Thursday, February 20, 2014

What's the denominator?

In response to “Zerophobia and minimum wages”, Lynn Thompson, the Seattle Times reporter who wrote the story I was commenting on, replied with an e-mail that made a good point:

“Other readers also suggested that I put the amount in the context of the city budget. $1 billion is actually the amount of the general fund from which any $15 an hour pay increase will come. The other $3.4 billion is in City Light and SPU [Seattle Public Utilities] revenues—utilities that get their money from rate payers and are operated as independent business lines.”

In broader terms, when you’re calculating a fraction it’s important to get the denominator right. This is another major piece of making budget figures meaningful.

With an estimated $1 million price tag for the minimum wage increase, or $1.5 million if summer youth programs are included, that still makes the proportion of the available budget 0.1 percent, or 0.15 percent with the youth programs. This does not include any effects of bumping up pay levels that were close to the new minimum wage. On the other hand, neither does it include potential increases in city revenues from the multiplier effects of the wage increases.

In any case, it still appears overall that the raises will have a very small impact on the city budget.

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