STUDY: Seattle Minimum Wage Increase Hurts Low Wage Workers

I'm not a huge advocate for high minimum wages.

I'm just laying out some of the consequences and solutions.

As far as up and coming businesses, if there were no minimum wage but still happened to be a small labor supply, you'd still have to pay a competitive wage or you can't get started.

You'll see a lot of startups either need a lot of initial capital though investors, their own money or big loans to pay well to get the good workers they need for a good product.

If you were making an object to sell or food to sell you wouldn't do well by buying cheap materials or cheap ingredients.

Again, I do put most of the blame on workers who do not create their own value by having good skills or provide good service.

And businesses are happy to take advantage of their cheap price point.

"If you like your job, then you can keep your job." - not Obama

It turns out that lunch isn't free after all.

It would be interesting to see the effects of a nationwide $15 min wage. In that case, businesses with multiple locations wouldn't be able to shift their workforce elsewhere in the country where wages are lower, which might lessen some of the negative effect. International companies, though, could still outsource labor overseas, and businesses would likely cut down on jobs that are not completely necessary. I would guess that a nationwide $15 min wage would decrease the number of available jobs and result in further outsourcing to countries with lower wage standards. The Dems will get more voters looking for handouts, though, so it will be a win for them.

kikKomen Soi sauce wrote:

The Dems will get more voters looking for handouts, though, so it will be a win for them.

Republican voters overwhelmingly take more handouts than Democrat voters. The irony of that is stunning.

X-Runner wrote:

...

Again, I do put most of the blame on workers who do not create their own value by having good skills or provide good service.

...

Then you should not want a minimum wage, because a minimum wage will price these people out of the job market which will keep them from getting the experience necessary to move up the salary ladder.

The minimum wage chokes off opportunities for people entering the work force while killing the low margin businesses which would give them the chance to earn career experience.

The minimum wage is economic poison. Nothing good comes from it.

I used the word "most" of the blame because some industries will absolutely take advantage of people and exploit them to whatever extent they can.

Minimum doesn't put the strain on businesses that some people claim and doesn't save workers to the extent that other people claim.

It is a protection from exploitation.

And it should go up in increments related to inflation.

It should be mostly localized, which it is.

Federal minimum wage is absolute baseline.

The vast majority of jobs aren't affected at all by any regulated minimums.

It's more of a political talking point for both sides.

Any discussion of minimum wage is superfluous w/o noting that various unions tag their pay as a multiple of minimum wage (225% for instance), thus creating a second-wave effect.

Pizza boy wrote:

I work at the corporate level for a major pizza chain. We had to close several of our Seattle stores because the higher prices we had to charge due to the minimum wage killed their sales. Those people who used to work there fir $10.00/hr now make nothing.

So yours were the only pizza restaurants in Seattle that raised prices? Or did all the other pizza restaurants in Seattle also raise prices and also go out of business? If question 2 is incorrect then your chain probably only had one thing going for it: price. Remove the low price and your pizza is not desirable to customers and your business is not competitive.

Les wrote:

Pizza boy wrote:

I work at the corporate level for a major pizza chain. We had to close several of our Seattle stores because the higher prices we had to charge due to the minimum wage killed their sales. Those people who used to work there fir $10.00/hr now make nothing.

So yours were the only pizza restaurants in Seattle that raised prices? Or did all the other pizza restaurants in Seattle also raise prices and also go out of business? If question 2 is incorrect then your chain probably only had one thing going for it: price. Remove the low price and your pizza is not desirable to customers and your business is not competitive.

This is a good point. The businesses that get squeezed out by government mandates on wages are almost always the low-price ones, typically those that the low-wage makers themselves (as a group) would patronize. So the poor really get it coming and going, as they don't have an income source, and their ability to buy cheap(er) goods/services is impaired.

X-Runner wrote:

I used the word "most" of the blame because some industries will absolutely take advantage of people and exploit them to whatever extent they can.

Minimum doesn't put the strain on businesses that some people claim and doesn't save workers to the extent that other people claim.

It is a protection from exploitation.

And it should go up in increments related to inflation.

It should be mostly localized, which it is.

Federal minimum wage is absolute baseline.

The vast majority of jobs aren't affected at all by any regulated minimums.

It's more of a political talking point for both sides.

Exploitation only occurs when someone is forced to work against their will or they are intentionally exposed to dangers without being told. If there are other ways workers can be exploited, let me know, but offering them low wages to work is not exploitation. Anyone who takes a "safe" job without coercion is not being exploited no matter what the salary is. Pizza makers are not being exploited.

It's possible that someone might actually pay to take certain jobs, like working for a world renowned artist, just to get the experience and credentials. That would be a negative salary. Who are we to tell them they are "being exploited", or that they can not have that opportunity because we think they should be earning a living wage?

When in doubt, don't mess with the free market, and there are a lot of doubts about the unintended consequences of the minimum wage.

More avocado on toast, please wrote:

Les wrote:

So yours were the only pizza restaurants in Seattle that raised prices? Or did all the other pizza restaurants in Seattle also raise prices and also go out of business? If question 2 is incorrect then your chain probably only had one thing going for it: price. Remove the low price and your pizza is not desirable to customers and your business is not competitive.

