Intrepid Private Capital Group Financial News Blog

Intrepid Private Capital Group


So many see the raising of the minimum wage as a panacea.
You may wish to read how it will affect Seattle.

Washington already has the highest state minimum wage � $9.32 an hour � a healthy cut above the federal minimum of $7.25 an hour. The usual supporters � unions, Democrats, meddling activists and uninformed thinkers who fancy themselves as “progressives” � are thrilled. No surprise there. Yet there is some astonishment that the city council and the law’s advocates couldn’t learn a lesson that is playing out clearly just down the road from the lawmakers’ chambers.

Fifteen miles south of the Space Needle is the Seattle suburb of SeaTac, home of Seattle-Tacoma International Airport. Earlier this year, SeaTac raised its minimum wage to $15 an hour for some industries. It’s already feeling the effects of government raising the cost of employing a worker.

In February, the Seattle Times reported that already at “the Clarion Hotel off International Boulevard, a sit-down restaurant has been shuttered, though it might soon be replaced by a less-labor-intensive cafe.” The Times also reported that ” other businesses have adjusted in ways that run the gamut from putting more work in the hands of managers, to instituting a small ‘living-wage surcharge’ for a daily parking space near the airport.”

The United Liberty website’s blog has noted that “some employees” in SeaTac “are feeling the pinch as employers cut benefits” after the wage hike and linked to a Northwest Asian Weekly story that featured a hotel worker who said that, due to the law, she had “lost my 401(k), health insurance, paid holiday and vacation.” There is also “no more free food” at the hotel that once fed her. The unpleasant experience in SeaTac is coming to Seattle. Then it will spread across the nation as cities and states, thinking the laws of economics don’t apply to them, foolishly replicate the Seattle mistake. The job market has turned cruel under this president and work is hard to find. Raising the wages an employer has to pay will only make conditions worse. Already, two large metropolitan areas � Portland-Vancouver-Beaverton, Ore., and Riverside-San Bernardino, Calif. � have unemployment rates higher than 50% for teens who haven’t graduated from high school. And they’re not rare exceptions. High jobless rates for teens can be found all over America. The rate is 31.4% in Seattle, 39% in Los Angeles-Long Beach and 37.5% in San Diego. Simply raising the minimum wage for teens won’t improve these numbers. It will, in fact, make them worse.

The Bureau of Labor Statistics reported last year that “minimum-wage workers tend to be young” and “made up about half of those paid the federal minimum wage or less.” They are going to be the ones who are hurt as data show that jumps in teen unemployment follow raises in the minimum wage. It makes no sense for government to make it more difficult for businesses to employ these young workers. Teens are hardly the only ones harmed by minimum-wage hikes, though. The American Action Forum, headed by former CBO director Douglas Holtz-Eakin, has found that for every $1 increase in the minimum wage, the jobless rate rose 1.48 percentage points, while the net job growth rate fell 0.18 percentage points. Seattle’s new minimum wage won’t take effect right away � it appears much of the compliance will be required by 2017. But the Washington Policy Center says the law “is already having a chilling effect on jobs” and pointed to the relocation of the Northwest Caster and Equipment company from Seattle to unincorporated Lynnwood, Wash. One media outlet called Seattle’s minimum-wage hike “a testing ground for what supporters of the wage hike hope will be a cross-country movement.” That might be right. We just hope policymakers across the country are paying attention when the city fails the test.

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Intrepid Private Capital Group • July 18, 2014

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