When Seattle voted to raise its minimum wage last year, it ignited a fever down the West Coast and sweeping across the country.
Early evidence suggests that it wasn’t such a good idea to raise the cost of labor because businesses – especially small businesses- won't be able to afford it.
New analysis from the American Enterprise Institute finds that from January to June, the Seattle-Tacoma-Bellevue area shed 1,300 jobs in food services and drinking places with 1,000 restaurant jobs being lost in May after the minimum wage increase began in April. That represents the largest one-month job decline since a 1,300 drop in January 2009 during the Great Recession.
The Seattle city council passed a $15 minimum wage law to be phased in over time last June. The first increase to $11 an hour took effect on April 1, 2015 with a pending increase of an additional $4 an hour by 2017 for some businesses.
The author notes:
Perhaps Seattle’s restaurant employment will recover, or perhaps it will continue to suffer from the upcoming full 58% increase in labor costs for the city’s restaurants that will be phased in during the coming years – time will tell. What we know for sure is that there are now 1,300 Seattle area restaurant workers who were employed in January who are no longer employed today, so it looks like the Seattle minimum wage hike is getting off to a pretty bad start.
Not everyone is convinced. A Forbes contributor is skeptical, but only comes up with conjecture himself:
Yes, there was a drop during April of 1,000 jobs, just as the $11 an hour local minimum wage went into effect. And what happened in May? A gain of 800 jobs. If the higher minimum wage were such a job killer, why would there have been a rebound?
Another problem is that even though you can isolate the restaurant data (notice that according to AEI’s quoted numbers, employment is up with a higher minimum wage, but that makes for a bad example if you don’t like a minimum wage), the industry faces complex issues. What happens isn’t just a matter of minimum wage.
For example, as I reported on another site, the restaurant industry is facing a personnel shortage. Not a shortage of jobs, but a shortage of people who can fill those jobs. It’s tough to find people who will work for the relatively low wages chefs themselves say the positions pay and who will put in the grueling effort necessary. Maybe a bunch of people got sick of the money and working conditions and simply left.
Or it could be a matter of part-time versus full-time jobs. What if a number of restaurants decided to work with more full-time positions, folding in multiple part-time ones?
This is full of maybes. The ominous numbers, on the other hand, are–well–numbers.
As we’re reported, there is also anecdotal information on a number of other unanticipated results from the wage hikes. There are some workers, for example, who are asking that employers cut back on their hours to keep their overall income low to avoid losing public assistance. Some locales are charging fees to absorb the higher labor costs. Young people are struggling to find work this summer.
We don't know where this is going, but we'll keep our eyes peeled for new data as it emerges.