Three years ago, the city council voted unanimously to increase the city's minimum wage incrementally to $15 per hour. As I have tried to explain in past columns, the council members rejected the idea that raising the costs of labor would cause employers to buy less of it. Somehow the council members just believed that employers would raise prices or work some sort of economic magic in order to keep all their employees and even perhaps hire additional ones. That has not happened.
A University of Washington study concluded that the costs to low-wage Seattle workers have been three times larger than the benefits. The report estimates that the city council's actions have cost more than 5,000 jobs and that workers whose wages were increased lost an average of $125 a month as employers reduced their hours.
Now the city council has voted to impose a tax on sugary soft drinks. The reason that is stated is to combat obesity. The tax was presented as a public health measure because, they argue, raising the price of these soft drinks will cause consumers to purchase fewer bottles of soda.
Now let me get this straight. The city council believed raising the minimum wage would have no significant effect on jobs. But that same city council believes that raising the price of soft drinks will reduce the number of bottles consumers will purchase.
Economists often confuse the discussion by talking about how elastic or inelastic wages and prices might be. But the simple fact is that the council apparently believes what it wants to believe about economic supply and demand as it suits their agenda.
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Kerby Anderson is a radio talk show host heard on numerous stations via the Point of View Network endorsed by Dr. Bill Smith, Editor, ARRA News Service
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