A ‘very credible’ new study on Seattle’s $15 minimum wage has bad news
washingtonpost.com
washingtonpost.com
Who am I to tell a homeless person that she is legally forbidden to engage in a voluntary, hourly employment contract for less than $15/hr? I would effectively be guaranteeing that she stays unemployed/homeless. Regardless of practical effects (which are ambiguous at best), it's wrong on moral grounds.
On the other hand, the minimum wage definitely benefits middle class teenagers on their first jobs (if they can get a job), and has questionable benefit for millennial humanities college grads who have yet to start a career. For them, the higher wage comes with fewer hours, according to this study.
In the long run though, the more we raise the minimum wage, the sooner the local price inflation catches up. Getting a casual meal in Seattle is NOT cheap right now.
EDIT: I'll throw in that I think a very basic income with no minimum wage/unemployment/other welfare is much smarter fiscally and economically, and is the only way to largely eliminate extreme poverty. And it's sad that HN readers flagged this article because it challenges a conventional liberal talking point.
I can buy some level of slippery slope at play here. But, by and large, this frames it in a way that allows sub-livable wages.
So, you can think my "side" is framing this in a way to justify it. This does little more than convince me your "side" is just trying to justify keeping ill earned wealth.
I think there is a fundamental difference between selling labor and selling legal rights. You might say that someone so financially desperate has de-facto given some rights to their employer, but coercion is always illegal (whether or not this kind of person is likely to seek legal help is another story).
> So, you can think my "side" is framing this in a way to justify it. This does little more than convince me your "side" is just trying to justify keeping ill earned wealth.
Sounds like you dislike exploitative businesses more than you care about the homeless. That isn't necessarily right or wrong, but I think it explains your inclination on the issue.
I think there is a fundamental difference between
selling labor and selling legal rights. You might
say that someone so financially desperate has de-facto
given some rights to their employer, but coercion is
always illegal (whether or not this kind of person is
likely to seek legal help is another story).
I'm not convinced I'm correct on this. But at face value, I don't see how it works.
Sounds like you dislike exploitative businesses more than
you care about the homeless. That isn't necessarily right
or wrong, but I think it explains your inclination on the
issue.
Unfortunately, I don't think there is an easy answer. :(
Assuming it's a bad decision (makes their lives worse off), the problem is that they make a bad decision. In that case, it might make sense to create a regulation that forbids people making bad decisions.
If it's a good decision, there's no point forbidding it.
For fully localized jobs that cannot move (ex: waiter) that means they probably won't exist at all and the business will close down.
Someone who hasn't unterstood minimun wage fully?
Minimum wage covers exactly this situation: You will have to pay at least that amount, even if the person you're employing happens to be homeless at the moment. If an employer is not willing to pay that, than that's not an issue with having a minimum wage...
But that's what I think is good about it!: It sets a baseline for what human labour is worth. Nobody has to say how much (or rather how little) his or her labour is worth. If an employer thinks someone should earn less than that - fully knowing that this wage will never enable this other person to get on in life - than she'd rather not employ anyone.
I was always a put off minimum wage laws by reading Thomas Sowell on how blacks had lower unemployment than whites in 1948 before minimum wage laws had much effect. After people hired non blacks and the unemployment rate shot up giving problems that continue to this day. ( eg http://www.twincities.com/2012/02/07/thomas-sowell-the-minim...)
Employers were only willing to hire black people because they were worked for lower wages, because they exactly knew that their labour was being considered less worth that that of white people? So introducing the minimum wage just made the racism obivous and I'm sure problems would also have arisen if the minimum wage had never been introduced and the black minority would have been forced to slave away on minimal incomes their whole life.
Sadly this is not just a consequence for the homeless but it impacts all those who are low skilled, which is disproportionally the young and minorities.
If you are dead broke and half starved and I offered you a take it or leave it offer to work carrying rocks for $2 an hour so you can get a sandwich and you agree, is that really voluntary?
I do agree with you about teenagers and other people that don't need the money in order to live. For dependents and people that agree not to get public assistance (e.g. retirees), I don't think there should be any minimum wage at all.
/Tens of Millions/ of Americans live their lives there.
Edit: I also think your expectations of relative difficulty in finding new work and doing it might be the result of minimum wage and other legally imposed on boarding costs. There would, for example, be a much more fluid market of sign spinning jobs with no minimum wage or employment regulations which for some reason want to designate people "employees" with "rights."
If I ask you whether you want your leg or your left hand cut off (and I have the power to make either happen) you can have a preference and still lose.
