Right On: This is why minimum wage increases harmed the very people they tried to help

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OPINION — Economics 101 teaches that when you make things more expensive, people purchase less of them, and when you make them cheaper, people buy more of them. This is common sense but apparently Democrats skipped the course.

Under the guise of “fairness,” Democrats, unions and the liberal media have championed a $15 minimum wage. The city of Seattle drank the Kool-Aid and decided to progressively (pun intended) raise its minimum wage over several years.

The results are not pretty: The higher minimum wage has actually lowered incomes not raised them. Worse for the liberal elite, these are exactly the results that conservatives predicted.

In 2015, Seattle raised its minimum wage from $9 per hour to $11 per hour, resulting in a modest increase in average worker income and with little measureable impact on jobs or hours worked. However the 2016 jump to $13 per hour resulted in a drop of 9 percent in hours worked and an average income reduction of $125 per month.

These numbers were reported in a University of Washington minimum wage study commissioned by – you’ll never guess who – the city of Seattle. The city was clearly expecting its study to report triumphant results and was left scrambling when its own report showed disastrous results instead.

In desperation, the city and liberal media now are hyping instead a more limited University of California, Berkeley study that showed a modest improvement. But the University of Washington study is regarded by impartial observers as far more rigorous and definitive.

Nationally recognized labor economist David Autor is cited in an analysis piece by the Washington Post as saying: “This strikes me as a study that is likely to influence people,” adding the study is “very credible” and “sufficiently compelling in its design and statistical power that it can change minds.”

The report has changed minds in two states.

St. Louis planned to follow Seattle’s example by increasing its minimum wage starting next year. Reading Seattle’s tea leaves, Missouri enacted legislation prohibiting any city in the state from establishing a minimum wage higher than the state’s minimum.

Restaurant workers in Maine rallied to oppose increases in their state’s minimum wage. They argued that if wages were increased, their employers would be forced to cut their hours and tips would likely decrease as menu prices increased. Maine’s Legislature listened; a number of Democrats joined Republicans to repeal the mandated wage increase.

Wouldn’t raising the minimum wage reduce poverty? In a word, no.

Why not? Because, per U. S. Census Bureau statistics, over half of minimum wage jobs are filled by teenagers and college students working part time and living in households whose average income is over $65,000 per year. Most other minimum wage workers work to supplement other household income and live above the poverty level.

Fewer than 1 in 10 full-time minimum wage workers live in a household whose income falls below the government poverty line. Only 4 percent of minimum wage workers are single parents working full time.

Targeting these truly needy workers with specific help would be far more effective than using a blunderbuss increase in the minimum wage with all its negative side effects.

Adding insult to injury, raising the minimum wage reduces work opportunities. As happened in Seattle, employers would look for ways to reduce employment by automating or by shifting full-time jobs to part-time, staffing only peak hours.

Nobel prize-winning economist Milton Friedman explained why unions – and the Democrats who pander to them – favor minimum wage laws:

There is absolutely no positive objective achieved by the minimum wage law …. What you are doing is to assure that people whose skills are not sufficient to justify that kind of a wage will be unemployed …. Its real purpose is to reduce competition for unions and make it easier for them to maintain the higher wages of their privileged members.

I am acquainted with three developmentally-disabled young adults who clear tables and empty trash at local fast food restaurants. They are friendly, cheerful souls who take rightful pride in their minimum wage work. But they would be uneconomical at $15 per hour and would likely lose their jobs.

A $15 per hour minimum wage is a way of saying that my acquaintances and others whose productivity doesn’t justify this wage shouldn’t have jobs at all. That’s not my kind of “fairness.”

I espouse free markets and limited government intervention in our economy. Far too many government actions taken in the name of “fairness” and “social justice” have instead benefited the few while disadvantaging the many. Minimum wage laws are one of them.

Howard Sierer is an opinion columnist for St. George News. The opinions stated in this article are his own and may not be representative of St. George News.

Email: hsierer@stgeorgeutah.com

Twitter: @STGnews

Copyright St. George News, SaintGeorgeUtah.com LLC, 2017, all rights reserved.

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15 Comments

  • dbcannon July 13, 2017 at 7:53 am

    Middle-of-the-road moderate here, so the quips about liberals don’t bother me, but I do have an economics degree. I find it silly when armchair pundits sanctimoniously invoke “Econ 101” to denounce their political foes…and then proceed to misuse basic economic principles or lump all economists into one (usually Reagan-era) group. There are economists of many persuasions, and I know some hardcore liberal economists much more intelligent than you or I, so stop waving that flag.

    I lived in Seattle for years, and it’s interesting how critics of the minimum wage have conveniently ignored the numerous studies showing its beneficial outcomes, and have latched onto a very flawed UW study like a life raft. Most haven’t even read the study, nor do they know that it is a working paper only, and hasn’t passed any peer review process. (Peer review is where other economists – not the Facebook kind – tear into the paper’s design flaws and send it back for refinement.)

    Back to Econ 101: if you are going to compare two groups in a pseudo-experimental study, the control group has to be comparable to the treatment group. The study you cite uses employment data for the City of Seattle, where the minimum wage increase occurred, and compares it with the rest of the state to estimate where employment levels would be without the wage increase. Anyone who has spent time in Seattle knows these two populations are in no way comparable: Seattle is taking off like a rocket as Bay Area tech companies expand into northern urban markets, while the surrounding parts of Washington State experience some economic spillover. They’re not comparable – any difference in employment levels

    There is also the principle of short-term vs long-term effects. I would personally not be surprised to see a slight reduction in total employment or hours worked immediately after a wage increase, as restaurants react to increased overhead; but over time

    The bottom line for me is this: if you rent a human being for the majority of their waking hours and pay them far less than they require to survive, there’s something wrong; you may feel that is the “market wage,” but you are taking advantage of a number of factors working in your favor to suppress wages: many job seekers are desperate and will take a bad opportunity now just to pay the bills; others have limited mobility; and there are numerous regulations and common business practices that make it more difficult for job seekers to shop around and negotiate for better pay.

