QUICK-HIT SCARE STUDY ON $15 MINIMUM WAGE MAY HAVE LITTLE WEIGHT

It's a good idea to take a skeptical view of Ike Leggett's commissioned study of the effects of a minimum wage hike in Montgomery County. It's pro-business and anti-worker, just like Ike. A broader view of the effects of increasing the prosperity of low-wage working people shows it makes better communities. See the August 3 update with EPI analysis, below...

/PM BlogSpace Report/ What happens when the minimum wage is raised to $15 an hour?

If you ask employers (let’s say, in Montgomery County) what the effect would be, they think first of preserving their profits rather than profiting from the increase in business that comes when people have more money in their pockets.

So business owners in Montgomery who were asked by Ike Leggett’s hired-gun survey firm PFM what their response would be to the Fight for $15 if workers won the higher minimum – well, they naturally said they would lay people off to preserve their profits.

The WaPo, never slow to back a pro-business and anti-worker opinion, calls it praiseworthy “evidence-based policymaking” on Leggett’s part.

The actual effects – the evidence – of such a raise are detailed in the New York Times in reference to SeaTac, Washington, which has had a substantial dose of reality after passing a $15 minimum wage in 2013. The results have been a boom, led by the hotel industry.

SeaTac is next to but not part of Seattle, which has had its own contentious political debate in which proponents of the $15 wage prevailed, and unemployment in the larger city is 3 percent.

‘Josh Bivens, research director at the nonprofit Economic Policy Institute in Washington, [told the NYT that] low-income workers who receive pay increases are likely to spend that extra income, stimulating economic growth, an effect called “middle-out economics.”

‘ “Wage increases at the middle and bottom are recycled back into the economy as spending on restaurants, clothes, cars — all things that support employment in other sectors of the economy,” Mr. Bivens said.’

Montgomery has its problems of inequality but remains one of the nation’s most affluent communities. The “middle-out” growth of prosperity suggested by Bivens is more likely here, as it was in the Seattle economy – and situations like that are understood by employers who are making interesting bets rather than hunkering down in safety in the face of poorly designed survey questions.

UPDATE the Economic Policy Institute has responded with a detailed analysis of the PFM survey, delicately labeled "junk science."

“Michael H. Mahoney, president of the Dallas-based development company Western International… said he considered the $15 minimum wage before deciding to go ahead with a 176-room Residence Inn by Marriott that is scheduled to open next spring, but it was not the determining factor. ‘We are competing for quality people seeking the best jobs, so would likely have been at that threshold anyway,’ “ he told the NYT.

 “There’s a lot of noise” about higher minimum wages, he continued, “but he decides whether to enter an area based on an overall favorable economic outlook. If the area is not doing well, ‘we’re not going in there,’ he said, so wages are not generally a factor.” Sounds to us as though he is talking about someplace like MoCo.

The WaPo editorial dismissed the findings of a Berkeley meta-analysis that, the NYT notes, “studied 30 years of wage and employment data and found that higher minimum wages had not reduced employment.” They prefer a more recent and gloomier quick-hit look at the Seattle area’s response to minimum wage hikes. But a longer view suggests that studying a single area for a short time is not going to give solid results, any more than asking businessmen how they would cope with the prospect of a rising payroll is going to.

MoCo has the resources and well-founded economy to show – like SeaTac – that a stronger wage picture brings a more prosperous and equitable economy and community. If the business persons in a consultant survey are nervous about a local economy in which they have less coercive power over employment and worker discipline, we have to ask ourselves if they are the business leaders we want or need.