Hidden Costs in the ‘Fight for $15’

Fewer jobs in New York and more crime among unskilled youth

WSJ editorial. Excerpts:

"New York City’s minimum wage rose again on Dec. 31. Businesses with 11 or more workers must pay $15 an hour, up from $13 last year and $11 in 2017. Employees who earn tips can be paid a lower rate, now set at $10 an hour for waiters, provided their total pay exceeds $15.

Is it merely a coincidence that the city’s full-service restaurants have fallen into a jobs recession? Employment in January dropped 3.7% year over year, according to the Bureau of Labor Statistics. At the start of 2018, the Big Apple’s sit-down restaurants had 167,900 employees. This January, after the wage bump, it fell to 161,700, a three-year low. The preliminary February number is 161,000, even as overall city employment is up around 2% year over year.

The monthly jobs data can be noisy, but the trend fits what restaurateurs are saying. The New York City Hospitality Alliance surveyed 324 full-service eateries late last year. Nearly half, 47%, planned to eliminate jobs in 2019 to deal with higher labor costs. Three-fourths expected to cut employee hours, and 87% said they would raise menu prices.

Meanwhile, in a National Bureau of Economic Research working paper posted last month, three economists examined whether minimum-wage increases had any effect on crime from 1998 to 2016. “We find robust evidence,” they write, “that minimum wage hikes increase property crime arrests among teenagers and young adults ages 16-to-24, a population for whom minimum wages are likely to bind.”

When politicians arbitrarily set the price of labor, young workers without skills can be locked out of the job market. That’s the finding in studies of Seattle’s wage mandate by a team at the University of Washington. The new wrinkle in the NBER paper is that some of these young people turn to petty crime.

What does this say about the Democrats’ idea for a nationwide $15 mandate? “Our estimates suggest,” the economists write, “that this minimum wage hike would generate over 410,000 additional property crimes and $2.4 billion per year in additional crime costs.”"