With a minimum wage increase comes inflation. We cannot simply raise minimum wage and honestly believe that people will suddenly have more money to spend. When an employer has to start paying their employees more, then they also have to raise the price of their goods and/or services in order to cover the pay raise. For exampled, instead of a $3 gallon of milk, you’re then having to pay $6 a gallon, etc.
Seattle implemented a $3 minimum wage hike and they are now regretting it after seeing how much money the average low skilled workers are actually losing: $1,500. This is due to the employers slashing hours because they cannot afford to pay the higher wage.
In 2015, a study by the University of California Berkeley’s Institute for Research and Employment called the first phase of Seattle’s minimum wage hike, to $11 an hour, a success. The study found that despite conservatives warning that higher costs would cut jobs, Seattle’s employment rose.
Now, UW has published its cost-benefit analysis of Seattle’s 2016 second-phase minimum wage increase to $13 per hour at the highly-respected National Bureau of Economic Research.
Although Vigdor reiterated that UW’s first-phase analysis of the $11 an hour minimum wage hike generated “fairly imprecise estimates,” he stated that the 2016 second-phase minimum wage hike cost the average low-skilled worker in Seattle $125 per month due to employers slashing 14 million hours of work.
UW found that the average low-wage employee enjoyed $54 per month in higher earnings due to the $3.53 per hour increase associated with the second phase of Seattle’s minimum wage ordinance. But Seattle’s low-wage workers lost $179 a month on average due to job losses and reductions in hours worked. That amounts to $1,500 a year.
The University of Washington study has made an important contribution to the economics literature regarding the dis-employment consequences of government interfering with setting wages. But the study also makes Seattle the poster of child how liberals can hurt the poor.
So, once again, Conservatives are right. Minimum wage hikes won’t work!
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