San Francisco and Seattle have begun to phase in a rise to an eventual $15 an hour minimum wage. Los Angeles passed a law in June to also raise its minimum wage to $15 from the current $9. Some presidential candidates have advocated a $15 an hour minimum wage, whether across the board or focused on a particular industry like fast food.
Higher wages make employers nervous for good reasons. The extra money has to come from somewhere, whether lowering other costs, raising prices, or reducing profit expectations. It’s another financial hoop and, to a company just scraping by, it might mean the difference between survival and going under. Communities may ultimately decide that they can’t expect safety net public services to help working people, effectively becoming subsidies to employers. And yet, there’s also the argument that higher wages mean more spending and stronger businesses.
It’s time to deescalate the worry and think clearly, and part of that is to recognize that the higher minimum wage hikes have just begun to happen. There hasn’t been enough time to see much of anything yet. Unfortunately, there are those who are so categorically opposed to the idea of a minimum wage at all that they will offer dubious takes on the little information that has come out.
In this case, the American Enterprise Institute took some restaurant industry employment data for Seattle from the Federal Reserve Bank of St. Louis and blamed a higher minimum wage for the worst decline in restaurant jobs since the Great Recession.
There’s just one problem. The AEI data analysis is incredibly flawed and doesn’t show that higher minimum wage means a lower number of jobs — and, therefore, that it is killing businesses.
I did an extended deconstruction elsewhere of the data and what it actually says. You can use the link to see it all. In short, when you look at the data closely enough, you could see it as easily argues that a higher minimum wage actually increased the number of jobs. There are also so many pressures on restaurants at the moment, including increased competition, great volatility in the number of establishments, and a difficulty in finding help (and if you can’t fill a job, it disappears and looks like a job loss), that there are many reasons that real job losses could happen.
And then, it also turned out that similar data for San Francisco showed an increase in restaurant jobs after an increase in minimum wage.
In other words, don’t panic. When you’re making plans for your company, it’s important to look at projections of economic conditions. But look into the data yourself and don’t assume that someone is giving you a clean picture.