Battle of experience: Economics of hiring minimum wage workers
A new report is shedding light on how workers and companies have adapted to Seattle’s minimum wage ordinance. According to a UW study, workers with more experience saw their pay rise and less-experienced workers did not undergo any actual change.
“It’s all about productivity. If somebody can flip 100 hamburgers in an hour, and each hamburger nets X amount of dollars in profit, because the person is producing 100 to meet demand,” said KIRO Radio’s John Curley. “But if you can only flip 10 in an hour, you’re not producing enough to justify your salary, so therefore you are a cost burden to the company.”
For the study, UW began looking at 14,000 people in 2015 who were earning $11 an hour or less, and then followed the group over time. The researchers found that those with more experience saw an increase of $251 more per quarter, and the less-experienced gained no change in income.
“If somebody doesn’t have the skills, you’re not going to pay the person to sit there and scratch themselves for eight hours while they’re not producing enough,” Curley said. “That’s the problem. When you don’t increase the production, but you increase the cost of the person at the job without increasing the production element, there’s a cost to the business when it comes to profit.”
Last year, the University of Washington’s ongoing study indicated that the number of low-wage jobs in Seattle was shrinking. Basically, employers were hiring less, or keeping fewer people on staff. The theory from opponents is that because companies have a finite amount that they’re willing to pay workers, they’ll in turn simply alter the hours of those employed, which appears to be the case with less-experienced workers.
Number of people entering the workforce declined
The study also showed that the number of people newly entering the work force peaked around the time minimum wage started increasing, and has actually declined since then.
“Shocking. So if you increase the cost of something, people buy less of it. Whether that is a cheeseburger or whether that is a human being that makes a cheeseburger, it’s the rules of economics,” Curley said.
“You’ve increased the cost of hiring that person, so less people get hired. Less people get an opportunity to get that first step onto the ladder to get that first job that leads to the next one.”