Latest Seattle Employment Numbers: Is Minimum Wage Hike Already Costing Jobs? [UPDATED with Data Criticism]
In June of last year, the Seattle city council passed a $15 minimum wage law to be phased in over time, with the first increase to $11 an hour starting on April 1, 2015. What effect will the eventual 58% increase in labor costs have on small businesses, including area restaurants? It's too soon to tell for sure, but there is already some evidence that the recent minimum wage hike to $11 an hour, along with the pending increase of an additional $4 an hour by 2017 for some businesses, has started having a negative effect on restaurant jobs in the Seattle area. The chart above shows that the Emerald City MSA started experiencing a decline in restaurant employment around the first of the year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), and the 1,300 job loss between January and June is the largest decline over that period since 2009 during the Great Recession (data here). The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession. In contrast to the January-June loss of restaurant jobs in the Seattle area: a) restaurant employment nationally increased by 130,700 jobs (and by 1.2%) during that same period (data here), b) overall employment in the Seattle MSA increased 1.2% and by 21,800 jobs (data here) and c)non-Seattle MSA restaurant employment in Washington increased 3.2% and by 2,800 jobs (data here).
I reported back in March about restaurateur fears of the hike and looming further hikes in Seattle, then about some counterdata noting that, well, permits for new restaurants hadn't seemed to slow down.
The loss of potential jobs to specific individuals on the margin need not show up in overall macro data about total employment post minimum wage. Still, the data AEI presented provides still further suggestive empirical evidence that the laws of supply and demand that underlie the entire logic of the science of economics might not disappear when it comes to labor, just because people think it would be cooler if lower wage people got paid more, as long as it isn't at their clear and direct expense.
UPDATE: Barry Ritholz, a regular critic of any empirical evidence seeming to show that the laws of supply and demand work in labor as well as anything else, points out that the AEI study's data is about an MSA far larger than the actual city of Seattle itself in which the minimum wage hike is occuring, making any direct connection between the laws and that data questionable.