Politicians on the left should take note: Advocating for expanded entitlements and a more caring government may make for good campaign sound bites but less than stellar policies.
Look at the impact of the Fight for $15 minimum wage push. Chances are you’ve seen these protests, which have popped up around the country. Detroit has hosted several.
“It’s been a hysteria sweeping the country,” says Mark Perry, American Enterprise Institute scholar and professor of finance and business economics at the University Michigan-Flint.
In April, 500 workers and activists made the case in Detroit for $15 an hour. Michigan’s minimum wage jumped to $8.90 at the start of this year. At the federal level, it is $7.25 an hour.
Liberals have embraced this cause. Hillary Clinton and Bernie Sanders certainly did as they competed for the Democratic nomination for president last year. And after announcing his bid for Detroit mayor earlier this year, state Sen. Coleman Young II said a $15 minimum wage would be on his to-do list. Several Michigan Democrats who’ve already announced their candidacy for governor have also made this a priority.
Clamoring for higher wages and “free” college tuition is popular these days. Even President Donald Trump, thanks to his daughter Ivanka, is pushing for a paid family leave mandate. While these may sound like positive developments, in practice they pose real problems. Someone has to pay for these benefits — usually middle-class taxpayers.
Commenting on Young’s proposal, Michael Saltsman with the Employment Policies Institute, countered: “Wayne County in particular can’t afford this hollowing out of its entry-level workforce. Nearly two-thirds of young adults in the county aren’t in the workforce at all.”
That’s the opposite effect Detroit workers need, especially those looking to build a resume. And Saltsman’s argument lines up with new research out of Washington state that should give higher wage proponents pause.
Here’s what $15 an hour actually looks like in practice. In 2014, Seattle passed a measure to raise its minimum wage to $15 (gradually), and it has provided researchers with excellent data of what each pay jump means for area employers and workers.
It doesn’t look good. Researchers from the University of Washington have found that although employees are indeed making more an hour, they have also seen a 9 percent loss in hours worked. For workers in Seattle, that amounts to $125 a month. The research team also estimates a loss of 5,000 low-wage jobs (a 6.8 percent decline) because of the wage mandate.
In addition to the burden on employers, especially small businesses, these high wages are also harming low-skilled workers who need experience, as employers will aim to hire someone “worth” $15.
“It takes away their bargaining power,” Perry says.
And the study was only looking at the impacts of the $13 hourly wage. Expect more negative results as the city hits the $15 target. Seattle was one of the first cities to adopt this high a wage, which made it ideal to study. But others have followed suit, including San Francisco and Washington, D.C.— and most recently Minneapolis.
“It just doesn’t make sense,” Perry says. “It sells politically, but very few economists would support a $15 wage anywhere. Hopefully this will sober people up a bit.”