Monday, August 3, 2015

Seattle Billionaire Nick Hanauer Explains Why Raising Minimum Wage Causes Booming Economy

On Facebook, and in other locations, I find myself getting annoyed at some of the  nonsense spouted by right wing reactionaries whose unevolved, uneducated, wrong-headed, economically stupid claims about raising the minimum wage bear no relationship to economic reality.

But, they are just so darn sure of themselves.

One of Seattle's billionaires, Nick Hanauer, speaking to the New York City wage board about the economic reality of raising the minimum wage, explains in simple easy to understand language what actually happens in towns and states which have raised the minimum wage to a level much higher than states like Texas and towns like Fort Worth.

Below I excerpted part of  how Billionaire Nick Hanauer Explains How Higher Wages Create Jobs, for your economic education enlightenment....

According to the U.S. Department of Labor, “a review of 64 studies on minimum wage increases found no discernible effect on employment.” And contrary to popular belief, relatively large minimum-wage hikes like those recently passed in Seattle, San Francisco, and Los Angeles are not unprecedented. For example, the federal minimum wage jumped 88% in one year, from 40 cents an hour in 1949 to 75 cents in 1950. Yet despite the usual warning from the Chicken Littles at the National Association of Manufacturing that the hike would prove “a reckless jolt to the economic system,” unemployment plummeted, from 5.9% in 1949 to 2.9% in 1953.

Likewise, my home state of Washington raised the minimum wage for tipped workers by 85% between 1988 and 1990—yet over the following decade restaurant employment growth somehow managed to outpace the nation as a whole.

I live in Seattle, the first major city in the US to enact a $15 minimum wage. But a high minimum wage was not a departure for us or something new. Seattle already had the highest minimum wage in the country. Rather, $15 was a continuation of an economic strategy that already was allowing our city to outperform yours.

Our current state minimum wage is $9.47—30% higher than the federal minimum. Seattle’s minimum wage is now $11.00, 52% higher than the national minimum. But we have no tip penalty in our state, so our tipped workers make $11 plus tips, 513% higher than the federal tipped minimum of $2.13, and more than twice the $5 still paid here in NY.

So, if the good people from the industry were right, that a higher minimum wage killed jobs, then we should have no restaurants in Seattle, right? You would have to bring food and cooking equipment when you came to visit us in the hinterlands. How could it not be otherwise, with these stratospherically high wages?

But here’s a really odd thing. Not only do we still have some restaurants in Seattle, we have a lot of them. In fact, we have more of them per capita than even—wait for it—New York City. According to a Bloomberg analysis, of all major cities in the US, Seattle ranks second in restaurants per capita. New York is number four. Read it and weep, New York. OK, so surely the number one spot will be held by some low-wage paradise, right? Not hardly. The number one spot is San Francisco, the only place in America that pays restaurant workers $12.25, even more than Seattle. Why? How can this be? They told us that high wages killed jobs!! And business! And the economy!


Seattle has more restaurants than New York because that’s how capitalism works. The fundamental law of capitalism is: when workers have more money, businesses have more customers, and need to hire more workers. In places where wages are high, business is good—particularly for restaurants.

Let me say that another way. When restaurants pay restaurant workers enough so that even they can afford to eat in restaurants, that isn’t bad for the restaurant business—it’s great for it, despite what the good folks at the National Restaurant Association may tell you.

With the highest minimum wage in the country, my state somehow manages to outpace the rest of the country in small business job growth.


Go to Billionaire Nick Hanauer Explains How Higher Wages Create Jobs to read all of what Nick Hanauer had to tell the New York City wage board.

1 comment:

Steve A said...

Cooncidentally, a report released last weekend cites a 1000 job DROP in Seattle restaurant jobs, attributed entirely to the first step of the wage increase. At the same time, equivalent jobs rose statewide. Reference "American Enterprise Institute." I have no knowledge of the AEI before this report.