Tuesday, June 27, 2017

A ‘minimum wage’ that kills wages


economics
Perry Como once recorded a very popular song called “Seattle“. It went like this:  
The bluest skies you’ve ever seen in Seattle
And the hills the greenest green in Seattle
Like a beautiful child growing up free and wild
Full of hopes and full of fears Full of laughter full of tears
Full of dreams to last the years in Seattle In Seattle
Nobody is talking about blue skies or green hills in Seattle these days. Instead, they are getting a very serious lesson in Economics 101, or what happens when you raise wages to pander for votes and end up hurting the people you were trying to help.  
It goes like this:   
As cities across the country pushed their minimum wages to untested heights in recent years, some economists began to ask: How high is too high?
 
Seattle, with its highest-in-the-country minimum wage, may have hit that limit.
In January 2016, Seattle’s minimum wage jumped from $11 an hour to $13 for large employers, the second big increase in less than a year. 
New research released Monday by a team of economists at the University of Washington suggests the wage hike may have come at a significant cost: 
The increase led to steep declines in employment for low-wage workers, and a drop in hours for those who kept their jobs. 
Crucially, the negative impact of lost jobs and hours more than offset the benefits of higher wages — on average, low-wage workers earned $125 per month less because of the higher wage, a small but significant decline.
Why is anybody shocked? This is so obvious that it makes you wonder about the people who keep voting for these charlatans.
In the real world, reality always has the last word. You can not pay someone $13 an hour just because a city council member wants a talking point.   Wages are a by product of economic reality not political pandering. Politicians are no more qualified to tell employers what they must pay than to force them to provide health care they can’t afford.
As my old economics professor used to say: “the employer does not have to pay you what you want to get paid… he writes the check, you know.”
Indeed he does!  In Seattle, many employers have decided that they can’t write those checks anymore. So they have cut back employee hours or simply stopped hiring or closed the business.
Another great day for socialism but terrible for the workers!
P.S. You can listen to my show (Canto Talk), (YouTube) and follow me on Twitter.

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