Economists have oftentimes been made the butt of jokes for their significant differences of opinion on a number of issues. “If you laid all the economists in the world end to end, they still wouldn’t reach a conclusion,” the saying goes.
But, despite a number of internal debates within the profession’s various schools of thought, there is strong agreement on some core beliefs, like the laws of supply and demand. The law of supply simply states that the quantity of goods offered by producers increases as the price rises, and vice versa. And, according to the law of demand, the quantity of goods demanded falls as prices rise, and increases as prices drop.
There is no exception to the law of demand for the market for labor, but you would not know it to hear some political discussions on the effects of the minimum wage. As the price of labor increases (in this case, due to a higher government-mandated price floor), more people will be eager to make more money, but employers will demand less labor, leading to job losses and cuts in employees’ hours.
So it was no surprise when a group of economists from the University of Washington issued a new study, commissioned by the city of Seattle, showing the damaging effects of the city’s minimum wage increase. In 2014, Seattle passed a measure that hiked the minimum wage to $13 an hour in 2016 and $15 an hour this year for large employers (smaller employers have a little longer before this rate kicks in).
“The lost income associated with the hours reductions exceed the gain [in hourly wages],” the authors concluded. “The average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6 percent), which is sizable for a low-wage worker.”
Other recent studies and estimates come to similar conclusions. Lynn Reaser, chief economist of the Fermanian…