Posts filed under “Taxes and Policy”

More Food for Thought on Seattle Minimum Wage


(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.

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.

seattle food biz 0826

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.)

Screen Shot 2015-08-21 at 10.54.18 AM

Some caveats:

  • 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:

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. 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.

Category: Current Affairs, Data Analysis, Economy, Taxes and Policy, Wages & Income

Mark Perry Doesn’t Understand Geography

@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:


Screen Shot 2015-08-17 at 6.08.17 PM


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.

Screen Shot 2015-08-15 at 6.36.53 PM

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.

Screen Shot 2015-08-17 at 7.47.13 PM

Source: St. Louis Fed

But I’d never do such a thing. Most reputable people wouldn’t.

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Category: Cognitive Foibles, Current Affairs, Data Analysis, Employment, Really, really bad calls, Taxes and Policy, Wages & Income

When Do Gasoline Sales Peak?

On Monday, I discussed why Tesla’s latest announcement was big. The electric carmaker said it planned a modification that would give its autos the ability to accelerate faster than cars that cost two to three times more and keep up with those that cost 10 to 20 times more. That’s an astonishing accomplishment. I made the…Read More

Category: Energy, Politics, Really, really bad calls, Taxes and Policy

John Oliver on Taxpayer Funded Stadiums

Cities spend massive amounts of public money on privately-owned stadiums. Cities issue tax-exempt municipal bonds that — wait, don’t fall asleep!


Last Week Tonight with John Oliver: Stadiums (HBO)



Category: Humor, Sports, Taxes and Policy, Video

Here Comes the Debt Ceiling Debate

Fascinating discussion via Real Time Economics:   click for ginormous graphic Source: WSJ

Category: Digital Media, Really, really bad calls, Taxes and Policy

The Stimulative Effect of Redistribution

The Stimulative Effect of Redistribution Bart Hobijn and Alexander Nussbacher FRBSF Economic Letter June 29, 2015       Policymakers often consider temporarily redistributing income from rich to poor households to stimulate the economy. This is based in part on the idea that poor households spend a larger share of their income than rich ones do. However,…Read More

Category: Taxes and Policy, Think Tank

How Much Do Silicon Valley Firms Really Earn?

If you missed the big Barron’s article (How Much Do Silicon Valley Firms Really Earn?) story this past weekend on Silicon Valley’s accounting, you should definitely check it out. There has always been a element of bullshit in not expensing stock options, but this has now moved towards absurdity.   Compaore & Contrast Source: Barron’s

Category: Corporate Management, Digital Media, Taxes and Policy, Wages & Income

A 14 Percent Infrastructure Fix?

My wife leaves for work earlier than I do, giving her first choice of which car to drive. She has a longer drive than my three-minute jaunt to the train station, so I don’t mind. That often means I get the rear-wheel drive convertible in the snowy winter months, and the all-wheel drive Jeep in…Read More

Category: Politics, Really, really bad calls, Taxes and Policy

Fast Food, Minimum Wage, and Wealth Transfers

This week, Los Angeles became the third major West Coast city and the biggest in the U.S. to agree to raise the minimum wage to $15 an hour, an increase that will go into effect by 2020. Los Angeles follows Seattle, which will require employers with 500 workers or more to pay $15  by 2017….Read More

Category: Taxes and Policy, Wages & Income

The Think Tanks

Source: No Exit

Category: Humor, Politics, Really, really bad calls, Taxes and Policy