Fast Food, Minimum Wage, and Wealth Transfers

This week, Los Angeles became the third major West Coast city and the biggest in the U.S. to agree to raise the minimum wage to $15 an hour, an increase that will go into effect by 2020. Los Angeles follows Seattle, which will require employers with 500 workers or more to pay $15  by 2017. San Francisco will require the $15 hourly minimum by 2018.

The Seattle increase in particular has caused all sorts of analytical errors from people who should know better. Seattle Magazine ran one article with the headline “Why Are So Many Restaurants Closing Lately?,” which cited the wage as among the reasons. This was quite surprising, given the lack of any notable increase in restaurant closings, which are running at about the same pace as before the minimum wage increase. Even more telling, permits for new restaurants are rising. The data overwhelmingly disproves the assertion that the minimum wage increase is leading to restaurant closings — or is discouraging people from opening new ones.

That was only the most obvious error, but the rest of the blessedly data-free article was equally as innumerate. This is an attribute of modern media: Instead of original reporting, there is a regurgitation of prior tweets, posts, anecdotes and second- and third-hand source nonsense. Anyone could have easily looked up the actual numbers on restaurant closing and permits, as one of my colleagues did last month. The details can be found in “A Pizza Place Closes in Seattle,” and “Jobless in Seattle? Not Yet, Anyway” (See part I and part II.)

What we know about the minimum wage is that modest increases have a negligible effect on employment, and usually work as a net economic positive to the region that passes them.

Continues here: Ending the Minimum-Wage Subsidy

 

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  1. cjb commented on May 20

    Nice article B.R. Enjoyed reading the exploding heads over at Bloomberg commenting on the piece. Noooo confirmation bias among any of them (yikes!) I wish, as a society, we could move away from any notion of Free Markets. That term should be used only by those of us who barter or run our business’s as sole employee on a cash accounting basis.

  2. wally commented on May 20

    What so many people just don’t get is that the health of an economy is not measured by how much money people have, it it measured by how much money is moving. Lifeblood must circulate.

  3. theexpertisin commented on May 20

    As things stand, there will be a continuous flow of illegal labor flowing into the country from the southern border and elsewhere.Until citizenship is earned – and limited and employers regardless of size are held to a more rigorous standard of compliance and penalties, the minimum wage will be a concept, not a reality for low-skilled workers, retiress and students in California or anywhere else in the U.S.

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