Take Two #127: The Minimum Wage Experiment

By Kyra-lin Hom

Congratulations, Seattleites! I may no longer be in position to benefit direct from Ordinance 124490, but that doesn't mean I can't appreciate the grand gesture for what it is. Making national news the nation over, Seattle now has on the books the highest minimum wage to date, a full $15/hour.

According to the ordinance, this rate is going to be steadily implemented over the next several years by local businesses at a pace dependent on size and benefits provided by the employer. Employers with more than 500 employees will have until 2017 (providing benefits bumps this to 2018). Employers with less than 500 employees have either until 2021 (those with 'wage compensation' such as commissions, bonuses, tips that contribute towards the $15/hour rate) or 2025.

Effective January 1, 2025, minimum 'compensation' will no longer be applicable and all employers must pay an hourly wage of $15 per hour worked. Potential exceptions to this are those under 18 years and trainees. The time delay is designed by economists to make the transition as smooth as possible for employers.

This move by the Seattle City Council is sensational and has sparked huge debate between politicians, economists, employers, employees, social activists and the finance sector in general. Everyone is cherry picking their supporting evidence and hurling it at the opposition like the will of God.

One side argues this is an ill-thought, radical move guaranteed to raise unemployment, shut down small businesses and perpetuate even worse discrimination in the hiring process (e.g. economist Thomas Sowell and the International Franchise Association). While according to the other side, raising the minimum wage in this manner will increase the quality of life for those at the bottom, specifically benefitting women and minorities; improve employee retention/loyalty, stimulate the local economy, diminish reliance on government aid, and have an overall practically negligent effect on business operating costs (e.g. UC Berkeley professors Michael Reich, Ken Jacobs and Annette Bernhardt).

They are both persuasive arguments. The former based, mostly, on large scale historical economic trends. The latter based, mostly, on statistical analysis of recent case studies such as San Francisco and Santa Fe. It is a particularly heated and messy debate, and I'm really not qualified to debate the issue – then again neither is most of the media doing so...

That said, one of the least heard aspects of this notable increase to the minimum wage is what I like to call 'perceived relative value.' If the average unskilled worker earns $15/hour, what do we owe our skilled labor? For example, consider our blue collar trade occupations like electricians, plumbers, mechanics, construction foremen, even masseurs and acupuncturists. These occupations require significant skill, education and certification all at the expense of the individual. Do we now owe them more to demonstrate an appropriate relative value of their time, expertise and expense?

Obviously some would argue no, that the entire point of the minimum wage increase is to diminish the wage gap between individuals. Others, namely those with costly professional degrees and/or years of on the job experience (in all fields of employment) tend to feel differently.

Is their professional time more valuable? Well, yes actually. Skilled labor is more useful than unskilled labor. (And yes, the fact that I don't particularly qualify as skilled labor even with an expensive degree under my belt is very irksome.) The question is: how much more? How do we appropriately value disparities in the workforce when, in four to ten years, everyone is earning at least $15/hour? Do we pay everyone else more or will it even matter by then?

If our financially conservative and liberal split nation can agree on nothing else, it's that we're all waiting with baited breath to see just how this whole experiment turns out. Rock on Seattle!

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