Last week we wrote about how New York City restaurants were shedding jobs as a result of the city’s steep hike in the minimum wage. An excellent overview article by economist Jonathan Meer, published in City Journal, the quarterly magazine published by the Manhattan Institute, takes a long view of the effects of the minimum wage.
Meer writes of the many debates occurring in cities, states, and Congress as advocates seek to boost the wage. He writes that the discussions generally focus on the obvious tradeoff.
Most of the debates focus on the number of jobs that might be lost from mandated increases and balancing these possible effects against the higher incomes.
This emphasis is misguided. When politicians point to crude job counts to justify policies like protectionist tariffs, economists routinely mock these lines of argument. Yet they seem content to accept them when it comes to the minimum wage. Data limitations are partly to blame—counting the number of people employed is relatively straightforward, while other aspects of a job, even the number of hours worked, rarely get tallied with any consistency. But the notion that the value of a job rests simply on whether one is employed and the level of cash compensation makes for unimaginative economics.
Besides the question of job loss versus pay hike are a host of considerations, harder to measure but of clear relevance to affected employees. Again, Seattle is cited.
Cutting hours is one approach, including opportunities for lucrative overtime work. After Seattle raised its minimum wage from just under $10 per hour in 2014 to $13 per hour in 2016, reductions in hours worked were much more striking than the reduction in the job count, as shown in research by the Seattle Minimum Wage Project. The nature of the job can change, too, with employers expecting more effort from their employees in exchange for those higher wages.
Meer covers a lot of ground, including some history that was new to us. While the minimum wage debates in Washington have subsided – the state and its major cities are near the top of the minimum wage scale nationally – the topic remains of interest. This, for example, is worth pondering.
…the real question is whether the minimum wage is good antipoverty policy. Does it transfer resources from high-income households to low-income households? Does it preserve incentives to work and to hire?
…The effects of the minimum wage on employment are likely to be nonlinear. Employers will adjust through other means, often making workers worse off in ways that aren’t generally visible to researchers. At a certain point, though, firms have no more ways to adjust, and then they will either lay off workers or find themselves unable to stay in business.
Enhancing economic mobility and alleviating poverty are of paramount importance. But the minimum wage is the wrong tool for the job. It lends itself easily to slogans and gestural politics, but it’s not a real solution for real problems.
Which brings us to the “super minimum wage” being proposed for salaried workers under the state’s proposed overtime rule. (We’ll again embed AWB’s excellent video explainer.)
Local business leaders are taking a dim view of a plan to raise the minimum salary in Washington to 250 percent of minimum wage — or nearly $80,000 a year — for executive, administrative and other salaried workers who don’t receive overtime pay…
Executives suggested the state Department of Labor and Industries trim the plan to less than 200 percent and give businesses until 2021 to begin implementation, a year longer than currently planned.
The proposal represents an overreach that will affect hiring and retention, say employers.
If approved, the rule will take effect next summer, with the minimum salary ramping up to 250 percent of minimum wage by 2025 for employers with more than 50 workers and 2026 for those with less.
Steve Simmons, owner of CG Public House, a Tri-City restaurant and catering business, is opposed to the plan. He said his employees bring a wide variety of skill levels to the job, and he recruits workers with disabilities and barriers to employment…
Nonprofits have gone on the record opposing the revised wages too.
The leaders of Columbia Industries, Grace Clinic and YMCA of Tri-Cities told the Tri-City Herald editorial board their funding hasn’t kept up and they can’t afford the new rates.
Converting salaried employees to hourly workers, as suggested by L&I, presents its own set of challenges, they said.
They would have to pay overtime when work exceeds 40 hours, upending flexible schedules that allow workers to take time off for family affairs.
That could threaten the ability of nonprofits to offer a wide range of services ranging from summer camps to college tours for high school students.
The deadline to comment is Sept. 6.
Written comments can be sent by email to EAPrules@lni.wa.gov or by mail, Employment Standards Program, P.O. Box 44510, Olympia, WA 98504.