Every time there’s an adjustment or increase to the minimum wage, business lobbyists, apologists for inequality, and self-appointed experts insist that they know what will happen. It’s Economics 101, they say: higher wages will surely sink the economy. Businesses will be destroyed. Prices will rise 25% or more. Open for business signs will go dark, owners will flee the state, and Seattle will become a city of Cheesecake Factories. But their dire predictions have turned out about as well as any other Chicken Little.
IN REALITY, THE SKY REMAINS ALOFT.
A quick review of the outcomes of such predictions over the years clearly shows that employer speculations about the minimum wage are more akin to dystopian science fiction than to a high-quality economic forecast.
Let’s take a walk down memory lane…
Did the 2012 inflation adjustment to the minimum wage increase turn out to stall hiring?
In late 2011, the Washington Restaurant Association surveyed 480 restaurant owners about the next year’s inflation adjustment to the minimum wage. They reported that 66% of these business owners said they planned on eliminating jobs or halting hiring in 2012 as a result of the state’s new minimum wage.
In reality, state data showed growth in restaurant employment that year.
Did the $15 minimum wage law turn out to cause massive job cuts?
In April 2014, while Seattle was debating the $15 minimum wage, the Washington Restaurant Association released a survey of business owners capturing their predictions about what they would do if the city passed $15. Their speculation seems taken from a parallel economic universe, unconnected to the one we are actually living in.
45% said they would either close their business, go bankrupt, or close a location.
69% of full-service restaurants and 49% of quick-serve restaurants said they would lay off employees
In reality, the restaurant business in Seattle boomed, and so-called “labor shortages” have been an increasing concern for many in the industry.
A few months later, a right-wing policy group surveyed 265 businesses about their plans to respond. The answers were also designed to cause alarm:
One in seven businesses predicted that closing their doors was “very likely”
70% of businesses said the minimum wage would cause a “big cost increase”.
Nearly two-thirds said they were “very likely” to increase prices.
43% reported they were “very likely” to limit their future expansion in the city.
Surveys of what businesses have actually did show something quite different: extremely high rates of job growth and business creation, near-record-low unemployment, and no evidence of significant detectable price increases.
Finally, the city-commissioned study on the minimum wage issued in April 2016 found a sharp mismatch between initial employer responses to the survey, and the actual results:
62% said they intended to raise prices, and 30% said they intended to add service charges or fees, though little to no evidence of price increases was actually found.
30% said they intended to reduce the number of employees, though no evidence of job loss was actually found.
11% said they intended to “withdraw from Seattle”, though no evidence of business flight was actually found.
Did any of these other dire business predictions actually come true?
In 1988, business leaders predicted that year’s minimum wage increase would threaten the restaurant industry by forcing 8 - 15% price increases.
A 1998 paper by the right-wing Washington Policy Institute predicted that passing the state minimum wage increase that year would lead to precisely 7,431 firings, and that employers would cut back on hours, reduce their output, and more. In reality, our state’s job growth has been among the highest in the nation since that wage increase passed by overwhelming popular vote.
In 2008, the Washington Restaurant Association predicted that allowing the minimum wage to rise with inflation to $8.55 the next year would be “crippling” to the restaurant industry.