Minimum wage hike wipes out jobs and cuts income for Seattle workers

Minimum wage hike wipes out jobs and cuts income for Seattle workers

A “very credible” new study on Seattle’s $15 minimum wage has bad news for liberals, notes Max Ehrenfreud at the Washington Post’s liberal-leaning Wonkblog. The City of Seattle is increasing the minimum wage to $15 over several years. The study finds that already, “some employers have not been able to afford the increased minimums. They’ve cut their payrolls, putting off new hiring, reducing hours or letting their workers go.” Indeed, the “costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study,” which was “commissioned by the city” and “conducted by a group of economists at the University of Washington.” Overall, the study estimates that the average low-wage worker in the city lost $125 a month because of the hike in the minimum.” As Ehrenfreud notes, the study was released “as a working paper Monday by the National Bureau of Economic Research.”

Minimum wage increases cost taxpayers a lot of money. California’s legislative analyst projected in 2016 that increasing the state’s minimum wage to $15 an hour would cost taxpayers $3.6 billion more a year in increased government worker pay. As I have previously noted, this is a very conservative estimate. This cost is partly due to the fact that government employees sometimes have their pay set as a multiple of the minimum wage, meaning they don’t have to be poor to benefit from a minimum wage increase.

Job losses due to minimum wage hikes also slash state and municipal tax revenue, contributing to budget shortfalls. The American Action Forum predicted the increase in California’s minimum wage to $15 would ultimately cost the state nearly 700,000 jobs. An economist at Moody’s calculated that 31,000 to 160,000 California manufacturing jobs will be lost.

In addition, low income workers who manage to keep their jobs despite the increased minimum wage will face increased taxes and lose some of their earned-income tax credits and food stamps. As Henry Schmid points out, “the tax implications of going from a $10- to a $15-an-hour minimum wage” wipe out much of the benefit of any increase to the affected workers. Schmid adds:

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For a family of four with both spouses making the minimum wage, their federal tax will increase from $4,106 to $7,219, payroll tax will increase from $2,579 to $3,869, their earned-income tax credit (EITC) will be reduced from $596 to zero … and the $2,400 food-stamp credit will be lost.

The Seattle minimum wage study is called “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.” It is available at this link.

Hans Bader

Hans Bader

Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department. Hans writes for CNS News and has appeared on C-SPAN’s “Washington Journal.”

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