Category Archives: minimum wage

Jobs Endangered by a $15 Minimum Wage in Seattle

 

Both candidates in the Seattle mayoral race support an effort to raise Seattle’s minimum wage to $15 per hour.  Mayor Mike McGinn says he would even support an effort to set the minimum wage even higher.  Mayor McGinn and challenger Ed Murray are foolish if they believe that the Seattle mayor or City Council can ignore the laws of supply and demand.  A mandate that workers in lower paying occupations receive higher wages will lead to substantial job losses in these occupations.  The labor force in the city of Seattle is about one-third of the King County labor force and one fifth of the labor force in the Seattle metro area. This means that when Seattle laws make it more expensive to operate a restaurant, coffee shop, retail outlet or other business inside city limits, businesses will relocate to the suburbs and shoppers and customers will follow.

The economics of a minimum wage for a city is quite simple.  Employers in Seattle are price takers in the market for unskilled and less skilled labor.  It doesn’t matter how inelastic the demand for less skilled labor is in the aggregate, all that matters is the elasticity of demand for workers within city limits.  A large increase in the cost of hiring dishwashers or cashiers within Seattle merely shifts demand for these services to businesses outside city limits where the minimum wage is $9.15 and costs are lower.  The $15 minimum wage will destroy jobs in Seattle but will increase employment in some businesses in the suburbs.  The best substitute for shopping or dining in the city is shopping or dining in the suburbs.  Customers will be inconvenienced, unskilled workers in the city will be harmed and have to commute further to work.  However, business owners and unskilled workers in suburban areas could benefit from a $15 minimum wage in Seattle.

Mayors and mayoral candidates who support large increases in the minimum wage should also be required to specify which jobs in their cities would be endangered by their policies.  Following the International Union for Conservation of Nature which designates species as endangered, vulnerable or near threatened, I believe that politicians should acknowledge when their policies threaten the viability of certain jobs.  Politicians should also be required to use the same sort of designation to indicate the severity of the threat posed by their actions.  Politicians can make jobs extinct by raising the minimum wage so much that workers are priced out of the market for their services.

I propose that in Seattle:

  • A job is endangered if 90% of current workers earn less than the proposed $15 minimum wage.
  • A job is vulnerable if 75% of current workers earn less than the proposed $15 minimum wage.
  • A job is near threatened if 50% of current workers earn less than the proposed $15 minimum wage.

The Bureau of Labor Statistics (in its OES data) lists 637 detailed occupations in the Seattle metro area.   In 120 of those occupations, employing 27.7% (over 390,000 workers) of the workforce, the median wage less than $15 per hour.  The following tables provides examples of occupations that are most at risk due to a $15 minimum wage.

There are 16 endangered jobs in Seattle.  These jobs are endangered because at least 90% of workers earn less than $15 per hour.  The following table lists some of the most common endangered jobs.  For example, there are 25,930 food preparation and servers in the Seattle metro area and 90% earn $14.07 or less.  A $15 minimum wage will likely cause restaurants in Seattle to lose business to suburban competitors.  Other jobs on this list are endangered by information technology.  For example, as the cost of hiring hotel and motel clerks increases, more businesses will use kiosks and encourage customers to check-in online.

Endangered Jobs in Seattle

At Least 90% of Employees Earn Less   Than $15.00 per Hour

Occupation Title

Number of Workers

90th Percentile Wage

Food Preparation and Servers, Including Fast Food

25,930

$14.07

Personal Care Aides

9,100

$14.11

Dishwashers

5,080

$12.72

Dining Room Attendants and Bartender Helpers

5,010

$14.94

Home Health Aides

4,120

$14.65

Hosts and Hostesses, Restaurants and Lounges

2,930

$14.30

Hotel and Motel Desk Clerks

2,070

$14.82

Baggage Porters and Bellhops

1,070

$13.75

There are 33 vulnerable jobs in Seattle.  These jobs are vulnerable because at least 75% of workers earn less than $15 per hour.  The following table lists some of the most common vulnerable jobs.  For example, there are 12,590 cooks in the Seattle metro area and 75% earn $14.59 or less.  A $15 minimum wage will likely cause restaurants in Seattle to lose business to suburban competitors.  Other jobs on this list are vulnerable to technological change.  For example, as the cost of parking lot attendants and ticket takers increases, more businesses will use kiosks and other devices to substitute capital for labor.

