For years, we were warned that raising the minimum wage in Seattle would raise prices for everyone. A new study put those threats to the test.
Ever since Seattle started down the road to the $15 minimum wage back in 2014, I’ve become a bit of a connoisseur of baseless threats. Whenever an increase in the minimum wage is discussed, the media lights up with threats detailing all the horrible things that will happen. No matter who’s issuing these threats—it’s usually a weird consortium of wealthy business owners, conservatives, the top 1%, and always (ALWAYS) one person who owns a Subway franchise, for some reason—they invariably follow the same pattern.
I’ve written a lot about some of these threats. Here in Seattle, folks warned that many restaurants will close if the wage goes up. (Not true.) And they claimed that restaurant workers would be out of work in huge numbers. (Didn’t happen.) They argued that wage hikes are always followed by mass layoffs. (Nope.)
But there’s another threat that I haven’t fully examined, and I wanted to address it here because a new study has debunked it. I’m talking about the claim that if you raise the minimum wage in a given area, prices will skyrocket.
This is a very common threat. Minimum-wage opponents often link back to this study by Thomas Macurdy of Stanford University, which claims that
Proponents of [minimum wage] policies contend that employment impacts are negligible and suggest that consumers pay for higher labor costs through imperceptible increases in goods prices.
In 2014, just before Seattle adopted the $15 minimum wage, the Seattle Metropolitan Chamber of Commerce released a poll of employers which discovered that “Fifty percent of companies that participated in the survey said they would increase prices to offset a $15 minimum wage.”
And of course, our old buddy Tim “Pro-Price-Gouging” Worstall wrote about price increases in a Forbes post about a minimum wage increase in Britain back in the summer of 2015:
There’s not really anywhere else the higher minimum wage can come from. Other components of compensation can be reduced to finance the wage rise, prices can rise, jobs can be cut or profits can fall. And if we’re honest about it the British supermarket industry (where a lot of minimum wage work is concentrated) is so competitive that profits aren’t all that great to begin with. So, cut other compensation elements, raise prices and cut staff it is, then…
If the price of groceries start to climb because of this, then there will have to be an increase in food stamps and welfare for the employees that may and probably will get their hours cut This is only going to lead to a snowball effect.
…and this one:
Also, I have observed, that whenever the minimum wage is raised, the price of every thing else is also raised. (especially groceries.)
Like all the other arguments against the minimum wage, this price argument is being disproven by a large body of evidence. And the latest study out of the University of Washington is a big nail in the price-threat’s coffin:
Raising the minimum wage in Seattle to $13 an hour did not affect the price of food at supermarkets, according to a new study led by the University of Washington School of Public Health.
Unlike other minimum-wage studies, which use secret proprietary “Synthetic Seattle” models to prove their points, this supermarket study uses a very clear and straightforward methodology:
[Professor Jennifer] Otten and colleagues collected data from six supermarket chains affected by the policy in Seattle and from six others outside the city but within King County and unaffected by the policy. They looked at prices for 106 food items per store starting one month before enactment of the ordinance, one month after, and a year later.
It couldn’t be more clear: some people threatened that the minimum wage would increase prices. The data so far proves them wrong, and this is only the latest in a string of new studies showing that costs don’t increase with the minimum wage.
So what’s happening, here? If employers are paying their workers more, why aren’t they raising prices? It’s because (all together now) when you raise wages of workers, those workers spend that money. When more people can afford more groceries, it’s good for everyone—even the grocery stores that pay their workers higher wages!
So the next time someone tries to tell you that prices go up when the minimum wage increases, tell them that they’re wrong: Research proves that their cornflakes and toilet paper will cost the same before and after the increase.
As someone who has become intimately familiar with these dystopian threats, I’m sad to report that they’ll never completely disappear. But as someone who has been following the impressive body of evidence surrounding the minimum wage, I’m thrilled to report that reality has proven them wrong every time.
New UW Study: Raising the Minimum Wage Doesn’t Raise the Price of Groceries was originally published in Civic Skunk Works on Medium, where people are continuing the conversation by highlighting and responding to this story.