Businesses that pay minimum wage always saying raising it will raise unemployment. The thinking is, if a new employee costs you more, you won’t hire that person. But is it true? Can we measure it?
Yes, we can.
Seattle raised its minimum wage, yet its unemployment rate is below 3%, a near record low. If you measure the actual number of unemployed instead of the unemployment rate, you get the same curve.
If, instead of unemployed, you measure the number employed – same result, expressed by a rising line. What if you widen out to show the whole region? Same result.
That’s actually the most interesting, because in Seattle you can measure the county where the wage rises, and compare it to a neighboring county where they didn’t raise it, and there’s no noticeable difference. So why do business people think otherwise?
First, some know better, but they’re understandably trying to keep their costs from rising. Second, some honestly believe it because they’ve been saying it for years, and when you start with a belief, it only takes a single restaurant closure to reinforce it in your mind - confirmation bias. In restaurants, where margins are small and wages are low, owners fear forced raises, even if not paying more means they spend hours a week dealing with sudden resignations impelled by those wages. Especially in a time of low unemployment.
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