Posts filed under “Current Affairs”
(Pun intended in the title)
There are myriad factors that typically go into determining the success or failure of any legislative policy. It will be no different with regard to the minimum wage.
Let’s turn (again) to Seattle, currently Ground Zero for the minimum wage debate, where the minimum wage was recently kicked up on a gradual journey to an ultimate $15/hour (it is $11 per hour as of April 1, 2015, and it eventually will phase in to $15 per hour for all employers by 2022).
By way of quick recap, many are focused on the restaurant industry, as it is known to employ a fairly high number of minimum wage employees relative to other industries.
Very importantly, there will be a long term study of the effects of Seattle’s recent legislation. Details of that study can be found here. It will hopefully, over time, answer many of the questions about the effects of the new law.
As the issue has been heating up, I have been keeping weekly tabs on the number of restaurant permits in issue for the city, covering five distinct NAICS codes. Below are the codes, listed in descending order of count. This count is for the city proper, not the Metropolitan Division (MD) or Metropolitan Statistical Area (MSA). This is simply a permit count; I’m implying nothing about employment.
722513 Limited-Service Restaurants
722511 Full-Service Restaurants
722410 Drinking Places (Alcoholic Beverages)
722330 Mobile Food Services
722515 Snack and Nonalcoholic Beverage Bars
Below is a recent graph of the overall count, which was first tallied by Evan Soltas here.
Based on the chart, there’s been no discernible impact on permits – they have grown steadily dating back to the first date Evan captured in March 2014, and currently sit at 3,947 (as of August 26).
As I’ve previously mentioned, one of my Seattle contacts advises that rising rents – the area is booming – will likely play more of a factor in a restaurant slowdown than higher wages. This will, hopefully, also be part of the information we glean from the aforementioned study.
Among the many factors that might also eventually be sussed out is this – food services saturation. How many restaurants can an area accommodate? Certainly there has to be a limit on the sheer number of restaurants any given geography can sustain.
Thankfully, Bloomberg has done some work in this regard. Importantly, note that Bloomberg looked at MSA’s, much broader areas in many cases than individual cities (as I’ve repeatedly pointed out). However, that said, the information is still instructive. (While some folks very subtly conflated the city of Seattle with its much broader MSA, that’s a game I’m not going to play.)
- Again, these are MSAs and not individual cities or “places.”
- While I suspect it matters very little if at all, the data were last updated in March 2014. I doubt much has changed.
- Bloomberg looked at only two NAICS categories – Full-service and Limited-service (aka “fast food”) – and not the broader array I’ve been looking at.
What we see:
- As of March 2014, the Seattle-Tacoma-Bellevue MSA was already #2 in the country behind San Francisco-Oakland-Fremont.
- A re-sort on the “fast food” column actually puts the Seattle-Tacoma-Bellevue MSA at #1 with 11.63 establishments per 10,000 population.
On Twitter, we see this observation:
— Charles WL Hill (@charles_chill) August 21, 2015
The math there seems more or less spot on: ~670,000 population/3,953 establishments = 169 people per establishment. Not sure yet how that compares to other cities (not Metropolitan Statistical Areas or Metropolitan Divisions), though I intend to try to find out, but it intuitively feels a bit crowded, at least to me.
In any event, the notion that a recently increased minimum wage in [fill in the geography] is already having an adverse impact in said geography is nonsense, as I’ve chronicled time and again (and again, again, again, again, again, again, again, again, and again).
This will be a marathon, not a sprint. That said, another factor in the equation must be the sheer number of establishments any given area can accommodate; it cannot be unlimited.
The overarching point here is this: Towns/villages/cities/states/the US all go through business and economic cycles. Rents rise and fall. People immigrate and emigrate. There are surpluses and shortages of goods, services, and labor that influence pricing. It’s all a very complex choreography, and it’s rare indeed that we get a good, clean experiment. And so it will be in Seattle, which is why the aforementioned study will be so important. In the meantime, we can stay abreast of what data we get and determine what we can, all with the knowledge that the best and most thorough data come with painfully long lags. But such is life.
@TBPInvictus here: As I recently highlighted, Mark Perry – an AEI scholar and professor of economics - is playing very fast and loose with data surrounding employment in Seattle post its recent minimum wage hike. In his recent “report” on the subject, which was picked up far and wide by conservative outlets, Professor Perry wrote (emphasis mine):
“In June of last year, the Seattle city council passed a $15 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 area restaurants? It’s too soon to tell for sure, but there is already some 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 Seattle area. The chart below shows that the Emerald City MSA started experiencing a decline in restaurant employment…”
The minimum wage hike took place in the city of Seattle, population ~650,000. What’s all this talk about “area restaurants,” “the Seattle area,” and the “Emerald City MSA”? (Note that companies with under 500 employees — that includes most restaurants — the actual date is 2021, not 2017).
