Photo: AFP/Getty Images
No Risk, No Reward: Seattle Should Approve a $15 Minimum Wage
Economics

No Risk, No Reward: Seattle Should Approve a $15 Minimum Wage

By Photo: AFP/Getty Images

Last week, Seattle Mayor Ed Murray announced a plan to raise the city’s minimum wage to $15 an hour. That’s much higher than any minimum wage in the United States. In fact, it would be the highest in the world after adjusting for purchasing power. The Seattle city council still must approve the proposal, but Murray says that the majority of them support it.

The benefits of a $15 minimum wage, which would be phased in over three to seven years, are self-explanatory: higher wages for workers. As Slate’s Jordan Weissmann points out, the campaign for a $15 minimum wage has made the Democrats’ push for a $10.10 national minimum wage look like a bargain. But a higher minimum wage also poses three risks to Seattle’s low-wage workforce:

  • Employers hire fewer workers. This is the typical argument against raising the minimum wage. By raising the price of labor, employers will curtail their hiring, leading to fewer employed workers. The Congressional Budget Office estimated in February that increasing the national minimum wage to $10.10 would lead to a loss of 500,000 full-time equivalent jobs.
  • Employers move outside the city limits where the minimum wage is lower. This is not a problem for the national minimum wage since employers would face the same price floor across the entire country. But it is an issue for Seattle whose nearby suburbs operate with a lower minimum wage. (Although the voters of SeaTac, a city south of Seattle that mostly comprises the Seattle-Tacoma International Airport, voted in November to raise its minimum wage to $15 an hour.)
  • Employers replace human workers with computers. Economists have long debated whether technological innovations will take the place of workers. Proponents of the theory like Andrew McAfee and Erik Brynjolfsson argue that employers will find it more cost-effective to employ machines instead of humans. Raising the price of laborparticularly to such a high thresholdmay tilt the scale further in the direction of automation.

If you’re a low-wage or unemployed Seattle worker, those are three big, scary risks. But the city's risk could be the rest of the country's gain, giving other states and the federal government a sense of what happens when you severely increase the minimum wage.

There's ample precedent for states serving as policy petri dishes. The individual mandate began as conservative idea in the Heritage Foundation in 1989, was implemented by Mitt Romney in Massachusetts, and became part of President Barack Obama’s health care law. During the first open enrollment window, Obamacare enrollment has followed a similar pattern nationally as it did in Massachusetts. Welfare reform in 1996 originated from the Wisconsin Works program under then-Governor Tommy Thompson, a Republican. Under the W-2 program, as it was known, welfare recipients had to either attend job-training programs or perform community service to collect their benefits.

In fact, this is how the national minimum wage originated, too. Massachusetts implemented the first non-compulsory minimum-wage law in 1912. Within the next eight years, 12 other states and the District of Columbia had their own minimum wage laws, although the Supreme Court struck down D.C.'s law that set a minimum wage for women and child laborers. In 1938, Congress passed a national minimum wage as part of the Fair Labor Standards Act and it eventually withstood a Supreme Court challenge.

The Massachusetts law could have been a disaster for its citizens, as no one knew for sure how a minimum wage would affect the economy. Instead, it laid the groundwork for a national minimum wage. Seattle’s low-wage workers may ultimately suffer for its $15 minimum wage, as conservatives and even some liberals are predicting. If it succeeds, though, Democrats would have a case for a higher national minimum wage than $10.10. We won’t know unless we trya scary prospect for Seattle, but exciting for the rest of us.

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