(Editor's note: This opinion piece was written by the USA TODAY Editorial Board. An opposing piece was also written by Seattle Mayor Ed Murray, which you can read here.)
For years, the union-backed slogan "Fight for $15" has been a popular liberal rallying cry. The idea of raising the minimum wage speaks directly to people’s concerns about income inequality and is a simple enough concept to put on a bumper sticker.
In recent years, the popular idea has begun to translate into electoral and legislative victories. San Francisco, Los Angeles, Pittsburgh, Washington, San Marcos, Texas, and Missoula, Mont., are among the cities where a $15 minimum is set to go into effect in coming years. California has a statewide law being phased in. And New York will go to $15 an hour in and around New York City with a $12.50 wage upstate. Both states allow a suspension in the increases if they are found to cause economic harm.
There is just one problem to all of this. Minimum wage increases don't translate into big income increases for low-skill workers when taken to extremes.
Witness the city of Seattle, where civic leaders adopted a phased-in $15-an-hour wage in 2014. Though it is not fully in place, a study by the University of Washington and the National Bureau of Economic Research found that employers have already cut back on hours to compensate for the higher wages.
The study, backed by the city and with unusually detailed access to employment data, found that the second round of wage boosts to $13 an hour (depending on the employer's size, whether it pays benefits, and whether tips are involved) produced a 3% increase in average wages. But employers cut back on hours by 9%, meaning that the city actually suffered a 6% drop in the total wages paid.
This drop in employment will make it harder for people to get jobs, or to work as many hours as they want. It will also mean lower tax revenues with which to fund city services.
Though perhaps attention-grabbing, the result shouldn’t come a surprise. The Seattle minimum wage is more than double the national minimum of $7.25, and 61% higher than Washington state’s at the time of its adoption. That is simply too far to push above the going rate for work without producing adverse effects.
Other communities should take notice. If $15 is too much in Seattle, a booming and wealthy city whose region is home to the likes of Amazon and Microsoft, it is too much elsewhere.
It is certainly way too high to be imposed nationally, as some progressive lawmakers such as Sen. Bernie Sanders want. If rural employers had to pay anything near $15, they might not just cut back on hiring, they might shut down entirely.
A good indication of what could be in store comes from the unlikely source of Puerto Rico. As a U.S. territory, it is subject to the federal minimum wage of $7.25 an hour. Yet its economy is much less developed than the rest of the United Sates. Its median annual household income is less than half of what it is in the 50 states.
That makes for a huge disparity — between the fair market rate for labor and what Washington says needs to be paid. That disparity has weighed heavily on Puerto Rico and is one reason that it has been in a state of severe fiscal crisis in recent years.
Backers of the $15 minimum wage respond to the report by doubting its validity. They cite other studies that have shown a more benign impact.
While it is true that one study is hardly conclusive, this one is the most up to date and comes from a very credible group of economists with no political axes to grind. What's more, It should be up to those pushing for rate increases to show that the economy can handle it, rather than for the skeptics to show that they are right.
States and communities around the country should take a deep breath, slow down, and carefully examine what happens in Seattle over the next few years before pushing ahead with a $15 minimum wage. It may fit on a bumper sticker. But that does not make it a good idea.
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