    Historians will tell you about a pattern throughout time of societies built on wage and debt peonage – peoples who took advantage of the desperation of their poor classes. To preserve this societal structure, the ruling class often spread propaganda reviling the poor, just as we have done and are doing now.

  • dbcannon July 13, 2017 at 8:00 am

    Apologies, my text was cut off.

    …There is also the principle of short-term vs long-term effects. I would personally not be surprised to see a slight reduction in total employment or hours worked immediately after a wage increase, as restaurants react to increased overhead; but over time, as employees are earning more money and restaurants have adjusted to the higher wage, you will probably see movement in the opposite direction.

    • 42214 July 13, 2017 at 9:28 pm

      Keep the minimum wage law as is. The longer it has negative unintended consequences the more data you will have to frame on the wall next to your economics degree. Unskilled workers are simply pricing themselves out of the labor market and you don’t need a degree to see that.

  • Lastdays July 13, 2017 at 8:38 am

    Minimum wage should be $1.00 an hour. If a person can make themselves worth more, then good for them.

    • jaybird July 13, 2017 at 8:37 pm

      Whenever I hear someone say “economics 101” i get ready for a load of BS from someone who was lucky to fall into a good job that will never be threatened. Or a retired bubblehead with no idea what he/she is talking about.

  • Who July 13, 2017 at 8:44 am

    Seattle is taking off like a rocket as Bay Area tech companies expand into northern urban markets,,,,, Could that be because it’s too expensive in the bay area? Oh, and by the way, do you know the average wage of a Bay Area tech companies employee?
    Unions were the vindication of the American worker until they realized how much money THEY could make. The time has come to take back America.

  • Badshitzoo July 13, 2017 at 8:53 am

    Thank you for the educated, and very knowledgeable response to this opinion piece by a “satellite systems engineer and program manager.” A career field not in demand in Southern Utah. That explains why he spent his life & career working on the East & West coasts before selling everything and moving to the “home of chronically low wages & cheap labor.” We should be asking someone who has lived and worked in Southern Utah their entire life. Someone who can tell you their Bachelor degree in Information Technologies has never got them more than the $15.00hr / 30k a year income that is the ceiling for 4yr degrees in this area. Utah has always been a state, just as Mr. Cannon said, that is “built on wage and debt peonage – peoples who took advantage of the desperation of their poor classes”. Church approved! Go to any Sacofexcrement meeting on Sunday: Poor in the back, Privileged up front.

    • jaybird July 13, 2017 at 8:41 pm

      Yeah. I always say if you’re thinking of moving to Utah, bring money.

  • Stephen Joe July 13, 2017 at 9:10 am

    Southern Utah has historically been overrun by conservative fools and inept sophists who pontificate about things they know nothing about. This article is pure unadulterated B.S. written by a clueless buffoon.

  • Conserve July 13, 2017 at 10:36 am

    Great article Howard, a little too politically correct, but well written. A lot of unhappy little liberal souls here- ain’t there now? I hear the weathers great in Seattle and Frisco!!!

    • Badshitzoo July 13, 2017 at 5:02 pm

      Is that why people complain about working 3 jobs just to stay afloat in this area? Because they’re “liberals”? Well, liberals are known to be the party of “Let’s help each.” and republicans have always been the party of “Let’s help ourselves.”

      • jaybird July 13, 2017 at 8:44 pm

        More like the party of lets help ourselves to everyone elses. Screw everyone else. Greed rules their every move. Utah is a rich state with 14% living in poverty.

    • jaybird July 13, 2017 at 8:46 pm

      No doubt you’re one of the Utah sheep, bragging “conserve” when dont have the money to back it up.

  • theone July 13, 2017 at 10:48 am

    “employers would look for ways to reduce employment by automating or by shifting full-time jobs to part-time, staffing only peak hours.”

    I believe Howard is unfit to challenge working class people and what a fair wage is. The example I am addressing just above is proof he knows diddly squat in the economics of business.
    As a Manager for big Corp, and business owner for 40 plus years, I can assure you employers having been practicing the shifting of full time and part time workers in line with staffing during peak sales periods long before a minimum wage even existed. Nothing new where folks. I’ve done it, Dillard’s has done it, Smith’s, Kmart, or should I dare say 100% of all markets have done it for as long as they’ve been in business. Now on to the automation for business. Holy crap technology strikes again!!
    For pete sake Howard did you think we wouldn’t advance our ability to streamline production in order to enhance the bottom line? Innovation is part of being efficient and profitable.
    The working class are just the pawns corps use to line their pockets and keep inflation as their tool for low wages crying we can’t make money if wages go up. What they really mean is, we don’t want to share in the profits.

    Your view and misplaced analogy of economics is moot.

  • utahdiablo July 13, 2017 at 9:31 pm

    Yeah the USA is just going gangbusters as to the economy nowadays, just look at the stock market, record highs most everyday? Everyone must be getting rich huh….that’s why every …* place you walk into now has a “tip” jar…..
    Ed. ellipsis: …*

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