Seattle Min Wage Hikes Crushing The Poor: 6,700 Jobs Lost, Annual Wages Down $1,500 - UofW Study

Just last week we noted that McDonalds launched plans to replace 2,500 human cashiers with digital kiosks like the ones below (see: McDonalds Is Replacing 2,500 Human Cashiers With Digital Kiosks: Here Is Its Math):

 

Of course, no matter how much anecdotal and/or hard evidence is presented to liberals on the negative consequences on higher minimum wages they simply can't be convinced it's a bad idea.  Somehow, the basic economic concept that raising the price of good (i.e. wages) would somehow destroy demand (i.e. employment levels) for that good just does not compute in the minds of progressives.

Never the less, below is yet another study from economists at the University of Washington that reveals some fairly startling takeaways about Seattle's minimum wage.  Per the chart below, minimum wages in Seattle increased from $11 in 2015 to $13 in 2016 and $15 in 2017 for large employers.

 

To our total shock, the study found that higher minimum wages caused a 9.4% reduction to total hours worked by low-skilled workers, or roughly 14 million hours per year.  Given that a full-time employee works 2,080 hours per year, that's equivalent to just over 6,700 full-time equivalents who have lost their jobs, just in the city of Seattle, courtesy of moronic politicians who don't seem to grasp basic mathematical concepts.

Our preferred estimates suggest that the Seattle Minimum Wage Ordinance caused hours worked by low-skilled workers (i.e., those earning under $19 per hour) to fall by 9.4% during the three quarters when the minimum wage was $13 per hour, resulting in a loss of 3.5 million hours worked per calendar quarter. Alternative estimates show the number of low-wage jobs declined by 6.8%, which represents a loss of more than 5,000 jobs. These estimates are robust to cutoffs other than $19.45  A 3.1% increase in wages in jobs that paid less than $19 coupled with a 9.4% loss in hours yields a labor demand elasticity of roughly -3.0, and this large elasticity estimate is robust to other cutoffs.

Adding insult to injury, pay hikes weren't nearly enough to offset lost hours...

Importantly, the lost income associated with the hours reductions exceeds the gain associated with the net wage increase of 3.1%. Using data in Table 3, we compute that the average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker.

To our complete 'surprise', the study found that demand for low-wage jobs is more elastic than prior studies from more liberal institutions may have suggested.  Shockingly, low-wage jobs are apparently particularly susceptible to automation...who knew?

These results suggest a fundamental rethinking of the nature of low-wage work. Prior elasticity estimates in the range from zero to -0.2 suggest there are few suitable substitutes for low-wage employees, that firms faced with labor cost increases have little option but to raise their wage bill. Seattle data show – even in simple first differences – that payroll expenses on workers earning under $19 per hour either rose minimally or fell as the minimum wage increased from $9.47 to $13 in just over nine months. An elasticity of -3 suggests that low-wage labor is a more substitutable, expendable factor of production. The work of least-paid workers might be performed more efficiently by more skilled and experienced workers commanding a substantially higher wage. This work could, in some circumstances, be automated. In other circumstances, employers may conclude that the work of least-paid workers need not be done at all.

Here is a look at the estimated percentage change in hours worked...

 

...and total hours.

 

Conclusion: Keep up the good fight, Bernie.  With policies like these, Nancy Pelosi may be the least of Democrats' worries.

Comments

TGDavis Jun 27, 2017 2:18 PM Permalink

There's no index of the amount of time people wait in line.  Two cashiers instead of four, lines get longer and more time is wasted.  Let's measure that.

Charvo Jun 26, 2017 10:23 PM Permalink

The real problem isn't minimum wage but rather too many people vying for too few jobs.  This is a symptom of overpopulation.  Mininum wage laws actually aggravate a horrible situation for demographics who are unwanted by employers.  When small businesses close down because of increased labor costs, the businesses left over after the destruction get to pick and choose who they want to hire because the available labor pool increases due to the destruction of businesses.  Who are these surviving businesses going to pick?  Probably the clean cut white person since this would match the demographic of the target customer.  Who is left out in the cold?  Black males.  This is why black male teens have the highest unemployment rate of any demographic group.

VZ58 Jun 26, 2017 10:05 PM Permalink

And $19 hr is considered a low skilled wage? No wonder this country produces nothing, but sh*t these days and no one can afford to live a decent life anymore. Nah, no such thing as inflation...

