Over the past year, there has been a growing faction in Seattle that believes the minimum wage should be higher — much higher. The amount is $15/hour, a 60% increase from Washington State’s current $9.19 (which is already the highest state minimum wage in the nation). The “instigator” is Kshama Sawant, an economics professor at Seattle Central Community College, and a Socialist Alternative politician who is now a member of the Seattle City Council. Once a niche movement, the campaign for $15/hour has taken on a life of its own. Even Mayor Ed Murray has pledged support for phasing in a higher minimum wage.

Whenever you propose to increase the minimum wage, someone will cry foul. Local perennial candidate Goodspaceguy frequently opines about the “job destroying minimum wage”. Closer to Earth, small business owners fear that a higher minimum wage will make it harder for them to stay in business. Do these criticisms have merit? Can we really legislate our way to a living wage? And why should urbanists care one way or the other?

Everyone deserves a place to live

In some ways, life has become cheaper over the past 100 years. In other ways, it has become more expensive. In 1900, the average household spent 57% of their income on food (43%) and clothing (14%), and 23% on housing. In 2003, 17% went to food and clothing, and 33% to housing. A century ago, if a household needed to save money, they would probably figure out a way to consume less food. Today, such a household would be forced to move to a cheaper home.

Compounding the issue, the average household today spends much more money on motorized transportation than the average household did 100 years ago. On a per-mile basis, motorized transportation is cheaper than it has ever been. But over the past century, urban design has significantly increased the number of miles that the average person must travel to go about their life. Commutes, errands, and leisure trips are longer than they have ever been. If a worker must own a car to get to her job, then she has less money still to spend on housing.

Low-income households spend more of what they earn

As income goes up, so does consumption. But consumption does not increase as quickly as income. At the lowest levels of income, people spend all of their income on basic life necessities. As income goes up, people will shift some spending towards luxury goods. At the highest levels of income, people save or invest the vast majority of what they earn.

Saving and investment are vitally important for the success of our national economy. But buying a portfolio of stocks and bonds will not do anything for the city you live in. Urban shops and cafes and restaurants rely on consumer spending to stay afloat. If workers earn more money, then they will have more money to spend at those local businesses.

There’s more than 40 hours in a week

What do you do if you earn $9.19/hour and your rent is $500/month? You get a second job to pay the bills. Someone who works 80 hours a week isn’t going to have time to do anything other than work or sleep. But a $15/hour minimum wage is high enough to allow most people to support themselves without working more than 40 hours a week. There are all sorts of things that someone could do with their free time that would make our city stronger. They could attend public hearings, or community councils, or design reviews for new development. They could gather signatures for a new ballot initiative. Or they could simply go to cafes and bars and restaurants and retail stores, and by patronizing these establishments, support their continued existence. A city can’t just be a place to work and sleep; it needs to be a place to play, too.

The environment will thank us

It’s a cruel irony of our time that the cheapest homes are the ones that require the longest commutes. Suppose that a poor household lives in an exurb, commuting 50 round-trip miles to work each weekday. A higher income might allow this household to move closer to work. Eventually, the household might even move to the city and ditch their car entirely. Either way, the less that a household drives, the less carbon they emit into the atmosphere.

Small businesses don’t have to suffer

Many small businesses have expressed opposition to raising the minimum wage, fearing that higher salaries will force them to cut jobs. However, this is only one way to handle a salary increase. Businesses can also choose to raise prices. Since most businesses have customers at a variety of income levels, using higher prices to pay for a minimum wage increase is effectively a redistribution from high-income households to low-income ones — exactly what the minimum wage is intended to accomplish.

It’s important to remember that businesses will have more customers and more sales with a higher minimum wage. Payroll expenses do not disappear; workers use their earnings to buy goods and services, often from the very same businesses that are worried about being able to pay their employees.

Even if some businesses have to cut jobs so that they can afford payroll, the benefits for the remaining workers would make this change worthwhile. A recent survey of economists found widespread agreement that a federal minimum wage increase would be a desirable policy, since any job losses would be more than outweighed by the gains for people who are still able to find jobs.

Conclusion

The $15/hour minimum wage isn’t just good politics; it’s good urbanism. I urge you to support the 15 Now campaign in any way that you can.

3 COMMENTS

  1. I’m right on the fence on this issue. My largest concern is that it’ll have the opposite effect described. We’ve already pushed many of the low-wage jobs out of the city simply by our high land cost*. Wouldn’t this encourage more of these businesses out to the suburbs?

    Note I’m not necessarily saying employment would go down** here – with the vacancies maybe higher value businesses move in and make up the difference. But if the lower wage jobs are pushed out this feels less like social justice and more like further class segregation.
    * or more specifically high floor area cost. the best way to drop floor area prices is to increase supply, and the best way to increase supply is to build up. but that discussion is for a different post.
    ** though traditional economics would tell us this will absolutely drop employment numbers, I’m open to the idea that this will stimulate the economy enough to balance that out.

    • It depends what kind of business you operate, right?

      A significant fraction (maybe even a majority) of the businesses that would be affected by a higher minimum wage are hyperlocal. If you run a fast-food restaurant, or a hair salon, or a cleaning service, or a grocery store, you *can’t* leave. Or rather, you can, but there will still be a demand for the service you provide, and other businesses will move in to take your place.

      There are lots of businesses that are much less concerned about location, like software firms, legal partnerships, etc. But those aren’t really the kinds of businesses that are paying minimum wage salaries.

      I’m not saying that *every* business falls into one of these two camps. For example, a big-box store can probably do just as well in Shoreline or Southcenter as it can do at Northgate; most people are driving there anyway, so it doesn’t really matter which way they drive. But I don’t think we’re going to see a mass exodus of jobs.

  2. Increasing the minimum wage in a controlled environment is a fantastic idea. Increasing wages would mean increased purchasing power for the common worker and an increase to the standard of living. Assuming jobs are not cut and lost, however, the increase in operational costs of businesses would spike forcing owners to jack up prices. It is quite foreseeable that the inflation caused by these actions would negate the benefits from the rise in wages and workers would be no better off. They would essentially be making more money of lesser value. And yes, housing prices would likely rise as well since the median income would be increased and landlords would desire the increased revenue.

    This is not to say that there wouldn’t be any benefit to a rise in minimum wage; it is just a caution to not have aggrandized expectations for the program.

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