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Here’s an update to my recent post about Seattle area restaurant employment “Minimum wage effect? January to June job losses for Seattle area restaurants (-1,300) largest since Great Recession.” Local area employment data by industry was released last week for the month of July, and showed a large increase in restaurant employment of 2,500 jobs during July for the Seattle MSA (seasonally adjusted), giving minimum wage proponents a lot to cheer about (see chart above). But before declaring victory for the success of Seattle’s (and San Francisco’s) pending increase to a $15 an hour minimum wage, we should consider the following:
1. The month to month changes in restaurant employment are inherently volatile and noisy, both for the not seasonally adjusted series reported by the BLS (dark blue line above) and for the seasonally adjusted series reported by the Federal Reserve (lighter blue line above). Therefore the month-to-month changes in Seattle area restaurant employment aren’t nearly as reliable for detecting underlying trends as the changes over longer periods of time.
2. For example, the chart above shows the 6-month percentage changes in Seattle area restaurant employment from January to July in each of the last 12 years back to 2004. The January to July percentage change of 1.8% in Seattle restaurant employment this year was lower than the increases over that same period last year and in 2012 (both 2.0%) and lower than the 4.3% increase in 2013. Put into the context of a longer 6-month time period, the one-month increase in July for restaurant employment in Seattle doesn’t seem quite so impressive.
3. Another way to smooth the month-to-month volatility in Seattle area restaurant employment and uncover any underlying trends is to calculate quarterly averages of the seasonally adjusted monthly data and then compare those quarterly averages to the same quarter in the previous year. The chart above displays the year-over-year changes for the quarterly averages for each month between January 2003 and July 2015. For example, the average number of Seattle MSA restaurant jobs over the last three months (May to July) of 135,000 is 3.4% above the average over the same months last year of 130,500. Similar growth rates have been calculated for each month.
An interesting pattern emerges in the chart above, which shows an acceleration of the year-over-year growth in restaurant jobs in the Seattle area following the Great Recession peaking at above 6% growth in six of the months between July 2013 and March 2014. Starting in the spring of last year, there has been a noticeable downward trend in the year-over-year growth rate of Seattle area restaurant jobs (quarterly averages), which fell below 3.6% in each of the last three months (May, June and July) for the first time since July of 2012, three years ago. Again, the one-month gain in July restaurant jobs may have created a slight up-tick for the last quarter’s average, but certainly didn’t come close to reversing the downward trend in growth rates over the last year.
4. The same analysis uncovers a very similar pattern in the year-over-year growth in San Francisco area restaurant employment, see chart above. In the most recent quarter (May to July), restaurant employment growth in the San Francisco MSA slowed to just over 4%, the lowest growth since October 2011, almost four years ago.
Bottom Line: It will take more time, probably several more years, to completely assess the employment effects of the $15 minimum wages in Seattle and San Francisco as those mandated wage hikes get phased in over the next few years. And the month-to-month job losses or gains in Seattle and San Francisco won’t tell us very much compared to looking at smoothed quarterly averages over longer periods of time like in the analysis above. But unless the time-tested, irrefutable, ironclad economic laws of supply and demand somehow don’t apply to the cities of Seattle and San Francisco, then it’s likely we’ll see some of the adverse effects of government price floors and the $15 an hour minimum wage that economic theory and empirical evidence clearly predict: reduced employment opportunities for unskilled, low-skilled, and limited-experience workers especially for minorities, adjustments from businesses and restaurants that include reducing workers’ hours, reducing workers’ fringe benefits, and raising prices. In other words, there’s no “free lunch” from a minimum hike to $15 an hour, despite what politicians (and minimum wage proponents) think. In the extreme, one only need look to the disastrous consequences of failed socialist, government policies in Venezuela (including price controls) to get some understanding of the effects of excessive government interference in the marketplace – including the effects (even if less extreme) of a $15 an hour minimum wage.
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