Actually, it does. Because avoiding pain or death, in a preferable way, is by definition a net positive.
> If I ask you whether you want your leg or your left hand cut off (and I have the power to make either happen) you can have a preference and still lose.
That's not the shape of the example here. The employer isn't the only job in town, and the employer didn't impose a situation of joblessness on the guy. There are other employers he could do menial low-trust work for.
The answer of imposing a minimum wage, by the way, means you get your leg and hand cut off.
Situation A: I can choose between no employment (bad), and exploitative employment (slightly less bad).
Situation B: With the benevolent intention of a minimum wage legislated into existence, I can "choose" no employment (same bad as before).
You don't make someone worse off by increasing the number of options.
You don't make people better off by arguing for the goodness of an intention.
Measure results of your policies. Keep in mind foundational economic principles. Do good.
Ninja edit for pedants: adding additional options to a baseline set of options. "Live peacefully -> (join my army | die)" is a greater number of choices, but I don't have the option of sticking with "live peacefully". I hope this helps clarify my sentence above.
The actual equation is [80 hours usable time] vs. [40 hours useable time + some small amount of money].
If I can use that 40 hours to find a better job or train for the future, I would be better off.
The term you're looking for is opportunity cost. And yes, the opportunity cost of A is !B. Similarly the opportunity cost for B is !A. We could come up with all sorts of stuff that happens in the time that would otherwise be devoted to the exploitative job, but that wouldn't clarify the point being made here.
We are in adversarial agreement.
You are saying that I can choose (no employment | exploitative employment | non-exploitative employment), whereas my post you originally responded to had (no employment | exploitative employment).
I agree with you. Expanding the set of choices is a good thing.
An honest assessment of the tradeoff is that we eliminated cheap labour OP's homeless person might have done to remove pricing pressure from the restaurant worker. That is, the homeless person might have done Task A at $2/hour and the restaurant worker Task B at $6/hour. By setting the minimum wage at $7/hour, the restaurant worker gets a bump and the rock-carrying job is eliminated.
Without the minimum wage, someone hiring for Task B could threaten the restaurant worker with unemployment under the bogeyman of the homeless person taking their job at $5/hour. The bogeyman is not real. The homeless person, we assume here, could not be trained to do Task B. But expecting the restaurant worker to know that, and negotiate competently on it, is not a responsibility we ask workers to bear, and with good reason.
TL; DR people doing Task B vote while people who could do Task A don't, or at least not in an organized, politically-coherent fashion.
Social Security is a transfer from current workers to retirees. Does that meet your definition of public assistance?
This is the problem. Everyone working 40 hours per week deserves a living wage, whether they're fresh out of high school or 8 years into a humanities degree. There's this weird sense out there that working in food service isn't a "real job," or as you say they haven't started their "career." This is how you end up with people working 60 or 80 hour work weeks, or two or three jobs, to provide for themselves and their family. Every 40 hour job is a "real job" and deserves a living wage. Otherwise you're just making people depend on our social safety net, and no one wants that.
I suppose the homeless and chronically unemployed people you've condemned do not usually use public assistance? I disagree with this, and regardless, it doesn't sound like a good solution for them.
There are a lot of cheap places out there (see: Midwest, South), but unfortunately, millennials do not want to live there. I would rather let economics sort it out instead of creating a vicious local inflation cycle that prices out local minorities and increases the homeless population via minimum wage.
to >I would rather let economics sort it out instead of creating a vicious local inflation cycle that prices out local minorities and increases the homeless population via minimum wage.
How about first reducing the gap by reducing taxation of labor income, including employer-side payroll taxes (which both reduces the nominal wage necessary for livable income and makes it less expensive for employees to hire workers at any given nominal wage.)
There lies enlightenment.
How do you replace the funding those taxes provide, especially FICA which funds Social Security and Medicare?
Minimum wage and other forms of welfare just don't make sense compared to a simple, clean, basic income.
You can earn a living wage for 40 hours a week doing anything in the US. You just can't afford a new iPhone. All the minimum wage does is makes it impossible to employ low-skill workers. So while before the minimum wage you could make a living, now you either can't make a living or you're effectively in the lower middle class.
Ask your dad or granddad what they had to go through to get you to a position where you think 15$ an hour is merely a "living wage".
Or a home. Or a car. Or healthcare. The idea that minimum-wage life in America is in any way up to developed-world standards is horribly, laughably, tragically wrong.
Not saying that minimum wage is the answer. Personally, I support abolishing it in favor of a Universal basic Income. But suggesting that the problem it is trying to address isn't even real is... just not correct.
