Seattle Shows Higher Minimum Wages Are Neither Populist, Nor Positive

The leftist elements of the Democratic party — the “resistance!” — are fed up with establishment’s aimlessness.

“Most candidates do not have the luxury of lighting millions of dollars on fire by spending close to $12 million on ads behind an uninspiring message,” Democracy for America chairman Jim Dean wrote following the Jon Ossoff’s stunning loss in the Georgia special election. “The same, tired centrist Democratic playbook that has come up short cycle after cycle will not suffice.”

The result has been renewed calls for a bold, progressive agenda that resonates with working class Americans who have increasingly defected to the GOP.

“Democrats can excite their base and also win over voters who are frustrated with both parties with a vision to transfer our nation into one that services the many and not a powerful few,” read a statement by the Working Families Party.

Although Democrats have no idea what their agenda should look like—nor taken any steps to put it together—they all seem to agree that it will include one thing: A $15 minimum wage. The populist idea has percolated from the fringe elements of the party straight to the top of the official party platform. It was one of the few (only?) ideas that had support from corporatist  candidate Hillary Clinton and socialist firebrand Bernie Sanders in this year’s presidential election.

But new research from economists at University of Washington, who studied the effects of Seattle’s bill to incrementally raise the city’s minimum wage to $15 an hour, suggests that Democrats progressive vision is build upon an extremely shaky foundation. Max Ehrenfruend writes for the Washington Post:

The city is gradually increasing the hourly minimum to $15 over several years. Already, though, some employers have not been able to afford the increased minimums. They’ve cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found.

The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city.

Specifically, the authors found that Seattle’s first minimum wage increase, to $11, created an elasticity of -1, which means that as wages go up 1 percent, total workers hours fall by 1 percent. Even that is not necessarily a great outcome since the marginal benefit of moderately higher wages for some employees meant that some employees lost their jobs completely. Losing a job can hurt an individual a lot more than an extra dollar an hour can help.

But Seattle’s next minimum-wage hike, this time from $11 to $13, was an unmitigated disaster. According to the study, it carried an elasticity of -3, meaning that hours fell by 9.4 percent while wages grew by just 3 percent. Cumulatively, 5,000 jobs and 3.5 million hours of work were lost, which meant the average low-wage employee saw their paycheck shrink by $125.

This does not come as a surprise to anyone who grasped the concept of supply and demand.

As the price of hourly labor goes up, one of two things happens: either there is enough margin in the product for the business to eat the difference or, as is more likely, there is not enough margin thereby forcing employers to reorganize their processes in less labor-intensive ways, cut employees, or close up shop altogether. But, as Jacob Vigdor, one of the University of Washington economists who authored the study, writes, this outcome runs directly counter to the goals Seattle was trying to achieve.

“The goal of this policy was to deliver higher incomes to people who were struggling to make ends meet in the city,” said Jacob Vigdor, a University of Washington economist who was one of the study’s authors. “You’ve got to watch out because at some point you run the risk of harming the people you set out to help.”

Somewhere south of $13 an hour was that point. But Seattle will soon press onward to $15, leading to thousands more lost jobs and diminished paychecks. And Democrats don’t appear willing to rethink the bedrock of their purportedly populist agenda.

As it turns out, Democrats care much more about what is politically beneficial for them than they do about what is good for low-wage workers.