Minimum Wage

Seattle-Area Restaurant Worker Numbers Are Not Actually Going Down

This doesn't mean no one is harmed by the minimum wage, for a number of reasons.

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Those very worried about the month-by-month apparent empirics of the results of minimum wage hikes have had their eyes on Seattle lately. Seattle has already seen a minimum wage hike to $11, and the legal wage will be increasing by $2 increments per year, on a slower $1 per year schedule for small employers than for large ones, ending in 2020 with a $15.75 minimum wage for small employers. (There is an 85 percent of that minimum leeway for workers under 16, and certain special categories can get exceptions by going through some city hoops, including "learners, apprentices, messengers and workers with a disability.")

I've been noting prominent contributions to the controversy as they go along, here and here. The most recent had Mark J. Perry of the American Enterprise Institute using data from the Seattle MSA—"metropolitan statistical area," far larger than metro Seattle itself—to detect an enormous and unprecedented areawide fall in restaurant employment in the first half of 2015.

Now newer numbers are out, as they always shall be, and that dip is now over.

"Invictus" on the website of Barry Ritholz, a constant warrior on the "minimum wage doesn't cost jobs" tip, finds that the newest monthly data from the St. Louis Federal Reserve show the highest monthly gain in recorded history from that dataset in food and beverage services jobs in that MSA, with 3,700 added in the past two months.

Fed Res Bank St. Louis

The same caveats that the "minimum wages couldn't possibly cost jobs" crowd applied to Perry's initial warning about apparent job losses still applies: these are Seattle MSA numbers, not just Seattle numbers, so they don't settle anything about the minimum wage affected area in and of itself.

And month to month fluctuations in one area are not sufficient empirical evidence to make a case about an issue as huge as the empirics of the minimum wage.

"Invictus" himself says exactly as much: "I'll interrupt myself here to again remind folks that we shouldn't really be looking at this series in the first place." Indeed, I regret paying so much attention to what people have been saying about them myself.

Most importantly, there's a subtle but vital difference between saying a higher minimum wage "does not lead after passage to an overall smaller employment number in a given area" and saying a higher minimum wage "does not cause any low-skilled person to not get a job they otherwise would have had."

The former can be true even while the latter is not. And that might not matter if you just like advocating higher minimum wages because it makes you feel better that some people with jobs are getting slightly higher incomes.

But it sure matters to the low-skilled person not getting the entry-level job that could change their life.

Some bigger picture thoughts on the empirics of the minimum wage.

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36 responses to “Seattle-Area Restaurant Worker Numbers Are Not Actually Going Down

  1. Of course the minimum wage costs jobs. That was part of its original rationale: it was a eugenics plot.

  2. MSA is really stupid because with a perfectly fluid market, all the restaurants would move outside the city but still inside the MSA.

    I wouldnt expect any appreciable changes in MSA numbers due to this.

    Its like with states with sales tax that varies by county. All the car dealerships end up in the low tax counties of the MSA.

    1. Yes. The Seattle MSA includes a lot of stuff that isn’t Seattle city proper and is really quite easy to get to. I can go to Facing East in Bellevue and be there in 20 minutes with no traffic. Shit, they probably include Tacoma in the MSA, which is absurd. I think we’ve had that discussion before, amirite?

      1. Isn’t Tacoma pretty close to Seattle? Doesn’t seem absurd to me.

        1. It’s 30 minutes away down the highway. It’s not super far, but very few people daily, or for a dinner, will drive from one to the other. It’s hard to describe unless you’ve lived here, but Tacoma is very distinct from Seattle.

          1. Well, it’s based on some notion of economic integration.

            For example, I lived in Buffalo for many years. Niagara Falls is in the same MSA. Nobody drives to NF for dinner but they are most definitely economically integrated.

          2. It’s 30 minutes on the chamber of commerce brochure.

            Add in a little commuter traffic which runs 7 days a week from about 7am to 1245pm and then 315pm to about 730pm, and it’s a helluva lot longer than 30 minutes.

