The Washington Post has “sobering news for $15 minimum-wage boosters.” It cites a 146-page study showing that 47,000 jobs would be lost in just one county—Maryland’s wealthy Montgomery County—if it raised the minimum wage to $15.
Boosting the minimum wage would also cost the county “$396.5 million in total income by 2022, due to workers’ being priced out of the job market by the higher minimum wage. This would spell a reduction of nearly $41 million in expected county tax revenue between fiscal 2018 and fiscal 2022; meanwhile, the county government’s payroll costs would go up $10 million.”
As Post notes, “The results of similar experiments elsewhere in the country should also give boosters of $15 per hour in Montgomery more pause than it apparently does. A team of economists at the University of Washington recently found that low-income workers across all businesses in Seattle lost an average of $125 a month because of reduced hours or job loss after that city enacted a $15 minimum.”
It would be nice if the Post’s concern about these job losses were shared by the Democratic Party as a whole (the Washington Post is firmly Democratic-leaning, and it has not endorsed a Republican for president since 1952). But Democratic Congressional leaders recently endorsed a $15 minimum wage for America as a whole, in their “Better Deal” legislative agenda.
Deep down, they know this is a bad idea. Hillary Clinton conceded in 2015 that a $15 minimum wage would cause “job loss and dislocation.” But to win over supporters of Bernie Sanders, who backed the $15 minimum, the Democratic Party added a $15 minimum wage to its 2016 platform.
Nationally, an increase to $15 could cost seven million jobs. Large minimum wage increases can also harm health and safety. By financially squeezing restaurants and forcing them to reduce staffing, minimum wage increases can have a negative effect on hygiene. That’s the conclusion of a new study by three professors cited by economist Tyler Cowen. It looked at the “hygiene rating of food establishments in Seattle [where minimum wage increased annually between 2010 and 2013] as the treated group and from New York City [minimum wage was constant] as the control group,” and found “an increase in real minimum wage by $0.10 increased total hygiene violation scores by 11.45 percent.” Similar findings resulted from “using an alternate control group – Bellevue City … located near Seattle.”
Minimum wage increases also cost taxpayers money. Analysts for the California Assembly’s appropriations committee estimated that increasing the state’s minimum wage to $15 an hour would cost taxpayers $3.6 billion annually in higher public-employee pay. Public employees sometimes have their pay set as a multiple of the minimum wage, meaning they don’t have to be poor to benefit from a minimum wage increase. Industry will also suffer: An economist at Moody’s calculated that up to 160,000 jobs would be lost in California’s manufacturing sector alone from an increase to $15.
Big minimum wage increases can be devastating for low-living-cost rural areas with low wages. In those areas, consumers pay higher prices due to such increases, while many workers get fired or work fewer hours. But even those who keep their jobs and their hours don’t benefit as much as consumers lose, because any gain to those workers is partly offset by the tax code. As one commenter noted, “the tax implications of going from a $10- to a $15-an-hour minimum wage” can wipe out much of the benefit of any increase to affected workers. “For a family of four with both spouses making the minimum wage, their federal tax will increase from $4,106 to $7,219, payroll tax will increase from $2,579 to $3,869, their earned-income tax credit (EITC) will be reduced from $596 to zero … and the $2,400 food-stamp credit will be lost.”
Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law.
Editor's Note: This piece was originally published by the Competitive Enterprise Institute.