Seattle’s proposing a $15 an hour minimum wage

A $15 minimum wage could be coming to Seattle.

Seattle mayor Ed Murray announced today that a joint business-labor-government working group he’s assembled has united around a plan for a phased in increase to a $15 minimum wage, up from the current $9.32 floor.

Large companies with over 500 employees will have three years to increase their wages to $15 an hour if they don’t provide health insurance, or four years to do it if they do provide insurance. Smaller companies will have seven years. The bill will also tie the minimum wage to the Consumer Price Index in the future. In the fact sheet distributed the committee assumes CPI will grow by about 2.4% a year, but given the Federal Reserve’s commitment to a 2% inflation target it seems likely that wage increases would not actually need to be that fast.

Opponents, obviously, will deem this a job-killer. That’s a hotly debated subject in the research literature, though this is a big enough increase relative to Washington State’s existing $9.32 an hour wage as to push the boundaries of what’s been studied in the past.

One factor that makes job losses relatively unlikely is the existing impact of misguided anti-growth zoning rules in most big coastal cities. To the extent that a big minimum wage hike makes Seattle retail businesses less profitable, that will ultimately tend to depress Seattle’s retail rents. That would reduce the pace at which retail spaces are built if we were talking about Texas, but in a place like Seattle it’s likely that the primary constraint is permitting rather than demand for space per se. They teach you in kindergarden that “two wrongs don’t make a right” but in public policy sometimes offsetting distortions can improve things. It will be interesting to see, however, if specific kinds of businesses end up clustering right outside the Seattle city limits to take advantage of the lower minimum wage rule. It’s hardly unusual for a person to work in a different municipality from where he lives or shops, so the ultimate impact of municipal-level regulation can be hard to judge directly.