As you might remember, Seattle’s city council voted in 2014 to raise the minimum wage in the city to $15, and the first phase of this hike on April 1 of this year, with the wage increasing to $11. Since then, the job market news for the city has been, predictably, not good. In fact, while the rest of Washington state saw a growth in jobs, Seattle did not. The American Enterprise Institute recently published a report laying out the numbers. According to them:
On April 1 of this year, the city’s minimum wage increased to $11 an hour which may have contributed to the loss of 700 Seattle area restaurant jobs between January and September (new BLS employment data for last month were released yesterday), the largest decline over that period since a loss of 3,000 restaurant jobs in 2009 during the Great Recession (see bottom chart above). What makes the restaurant job losses this year especially noteworthy are that the average job gain during the January-September period over the previous five years from 2010 to 2014 was almost 3,000, and over the previous three years nearly 4,000.
What is also noteworthy about the loss of Seattle restaurant jobs this year is the fact that restaurant employment in the rest of Washington state is booming this year, as the top chart shows (see dark blue line, state restaurant employment data here). At the same time that Seattle area food services employment has declined this year by 700 (and by -0.52%), restaurant jobs in the rest of the state have increased by a whopping 5,800 new positions (and by 6.6%).
To go along with this, the AEI has produced a couple of charts to visualize the problem. This one is the most telling.
Since the end of the so-called Great Recession, both Seattle and the rest of Washington state’s restaurant job growth progressed generally upward, and the two correlate well up until the second half of 2014. Then, we get to 2015, and find the Seattle MSA’s numbers stagnating, even dropping. Meanwhile, the rest of the state has recovered from the sharp drop in 2014, and restaurant jobs there are well outpacing the city.
In other words, these numbers track very well with the advent of the minimum wage increase, and since the beginning of 2015, restaurant jobs have seen essentially no growth. By September, it is clear that the rest of the state is growing the number of restaurant jobs while Seattle is hemorrhaging them.
Looking at this particular sector of the economy is one of the most useful ones for understanding how the minimum wage affect job growth, Washington requires servers, waiters and waitresses, and other restaurant workers to be paid at least minimum wage plus whatever tips they make. Thus, we can be fairly certain that most of the people working these jobs, especially those who are recently hired, to be making at or around minimum wage. A higher minimum wage means restaurant owners have to pay their staffs more, and that cost increase is understandably likely to result in a shrinking workforce, unless there is a sudden increase in profit, which to my knowledge has not happened.
At any rate, San Francisco and Los Angeles have jumped on board with this wage hike as well, so it will be interesting to see what their job numbers in positions like these are going to look like in the coming months. If your city or state is considering a similar minimum wage increase, write to your political leaders and let them know about what has happened to Seattle since April 1, 2015, and remember the minimum wage in the city won’t even reach the full $15 until 2017. This hike to $11 is only the first stage.
(H/T to the Daily Caller for the story)