Now, Los Angeles becomes the biggest city to pass a $15 per hour minimum wage law. Note the very big difference between having a law, and having an actual $15 minimum wage, which it does not, and will not until 2020.
Almost exactly one year ago, I wrote about how raising the minimum wage doesn’t really end up hurting businesses or the economy, in large part because minimum wage jobs are already, well… minimum. The idea is that minimum wage jobs pay the minimum, are done by the minimum number of people, and cannot be outsourced to somewhere where you could pay less than the minimum. The only possible downside, then, is a mass closing of minimum wage businesses. This was because Seattle had just become the biggest city to have a $15 minimum wage law.
Various publications and “news” organizations are already trying to claim to see whatever effect their side predicted is happening. The irony is that anyone saying they know, or can already see what the effects of a higher minimum wage are, is probably lying, or misconstruing their data.
What Happens With $15 Minimum Wage
Here comes hard fact number 1. There is no $15 minimum wage yet. In Seattle, the minimum wage in April went to $11 per hour. That’ right, $11. Not $15.
Here comes hard fact number 2. It takes a long time for adjustments to actually effect the economy. The Federal Reserve assumes that when it changes interest rates, the most dramatic possible direct change to the economy, that it takes six to twelve months for the effects to trickle through the economy. There is no way of knowing, after 30 days, what, if anything, the higher minimum wage is doing in Seattle.
The $15 minimum wage gets phased in over several years. It turns out that even higher minimum wage supporters understand that you can’t just drop a huge increase into the middle of an already running economy. Instead, the wage increases in phases, in part to give businesses (and workers) time to adjust.
The only place with an actual, in full effect, minimum wage of $15 per hour right now is SeaTac, the community around the Seattle-Tacoma Airport. The catch is that thanks to rules, and a lawsuit, only a small portion of the employees there are actually affected, around 1,500 or so. None of the businesses around the airport have gone under, and in fact, many of the businesses that predicted doom and gloom, are actually expanding. The city manager says that there has been no change in sales taxes or property taxes meaning that mostly things are unchanged.
The trick to drawing conclusions here is that 1,500 people is a micro economic case, at best. The economy of the surrounding area, and the United States is doing a little bit better, and that would far offset the implications of such a small number of workers.
The first real, non-partisan, non-specific example of one restaurant, comes in about four months, when businesses start reporting data (for tax purposes, not for minimum wage studies) to the State of Washington. Then, we’ll see if there are more or less businesses, employees, and so on. Of course, the 3 month change could be due to anything, so it’s not like that data will be definitive. And, even then, that data will be for a $11 minimum wage, not a $15 minimum.
We won’t find out about a $15 minimum next year either. The minimum wage in Seattle goes to $13 in 2016. Finally, in 2017, the minimum wage actually hits $15.
Will is succeed or fail? The irony is that the answer likely depends a lot more on how the economy is doing than the actual minimum wage. If things are down, expect the minimum wage to get a lot of the blame. If things are doing well, expect people to say, see the minimum wage didn’t hurt anything.
In the meantime, there are a lot of places that have different numbers in between. Here in Colorado, the minimum wage is indexed to inflation. That means there are no planned increases coming, but the minimum wage increased to $8.23 from $8.00 in 2014.
Of course, the Good Times Burgers restaurant on Colfax in downtown Denver is advertising a starting pay of $9.25 per hour. So, there is no telling how many Coloradoans are actually getting minimum wage right now.