In 2014, Seattle passed an ordinance to eventually raise the minimum wage in the city to $15 an hour, giving the Pacific Northwest city the highest pay floor in the U.S.
The ink wasn’t even dry on the wage legislation when the dire warnings of economic collapse began. Unemployment would skyrocket, economic growth in the state would be hurt, restaurants and small businesses would close en masse. The deserved punishment would be swift and harsh.
But a funny thing happened on Seattle’s way to economic collapse: the city thrived. Restaurants didn’t close — they actually prospered — and new restaurant openings rose. Unemployment fell, most recently to less than 4 percent, more than a full percentage point lower than the national rate. By all accounts the city on the Puget Sound is booming.
How did the doomsayers get it so wrong? As in so many other cases ofpolitically motivated economic analysis, this was what the opponents hoped would happen because it fit with way they think world should work. But given what we know about Seattle (more on that in a bit) higher minimum wages can improve workers‘ living standards and stimulate the local economy.
Blame a fundamental misunderstanding of minimum-wage economics and, of course, good old-fashioned political bias. There have been repeated attempts to misread the data and conclude it has hurt employment, but so far none of this research has withstood scrutiny.
Much of the history of the debate on minimum wage traces to a famous 1993 paper by Alan Krueger and David Card that looked at what happened to employment in the fast-food industry when minimum wages were raised in one market but not in an adjacent market. They found no reduction in job growth in the market where pay was increased; in fact, the opposite happened. The economic lesson was that modest increases in minimum wages don’t hurt employment, and tend to increase economic activity.
Continues at: Doomsayers Keep Getting It Wrong on Higher Minimum Wages