For years economists have been justifying minimum wage by using flawed data, but reality is intruding on Seattle.
Minimum wage is the gift that keeps on giving to politicians. It allows them to pose as the rescuers of the poor and it increases poverty so that more people will vote to be rescued in the next election. Since politicians benefit from minimum wage, economists find a way to claim that it helps. After all, politicians were the main customers for economists.
But it looks like Seattle has caused such havoc in the local economy that reality can no longer be denied.
The Washington Post reports, “A ‘very credible’ new study on Seattle’s $15 minimum wage has bad news for liberals.”
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 The study, published as a working paper Monday by the National Bureau of Economic Research, has not yet been peer reviewed.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.
The paper’s conclusions contradict years of research on the minimum wage. Many past studies, by contrast, have found that the benefits of increases for low-wage workers exceed the costs in terms of reduced employment — often by a factor of four or five to one.
“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.”
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