NYT looks at Seattle minimum wage, plus some inconvenient facts on possible impacts

By: Richard S. Davis
12:00 am
April 7, 2014

The New York Times uses Seattle’s $15 minimum wage initiative (small “I” so far) to highlight efforts across the country to combat income inequality by raising the wage floor. The story by Annie Lowrey leads by citing the travails of a low-wage worker whose hours have been cut back. By now, we’re accustomed to such tales as they play heavily into the pro-wage-hike campaigns. But she also offers some necessary perspective on the limitations cities face.

“Cities just don’t have the tax and trade policy and tools to rein back inequality in a significant way,” said Alan Berube, a senior fellow at the Brookings Institution in Washington, D.C. “They can’t really redistribute income in the way the federal government can, so they are reaching for the levers they have.”

She offers a quick overview of the changes in Seattle’s economy over time, plus this take on the city’s politics.

Seattle’s politicians — who generally range from left to far-left …

I urge you to read the whole thing, and not just because I get a mention toward the end.

“When you jump to $15, you change the game substantially,” said Richard Davis of the Washington Research Council, a local think tank. “Automation becomes a more attractive substitution than when you’re making a more incremental increase.” Businesses might move beyond the city limit, and inequality might even jump.

In an unrelated NYT piece, economist Tyler Cowen examines trends in automation that should not be overlooked by those pushing the wage hike. Although throughout history advancements in technology have caused some jobs to disappear, the labor market has generally recovered as workers found employment in other fields. This may be different, Cowen writes in his thoughtful column.

…technologically related unemployment — or, even worse, the phenomenon of people falling out of the labor force altogether because of technology — may prove a tougher problem this time around.

Labor markets just aren’t as flexible these days for workers, especially for men at the bottom end of the skills distribution.

The bottom end of the skills distribution is where most minimum wage workers are found. Unemployment here remains stubbornly high, particularly among the least educated.

Even those workers who benefit from the higher minimum wage may see a large chunk of the wage hike offset by payroll taxes and lost benefits.

Finally, in considering efforts to combat income inequality, Gary Burtless, a Brooking Institution fellow, shares insights drawn from analysis done by the Congressional Budget Office.

Some crucial findings of the new study may come as a surprise, especially to people who believe incomes of the poor and middle class have stagnated since the turn of the century while incomes at the top have soared. The CBO’s latest numbers show the opposite is true. Since 2000 pre-tax and after-tax incomes have improved among Americans in the bottom 90% of the income distribution.

Unemployment remains our biggest problem, one that attacks on income inequality will not solve and may possible make worse.

Categories: Categories , Current Affairs , Economy , Employment Policy.
Tags: inequality , minimum wage