Vulnerable Jobs in Seattle

At Least 75% of Employees Earn Less   Than $15.00 per Hour

Occupation Title

Number of Workers

75th Percentile Wage

Restaurant Cooks

12,590

$14.59

Food Preparation Workers

7,300

$13.71

Maids and Housekeeping Cleaners

7,280

$13.82

Counter Attendants, Cafeterias and Coffee Shops

6,900

$12.38

Packers and Packagers

5,740

$12.40

Childcare Workers

4,620

$12.28

Amusement and Recreation Attendants

2,990

$12.56

Cleaners of Vehicles and Equipment

2,740

$14.65

Parking Lot Attendants

2,670

$12.28

Taxi Drivers and Chauffeurs

2,230

$14.58

Ushers and Ticket Takers

1,510

$13.64

Manicurists and Pedicurists

1,370

$11.59

Lifeguards

1,220

$11.79

Laundry and Dry-Cleaning Workers

1,120

$14.15

There are 71 near threatened jobs in Seattle.  These jobs are threatened because at least half of workers earn less than $15 per hour.  The following table lists some of the most common threatened jobs.  For example, there are 47,390 retail sales workers in the Seattle metro area and half of them earn $12.13 or less.  A $15 minimum wage will likely cause shops and stores in Seattle that employ these workers to lose business to suburban competitors.  Other jobs on this list are threatened by technological change.  As the cost of stock clerks and order fillers increases, more businesses will use computer and information technology to substitute capital for labor.

Near Threatened Jobs in Seattle

At Least 50% of Employees Earn Less   Than $15.00 per Hour

Occupation Title

Number of Workers

50th Percentile Wage

Retail Salespersons

47,390

$12.13

Cashiers

26,110

$11.70

Stock and Material Movers

19,290

$13.76

Stock Clerks and Order Fillers

16,860

$13.84

Janitors

16,300

$13.74

Nursing Assistants

9,400

$14.43

Receptionists

9,270

$14.82

Security Guards

8,790

$14.02

Landscaping Workers

8,730

$14.36

Bartenders

7,610

$12.43

Counter and Rental Clerks

7,440

$13.57

Hair Stylists

5,500

$14.31

Bank Tellers

4,550

$13.58

Preschool Teachers

3,480

$13.69

Cafeteria Cooks

3,200

$14.82

Meat, Poultry and Fish Cutters

3,050

$11.43

Bakers

1,950

$13.56

Sewing Machine Operators

1,460

$11.65

File Clerks

1,360

$14.47

The mayoral candidates in Seattle may think they help workers in their city who are struggling in today’s economy by advocating a $15 minimum wage.  In fact, the mayoral candidates’ policies will harm the workers they would like to help.  These candidates tell Seattle residents that if they can’t find an employer willing and able to pay at least $15 per hour for their services, they will be prohibited from working inside city limits.  A $15 minimum wage in the city will cause Seattle residents to commute to the suburbs to work in stores, shops and restaurants. The only voters and businesses that should support this silly policy are those located outside Seattle city limits.

Jobs Endangered by a $15 Minimum Wage in Seattle
Stephen Bronars
Thu, 10 Oct 2013 19:27:33 GMT

Advertisements

Great sentences on the minimum wage

This from a blog focusing on monetary economics!

From Bill Woolsey. I’m not sure about the end of this one way or the other but its an interesting thought:

“My vision of the real world is that it is rife with monopoly, monopsony, and all sorts of price and wage discrimination. But, this is in the context of lots of competition. Competition is “imperfect,” but the gains and losses in efficiency are small and fleeting in world of creative destruction.
Still, I wouldn’t be surprised if the monopsony effect resulted in some firms hiring more workers due to a higher minimum wage. Unfortunately, that same increase in the minimum wage will push the wage above the marginal revenue product of labor for other firms so that they hire fewer workers.
The notion that government operates like an omniscient benevolent despot and could and would set a wage in each and every market so that competitive equilibrium is approximated is completely unrealistic. I think a more plausible starting place would be politicians trading off the loss of employment versus the increase in wage income. That would suggest that minimum wages would be set above the marginal revenue product of the current level of employment. Of course, reduced profits to firms, very significant politically relevant short run, and even higher prices to those purchasing the products might relevant.”

Our estimates are pooled across labor markets and firms. A zero effect really just means we’ve got about as many going one way as the other.
The wage discrimination point in the post is important to consider too, although its relative prevalence is obviously an empirical question (I’m guessing these places for the minimum wage discussion have take-it-or-leave it wage structures).

Great sentences on the minimum wage
dkuehn
Sun, 24 Feb 2013 18:40:00 GMT

Even better though I think in the Woolsey piece is this:

With perfect wage discrimination, or just sufficient wage discrimination to exhaust all the gains from trade, a minimum wage will not increase employment.   On the other hand, as long as it is no higher than the marginal revenue product of labor, it would raise the wages of all of the workers being paid wages less than the marginal revenue product of labor without there being any decrease in employment.

A minimum wage (or a union) could increase the wage and not reduce the quantity of labor employed.    The only effect would be increase the wage of the least paid workers.  I think it’s a revelation.   Also, I tinink wage discrimination is more the norm than the exception.  Otherwise, why are employees encouraged to not tell others what they are paid?

Two cents on the minimum wage

I think he makes a pretty good case:  namely that the problem is so much low wages as no wages.  The minimum wage may well make that even worse.