40MikeMike Jun 26, 2017 6:28 PM Permalink

Make democrats  dumb again. Two countries. The good will help the bad understand that executive thinking is a necessity. PLEASE make the left coast starve to death because of their politics. Hurray for too stupid to remember  to breath progressives! Democrats need to be forced into sterilization. So they don't do harm to each other. A more intelligent group must run their lives. Or they can starve to death. As is nature's  way.

decentraliseds… (not verified) Jun 26, 2017 5:58 PM Permalink

 Why waste time on this alligator when the swamp’s most critical economic and political problems revolve around the hegemony of a global corporate cartel, which is headquartered in the US because this is where their dominant military force resides. The US Constitution is therefore the “kingpin” of an all-inclusive global financial empire. These fictitious entities now own the USA and command its military infrastructure by virtue of the Federal Reserve Corporation, regulatory capture, MSM propaganda, and congressional lobbying. The Founders had to fight a bloody Revolutionary War to win our right to incorporate as a nation – the USA. But then, for whatever reason, our Founders granted the greediest businessmen among them unrestricted corporate charters with enough potential capital & power to compete with the individual states, smaller sovereign nations, and eventually to buy out the USA itself. The only way The People can regain our sovereignty as a constitutional republic now is to severely curtail the privileges of any corporation doing business here. To remain sovereign we have to stop granting corporate charters to just any “suit” that comes along without fulfilling a defined social value in return. The "Divine Right Of Kings” should not apply to fictitious entities just because they are “Too Big To Fail”. We can't afford to privatize our Treasury to transnational banks anymore. Government must be held responsible only to the electorate, not fictitious entities; and banks must be held responsible to the government if we are ever to restore sanity, much less prosperity, to the world. It was a loophole in our Constitution that allowed corporate charters to be so easily obtained that a swamp of corruption inevitably flooded our entire economic system. It is a swamp that can't be drained at this point because the Constitution doesn’t provide a drain. This 28th amendment is intended to install that drain so Congress can pull the plug ASAP. As a matter of political practicality we must rely on the Article 5 option to do this, for which the electorate will need overwhelming consensus beforehand. Seriously; an Article 5 Constitutional Convention is rapidly becoming our only sensible option. This is what I think it will take to save the world; and nobody gets hurt: 28th Amendment: Corporations are not persons in any sense of the word and shall be granted only those rights and privileges that Congress deems necessary for the well-being of the People. Congress shall provide legislation defining the terms and conditions of corporate charters according to their purpose; which shall include, but are not limited to: 1, prohibitions against any corporation; a, owning another corporation; b, becoming economically indispensable or monopolistic; or c, otherwise distorting the general economy; 2, prohibitions against any form of interference in the affairs of; a, government, b, education, c, news media; or d, healthcare, and 3, provisions for; a, the auditing of standardized, current, and transparent account books; b, the establishment of state and municipal banking; and c, civil and criminal penalties to be suffered by corporate executives for violation of the terms of a corporate charter.    

Too-Big-to-Bail (not verified) Jun 26, 2017 5:13 PM Permalink

Their annual salary might then push past 20,000 which will be a real psychological milestone

Economy-X Jun 26, 2017 5:24 PM Permalink

This article is simply retarded, both economically and historically. Take the economics first. Increasing the cost of labour is not the same as increasing the cost of a commodity such as avocados. When the cost of avocados goes up significantly people cut back in direct proportion. Simple! Labour is not a commodity produced for sale on the market and is NOT subject to the same supply/demand curve as goods that are, like avocados.First, labour is absolutely necessary to a business. So business trying to expand cannot just cut back if costs go up, not it it wishes to continue as a business. If it can automate low-skilled jobs then it will do this anyhow. Thus, I'm not saying that there is no supply-demand relationship - there is - but it is very different to the supply/demand curve of all other commodities simply because labour is both a necessary ingredient to production and a crucial source of demand.Second, wages are a massive source of demand. When you pay more wages you get more demand in the consumer economy. Thus the money is recycled back into the economy almost immediately. Wages are not simple a cost that disappears into a black hole. The poorest workers spend every penny of their wages each week as they have higher propensity to consume. Thus any increases in wages a direct boost back into the economy. Thus businesses that keep staff will win the economic war over their rivals, by benefitting from a boost in demand. Third, from the reasoning of the above article, it is clear that the only way to save the poorest from automation is to keep reducing their wages in competition with the continually dropping costs of robotics. Some day the poor will have to work for free to ensure they can keep their jobs. This is called slavery by the way!!! Now lets do the history part. Historically under capitalism the lowest skilled jobs at any time in the economy are usually under threat of extinction through automation. It happened to the weavers of 19th century Britain when the spinning jenny was invented. It happened to the cotton pickers of the United States, it happended to the blacksmiths and the hole diggers, the ship hands and the railway signal men and so on.Technological economies automate low-skilled jobs. This is NORMAL, NATURAL and GOOD, since it means that highly skilled decision-making creatures, humans, can actually do more interesting stuff. STOP BEING AFRAID OF THE FUTURE. Tech opens up new jobs, new possibilities other than being human automoton. As for the question of who crushes the poor. For a start when the CEO's of PIMCO and GOOGle between then got pain a half billion dollars for a single years work it becomes exceedingly clear who crushes the poor. No human on earth could ever, ever do any work, no matter how clever or risky that can realistically be valued in real terms at 250 million dollars in a single year!!! Remember this, when you crush something that is indomitable, the human spirit, you don't destroy it, you simply condense it until an enormous mass of pressure one day soon explodes.

