Uncharted Territory: Seattle Votes to Reduce Health Insurance Coverage for Low-Income Workers

Well, that is not how headlines reported Seattle’s raising the minimum wage to $15 per hour:

The City Council here went where no big-city lawmakers have gone before on Monday, raising the local minimum wage to $15 an hour, more than double the federal minimum, and pushing Seattle to the forefront of urban efforts to address income inequality.

“Even before the Great Recession a lot of us have started to have doubt and concern about the basic economic promise that underpins economic life in the United States,” said Sally J. Clark, a Council member. “Today Seattle answers that challenge,” she added. “We go into uncharted, unevaluated territory.” (NYT)

I suppose the politicians who voted for this job-killing law will soon amend it to introduce loopholes and exemptions. Nevertheless, employers must react to this huge cost of doing business. It takes until 2021 for the new minimum to kick in for small businesses, and tips will be excluded. I can think of three effects:

  1. Exodus of hospitality businesses to neighboring municipalities.
  2. Reduction of tipping at bars and restaurants, perhaps down to zero, in order to restore equilibrium in the hospitality sector.
  3. Reduction in the provision of health insurance to low-income workers. Within the absolute cost increase for labor, the relative cost of paying the fine for violating the employer mandate will be lower than before. (The economics of the employer mandate is illustrated in NCPA’s new series of booklets, Living with ObamaCare, available to members.)

There are surely other unintended consequences. Please weigh in in the comments section.

Comments (9)

Trackback URL | Comments RSS Feed

  1. mb says:

    employees ($31,200.00/yr) better be better than Baxter


    • Mtich says:

      slap an ipod dock on that thing and im sold.
      my r2 unit is from the 80’s and hes a little outdated.

  2. Laura says:

    Cant wait to watch the aftermath of this wage raise. man, you know who this really hurts? that dude who thought he was doin ok making almost double minimum wage… 🙁

  3. Don Levit says:

    Not providing health insurance to workers based on income will probably not pass the discrimination test.
    An employer can discriminate against the higher paid employees, not the lower paid.
    Don Levit

    • John R. Graham says:

      Thank you. The hospitality industry is not limited by this, especially franchises or where there are part-time workers.

      Which brings me to another likely outcome (which we’ve already seen with ObamaCare): Reducing full-time workers to part-time.

  4. Greg Shaw says:

    Oh Seattle… Just because you won a superbowl, doesn’t mean you can fix poverty…

  5. MrFreedom says:

    Way a sad day when the public believes all the liberal hype about raising the minimum wage…how uniformed can citizens be?! One of the basic principals of economics is that you cannot raise wages without corresponding increases in product demand or productivity without creating negative consequences.

    Of course these three consequences will result. But, as usual, the liberal media will never report (out of sheer ignorance or ideology) the flip side of such imbecilic minimum wage laws that hurt the very people these unscrupulous politicians claim to help.

  6. Erik says:

    with the additional resources this brings to the labor pool I believe in the maxim:

    “A rising tide lifts all boats.”

  7. WP Knabe says:

    Prices will rise. Relative spending will increase at businesses able to rise prices less. Those businesses able to raise prices less will have higher ratio of capital to labor.

    The price increase will offset the wage increase for the lucky few who benefit.