cost points, whether that means firing employees, offering fewer hours to remaining workers, or some combination of these unfortunate outcomes.

A symptom of the incomplete skillset that often results in a low-wage employee being resigned to these low-paying jobs, a Burger King employee of 10-plus years is unlikely to see the far-reaching effects of legislating a drastic increase in minimum wage. However, politicians should know that, according to those most knowledgeable, manipulating the capitalist wage system will have negative effects on the workforce more often than not.

Yet, in cities such as Seattle, politicians are willing to throw gasoline on the latent disgruntlement that all workers experience to varying degrees, the idea that one deserves more for their efforts. These legislators are willing to sacrifice the relative stability of the low-wage marketplace in favor of decreased wages and overall employment, all to gain the votes of the low-wage workers chasing a pipedream.

It’s not the responsibility of minimum-wage workers not to ask for higher pay, it is on those that know better to insulate a maid or parking lot attendant from what they can’t or don’t know.

Yet, in Seattle, this mandate to protect low-wage workers from the ills of a manipulated wage-scale was ignored, resulting in additional headaches that informed observers of the economy knew to be inevitable.

While hourly wages within the minimum-wage workforce of Seattle increased by three percent, the number of hours worked declined by approximately nine percent. These figures meant a decline in the overall payroll that constituted a decrease in monthly wages of $125 per worker.

A decline in take-home pay by $125 per month, an annual loss of $1,500 per year, was not what low-wage workers envisioned when they railed for such policies to be put in place. They envisioned the opposite effect, and many of them did not know any better.

However, despite seeing similar, though predictably milder, effects from the first wage increase from $9.47 to $11 per hour, Seattle legislators continued to appease their rose-sniffing population despite knowing that such negative effects would inevitably be incurred when the minimum wage was again increased to $13.

Modest wage increases are one thing, and in certain cases can be warranted and economically positive for all citizens. Extreme hikes in the pay for those whose skill set does not justify such paychecks destabilizes the marketplace, resulting in the overall decline in take-home pay that has taken hold in Seattle.

When looking for who to blame, minimum-wage workers should put some of the onus on themselves. They asked for these changes, after all.

But most of the criticism should fall on the politicians in Seattle that led this crusade, acting against the better judgment of countless economists who now can only say, “I told you so.”