This is simply someone with an agenda deliberately being intellectually dishonest in an attempt to mislead readers and spread misinformation widely through the conservative echo chamber. It’s a tried and true method that, unfortunately, has worked time and again.
When Perry talks about Seattle (city proper) and the “Seattle area,” you may not know it, but he’s talking about two very, very different areas.
Legislatively, economically, legally and socially, these are two completely different regions. Perhaps most important of all, in terms of data collection for the subject at hand, the map below shows exactly how different they are:
Seattle, the city in question whose minimum wage is now $11, on its way to $15 over the next 3-7 years – is (as best as Paintbrush lets me draw it) the area within the red oval. The “Seattle area” or “Emerald City MSA,” as Perry misleadingly wrote, are the three more darkly shaded counties – Pierce (bottom), King (middle), and Snohomish (top) – engulfing Seattle and making it look, well, geographically tiny in comparison.
The MSA Perry referenced as being impacted by the new minimum wage has an overall population of some 3.6 million versus the aforementioned population of Seattle at about 650,000. What’s to compare? As Media Matters put it in their takedown of Perry’s work: “The employment trends of the entire region are not representative of the impact of a local wage ordinance in a single city.” But Perry does not care, as he’s repeatedly referenced the same irrelevant data point multiple times on Twitter. He is exactly the man whom Upton Sinclair was referring to when he said, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”
Why would anyone look at a MSA when it is the city – and ONLY THE CITY - that has the new minimum wage law. The New York equivalent would be to suggest that perhaps an ordinance in New York City might somehow have a ripple effect in White Plains, N.Y., or Hackensack, N.J. After all, they are both part of the greater tri-state region (there is a massive New York-Newark-Jersey City MSA). It’s absurd on its face, and any honorable analyst understands this.
This suggests that Perry is engaging in fraud or ignorance. Neither reflects on him favorably. Perry should apologize and AEI should retract that piece in entirety.
An analyst as intellectually dishonest as Perry apparently is could do something similar on the flip side:
Seattle Passes Higher Minimum Wage; Area Food Biz Employment Now at 134,000!
First, I’d point out that at the end of 2013, the most recent year for which we have good statistics on the city itself, Seattle city employment in two broad categories combined – Arts, Entertainment & Recreation and Accommodation & Food Services – totaled about 40,000, as seen below.
Source: American FactFinder
Then, I’d trumpet the “fact” that the “Seattle area” or “Emerald City MSA” (see what I did there?) has more than tripled that total to a whopping 134,000. I’d then claim victory at having “demonstrated” that the ordinance I supported was having its desired effect.
Source: St. Louis Fed
But I’d never do such a thing. Most reputable people wouldn’t.
@TBPInvictus I am reminded of the above law each and every day. And a law it is. Inviolable. No sooner had I posted the other day about the shoddy “work” coming out of AEI than, voilà, said shoddy “work” is being trumpeted by pompous blowhard Stuart Varney on Fox News. I’ve seen this happen…Read More
@TBPInvictus If you’re just joining us, here’s our story thus far: Some on the right took a fairly benign article out of a Seattle publication and twisted it to fit their agenda, i.e. that the increased minimum wage there would spell disaster for the Seattle restaurant scene as eateries closed in rapid succession. Their hopes…Read More
@TBPInvictus Among the more overlooked data sources out there is the Federal Reserve’s Survey of Consumer Finances (SCF). My guess as to why it’s overlooked is that it’s only published triennially – not exactly a high frequency release. The most recent (2013) update was issued last September. As I saw very few, if any, write-ups…Read More
@TBPInvictus here It’s been a few months since the first increase in the Seattle minimum wage (see here for the schedule of bump ups). Even before the initial April 1 rise, we were treated to a chorus of conservative voices claiming that the restaurant business in Seattle was doomed. The nexus for many of the claims was…Read More
@TBPInvictus here. We have interesting experiments going on in the state of Kansas and the city of Seattle. Herewith a brief update on both. Thanks to the following Tweet, I was made aware of the fact that – as you can see – the state of Kansas, under Sam Brownback’s awesome tax cuts, recorded the…Read More
The never ending sturm und drang over the state of Greek debt, membership in the euro zone and the potential shocks of a debt default have moved from tragedy to comedy to monotony. The solution is simple. It won’t be fast, it won’t be easy, but it will be a huge improvement for all concerned….Read More
The details are still being sorted out on the deadly Amtrak crash that killed at least six people earlier this week and injured 100s more. But what we do know is that the stretch of track where the train derailed did not have the latest automated speed control system. National Transportation Safety Board (NTSB) board…Read More
Barry here: I know Invictus personally for more than a decade. I also know he works at a shop that does not allow its staff to publish economic and data analysis outside of their formal imprimatur. I would not allow his work to be published here if I was not confident about his respect for data, his integrity…Read More