VZ58 Economy-X Jun 26, 2017 10:14 PM Permalink

Holy crap are you retarded. Labour is not a commodity? Wages are a massive source of demand? Wow, someone found Keynes on Wikipedia! Yeah, now you are ready for Wall Street dude. Real edumacated. You need a Nobel Prize now. Here's an idea - start a business and come back one day when you have a clue about how the world works.

In reply to by Economy-X

chosen (not verified) VZ58 Jun 26, 2017 10:55 PM Permalink

Workers are just like cattle (a commodity).  Employers get the most out of them they can.  If they can find someone more productive, they will fire the least productive, and hire the most productive.  If the workers can be replaced by machinery, they will be replaced.  Workers are a commodity, no more no less.   That's why business refers to them as "labor costs", just like the cost of raw materials.

In reply to by VZ58

Omni Consumer … Economy-X Jun 26, 2017 8:36 PM Permalink

Oh Goody!Someone found Krugman's book, "Keynesian Klown Kollege," and has decided to paste excerpts of it into his ZH comment!Please, tell us more about this magical "demand." You just make it go to inifinity, and people spend, and the economy hums along, amirite?Last time I checked, no one put a gun to anyone's head, demanding your tax dollars to pay for the salaries of Bill Gross or Eric Schmidt. They're pricks, to be sure, and I think they ought to be replaced by some of these kiosks that McD's is rolling out, but the jackbooted enforcer thugs aren't going to come to my house if I refuse.We already have slavery, dumbass. When money is debt, and debt is money, and when the debt can never be repaid because to repay debt is to destroy money, then the very basis of your Keynesian Klown equations - the currency - is totally corrupt to begin with. 

In reply to by Economy-X

HuskerGirl Jun 26, 2017 4:56 PM Permalink

It's not that liberals are blind to the effects of higher minimum wages on the poor.  It's that they don't see increased government dependence as a bad thing.  So far we've spent the equivalent of our national debt on LBJ's "Great" Society and all we've gotten for it is a subclass of citizens that very reliably support more and bigger government.If you're liberal it's worked better than you could have hoped.   

rudyspeaks Jun 26, 2017 4:03 PM Permalink

Love it! ZH is determined to prove commies like me RIGHT when we say capitalism can not, will not pay compensation adequate to live a decent life. No articles, I notice, on the excesses of the .01%ers. But, again, no arguements. We are in accord. Life under capitalism is...Serfs & Lords!

bloofer rudyspeaks Jun 26, 2017 5:10 PM Permalink

I often hear from a Facebook friend whose position is that "any business that doesn't/can't pay its employees a living wage should not exist."If you would like to understand why this policy is a bad idea, try starting a business. Most small businesses don't make a profit for the first year or two. In fact, the vast majority of them fail after the first 18 months.This means that the employer in a small-business start up is making zero dollars per hour--or more likely is making something in the negative number of dollars per hour.In a start-business of any significant size, the owner may need to hire some help at some point. If so, the employee must produce at least enough to justify their hourly wage, and do it right out the gate, or the employer will lose money by hiring some help.Try it yourself. You know how to make something or do something, right?

In reply to by rudyspeaks

Ckierst1 rudyspeaks Jun 26, 2017 5:03 PM Permalink

Life is rarely kind to criminals, looters and morons.  Capitalism is your term, Marxist scum.  We actually have a mercantilistic economy.  Classify it as crony capitalist if you prefer to use that imprecise term.  I prefer to restore the long lost laissez faire free enterprise system that was in general use prior to the War to Prevent Southern Independence (1861-1865). It made America an economic powerhouse of private initiative and invention, only to be destroyed by the Northern Unionist economic interventionists forcing an agenda of crony "internal improvements" at gunpoint.  To discover the real motives for the war just follow the big money.

In reply to by rudyspeaks

DFCtomm rudyspeaks Jun 26, 2017 4:49 PM Permalink

You mean like how it was in the USSR? Serfs & party members! Automation is going to make your ideology as bankrupt as capitalism. It's nothing more than mammoth hunters sitting around the fire arguing about the best principles around which to organize mammoth hunter society, except the mammoth will all be gone in 20 years. You're a fucking dinosaur and you're too stupid to know it.