      2. Here you go.

        [Wiki link deleted due it moronic, idiotic 50 character limit]

        Includes Tacoma, other cities, and three counties.

        It is quite stupid to look at a city and its neighboring jurisdictions as one unit when looking at the effect of a new law or regulation.

        1. [Wiki link deleted due it moronic, idiotic 50 character limit]

          tinyurl.com is your friend (although I agree with you about the policy).

          1. The problem with tiny is no one clicks on them because they mask the true destination. Embed and you’re fine.

      3. Lies, damned lies, and statistics. I was just going to ask *why* use MSA data, when it’s only Seattle that has the min. wage increase? To “prove” that the increase didn’t cost jobs?

    2. If memory serves me, I remember you (robc) and another commenter getting into quite a heated argument about the Seattle MSA about 4 years ago. No one wanted to back down and it got pretty cruel. Entertaining as hell.

      1. And I was right!

  3. including “learners, apprentices, messengers and workers with a disability

    Standard libertarian disclaimer aside, isn’t it blatantly illegal to discriminate because of a disability?

    Semi-related: if you’re a living wage type, don’t you believe the disabled deserve a living wage too? How can you possibly accept that some people should be paid less money just because they have lower productivity?

    1. It’s an attempt to get around one of the original purposes of the minimum wage, was to disemploy the disabled for eugenics purposes. See my link above.

  4. Does the data take into account how much prices rise? Of course minimum wage won’t cost jobs if business pass the cost on to customers.

    Haven’t examples of business folding already started to happen (I know there is a SF bookstore example)

    Again for the does cost jobs crowd – why 15.75? Why not $25 so everyone can be well off or $100?

    1. Borderlands, the SF bookstore, was rescued by crowd-funded donations.

      But not all businesses can pass the costs onto customers. People go to restaurants less often when their prices rise.

  5. Keep in mind that the people who advocate for a living wage are completely ignorant about economics. Also, they are less than honest.

  6. So as a restaurant worker in Seattle I feel like I can add something to this conversation.

    First of all, the current increase is minimal for tipped employees (from $9.47 to $10/hr.). This is because the city law allows a $1 tip credit. It also allows a credit for companies that provide health insurance.

    What I expect to see is that as the gap between labor costs in Seattle proper and the surrounding areas increases in the coming years you will likely see a gradual shift of the epicenter of restaurants. This will largely be an unseen change, and will really be reflected in the number of restaurants that *are never opened* versus a rash of closings.

    One local restaurant (Ivar’s Salmon House) has already begun experimenting with ways to cope with this change by raising menu prices, eliminating tipping and spreading the new revenue amongst the entire staff and paying everyone $15 immediately. I suspect more of this kind of experimentation will continue as the wage goes up. What kind of effect this has on the guest experience remains to be seen.

    Tl;dr Wage increase was small for most restaurants and the change is too gradual any job losses to be picked up in stats.

    1. One local restaurant (Ivar’s Salmon House) has already begun experimenting with ways to cope with this change by raising menu prices,

      Menu prices went up 21% at Ivars. Guess where I don’t eat?

      Tl;dr Wage increase was small for most restaurants and the change is too gradual any job losses to be picked up in stats.

      Exactly. But the argument from the Kshama Sawant wing of the council (The Pol Pot wing, for those keeping score at home) was that minimum wages make things better and increase employment. If they actually believed this, then you’d want a less gradual increase to the wage, and only going to $15 wouldn’t make any sense. You’d do much better with $25 or $35 minimum wage.

  7. If higher minimum wages simply led to lower employment numbers, period, the end, then the US’s unemployment rate would be through the roof.

    However, higher minimum wages are certainly partially responsible for why a Hershey Bar no longer costs 5cents, and my lower-middle-class home cost me five times what my parent’s upper-middle class home cost, and two bags of basic groceries costs $100

    1. Re: Paul,

      If higher minimum wages simply led to lower employment numbers, period, the end, then the US’s unemployment rate would be through the roof.

      The unemployment rate of those most affected by a wage floor is through the roof.

