Wednesday, November 27, 2013

MW in (a small part of) Tacoma

A key excerpt from a relevant article at

A voter initiative to enact a $15 minimum wage for thousands of workers in a Seattle suburb that houses the region's main international airport won a narrow victory on Tuesday that proponents hailed as a signal moment in the nationwide fight for livable wages.

The measure mandates that some 6,300 workers at Seattle-Tacoma International Airport and nearby hotels, car rental agencies and parking lots receive a minimum hourly wage more than double the federal minimum wage of $7.25.

Notice that they keep it restricted to the airport, areas nearby, and to services closely connected to the airport.

On one hand, it's gutless (and disingenuous) not to extend the glorious legislation to the entire city.

On the other hand, it's genius, since the demand for airport services is highly inelastic and the demand for airport-related services is somewhat inelastic. Those enterprises are in a relatively good position to absorb the MW "tax" and pass it along to customers. Moreover, the supply of some services-- particularly those with large fixed costs-- is also inelastic, since they cannot get away from the tax easily. (Imagine taxing a casino at a higher level, after they've been built. What are they going to do?)

It will/would be interesting to watch the shifts that will likely occur: 1.) a (probably modest) decline in those services being available in the zone; 2.) relevant smaller businesses moving just outside the MW-tax zone (e.g., rent-a-car companies); 3.) relevant larger-fixed-cost businesses (that cannot move easily and don't shut down) shifting away from lower-end labor (e.g., hotels and parking lots moving toward more automation); 4.) hotels will contract out their cleaning services to companies outside the zone, so that they're not employed by the hotel anymore or subject to the MW-tax; 5.) workers will shifted to part-time and will lose health-insurance or other benefits, as firms seek to keep compensation near market-levels; and so on. Can you think of others?


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