Here’s Why Unemployment Is Not the Best Measure of the $15 Minimum Wage

minimum wage increase

Damn you, $15 an hour minimum wage!

 

There are a handful of anti-minimum wage propagandists who jump on any monthly uptick in Seattle’s already low unemployment rate (or whatever statistic they’re obsessing on this month) as evidence that Seattle’s $15 minimum wage ordinance is an unmitigated job killer. Sure, anybody who actually lives here knows firsthand that Seattle’s economy is booming, but, you know, statistics don’t lie, or something.

Of course, it will take years to tease out the real impact of Seattle’s higher minimum wage, so all this short term analysis is just so much bullshit. But let’s for the sake of argument assume that the righties are right, and that a modestly higher minimum wage does in fact result in a modestly higher rate of unemployment.

Would that necessarily be a bad thing?

If you think about it, if you’re unemployed, what really matters to you personally is unemployment duration, not the unemployment rate — that’s the amount of time it takes you to find a new job. You know, the time during which you might expect to be unemployed.

Historically, the median unemployment duration has tended to be about 5 weeks, while the average came in somewhat higher at about 15 weeks, with both figures rising and falling somewhat in line with the unemployment rate. Likewise, the rate of longterm unemployment (defined as 27 weeks or more of unemployment) has tended to average about 1 percent, again, fluctuating somewhat in line with the overall rate of unemployment.

(The exception to all this was the Great Recession, when the rate of longterm unemployment soared compared to past downturns. Given that the number one predictor of your likelihood of finding a job is the length of time you’ve been without one, many Americans who lost jobs during the Great Recession may never work again.)

Seattle’s seasonally adjusted (though preliminary and uncorrected) unemployment rate has in fact risen about a point since bottoming out at a near historic low of 3.5 percent this summer. It would be stupid given what little data we have to blame this on our minimum wage, but again, for the sake of argument, let’s be stupid and do exactly that. So what exactly does this mean for our city’s low-wage workers?

Well, the fact is, at about 4.5 percent, Seattle’s unemployment rate is still so low as to fall within the range of what most economists consider to be “full employment,” and thus history tells us that at this rate it is reasonable to assume that unemployment duration should remain low as well. But even if unemployment duration increased substantially, Seattle’s minimum wage workers would still come out way ahead. That’s because any lost income from an increase in unemployment duration would quickly be made up by an increase in hourly wage.

At $13 an hour, Seattle’s minimum wage workers already earn $3.53 an hour more than the state’s $9.47 minimum wage, meaning it would take less than three weeks of work to make up for each additional week of lost wages at the lower state rate. Except, that’s not counting for unemployment insurance. Throw in WA state’s minimum unemployment compensation of $158 a week, and it takes only about a week and half of work at $13 an hour to make back the lost wages from each additional week of lost wages at $9.47 an hour.

Let’s put this another way. Let’s say, on January 1 of this year, two workers, Mark and Tim, got laid off from their $13 an hour jobs at a franchise of a national fast food chain. Mark immediately took a $9.47 an hour job tossing pizzas in Renton, while Tim took 14 weeks of unemployment — until April 1 — until he could find another $13 an hour job in Seattle. By September 2, Tim’s year-to-date income would already surpass Mark’s, despite three full months of unemployment! Assuming full-time work, by the end of the year, patient Tim would have out-earned Mark by more than $2,400.

But the real payoff for Tim comes in 2017, when Seattle’s minimum wage climbs to $15, and the inflation-adjusted state minimum wage inches up to maybe $9.66, tops. Over the course of the year, Tim would earn more than $11,100 more than Mark for the same 2,040 hours of full-time work!

Or, let me put this in a way even one of our city’s well-paid tech workers might understand: If you suddenly lost your current job, would your rather take another one immediately at $96,000 or would you rather take a few extra months to find a comparable job that pays $150,000? If you choose the former, I’m guessing you can’t do the math well enough to command either.

The point is, the goal of our economic policies shouldn’t be to lower unemployment or increase GDP (or boost corporate profits, for God’s sake); the goal of our economic policies should be to broadly improve the lives of our people. And while we’d rather keep the unemployment rate low — and while there’s no empirical evidence suggesting that minimum wage hikes boost unemployment — we’re more than willing to accept a modest increase in unemployment in exchange for a substantial increase in wages, if that’s what’s best for our community.

The problem with focusing on metrics like the unemployment rate is that you end up prioritizing those things that are easiest to measure rather than those that best reflect outcomes. But in the end, as I’ve said before, whatever the statistics, only Seattleites get to decide whether $15 has succeeded or failed.

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Goldy
David "Goldy" Goldstein has written about politics for The Stranger, The Nation and the Huffington Post. He hosted “The David Goldstein Show” on Seattle’s news/talk 710-KIRO from 2006 through 2008, and has been pissing off readers at his blog HorsesAss.org for more than a decade.