When the Fair Labor Standards Act was signed by Franklin Roosevelt in 1938, employers were apoplectic. The minimum wage would destroy America! It will lead to layoffs! It will undermine the freedom of Americans to make the wage they want, which somehow is less than minimum wage guidelines! And really, these arguments went back well before 1938 and were used for decades to oppose not only minimum wages but the 8-hour day and other labor reforms. They are all lies. Yet they hold great power today too. They are frequently used against new minimum wage hikes. When Seattle passed its $15 minimum wage, the same freakout happened. The restaurant apocalypse was nigh! So has how that turned out? Not surprisingly, it has had no effect on hiring in that industry:
The reaction was immediate, strident — and deeply wrong. The increase was an “economic death wish” that was going to tank the expansion and kill jobs, according to the sages at conservative think tanks. The warnings were as unambiguous as they were specific: Expect restaurants to close in significant numbers and unemployment to rise, all because of this foolish attempt to raise living standards.
Those ideologically opposed to mandated minimum-wage increases freaked out when a Seattle pizza parlor closed. Meanwhile, they ignored data showing Seattle-area employment in the restaurant industry on the rise. The critics even blamed Seattle’s minimum wage law for unemployment in suburbs not covered by Seattle’s laws. Despite their dire forecasts, not only were new restaurants not closing, they were in fact opening; employment in food services and drinking establishments has soared.
Amazingly, you can pay people to live in Seattle and other residents will still eat at restaurants. Shocking. Of course, it is possible that other factors are at play:
Now of course, we should consider the argument that Seattle’s economic growth has been so strong that it overwhelms any negative effects from the higher minimum wage. No one should ignore that possibility and we will be among the first to acknowledge that this could be the case. We may never know for sure, because in economics you don’t get a chance to run control experiments; you only have the facts at hand.
But we can’t emphasize enough just how wrong many of the initial analyses of the wage increase have been. Cognitive dissonance is a powerful force. If your ideology includes the belief that all government attempts at raising living standards are doomed, then of course you are going to be against mandated minimum wages. The problem occurs when these folks are confronted by facts that are at odds with their belief systems. The options are to either rethink your ideology or alternatively ignore the data. Most participants seem to have done the latter. Kudos to the University of Washington team for at least trying to incorporate the facts into their latest research.
The best answer when people say that raising minimum wages will negatively impact jobs is to say that while theoretically, this is possible if the wage was raised too far too fast, we have 80 years of evidence on this point without any reason to believe that it has ever happened. Maybe someday we will have a data point suggesting otherwise, but all we know to this point is that rising wages help workers and we should fight for more of that.