I've changed my mind

[scott_sanford]

Last week I got into a conversation about last year's minimum wage increase in Seatac Washington. As some of you may know, this has annoyed and even outraged some people who object to people who work for a living getting paid good money for their efforts.

I passed along this Addicting Info article that, in an admittedly snarky way, chronicles the total failure of Seatac to implode into a Mad Max style wasteland of poverty and exotic fetish gear. Naturally I got an excited response telling me that raising the minimum wage would put many companies out of business and that Seatac's economy really was failing quickly because of the extra expense. (This does not seem to be the case on my planet.) So far I haven't been convinced by any of the vigorous allegations that raising the minimum wage can't work, though I've been told that things that don't or can't work include raising the minimum wage, socialism, Keynesian economics, democracy[1], Marxism (okay, no argument there), and unions.

*facepalm*

So...was I wrong? About higher wages leading to workers having more money and therefore more disposable income with which to stimulate their local economy, I think not. That Seatac's example is useful? I think so. Let me explain.

For anyone who doesn't know, Seatac is a small suburb south of Seattle. It has about 27,000 residents and 10 square miles – and is functionally just the neighborhood around Seattle-Tacoma International Airport. This is important; Seatac isn't an independent community but a small part of a major metropolitan area, and rather than being a varied economy it's based on a single gigantic industry.

Since the airport is a choke point through which much of western Washington's air traffic goes the demand for their services is price inelastic - an economic term meaning that demand doesn't change very much as prices vary. Even if minimum wage labor costs were a major part of the overhead to run an airport the law should not change the number of travelers greatly and the city should do fine. (Technically Port of Seattle employees are one of the exempt categories anyway, but the increase still applies to many support businesses such as hotels and restaurants.) The airport can't move – in fact it's expanding again soon – and the customers have few alternatives.

Seatac's situation is specific and limited; they sell air travel services to a much larger customer base and if the average traveler spends a dollar or two more it doesn't matter much. The increased wages rule is also very minor, affecting about a thousand people[2] so it's no surprise at all that effects are also minor. That's not to say the precedent that people could actually deserve decent pay for their work isn't seen as dangerous in some circles.

So I've changed my mind. Oh, I still believe that prosperity follows naturally when working people have more money. But I no longer think that Seatac's continued wealth is a useful example for illustrating that. It's too small and specialized. We'll have better information in a few years when we can look at what happens in the Seattle metropolitan area as a whole when their minimum wage increase has had a chance to establish iteslf.

If you have anything to add, you're welcome to add a comment below.


[1] Yeah, that one surprised me, too.

[2] According to http://www.masterparking.com/SeaTac-Living-Wage there are only 930 workers affected by this law in all of Seatac, out of 39,530 people employed in the city. That number seems very low to me but there are several exemptions for various categories of company.
[2a] Edit: A day later I find a claim of 1600 affected workers elsewhere, still not a large number.

Appendix, added the next day:
One of the responses I got was the point that $7 beats $0. That's true but it's also not as good as $15, and if people are making only $7 an hour who's going to have the discretionary income to keep businesses going? But this is an interesting point and one that's been brought up by right-wing objectors on the internet already. They sometimes ask why we have a minimum wage at all, such as in this editorial.

I'll go along with William Hausam, the author of that piece, and propose running the experiment. I nominate Tukwila, a Seattle suburb with the advantage of being right next to Seatac. Let's write up an exemption to all minimum wage laws for the city of Tukwila, wait a few years, and see what happens!

Tukwila is about two thirds the population of Seatac and only a little smaller in area. It doesn't have an airport but it does have a big mall right off of I-5. In addition to retail and hospitality businesses it has a large industrial area as well. The two suburbs can reasonably be compared.

Googling turned up reports that Seatac employers are positively awash in applications lately, which doesn't surprise me at all. Since working near the airport brings more money it stands to reason that many people within commuting distance will want to work there. Likewise, people with jobs in Seatac will want to stay there. Over the coming years we can expect Seatac hotels and restaurants to accumulate experienced and skilled workers.

So...who do you suppose would apply in Tukwila? At a guess, not the crem de la crem of Seattle's labor force.

It also occurs to me that if this experiment were performed the city of Tukwila would attract the kind of employer who's looking for ways to pay very little to their workers. While most existing businesses presumably wouldn't chop wages to make a quick profit – I'd like to think – it would certainly be a factor for anyone moving in. It would probably be a good idea to keep an eye on Tukwila businesses to catch those that were willing to cut corners on other expenses such as workplace safety.

So, yes, I'll take them up on this idea. Let's try both models and let them compete. Let's see if motivated well paid workers do better than whoever couldn't get a better paying job elsewhere.

Do I really expect this to happen? Certainly not! It would be an interesting demonstration but it will never happen. Not very many people would really like to repeal minimum wage laws, Anarcho-Libertarians to the contrary. And quite honestly I don't think many people who are vocal on the internet really believe in their claimed models; too often they argue their ideology rather than their ideas.


Postscript: There's a much plagarized article claiming that one supposedly typical hotel worker is unhappy about now making $15 an hour. Since Assunta Ng provides no identifying details we can't know if the reported exchange is accurate...but if it is this hotel worker has some very real grounds for complaint. Firstly, she alleges that before the new law she was making $7/hour, which is below the previous minimum wage. She should talk to her coworkers and either individually or collectively get a lawyer to sue the pants off of that hotel. Secondly, she says that one of the things she lost was her 401(k). This is bad. Your employer does not get to withdraw money from your 401(k) or close it down; that's not your employer's money, that's your money. If her 401(k) account has been lost she should call the King County police and ask to talk to someone about embezzlement; the fraud unit should be very interested to hear from her.

Comments

[msconduct.livejournal.com]

If you have anything to add, you're welcome to add a comment below

Time-travelling back from 2016, challenge accepted.

From the perspective of a non-American, I always find the "sky is falling!" attitude to a minimum wage bemusing. NZers are kind of fierce about the minimum wage as we were the first country to pass minimum wage laws (in 1894). In New Zealand the minimum wage is currently $15.25 and we will have a higher growth rate than the US this year (currently 2.6% here and 1.9% in the US). Of course, it's not an exact comparison because of differences between the two economies; however, it's illustrative. Tangentially, we made zero-hour contracts illegal here this year and that doesn't appear to have tanked the economy either.

[scott-sanford.livejournal.com]

Greetings, time traveler! The continued failure of New Zealand to collapse into barbarism, catch fire, and sink into the ocean is noted. *grin* I'm tickled people are still finding this article, too.

[msconduct.livejournal.com]

Yes, it's renowned throughout history.

BTW, I'm still snickering at your Dilbert LARP remark. That was a welcome ray of light in the murk of the IT trenches.