SeaTac’s $15 Minimum Wage Is Hurting the Workers It Is Supposed to Help

May 29, 2014

The law of unintended consequences is an economic idiom warning that the intervention of people and government in economic systems almost always has effects that are unanticipated and often undesirable.

Every debate over increasing the minimum wage comes with predictions that the law of unintended consequences will result in the opposite of what a higher wage is designed to accomplish—a better standard of living for low-wage workers.  Employers cannot pay a worker more than the value of their output.  In other words, if an employer must pay a worker $15 per hour, they must ensure the worker produces at least that amount, or they must figure out a way to reduce the cost of that labor.  So forcing employers to pay workers an artificially high wage creates perverse incentives for employers to find other ways to cut labor costs.

One way employers are cutting their labor costs in SeaTac, which recently mandated a $15 per hour minimum wage for certain workers, is by stripping away the benefits they used to offer. 

Northwest Asian Weekly reports that employees earning the new wage in SeaTac have lost benefits such as 401k, paid holidays and paid vacation, free food, free parking and overtime hours.  One hotel waitress said she is earning less because tips have decreased since the high wage has been in effect.  In many cases these benefits plus the lower state minimum wage added more value to workers’ earnings than the new $15 wage.

As one SeaTac worker put it, “It sounds good, but it’s not good.”

SeaTac’s $15 minimum wage has been in effect less than six months and workers in the city are discovering the new high wage comes with a steep cost.  In Seattle, a minimum wage has not even gone into effect yet, but employers warn they will be forced to use similar tactics to reduce labor costs once a $15 wage is imposed.  Some say they will be forced to lay off workers.

Despite theses warnings, the Seattle City Council is meeting today to continue debating how to implement a $15 minimum wage in the city.

UPDATE: The Seattle City Council Committee on Minimum Wage and Income Inequality unanimously passed Mayor Murray's proposed ordinance today gradually increasing the minimum wage in Seattle to $15 an hour.  The Committee delayed implementation of the new minimum wage from January 1, 2015 to April 1, 2015 and approved a sub-minimum training wage for teenagers.  The ordinance is scheduled to be voted on by the full City Council next Monday.

Comments

Next Mondays Seattle City Council Meeting

Any bets the new $15.00 an hour minimum wage not passing?