This is a good point. The businesses that get squeezed out by government mandates on wages are almost always the low-price ones, typically those that the low-wage makers themselves (as a group) would patronize. So the poor really get it coming and going, as they don't have an income source, and their ability to buy cheap(er) goods/services is impaired.

That's true. But also consumption goes down with price increases. People will eat less pizza, overall, if the price of pizza goes up. Depending on margins, this reduction in consumption could make the difference.

And what kind of salaries are you and the rest of corporate making? Serious question.I get that the low wage jobs are the first ones cut. But CEOs always seem to be raking in big bonuses anyway.

Pizza boy wrote:

I work at the corporate level for a major pizza chain. We had to close several of our Seattle stores because the higher prices we had to charge due to the minimum wage killed their sales. Those people who used to work there fir $10.00/hr now make nothing.

jamoptimist wrote:

They need to raise it from $15 to $20/hr in Seattle

Why just $20? Why not $25? $30? $40? $50? $100? What figure is enough to satisfy you? This entire "raise the minimum wage" movement is just a socialist scam that is doomed to failure.

Do you even live in Seattle? If not, N.O.Y.B.

You can exploit workers if there is an oversupply of laborers in an area and the bosses keep firing workers and giving the jobs to the next person that will do it for a dollar less to the point where no families in the area can afford to feed themselves.

The bosses may then possibly supply some kind of help with food and shelter and keep them basically in an enslaved situation.

A minimum wage in that situation would prevent the low bidders from taking jobs.

The workers would then be able to afford their own food and the surplus workers would have to travel or move to find work.

But you would at least have some standard of living for a group of people rather then extreme poverty for all that are not the owners.

To say "Exploitation only occurs when someone is forced to work against their will or they are intentionally exposed to dangers without being told" is ridiculous.

There are many forms of exploitation.

the letter why wrote:

And what kind of salaries are you and the rest of corporate making? Serious question.

I get that the low wage jobs are the first ones cut. But CEOs always seem to be raking in big bonuses anyway.

Pizza boy wrote:

I work at the corporate level for a major pizza chain. We had to close several of our Seattle stores because the higher prices we had to charge due to the minimum wage killed their sales. Those people who used to work there fir $10.00/hr now make nothing.

The question to follow yours is: How much more value does Pizza boy bring to the company?

I work in oil & gas, and the value I bring to the company is worth tens of millions a year. I'm literally many times more valuable than the guy working at the gas station.

X-Runner wrote:

You can exploit workers if there is an oversupply of laborers in an area and the bosses keep firing workers and giving the jobs to the next person that will do it for a dollar less to the point where no families in the area can afford to feed themselves.

...

If there are so many people in one area without jobs that a company can lower their wages to below starvation levels, then that area has much bigger problems than a company offering low wages. In fact, such an area desperately needs companies to provide work opportunities. People will be leaving in droves no matter what the company pays a few lucky people with a job. This happened to Detroit.

The idea that people will starve because companies will not pay them enough without the minimum wage is truly ridiculous. If that were true, then all of humanity would have starved to death before the minimum wage was set. That didn't happen, so your theory doesn't work.

vcv wrote:

More avocado on toast, please wrote:

This is a good point. The businesses that get squeezed out by government mandates on wages are almost always the low-price ones, typically those that the low-wage makers themselves (as a group) would patronize. So the poor really get it coming and going, as they don't have an income source, and their ability to buy cheap(er) goods/services is impaired.

That's true. But also consumption goes down with price increases. People will eat less pizza, overall, if the price of pizza goes up. Depending on margins, this reduction in consumption could make the difference.

Consumption of low cost pizza might go down, but very likely the customer will shift to other low cost food like tacos or burgers. If a price-sensitive item like a $10 pizza goes up to $15, then it will very likely affect sales, assuming it's a low quality item whose only redeeming value is its price. But if a high quality pizza that cost $35 went up to $40, the price increase isn't as much percentagewise, and sales would probably not take as much of a hit. Customers are buying that item because of its quality, not its price.

That the first study was wrong should be mentioned. The minimum wage increase had zero effect on employment while raising wages.

My brother in law has a very successful restaurant in Seattle. They have not felt the new minimum wage law because they end up having to pay unskilled labor $15 an hour just to retain people who will actually show up sober and ready to work. Most low income workers have been pushed out of Seattle and have to live across the sound or down close to Tacoma to find affordable housing. Then, they burn out on the commute and find work closer to home, even if it means a pay cut. Companies that need low skill labor and are not tied to the Seattle area are moving out to where the low wage workforce is located. So, I am not so sure that the study is giving insight into the effect of the minimum wage law or the impossible housing market.

Minimum wage laws generally do not work piecemeal. Most municipalities are just a fraction of the larger metro community. So, if you raise minimum wage in Houston, TX to $15 an hour, you are only helping 2 mil out of 6 mil. It is just too easy to move out of the jurisdiction to cut labor costs.

But the fears that McDonald's and others have are real. Most franchises are owned by individuals, not corporations, and often operate on a slim profit margin. Since labor is two-thirds or more of costs, a doubling of the minimum wage would be ruinous for many franchisees.