Last night, I made a bet about the effects of minimum wage on employment rates in the Seattle restaurant industry.
On April 1, 2015, Seattle’s minimum wage increased from $9.47 to $11. The wager: The trendline for Seattle restaurant employment has fallen by at least 20% since then. I took the over.
Their rationale: Supply and demand. Increase the price of an employee, and people will hire fewer employees.
My rationale: Employer demand is inelastic, but employee supply is elastic. Restaurants already do not employ more workers than necessary.
I can see how the world might believe otherwise. This was the result of the first Google search I performed:
It came from Google, so it must be right. But let’s look at some actual numbers.
This is the chart presented by Mark Perry, author of Google’s first search result:
It seems to show that the Seattle metropolitan area lost restaurant jobs while Washington state as a whole gained restaurant jobs.
But the Seattle metropolitan area didn’t increase the minimum wage. Only Seattle city did. We’re talking about a population of 670,000 vs a population of 3.7 million.
@TBPInvictus breaks out Seattle metro’s restaurant industry employment by component counties. King County, place of Seattle proper, has a population of 2 million. It’s a slightly better proxy but not perfect.
If anyone lost restaurant jobs, it’s Pierce County, whose minimum wage didn’t change. King County did just fine.
I think I just won a peppercorn.
Seattle’s longer-term minimum wage effects are unknown, but none of this is new. In the last eight decades, federal minimum wage increased from 25 cents to $7.25, and the restaurant industry somehow didn’t get decimated along the way.
I’ll save speculation of why for a later post, but for now I’ll end with the references below. Most importantly, don’t trust Google search infoboxes.
1. D. Card and A. Krueger. Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania. American Economic Review, Vol. 84, No. 4, pp. 772-793, September 1994.
2. We Can Afford a $12.00 Federal Minimum Wage in 2020 –Economic Policy Institute, April 30, 2015