I missed this post a few weeks back from Kevin Drum at Mother Jones, pointing out that we won’t really know the full impact of the Los Angeles experiment with significantly higher minimum wages:
So my near neighbor of Los Angeles is poised to raise the minimum wage to $15. How should we think of that?
Personally, I’m thrilled. Not because I think it’s a slam-dunk good idea, but because along with Seattle and San Francisco it will give us a great set of natural experiments to figure out what happens when you raise the minimum wage a lot. We can argue all we want; we can extrapolate from other countries; and we can create complex Greek-letter models to predict the effects — but we can’t know until someone actually does it.
So what do I think will happen? Several things:
In the tradeable sector, such as clothing piece work and agriculture, the results are very likely to be devastating. Luckily, LA doesn’t have much agriculture left, but it does have a lot of apparel manufacture. That could evaporate completely (worst case) or perhaps migrate just across the borders into Ventura, San Bernardino, and other nearby counties. Heavier manufacturing will likely be unaffected since most workers already make more than $15.
In the food sector, people still need to eat, and they need to eat in Los Angeles. So there will probably be little damage there from outside competition. However, the higher minimum wage will almost certainly increase the incentive for fast food places to try to automate further and cut back on jobs. How many jobs this will affect is entirely speculative at this point.
Other service industries, including everything from nail salons to education to health care will probably not be affected much. They pretty much have to stay in place in order to serve their local clientele, so they’ll just raise wages and pass the higher prices on to customers.
Likewise, retail, real estate, the arts, and professional services probably won’t be affected too much. Retail has no place to go (though they might be able to automate some jobs away) while the others mostly pay more than $15 already. The hotel industry, by contrast, could easily become less competitive for convention business and end up shedding jobs.
While I’m certainly in favour of people being able to afford to live on their base income, I’m afraid that this experiment is going to hurt a lot of already at-risk poor people who will have few other options if their jobs go away. I’m especially amused that LA-area union reps are now reported to be pushing to exempt the businesses where their members work (so that unions will have an effective monopoly on low-wage jobs because non-unionized companies would have to pay a higher wage). That, after putting all their organizational muscle behind getting the minimum wage raised in the first place. That’s a high grade of cynicism.