Once upon a time, the minimum wage, like free trade, was a basic test of whether you were awake in the first week of econ 1. We put a horizontal line in a supply and demand graph. Minimum wages increase unemployment of poor people.

It still strikes me, that like much of the current policy discussion, we’re asking the wrong question. The question is not “is this great” or “is this terrible” but “does this have anything to do with current problems?”  The fiddling while Rome burns is worse here than the belief in minor economic magic.

President Obama’s state of the Union Address  was to me, an interesting peek into the Administration’s thinking, and a revealing piece of political rhetoric (I mean that in the good sense of “rhetoric,” i.e. “what arguments we use to persuade people”) 

…today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong….
Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets..…

… Is the first-order problem of these neighborhoods that its residents live in intact families with two kids, one full-time wage earner, trying to live on the wages from a full-time minimum wage job, but  having a tough time making ends meet? Is there anyone like this?
The tragedy of the neighborhoods around where I live, and President Obama used to live, is the vast number of people with no job at all.  How does raising the minimum wage for the few who have a minimum-wage job help the vast majority who have no job at all?
Minimum wages are about teenagers and young adults, most still living at home. It’s about the “dating” phase of work-force attachment, where people learn the skills and habits, and make connections by which they can move up to better jobs when they are ready to have families.
“Families” is an interesting word as well. Marriage among lower-income Americans is rare, as President Obama made clear when he came back to talk to students at Hyde Park High school and made some controversial remarks about the absence of fathers.

For example in zip code 60619, just south of the University, there are “4,967 married couples with children, and 12,745 single-parent households (2,655 men, 10,090 women).” Here’s the marital status chart.

The final line also caught my eye: “For businesses across the country, it would mean customers with more money in their pockets.”  I wonder who signed off on that one.
Even if the Administration’s theory works, it is exactly the same as a tax on sales of local businesses (i.e. cost passed on as higher prices) to subsidize employment. This is an interesting harbinger of things to come in the politics of budgets: Passing a national sales tax on businesses that employ minimum wage workers, to fund an on-budget subsidy of those workers’ wages, would obviously go nowhere politically, and would count on the budget. But forcing businesses to do it, though economically equivalent, makes it looks as if the government is not taxing and spending as much as it is. 
cents on the minimum wage
John H. Cochrane
Tue, 19 Feb 2013 17:47:00 GMT

Economist vs Economist: on Minimum Wage Hikes

Like Spy Vs Spy in the old Mad magazine.

(This post is taken from the heavy lifting David R. Henderson performed.)

Here’s an economist talking about the textbook view of the minimum wage, and how we should take the (in)famous Card & Krueger results with a grain of salt:

So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces.

What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda…Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects…

Now to me, at least, the obvious question is, why take this route? Why increase the cost of labor to employers so sharply, which–Card/Krueger notwithstanding–must pose a significant risk of pricing some workers out of the market, in order to give those workers so little extra income? Why not give them the money directly, say, via an increase in the tax credit?

In short, what the living wage is really about is not living standards, or even economics, but morality. Its advocates are basically opposed to the idea that wages are a market price–determined by supply and demand, the same as the price of apples or coal.

Just today, Paul Krugman offers a decidedly different take on how we should interpret the Econ 101 textbooks and the empirical evidence:

So what should you know? First, as John Schmitt (pdf) documents at length, there just isn’t any evidence that raising the minimum wage near current levels would reduce employment. And this is a really solid result, because there have been a *lot* of studies. We can argue about exactly why the simple Econ 101 story doesn’t seem to work, but it clearly doesn’t — which means that the supposed cost in terms of employment from seeking to raise low-wage workers’ earnings is a myth.

So a minimum wage increase isn’t some kind of counsel-of-despair way to help workers a bit in a dysfunctional political scene (although there’s that too); it’s actually good policy.

At this point, surely I don’t need to tell you guys who wrote the first block quote above, do I? It was from 1998.

P.S. Yes, in the first block quote, he’s talking about a “living wage” proposal that means a large increase in the minimum wage, whereas in the second he’s talking about a more modest increase. If you think his readers are picking up on all those nuances, and that this is a consistent economic perspective, you have more faith in humanity than I do.

Two Views on Minimum Wage Hikes
Bob Murphy
Sun, 17 Feb 2013 02:33:45 GMT

Krugman on the minimum wage

 

I am always happy to link to interesting new arguments which have not been considered on this blog before:

…the usual notion that minimum wages and the Earned Income Tax Credit are competing ways to help low-wage workers is wrong. On the contrary, raising the minimum wage is a way to make the EITC work better, ensuring that its benefits go to workers rather than getting shared with employers. This actually is Econ 101, but done right: given a second-best world in which you use imperfect tools to help deserving workers, two tools together can produce a better outcome than either one on its own.

He is drawing from this Rortybomb post.  For other, different arguments, here is Angus and here is David Henderson.

Krugman on the minimum wage
Tyler Cowen
Sat, 16 Feb 2013 20:34:35 GMT