Today in “What A Surprise!”

I know, I know. You’re all shocked:

This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.

Now, the study does come with some legitimate concerns about methodology. Among other things, it excluded workers who work with chains (which is about 40% of low-wage jobs) because that data is provided on a state, not a city, level. But the latest of multiple studies show that the Law of Supply and Demand does, in fact, apply to low-wage labor. And this does come from the very group the city commissioned to study the effect.

The thing I keep saying about the minimum wage is that it is literally gambling the lives of people on crackpot economic theory. To quote myself:

Here’s the thing: the Democrats are claiming, based on a grand total of one study that doesn’t say what they think it says, that we can raise the minimum wage without increasing unemployment. Let’s pretend that this point is up for debate and that we are, in effect, engaging in a massive gamble on the laws of economics. What is the downside risk if they’re wrong?

As I noted in my last post, long-term unemployment is one of the most damaging things that can happen to someone. It can repress earnings for a lifetime, it can affect health and happiness and, as we’ve seen in Europe, masses of unemployed young men can become a hotbed of crime and extremism. That’s the risk if they’re wrong.

The Democrats are gambling the futures of millions of people on this will-o-the-wisp idea that the Law of Supply and Demand is magically suspend for labor because … well, because the unions want it to be. If they’ve gambled wrong, they won’t be paying the price. Millions of poor people and minorities will. If the $15 wage causes mass unemployment, the effects will last for generations. It may not be reparable in our lifetime.

I’m glad the Democrats have a few pet economists who will tell them this is a low-risk bet. But it’s yet another illustration of how the Democrats “help” people by holding their heads underwater. I have no doubt that they think they are being compassionate. But gambling someone’s life on crackpot economic ideas is not compassion.

The last time we gambled our country on Left-Wing economic theory was when we deliberately inflated our currency in the 1960’s and 1970’s based on the idea that the Phillips Curve predicted it would end unemployment. We then ended up with both high inflation and high unemployment, which the Keynesians has assured us was mathematically impossible. It never ceases to amaze me how the Left will gamble so much on economic theory.

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  1. CM

    Meanwhile, nine years (in a row) of minimum wage increases by our centre-right govt results in no employment or wage issue, or controversy at all here.

    All up, the increase has been more than 30 per cent, more than double the rate of inflation over the period. (Add to this that in its final year of office Labour made an election year increase of 75c an hour, so the increase in a decade is 40 per cent).
    Logic suggests that someone will miss out because some company, somewhere, cannot afford to take on that extra employee.
    This would apparent in a time of recession (perhaps offset by the fact that lower paid workers, who tend to spend every dollar they earn, have more in their pocket).
    But in the third quarter of 2016, unemployment fell below 5 per cent for the first time since 2008.
    The number of hand written signs on shops and restaurants across New Zealand seeking staff this summer is hardly scientific, but it suggests the constraint many companies face is finding workers, not paying them.
    In previous years, the Government has hinted that the decision to increase was an agonising balance between being generous to tens of thousands of people affected, while not wanting to price workers out of the market.
    Back in early 2015, as he raised the minimum wage to $14.75 an hour, Workplace Relations Minister Michael Woodhouse warned that had the increase been to $15.50, it would “constrain employment growth” by 5000 jobs.
    This year Woodhouse’s release contained no such figure, noting instead that another $65 million would be pumped into the economy from the increase.
    Perhaps the research on the looming job losses has not been finalised, or perhaps it shows that the minimum wage could have gone to $16 without making much of an impact after all.
    As it happens, the latest increase seems destined to pass with almost no one noticing.

    Seems to me that no situation is ever really the same and there is no ‘one size fits all’ prescription or outcome. Which is why the literature is all over the place.

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