Oregon Says The State's Minimum Wage Rise Will Cost 40,000 Jobs

[Weird Tolkienish Figure]

As we all know whether or not to raise the minimum wage is one of those things easy enough to get people snarling at each other over. There’re the economic rationalists who insist that making something more expensive means that people will buy less of it. There’s the fantasists insisting that of course this doesn’t happen for the capitalists will just take smaller profits because they’re nice people. And then in the middle there’re the empiricists saying that our evidence from the past is that modest rises in the minimum wage have modest effects anyway. But we’re not sure that $15 can be counted as a modest rise so bets are off at this point.

At which point we get a bit of enlightenment from the State of Oregon . The Oregon Office of Economic Analysis (yes, a part of the state government, not just some people with a catchy name) tell us that the state’s recently announced minimum wage will reduce the number of jobs by some 40,000 in the future. Which puts them somewhere with both the realists and the empiricists. 40k jobs in somewhere as large as Oregon isn’t a vast number. But the effect is definitely to have fewer jobs as a result of the higher minimum wage.

A news report:

But Oregon Democrats acted before state economists even had a chance to weigh in. Last week, state analysts concluded in a prepared forecast the high wage will “result in approximately 40,000 fewer jobs in 2025 than would have been the case absent the legislation.”

The story being that the Democrats were stampeded by the SEIU and the fight for $15 into doing something rather than waiting for an even more damaging move to $15. But this all happened to fast that the economists didn’t have time to model it. And now they have:


Absent the state’s new minimum wage law, passed during the 2016 legislative session, the upward revision to the employment outlook would have been even larger. While the impact is relatively small when compared to the size of the Oregon economy, it does result in approximately 40,000 fewer jobs in 2025 than would have been the case absent the legislation. Our office is not predicting outright job losses, however we are expecting somewhat slower growth. Low-wage workers receiving raises in the near term boost incomes. Over time, however, employers will adjust by increasing worker productivity, possibly via capital for labor substitutions.

And in more detail from the full paper itself:

Absent the state’s new minimum wage law, passed during the 2016 legislative session, the upward revision to
the employment outlook would have been even larger. Using estimates provided by the Oregon Legislative
Revenue Office, along with the academic literature, our office’s outlook now includes a slowdown in job growth
due to the higher minimum wage moving forward. While the impact is small when compared to the size of the
Oregon economy, it does result in approximately 40,000 fewer jobs in 2025 than would have been the case
absent the legislation. Our office is not predicting outright job losses due to the higher minimum wage, however
we are expecting future growth to be slower as a result. In the near term, the higher minimum wage boosts
overall state income as low-wage workers receive raises. Over the medium term, employers are expected to
adjust to the higher wages and increase worker productivity, possibly via capital for labor substitutions. Our
office has incorporated these overall effects into the outlook for wages and in the industries which employ the
largest numbers of low-wage workers. These include the obvious like leisure and hospitality, and retail trade, but
also health care and food processing manufacturing, among others.

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Well, there you have it, raising the minimum wage costs jobs. And, as I’ve pointed out several times around here the real effect (assuming no one does something mad like instituting a $28 an hour one, as Nick Hanauer has muttered about doing) is not that it destroys jobs en masse. Rather, simply, fewer jobs are created in the future leaving that future with fewer jobs than there would have been absent the minimum wage rise.

All of which means that we’re correct in our usual insistence around here. The correct minimum wage is and always has been $0 for that is what you get when you’ve no job: as those 40,000 unfortunates are going to find out in the future. Further, if you want to make the poor better off then you’ve got to go tax some people to get the money to give to the poor. That is, redistribution works as a social policy, messing with markets does not.

http://www.forbes.com/sites/timworstall/2016/06/11/oregon-says-the-states-minimum-wage-rise-will-cost-40000-jobs/#1802e420145e