Blowing up the minimum wage in a confined space

An excellent little experiment for economists and minimum-wage advocates is about to kick off in Seattle:

Workers are optmistic that the SeaTac "Good Jobs Initiative" will pass after jumping out to an early lead in the election. And with the latest ballot count on Wednesday night, with 3,942 votes counted, that optimism reigns with a tally of 53% to 47% supporting the initiative.
The initiative seeks to raise the minimum wage to $15 an hour for workers in Seattle-Tacoma International Airport and at airport-related businesses. [my italics]
$15/hour? Bloody hell. Even in ultra-expensive San Francisco they're only going up to $10.74 an hour. So what's going to happen here? If we look within the confines of SeaTac, it seems plain that travellers are captive users - they don't have any ability to change to a better-value business - so we'd expect a certain fraction of travellers with non-discretionary spending (stuck in airport during transit, business-funded) to grit their teeth and pay the higher prices inevitable as a result of wage increases of up 50% (and service / rental charges to businesses rising as a result of cleaning, security and catering staff wage hikes). Other travellers such as gift shoppers will be more reluctant to pay the higher prices at the margins, leading to lower sales overall and especially in staff-intensive low-margin businesses. If I were the manager of the SeaTac McDonald's, I'd definitely be trialling automated ordering points. Overall I'd expect SeaTac revenue to be approximately neutral, so if they're going to be spending more per worker then they'll likely have to be employing fewer workers.

The real fun is going to come in the definition of "airport-related businesses", of course. The Washington worker unions will be pushing to stretch this definition as far as possible, so that any business which supplies anything of note to the airport will be subject to the law. As a result, non-aviation businesses will decline airport custom as fast as they can. That reduces supply to the airport, so pushes up prices. As noted above, an airport has a very limited captive customer base. Personally I don't buy anything more than coffee and a Brad Thor novel in an airport unless it's on someone else's dime.

Now I've travelled through SeaTac a fair bit and had the (dubious) benefits of service at several of its establishments. With the notable exception of the high-priced but excellent Vino Volo, I was generally made to feel as if I was intruding on the personal time of the transport, security and retail staff there. The TSA was particularly slack-jawed, idle and incompetent - and that's a pretty low bar to crawl under. I'm not sure how raising the minimum wage is going to help this situation; it's possible that the attractions of a $15/hr job would make the worker work harder to keep the job, but beyond that why try harder for an undoubtedly negligible salary increase?

Of course, this is a slippery slope:

Organizers expect their message to spread beyond SeaTac workers. This summer in Seattle, fast food workers also rallied to raise the minimum wage to $15 an hour and both Mayor Mike McGinn and Ed Murray supported the idea, and we’re told the city council may take up the issue as soon as this week.
"Hey, my neighbor gets $15/hr mandated, why shouldn't I?" Expect a rapid rise in wage demands across Washington state, at which point it becomes crystal-clear a) which areas have politicians funded by labour, b) which by business and c) that customers will travel from a) to b) if at all feasible when they want to buy something labour-intensive.

Check back in a year and see what SeaTac looks like. If I go through there towards the end of 2014, I'll report back.

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