Hillary Clinton’s campaign is a hodgepodge of pandering and conflicting promises and ideology. Much of it spurns from trying to win over the Bernie Sanders crowd, and the biggest concession comes from her adoption of a $15 minimum wage platform.
This ideal is a beacon to the economically ignorant and accounts to little more than a candidate literally trying to buy votes. This may feel like a harsh analysis, but there are huge quantities of minimum wage data, and despite the wildly different circumstances of implementation, they all point to a few common themes.
The most prevalent is that wage hikes that are too aggressive tend to hurt minimum wage earners the most, even if the economy can absorb the overall costs. Very recently, the adoption of a higher minimum wage in Seattle is very telling.
Seattle Data
Before hitting the numbers too hard, remember this one important note: even the most progressive economists agree that a minimum wage that exceeds 60 percent of the region’s median wage is dangerous. In practice, that number is much lower.
Another important fact to understand about Seattle is that the schedule for wage hikes depends on the size of the employer and a few other factors, so not all employees have the same true minimum wage.
The first scheduled increase hit the city April 1, 2015. The absolute lowest wage any employer could pay at that point rose from $9.32 to $10.00. Since then, the city has seen overall job and wage growth comparable to the rest of the nation.
What sets Seattle apart is the job change in the minimum wage category. Before the hike, Seattle led Washington and the country in low-wage employment growth. As soon as the hike went into place, Seattle growth for minimum wage dropped from over 7 percent to under 1 percent. In that time, the same industries have seen accelerated job growth in the rest of the country.
Another big factor is also worth noting. Excluding individuals who have lost employment entirely, minimum wage jobs in Seattle have cut overall employment hours across the board. So, while the payment per hour of work increased, the overall number of hours worked has dropped accordingly.
What is the end result?
Minimum wage earners under the new law are earning the exact same amount of money per week as before, plus or minus five dollars a week.
Many proponents of the wage change will still call this a win, since earners are making the same money with less time, but the overall distribution of wealth and wages is completely unchanged, with the added negative of a massive decline in job growth. If the trends hold, the impending wage hikes coming each January for the next four years could push jobs into an overall decline.
Projections for the Rest of America
Do you remember that point about minimum wage and median wage? It’s time to revisit that point. The median wage in Seattle is currently $75,331, or $37.67/hr. The current minimum wage of $10.00 is only 26 percent of the median wage and already economic issues are being observed.
Comparatively, the nation as a whole has a median income of $53,939, or $26.97 an hour. A $15 minimum wage would be 55.6 percent of that. That’s dangerously close to the catastrophic 60 percent projections made by the most liberal economists, and it is more than double what has been seen in Seattle so far.
Domestic data shows that this would at minimum represent devastating losses for the lowest income earners, but what does it mean for the country as a whole?
One of the best ways to approach the problem is to look at contained economies that have experienced excessive minimum wage. The obvious example is Puerto Rico. The current minimum wage in the territory is $7.25, which amounts to 77 percent of the region’s median income. Since that wage hit Puerto Rico in 2009, there has been total, widespread economic ruin. The territory is in danger of defaulting on $72 billion of debt, with no achievable solution in sight.
Understanding just how far minimum wage problems can reach, the best way to look at how Clinton’s plan will affect the country is to break the U.S. into regions. State borders make this easy. Going by the 60 percent rule, only 20 states currently could sustain the $15 minimum wage without catastrophic results. Using a slightly more modest 50 percent rule, only 11 states would survive.
Regardless of the breakdown, this policy is an example of pandering to voters even at the expense of their well-being. Don’t expect to hear the Clinton Campaign talk openly about jobs numbers in Seattle, because the truth does not look good.
Regards,
Ethan Warrick
Editor
Wealth Authority
