Basic economic principles still work, even in Seattle

seattleIn 1987, the New York Times editorial board, of all people, said the best minimum wage would be $0.

“The idea of using a minimum wage to overcome poverty is old, honorable – and fundamentally flawed,” it said. “It’s time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little.”

While it would be hard to imagine the Times saying such a thing today, it is still a fundamentally correct position that, at the time, was based on “a virtual consensus among economists that the minimum wage is an idea whose time has passed.”

A new study from the University of Washington puts Seattle’s well-publicized effort to raise the city’s minimum wage to $15 in a spotlight that would be familiar to those who wrote that piece.

The study found the law has indeed boosted wages since taking effect (the current minimum is $13 per hour, trending toward $15 by 2021), but the number of hours worked has dropped by 9 percent.

When the cost of something, like labor, rises, the market will demand less of it. That’s basic economics. This reduction in hours costs the average low-wage worker $125 per month.

That, one of the authors told ABC News, might be enough to keep someone from paying rent.

Unlike 30 years ago, however, a consensus no longer exists in the academic world. The study comes on the heels of another one by the University of California at Berkley, showing that Seattle’s higher wage law hasn’t harmed wages at restaurant jobs.

Authors of the two studies did a back-and-forth in news reports. But the University of Washington researchers said their study actually corroborated the Berkley results for restaurants. It’s just that those restaurant workers would have seen an 11 percent increase in their hours without the minimum wage law.

Again, this shouldn’t surprise anyone with a basic understanding of economics.

Seattle’s economy is booming, as evidenced by its 2.6 percent unemployment rate, according to ABC News. But economies boom on the backs of high-paying jobs. Seattle’s high-tech sector has been the catalyst for jobs that pay enough for people actually to afford living there. Trends at the lower end of the pay scale tend not to be as evident.

Back in ’87, the Times said the best ways to help the poor were to either provide them cash, through government-subsidized wage supplements or an increase in the earned income tax credit, or to raise their earning power through education and training.

That kind of sense can be hard to hear today against the din of demands for higher wages from people who don’t understand supply and demand.

 

 

About the Author

Jay Evensen

Jay Evensen is the Senior Editorial Columnist for the Deseret News. He has 32 years of journalism experience covering politics and a variety of other assignments at news organizations ranging from United Press International in New York City to the Las Vegas Review-Journal and the Deseret News, where he has worked since 1986. During that time, he has won numerous local, regional and national awards. Most recently, he was given the Cameron Duncan Media Award, given annually in Washington, D.C., by the advocacy group RESULTS, to the journalist judged to have done the most to further the cause of the world's poorest people.

Leave a comment

DeseretNews.com encourages a civil dialogue among its readers. We welcome your thoughtful comments.

*