Minimum wage effect? From Jan. to Sept. Seattle MSA restaurant jobs fell -700 vs. +5,800 food jobs in rest of state

From Mark Perry.

"In June of last year, the Seattle city council passed a $15 an hour minimum wage law to be phased in over time, with the first increase to $11 an hour taking effect on April 1, 2015. What effect will the eventual 58% increase in labor costs have on small businesses, including Seattle area restaurants? It’s too soon to tell for sure, but there is already some preliminary evidence that the recent minimum wage hike to $11 an hour, along with the pending increase of an additional $4 an hour by 2017 for some businesses, has started having a negative effect on restaurant jobs in the greater Seattle area.

 

 

The lighter blue line in the top chart above shows that restaurant jobs in the Emerald City started to stagnate and then decline around the first of this year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), following steady growth in Seattle MSA food services employment during the previous five-year period between January 2010 and January 2015 (data here). On April 1 of this year, the city’s minimum wage increased to $11 an hour which may have contributed to the loss of 700 Seattle area restaurant jobs between January and September (new BLS employment data for last month were released yesterday), the largest decline over that period since a loss of 3,000 restaurant jobs in 2009 during the Great Recession (see bottom chart above). What makes the restaurant job losses this year especially noteworthy are that the average job gain during the January-September period over the previous five years from 2010 to 2014 was almost 3,000, and over the previous three years nearly 4,000.

What is also noteworthy about the loss of Seattle restaurant jobs this year is the fact that restaurant employment in the rest of Washington state is booming this year, as the top chart shows (see dark blue line). At the same time that Seattle area food services employment has declined this year by 700 (and by -0.52%), restaurant jobs in the rest of the state have increased by a whopping 5,800 new positions (and by 6.6%).

And overall employment in the Seattle MSA increased 1.9% and by 34,800 jobs between January and September, while jobs at the state level increased 1.6% during that period, with both of those job growth rates far above the 1.1% growth in payroll employment at the national level during that period.

Bottom Line: Overall, job growth rates this year from January to September in Washington state (1.6%) and in the Seattle MSA (1.9%) are above average compared to the 1.1% payroll growth nationally from January to September of this year. Further, restaurant employment in the state of Washington outside of the Seattle MSA is booming this year, with food services jobs increasing by 5,800 (and by 6.6%) between January and September. Meanwhile, there is at least one weak spot in Washington’s employment situation – restaurant employment in the Seattle MSA has declined by 700 jobs since January, the largest decline over that period since 2009.

One likely cause of the stagnation and decline of Seattle area restaurant jobs this year is the increase in the city’s minimum wage. Perhaps Seattle’s restaurant employment will recover, or perhaps it will continue to suffer from the upcoming full 58% increase in labor costs for the city’s restaurants that will be phased in during the coming years – time will tell. What we know for sure is that there are now 700 Seattle area restaurant workers who were employed in January who are no longer employed today, so it looks like the Seattle minimum wage hike is getting off to a pretty bad start. Especially considering that restaurant employment in the rest of the state is booming, and nearly 6,000 more restaurant workers are employed today than in January."