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Saturday, April 23, 2016

Don't worry, hikes in the minimum wage don't cost jobs

Unless, of course, you actually hike the minimum wage, as Los Angeles is already finding out and California writ large will soon discover:
Los Angeles was once the epicenter of apparel manufacturing, attracting buyers from across the world to its clothing factories, sample rooms and design studios.
But over the years, cheap overseas labor lured many apparel makers to outsource to foreign competitors in far-flung places such as China and Vietnam.
Now, Los Angeles firms are facing another big hurdle — California's minimum wage hitting $15 an hour by 2022 — which could spur more garment makers to exit the state.
Last week American Apparel, the biggest clothing maker in Los Angeles, said it might outsource the making of some garments to another manufacturer in the U.S., and wiped out about 500 local jobs. The company still employs about 4,000 workers in Southern California. 
. . .
The minimum wage is accelerating changes in the L.A. apparel industry that began decades ago, industry experts said.
This is the LA Times, talking, people -- not exactly the most conservative publication in the world. In fact, outside of New York, it likely would be hard to find a newspaper more likely to support dramatic increases in the minimum wage. And yet, even before California's increase kicks in, even the LA Times sees that it is hurting employees as companies decided LA and California are becoming too expensive to do business in. True for years, of course, but California finally is pushing things past the breaking point. The only part about this that is surprising is that there are people in California who find this surprising.

Fear not, though. California not only is not alone in their surprised (some might call it economic ignorance), California actually was warned. Of course, it paid no mind when Seattle decided in June 2014 to torpedo its economy with a hike in the minimum wage to $15 per hour, with predictable results:
Now that the first Seattle minimum wage increase has been in effect for more than ten months, and as local employers brace for the additional minimum wage hikes that will eventually increase their annual labor costs per full-time minimum wage worker by 61% and by a whopping $11,300 (from the increase in hourly labor costs from $9.32 to $15 an hour), are there any noticeable effects so far on the city’s labor market? Is Seattle’s radical experiment with the highest-ever minimum wage in US history serving as a “model for the rest of the nation to follow”? Or is Seattle serving as an “economic canary in the coal mine” for other cities and states (and the country) considering the “bold action” of imposing higher labor costs on employers by as much as $15,500 annually per full-time minimum wage workers if they enact legislation increasing the minimum wage from $7.25 to $15 an hour?
Naturally, the AEI study answers  its own question:
Early evidence from the Bureau of Labor Statistics (BLS) on Seattle’s monthly employment, the number of unemployed workers, and the city’s unemployment rate through December 2015 suggest that since last April when the first minimum wage hike took effect: a) the city’s employment has fallen by more than 11,000, b) the number of unemployed workers has risen by nearly 5,000, and c) the city’s jobless rate has increased by more than 1 percentage point (all based on BLS’s “not seasonally adjusted basis”). Those figures are based on employment data for the city of Seattle only(not the Seattle MSA or MD), and are available from the BLS website here (data are “not seasonally adjusted”).
So, raise minimum wage by a lot, decrease employment by a lot. Why, exactly, is this surprising?

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