For all y’all who want to see a $15/hour “working” minimum wage, let me make this clear. It’s a math issue, like I’ve alluded to all along. The government cannot force an increase in payroll costs and not expect a business to either lower the product quality, number of employees or their hours, and/or prices to rise. It all boils down to the math of the numbers in a business’s Profit/Loss sheet.
And yes, I am aware of and have read Card and Krueger’s paper on minimum wage in NJ and PA.
Bloomberg distills “the math thing” down to the essentials in this article, Seattle's Painful Lesson on the Road to a $15 Minimum Wage:
… If you make $9 an hour, but generate $10.50 in revenue for your boss, a law that raises the wage to $10.45 may cause her to shrug and decide it’s easier to keep you on as long as she’s making something. But a wage that forces her to pay you far more than you bring in…. Continuing to employ you would just be bad business.
So let’s set the stage to open this discussion.
In April 2015, Seattle raised the hourly minimum wage from the Washington State mandated $9.47 to $10 or $11, depending on several factors, on its way to $15 in 2021.
In July 2016, the University of Wisconsin released a paper, Report on the Impact of Seattle's Minimum Wage Ordinance on Wages, Workers, Jobs and Establishments Through 2015 on the first step. The results were there, although unremarkable. Wages up with no significant negative impact across the board. Likewise in June 2017, the University of Berkeley released a Center on Wage and Employment Dynamics report Seattle’s Minimum Wage Experience 2015-16. This one focused on fast-food restaurants. It also described no significant negative impact as a result of the wage increase.
So, let’s recap. The first step raised the minimum wage 5-16% and showed no significant ill effects on the Seattle economy. So far, so good.
Then on January 1, 2016 Seattle again boosted the minimum wage to anywhere from $10.50 to $13, depending on several factors. The second step raised (from the original $9.47) the minimum wage by 10-27%. According to The National Bureau of Economic Research (paywall, sorry), things started happening. When that second step hit, pay overall increased by 3%. That’s the good news. The bad news is the number of hours worked decreased by 9%, leading to these workers on average losing $125 a month in pay. This is where that math thing comes into play.
So if it’s a math thing, why didn’t the number of hours worked decrease by 3% and make it balance out? Administrative costs went up because with the increased minimum wage also came new regulations, increasing the administrative workload (and thus overhead) on the business.
To illustrate this, here is an article from CNN Money, New study casts doubt on the benefit of Seattle's $15 minimum wage:
Things have been harder on Joe Fugere, the owner and founder of Tutta Bella Neapolitan Pizzeria. He runs five restaurants -- three are within city limits -- and also manages 200 employees.Fugere says he's always supported a $15 minimum wage, and still does. But an array of new regulations have collectively been tough on his business.
One example, he said, is a scheduling ordinance set to go into effect in July. It mandates that bosses must give workers their schedules two weeks in advance -- and requires them pay up if hours change.
"One piece of legislation after another, in a very progressive city, can add up," Fugere said.
He loves his city, but said he's hesitant to expand his operation there.
"If I were to open another restaurant today, I would not open it in Seattle," Fugere said. "In fact, I'm looking elsewhere." (emphasis mine)
So here you have Mr. Fugere saying he will expand his business, just not in Seattle because he can’t afford it there.
How can you say with a straight face that “raising the minimum wage helps the workers”??? Because when that worker’s wage went from $10.20 to $10.50, their pay (assuming a 40 hour week) went from $408 to $420, however that workers hours dropped to 36 hours a week (assuming that 9% reduction in hours). This means they only made $378 that week, which is a $30 pay cut from what it was before the pay raise.
In conclusion, what does this show? That Economics is a very complex science, made harder by the randomness of human beings. The laws of physics are pretty much universal (if you excuse the pun) across the universe. Economics will get a close but not exact result from a repeated given action. You could try the same experiment twice with the same set of people and not get the exact same result. The same experiment in another culture would also produce a similar, but not exact replication of the result.
Economics also shows some elasticity in it. In the example above, the first small rise in the minimum wage did not produce an appreciable negative result. However a second rise outside of an unknown trigger level produced a significant negative change in the result. If that second change had happened a year later, the result would probably have been similar to the first, i.e. negligible since the market had time to absorb the first change and stabilize to "the new normal" from it.
I am still doing research on the nature and demographics of minimum wage workers, you should see that soon.