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:
- Exodus of hospitality businesses to neighboring municipalities.
- Reduction of tipping at bars and restaurants, perhaps down to zero, in order to restore equilibrium in the hospitality sector.
- 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.