By Nick Hanauer
Noah Smith, a smart financial writer with a very good blog, wrote an article on the $15 minimum wage at Bloomberg earlier this week. The piece celebrated the fact that, finally, we’ll have some data on how the $15 minimum wage would affect jobs. Smith said he considered it a test because in theory “a higher minimum wage should cause increased unemployment.”
The more I thought about it, the less sense this premise made. Noah’s article underscored two big things for me: first, the degree to which people see the evidence they want to see, and also how silly the idea of “economic theory” can be. Smith claims that we don’t know what the result of a $15 minimum wage will be. Will it kill jobs or not? But the truth is, there’s abundant and overwhelming evidence that this theory is wrong, and that higher minimum wages don’t hurt employment. The evidence is there; you just have to choose to see it.
Let’s just look in my own back yard for an example of that evidence. Washington State has had the highest minimum wage in the nation for several years—at $9.47, it’s a full 30 percent more than the federal minimum of $7.25. Washington’s unemployment rate of 5.5 percent isn’t the best in the country, but it’s not the worst, either. In fact, it perfectly matches the national rate. But Seattle was until recently the fastest growing big city in the country. And speaking of evidence, the first part of the $15 minimum wage rollout was successfully implemented in April, and unemployment in our county promptly plummeted to 3.3 percent.
An even more dramatic example of the goofiness of this so-called “economic theory” is the impact of the wages of tipped workers on the restaurant industry. In Washington, these workers earn at least $9.47 plus tips, a whopping 440 percent more than the federal tipped minimum of $2.13 plus tips. Despite the predictions of “economic theory,” and despite the warnings from the National Restaurant Association that eliminating the tip credit would cause food armageddon, Seattle has one of the most robust restaurant scenes in the USA. Why? Because when restaurants pay restaurant workers enough so that even they can afford to eat in restaurants, it’s really good for the restaurant business. If economic “theory” were correct, if paying workers more resulted in higher unemployment, we would have no restaurants in Seattle.
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