Saturday, July 2, 2016

Minneapolis Is the Wrong Place to Try a $15 Wage

From Megan McArcle. Excerpt:
"So the who, what, where and when matter a great deal when we are considering an increase. That’s why, while I’m skeptical of the Los Angeles increase, I’m downright bearish on the outcomes of a $15-an-hour minimum wage in Minneapolis.

Look at the relative cost of living in the two cities: The cost in places like Los Angeles and Seattle is about 30 percent higher than in Minneapolis. A wage that might have relatively small employment effects in higher-cost cities can have much larger effects in places where the cost of living is lower, because local consumers don’t have nearly as much room to absorb the cost of higher services.


At the very least, I’d be quite cautious about enacting such an experiment, particularly before we have good data on what these minimum wage levels are doing to cities with higher costs of living. If it turns out that a $15 minimum wage causes a significantly higher unemployment rate in Los Angeles and Seattle, I’d be very leery indeed of trying the same in a place with a significantly lower cost of living.

Unfortunately these campaigns are not constructed by careful technocrats who are experimenting in small areas before rolling things out to larger regions; they’re grass-roots movements that generally seem more interested in questions of social justice than the boring slog of constructing empirical data.
There's some consolation here. Imposing a $15-an-hour minimum wage in Minneapolis would give researchers a real-life laboratory to find out what happens when you push through a dramatic increase in an area without the dramatic disparities between median wages and median housing costs that you see on the coasts. That might end up being bad for Minneapolis workers. But it would indisputably be great for social science."

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