Reconciling Anecdote and Data in the Minimum Wage Debate

March 28, 2014 | Marilyn Watkins

Ivars

Photo via Lee Coursey on Flickr

Last Monday, several of us headed out after work to celebrate with our intern who had just passed her PH.D. qualifying exams. But when we reached the bar we’d chosen, we found it was closed on Mondays. Did we shrug our shoulders and just go home? Of course not. We headed to another bar nearby and enjoyed its happy hour instead.

Yesterday the City of Seattle hosted a symposium on income inequality, bringing together researchers from around the country, local business owners and workers, politicians and activists to talk about minimum wage policy. The several hundred people who attended represented quite diverse perspectives. At several points, the data from the economists seemed to contradict the analysis that some business owners offered based on their own individual circumstances.

Michael Reich, a professor in Economics at UC Berkeley with a Ph.D. from Harvard, presented the results of research that he and a team of other well-credentialed academics have conducted on minimum wage increases. Reich and his team have compiled all the data from around the country from the past 25 years, including pairing every set of counties in the U.S. across state lines with different minimum wages. Their conclusions are clear. These minimum wage increases resulted in higher incomes for low-wage workers, lower rates of job turnover, and had no impact on the number of jobs in low-wage industries. Reich added the caveat that most of the increases in their studies had been implemented in stages, and none were as large as a jump from $9.32 to $15 would be.

Reich’s team also looked at the data from San Francisco, which raised its city minimum wage and required businesses to provide both health insurance and paid sick leave. When a Seattle restaurant owner stated that a friend from San Francisco reported that the cost of complying with all those regulations was forcing restaurants to leave the city, Reich responded that the data show San Francisco has not had any loss in the number of restaurants or restaurant workers.

Several of the local business owners who attended said that it would not be possible for them to continue their business with a $15 minimum wage. I had a separate conversation with two restaurant owners who said that a $15 minimum wage, even if phased in over several years, would force them to close less profitable shifts, like lunch and those Monday nights, meaning fewer workers.

I don’t doubt the sincerity of many of the local business owners opposing a $15 minimum wage, but this brings me back to my own anecdote. The people who want to eat lunch or go out on Monday night or make a purchase are most likely to walk down the street to another business if their original choice turns out to be closed. That is one of the factors that gets picked up by those crunching the data on jobs from all the businesses, but is likely to be missing in the analysis of individual business owners.

In an earlier post, I gave my own view based on a broad look at the data. Seattle should raise its minimum wage. The largest corporations could accomplish a move to $15 all at once, but for the bulk of employers – including locally owned and operated businesses, nonprofits, and childcares – the higher wage should be phased on over three to five years, without carve outs.

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Posted in Minimum Wage, State Economy

Comments

  1. Mike Warren says:

    I can see a phase-in for small businesses and non-profits, but only short term. Neither the small businesses nor the non-profits could afford to pay less and keep good employees. The reduction in turnover, alone could make up much of the additional cost. I have seen, in other areas, that the tip exemption leads to lower total compensation in many cases.

    • Jeff Smith says:

      I think it should be $15 from the get-go. If the City thinks this hill is too steep for the owners the City should offer a subsidy to make up the difference. I keep thinking of our promises to fix our education system. Every time something is done, it’s a move for incremental change. In the meantime the kids in school now don’t benefit from the pie-in-the-sky promises. In 12 year they will graduate with the same crappy education we are trying to get rid of now. Phasing in wage increases will mean a continuation of inadequate compensation for the thousands of workers trying to get by. There’s something not right here. If we want to right a wrong, that is what we should do now, not sometime in the future. Working wages for working people!

  2. Jeff Smith says:

    It is frequently agrued that workers who work in professions where patrons give tips should be paid a lower minimum wage by their employer, and the tips counted as part of the sum used to measure their minimum wage – this is “tip credit”. But “tip credit” is better looked at as an attempt to force the worker to share the tips with the boss because for every tip that comes in, a part of the paid wage is given up. There is something wrong with this picture. It means that the owner can reduce the cost of the food and still make a profit by penalizing the worker for pleasing the customer.

  3. You need to emphasize the increase in customers that many local businesses will have after the minimum wage goes up. I was out talking to small businesses in Hillman City this morning about 15 Now. This was something that the could all relate to.

    From another point of view, raising the minimum wage for big corporations has the effect of bringing in outside money (that would otherwise go to corporate profits or CEOs), strengthening the local economy. While even just redistributing income within the local economy strengthens it because more is spent on the needs of the struggling instead of being wasted on the wants of the affluent.

  4. billwald says:

    Working class wages should be defined by a union contract. In union communities, union scale sets the goal for scab workers and in normal times there is no economic reason for employers to pay more than union scale. In scab states, the minimum wage sets the desired pay goal for those who hire for low skill jobs.

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