Friday, September 18, 2015

The Wall Street Journal Lies About Seattle's Minimum Wage Increase

American conservatives endlessly recycle a lot of rhetoric that has no application in the real world. For example, Republican Presidential candidate Jeb Bush is currently pushing a plan that would dramatically reduce taxes for the rich. Won't that mean significantly lower revenues, and thus a greatly increased federal deficit? Don't worry about that says the Bush team, lower rates will unleash tremendous economic growth. There just one problem with this talking point: It's demonstrably false. And by, "demonstrably," I mean it's been proven over and over and over again that tax cuts for the wealthy do not significantly spur economic growth.

Similarly, conservatives want Americans to believe that increasing the minimum wage is a bad thing. Most especially, the executive leadership of America's fast-food corporations want everyone to believe that increasing the minimum wage will cost jobs, because those corporations like to pay employees poverty wages. So that executive leadership isn't too happy with my hometown of Seattle, WA. Washington already has the nation's highest state minimum wage; $9.47 as of January, 2015. Separately, the city of Seattle increased minimum wage for large businesses to $11.00 in April, and all business will be required to pay $15.00 within seven years.

Seattle is America's fastest growing city, so it's difficult to find any negative impact to the recent increase in minimum wage. So difficult in fact, that the Wall Street Journal is prepared to simply lie. Recently the Journal welcomed an opinion piece written by Andy Pudzer, the CEO of CKE Restaurants. CKE owns Hardee's, Carl's Jr. and other fast-food chains. The article is hidden behind the Journal's paywall, but there's easy ways around that. According to Mr. Pudzer,

"It’s still early to know how the hikes are affecting the job market, but the preliminary data aren’t good. Mark Perry of the American Enterprise Institute, Adam Ozimek of Moody’s Analytics and Stephen Bronars of Edgewood Economics reported last month that the restaurant and hotel industries have lost jobs in all three cities. Mr. Bronars crunched the numbers and discovered that the “first wave of minimum wage increases appears to have led to the loss of over 1,100 food service jobs in the Seattle metro division and over 2,500 restaurant jobs in the San Francisco metro division.” That is a conservative estimate, he notes, as the data include areas outside city limits, where the minimum wage didn’t increase."

The loss of 1,100 restaurant jobs in Seattle area would be significant. And I have to emphasize, "would be," because Mr. Pudzer is lying. Let's have a look at what Mr. Bonars found when he analyzed the numbers from the Bureau of Labor Statistics. Bonars notes that growth in restaurant employment in the Seattle metro area significantly outpaced the national average between 2011 and early 2014. Between early 2014 and early 2015 however, restaurant employment in Seattle grew by 2.42% while the balance of the country saw growth of 3.52%. The difference of 1.10% apparently translates into at least 1,100 jobs.

So to summarize,
*Seattle continued to add restaurant jobs despite the minimum wage increase, yet Mr. Pudzer refers to a "loss" of jobs because he's prepared to assume that more jobs might have been created under different circumstances.
*He's also prepared to assume that the minimum wage increase is driving the loss or gain of jobs, despite the fact that three out of four jobs in the Seattle metro area are outside the city limits and not affected by the minimum wage increase.
*He's further prepared to assume that there are no other variables in the equation. Consider for example that for years the growth of restaurants in the Seattle area outpaced the rest of the country, so that the city now has more eateries per capita than any city except San Francisco. So it's just possible that our restaurant infrastructure is now over-built, and the pace of new hiring is now bound to slow down.
*As already noted, growth of restaurant employment in Seattle significantly outpaced the nation average between 2011 and the end of 2014, a time during which Washington state also increase minimum wage from $8.67 to $9.42. One wonders how that could happen if the impact of increasing wages is as great as Mr. Pudzer claims.

The right-wing American Enterprise Institute also decided to get in on this game, although this article by Mark J. Perry is a little more cautious in its conclusions. He notes that according to the BLS, the Seattle metro did in fact lose 1,000 restaurant jobs in April, the same month is which the minimum wage increase went into effect. so in Mr. Perry's opinion, "it looks like the Seattle minimum wage hike is getting off to a pretty bad start."

This opinion is already moot. Although the Seattle metro saw an decrease of 2,000 restaurant jobs between January and May of this year, the months June, July and August saw an increase of 1,900 jobs.

So what's the actual effect of increasing minimum wage? I'll leave the answer to economist Paul Krugman:

"Now, you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question — lots and lots of evidence, because the minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many “natural experiments” here, in which one state raises its minimum wage while others do not. And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment.

Why is this true? That’s a subject of continuing research, but one theme in all the explanations is that workers aren’t bushels of wheat or even Manhattan apartments; they’re human beings, and the human relationships involved in hiring and firing are inevitably more complex than markets for mere commodities. And one byproduct of this human complexity seems to be that modest increases in wages for the least-paid don’t necessarily reduce the number of jobs.

What this means, in turn, is that the main effect of a rise in minimum wages is a rise in the incomes of hard-working but low-paid Americans — which is, of course, what we’re trying to accomplish."