In reply to by rudyspeaks

waspwench rudyspeaks Jun 26, 2017 4:33 PM Permalink

What we have right now in the US is not capitalism.   We have crony-capitalism, monopolies and regulatory-capture.Corruption destroys capitalism.   Communism is a great theory but it too has always been destroyed by corruption - there were serfs and lords aplenty in soviet Russia, just as there are in China and North Korea.   All communists are equal but some are more equal than others.

In reply to by rudyspeaks

Pure Evil rudyspeaks Jun 26, 2017 4:22 PM Permalink

So, please explain in concise grammer exactly why the Soviet Union imploded in 300 words or less.And, please explain how the North Korean economic system is superior the South Korean economic system.You might also want to point out why it was a mistake for Red China to adopt a capitalist system.And, also explain why you have yet to move to Venezuela to live in their glorious Socialist system.

In reply to by rudyspeaks

Harry Lightning Pure Evil Jun 26, 2017 4:34 PM Permalink

Socialist systems that fail are not truly Socialist systems, because they maintain a layer of dictatorship that skims the lifeblood out of their economy, and used to stash it away in Switzerland but now prefers off shore hedge funds in places like Luxembourg and Isle of Man and a few other information shelters. If you had a true Socialist economy, distribution of products and services and money would be more equitable. Socialism has other problems that make it a difficult economic system. In the case of the Soviet Union it was the misallocation of capital based upon the uninformed economic choices made by the leaers of the centrally planned economy. The Chinese and severl other countries have shown that a system that combines the best qualities of several economoic systems, capitaliskm and socialism among them, works quite well in overall performance. You will have a chance to see how such a system will work in the US once machines can perform much of the work now performed by humans and the masses revolt at the loss of jobs and take over ownership of the economy. Its a couple of deceades away, so stay healthy.

In reply to by Pure Evil

DFCtomm Harry Lightning Jun 26, 2017 4:54 PM Permalink

So it's never worked anywhere, but that's only because we haven't tried it hard enough. Socialism is always on the way to becoming an authoritarian dictatorship, because socialism creates a government with enough power to attract pyschopaths. You can make the same argument about capitalism, except socialism gives those psychopaths access to a police force and a military, while capitalism only gives them access to money.

In reply to by Harry Lightning

RopeADope Jun 26, 2017 3:51 PM Permalink

Here is the logic that is being cited...

After increasing the minimum wage from $13 to $15, the total hours worked by people earning $14 an hour dropped significantly.

AKKadian Jun 26, 2017 3:46 PM Permalink

Those slugs in the picture don't work at McCdick. They work at some government job, they know once the minimum goes-up, their in for wage increases at their gov. job. It's a scam and the less skill uneducated minorities are the ones getting rammed in the end. Then again they can head on back down south. It was a good run, now it's over.!!! 

shimmy Jun 26, 2017 3:45 PM Permalink

You could show that net monthly loss to libtards and they will just say wages need to increase even more to cover the lost amount. That's how crazy these clowns are.The republicants will of course be blamed by the dumbocrats for this whenever the min wage working liberal idiots who vote for them start bitching about losing hours or their jobs. 

shadow54 Jun 26, 2017 3:44 PM Permalink

Ontario's Liberal government is raising its min wage from $11:40 per hour to $15 in less than two years. The effects will be automation, an immediate reduction in hours. They will want more work in less hours. Some jobs will be eliminated.Ontario has an enormous burden of Disabilty and Welfare Fraud artists, hundreds of thousands of them so perhaps they are hoping  a higher wage will cause some of them to work. If so this plan will fail. Tens of thousands of refugees from Somalia and other places will not give up their free housing, superior medical care and fat gov checks. Most of those people do not want to work and in fact, since Trump got elected more of them found out about the free ride in Canada and are jumping the border. They go to places like Canada because they are bums looking for host nations to suck dry.Canada also brings in 350,000 foreign workers each year and many work on low wage jobs. At least they do until they run away from the job and find a way to get on welfare. They shouldn't be coming in at all and a min wage increase to give a raise to foreigner doesn't make much sense.

mary mary Jun 26, 2017 3:39 PM Permalink

These people should open their own mom-and-pop restaurants, the way Chinese immigrants do.  It's a mistake to expect anyone else to give you anything.  You have to make them an offer they can't refuse - like mom-and-pop cooking they can't get anywhere else in the world.

gilhgvc Jun 26, 2017 3:37 PM Permalink

you want to know why low skill workers never prosper? It is the CRAP they buy to make themselves feel good. it's not rent or medical bills or low wages...I buy and sell delinquent storage lockers....generally abandoned by LOW INCOME, LOW SKILLED people..CD'S, DVD's, designer clothes, Nike's Reeboks etc etc etc. literally THOUSANDS wasted each year by some of these folks. quit complaining and save some damn money up...then MOVE OUT OF THESE HIGH COST PLACES. I could write a freaking book.