The last minimum wage study to cause a stir involved an analysis of Seattle’s $15-an-hour minimum wage. The study found that the mandated wage law was having disastrous ramifications, even before fully taking effect (the minimum wage is set to increase to $15 in 2021). The seemingly paradoxical but expected conclusion was obvious to anyone who has taken an economics 101 course: Workers were left worse off.
— Phil Kerpen (@kerpen) June 26, 2017
The very same low-income workers the minimum wage advocates were trying to help have actually seen their income reduced at an annual rate of $1,500. How? By steep declines in employment of low-skilled workers, and a drop in hours for those lucky enough to keep their jobs. The decrease in $1,500 represents a significant amount of money, especially for a minimum wage worker.
The study, in other words, found that the laws of economics are still operating. When you make something more expensive (like labor), people (or in this case, employers) purchase less of it.
That was back in June. Now Seattle’s city council is apparently embracing basic economics when it’s convenient for them. George Will reports, “the city council has voted to impose a tax, effective next year, on sugary soft drinks, raising the price of a 2-liter bottle of soda about $1.18. Presented as a public-health measure to combat obesity, the tax is projected to generate about $15 million a year, although the aspiration of sin taxes (e.g., Seattle’s taxes on guns and ammunition) should be zero revenues because chastened consumers will mend their benighted ways.”
Will continues: “Still, proponents of the tax are confident that it will make people behave better by consuming less of the disapproved drinks.”
So, they want to make soft drinks more expensive so people purchase less of them, but don’t realize that making labor more expensive has damaged their labor market? That doesn’t make a lick of sense.
Unfortunately for the city council, the economics aren’t exactly in their favor here either, since people can simply purchase their soft drinks outside of Seattle to avoid the tax.
Something similar happened in Denmark, in which the nation had to repeal their “fat tax” (a tax of $2.7 per kilogram of saturated fats in a product) after it had been in effect for just over a year because they found people simply ventured across the border to purchase their snacks.
Socialist senator Bernie Sanders certainly didn’t have those facts in mind when he encouraged Americans to look to Scandinavia for lessons on good government – but in this case, we certainly should.
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