A Canary in the Coal Mine?

Among the primary reasons for opposition to increasing the minimum wage is that doing so will result in job losses. Numerous academic studies show the negative effects of minimum wages on employment. New information from Seattle gives even more evidence that increasing the minimum wage will cost jobs.

In June of 2014, the Seattle city council passed a new law that will increase the city’s minimum wage to $15 an hour, with the increase being phased in over a period of years. The first increase (to $11/hour) came in April of this year. The American Enterprise Institute (AEI) studied restaurant employment in Seattle for the first 6 months of 2015, and what they found falls in line with what many other studies have shown.

According to AEI, between January and June of 2015 the Seattle Metropolitan Statistical Area (MSA) saw restaurant employment fall by 1,300 jobs—the largest decline since 2009 (during the Great Recession). It’s true that this figure counts job losses in months before the city minimum wage went up. However, the state of Washington’s minimum wage increased starting in January. In fact, after its latest increase, Washington has the highest state minimum wage among all 50 states.

AEI also found that the 1,000 jobs lost during May (which followed the city minimum wage increase in April) was the largest 1-month decline since January 2009.

During this same 6-month period, restaurant employment increased nationally by 130,700, overall employment in the Seattle MSA increased by 1.2 percent, and non-Seattle MSA restaurant employment in Washington increased by 2,800 jobs.

It should be noted that the Seattle MSA includes more than just the city of Seattle. Job losses could be occurring outside the city, and that could be skewing the results. But aside from the minimum wage increase, what economic/policy differences would account for the restaurant job losses in the Seattle MSA and the restaurant job gains that occurred in the rest of Washington?

Is Seattle the canary in the coal mine for the rest of the country? More time is needed to see what the full effects of the minimum wage increase actually will be. However, if these kinds of job losses are occurring in Seattle, which is much better equipped to handle a $15 minimum wage than Saint Louis, what does such a wage floor portend for Saint Louis? Instead of rushing to pass a minimum wage increase that could cost people jobs, Saint Louis policymakers should wait for more results to come in.