      1. I haven’t clicked on your link, but I won’t argue that the concept of unemployment is highly nuanced. People leaving the workforce is certainly a good place to start looking.

    2. Those changes are mostly due to monetary inflation and other government imposed cost increases. No one makes minimum wage in residential construction.

      The main cumulative effect of minimum wage is persistent unemployment of marginal workers. The cost of the welfare system (employees and recipients) does increase the cost of doing business and that can manifest in a higher cost of living for producers.

      1. Those changes are mostly due to monetary inflation and other government imposed cost increases. No one makes minimum wage in residential construction.

        Minimum wages lift all wages.

        The guy who’s been working for the store owner for three years who started at $7.95 an hour who now makes $15 an hour is now making the same as the new employee with no experience or time on the job. So the experienced employee demands a raise, and so on.

        This is has been shown.

        1. This is has been shown

          You know a link to a study showing that would be helpful, instead of just asserting it as fact.

        2. The guy who’s been working for the store owner for three years who started at $7.95 an hour who now makes $15 an hour is now making the same as the new employee with no experience or time on the job. So the experienced employee demands a raise, and so on.

          That’s not how it works. The job pays $15/h now, but it’s a different guy working there. The employee who would have made $7.95/h simply ends up out of the workforce.

          Long term, these jobs simply get eliminated. My local supermarket has two people handling checkout for eight checkout lanes; no baggers, no cashiers. At night, a few people come in and restock the shelves. Low end European restaurants have very little service and often require you to clear your own table.

          Even if it did work the way you said, it wouldn’t help, because prices would simply adjust upward to compensate, so the $15/h people are making would then be worth much less.

      2. To drive the point home, in Seattle, I’ll bet residential construction workers make minimum wage now!

        1. No, they don’t since once again minimum wage is $11/hr. which is a little less than $23k/yr. I promise you that in this city they make double that if not more.

    3. Simple monetary inflation by the Fed explains *most* of the price increases over the decades. Wages have generally been a lagging indicator, trying to catch up with inflation.

    4. If higher minimum wages simply led to lower employment numbers, period, the end, then the US’s unemployment rate would be through the roof.

      That’s nonsense on multiple levels.

      First, higher minimum wages only affect a small part of the workforce, so their effect is not noticeable in overall employment statistics.

      In addition, unemployment rate is economically nearly meaningless, being a combination of some arbitrary criteria of how long people have been looking for work. Many minimum wage workers probably wouldn’t show up in any unemployment statistics.

      A bit more meaningful is the labor force participation rate; that has suffered badly under Obama and his economic policies (though mostly for reasons other than minimum wage).

  8. Population of Seattle-Tacoma-Bellevue Metropolitan Statistical Area:
    3.67 million

    Population of City of Seattle:
    0.61 million

    Yep. Pretty sure all that fast-food job growth wasn’t in Seattle proper.

  9. BTW: I’m not sure why we keep focusing on the restaurant industry, because the new minimum wage applies to everyone. Has anyone tracked small clothing store employment?

    1. Restaurants are almost certainly the largest sector of minimum wage employment. They are fairly labor intensive endeavors and there are a lot of them. When I was in high school I worked in retail clothing (in the Seattle Metro area) and even then I was doing better than minimum wage.

  10. The effect of minimum wage increases on the number of jobs in an industry is unpredictable. What is predictable, however, is that if businesses are forced to hire at $15/h, they are going to hire employees that are worth $15/h. They are either hiring a better, more productive, more experienced class of workers for what was formerly entry-level jobs, or they are simply eliminating the entry-level jobs and hire workers for more complex and high-end tasks instead.

    1. Excellent point.

      When the minimum wage in Seattle does actually hit $15/hr. for everyone (small and large businesses alike), I expect we will largely see a divide in where one can find an entry-level position in this region, especially in restaurants. This will likely mean that to get hired at even a fast food restaurant within the city limits one will need work experience, references etc, while outside the city a high schooler will likely still be able to get hired with no experience whatsoever.

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