04/13/2017

Surprise, San Diego's Minimum Wage Rise Appears To Be Killing Restaurant Jobs

Tim Worstall, Forbes.com

It's a common enough complaint that we who focus upon the costs of the minimum wage appear to be fixated on the restaurant industry. You know the idea, a rise in the minimum wage will make millions better off so why this concern about a few waiters and burger flippers? The answer being that whatever the effects of a rise in the minimum wage are going to be it's the restaurant industry where we're going to see them first. Simply because that's where the minimum wage binds. Roughly, even if not accurately, 50% of people in restaurants get the minimum wage and some 50% of the people who get it work in restaurants. So, if we're looking for the effects of the minimum wage restaurants are a real good place to go looking.

Which is just what has been done in San Diego:

Rather than inch upward from $10 per hour to $10.25 per hour in January 2016, as the rest of the state was doing, San Diego jumped its minimum wage to $11.50 per hour. In the year and three months since then, the number of food service jobs in San Diego has dropped sharply, with perhaps as many as 4,000 jobs lost, or never created in the first place.

"If job growth in the restaurant sector had just kept pace with the state's performance … the industry could have created 5,200 jobs instead of the 1,300 that took place," Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University, told Dan McSwain, a columnist with the The San Diego Union-Tribune.

It is indeed just the one report so far and of course it needs checking to see whether it's wholly true. That's the way science works, a result must be replicable:

Amid an abrupt slowdown in growth, nearly 4,000 food-service jobs may have been cut or not created throughout San Diego County from the beginning of 2016 through February of this year, according to an analysis of federal payroll data by Lynn Reaser, chief economist of the Fermanian Business & Economic Institute at Point Loma Nazarene University.

“This was at a time when both overall economies performed similarly well,” Reaser said. “If job growth in the restaurant sector had just kept pace with the state's performance … the industry could have created 5,200 jobs instead of the 1,300 that took place.” Last month growth turned negative, as the sector actually lost jobs.

Don't forget what our measure of the effects of the minimum wage is. It is not that there are more jobs, or even fewer, after a minimum wage rise. The economy is more complex than that. What we want to know is what is the specific effect of a minimum wage rise after we've managed to extract only that effect? And the easiest way to do that is to look at a place where the minimum wage has risen and then compare it to another which is broadly similar but didn't have the wage rise.

This is what the University of Washington did when looking at Seattle's rise. This is what has been done here in a slightly rougher fashion. The entire state is probably too broad an example to give us detailed information on exact numbers but useful enough in showing us the direction of travel.

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