One of my issues with setting a national minimum wage is those last two are very different if you are living in Seattle vs rural Arkansas. How would you set minimum wage in such that it gives the same standard of living to people in both of those places?
As an aside, I think our social safety net should be changed so that any income will increase your standard of living. There are too many situation were going from 0$ to something will decrease your standard of living.
That's a major argument for UBI.
With the current system the aid is earmarked for certain items. This prevents one of the issues with UBI where someone gets a check, eats steak for a week, then cannot make rent the next week.
I know the earmarks don't work perfectly currently or prevent all bad choices but I think that UBI would allow for more bad choices.
The problem is that automation increases inequality (I think). Between individual workers (software engineers vs factory workers) - and between capital and labour.
The solution is income redistribution. To me, the negative income tax with no minimum wage makes most sense. Minimum wage is a weird, hard-to-analyze hack.
I don't think so. If we agree human labor has value, then the question is what that value is. About a century ago, we collectively agreed that 40 hours of work per week is a decent balance between work and home life. It seems reasonable to conclude that someone working those 40 hours has performed enough work to earn enough to have all of their needs paid for, including housing, transportation, food, and leisure time costs. In short, someone working 40 hours per week deserves a living wage.
Now, the US (and most governments) miss out on the other side of the in that, we want to force people out of low skill effectively worthless jobs, and into higher skill positions that drive the economy. That means reeducation programs, community involvement, and a social safety net which all costs tax money.
I don't think that's true at all ... as a Californian, I am surrounded by zero skill tasks related to agriculture that pay well more than zero.
I pay workers in my vineyards and orchards for zero-skill tasks like weeding, mowing, digging, etc. over minimum wage. Granted, this is in a coastal area (Marin County) but even in the central valley the value of zero-skill labor is much more than zero.
In fact, I will bet that anywhere in California a worker that can show up on time and work hard for a full shift will consistently be paid over minimum wage for this zero-skill labor (absent employer trickery).
The real problem, in my opinion, is that there is a great social migration taking place towards high-priced cities with low housing stock and lots of wealth driving up prices of all goods and services in these areas.
So it's not that zero-skill work has zero value, but rather: zero skill work cannot meet basic living standards in an expensive city - and these days, all of the cities are (relatively) expensive.
We are talking about Seattle, after all ...
Still to my mind, a high level of Universal Basic Income combined with no minimum wage would be a more logical thing to do, and solves the above problems.
Neither of our anecdotes is particularly useful in this discussion, but the economics and data (as in the article) tend to suggest that having a high minimum wage is unsustainable.
Yes, my guess is increasing the minimum wage, along with the rising cost of healthcare benefits, will be very convenient excuses for automation.
* I support higher taxes, particularly on higher income people, almost for its own sake.
* I oppose almost all military intervention abroad.
* I believe the federal government needs to intervene with local governments to prevent police abuses.
* I strongly support public schools and oppose public-funded charters.
... and I could go on and on this way.
On the other hand, I do not believe in a high national minimum wage, or in a small number of other "liberal" orthodoxies^h^h^h^h^hidees fixes (like universal college tuition, or single-payer health care).
Why am I meant to feel like my "team" lost something when a study confirms something that most economists have been saying for decades?
I can't say that I agree with you, but you're generally a thoughtful guy and I would appreciate getting another perspective on the issue.
(Also, curious: is the word "national" operative there -- eg, do your beliefs differ between a national minimum wage and a local one like the Seattle measure?)
I definitely don't oppose the minimum wage! There's no libertarianism creeping into my perspective here. :)
Because that "team" did, in fact, lose something - at least in relation to the very cynical (and probably correct) charge that minimum wage increases are vote-buying.
Also, I think it's worth considering that the very sound and considerable notion that "a wage price floor causes all other prices to catch up" is probably lumped right in with "the government collects the same amount of revenue at this point on the curve as on this point of the curve"[1][2]. Since that "team" is vehemently opposed to the Laffer Curve it's not surprising that they'd be vehemently opposed to other "voo doo economics".
[1] https://en.wikipedia.org/wiki/Laffer_curve
[2] https://www.youtube.com/watch?v=uhiCFdWeQfA (jump to :37)
What I was trying to say was: "people who think (that team) is losing might be having a knee-jerk response to a (mistaken) link in their own minds between wage price floor theories and supply side economic theories".
No, I don't think they are the only two options and further I don't think they are related at all.
(it's an elegant illustration, but to implement policy concrete estimates of impacts on revenues are more useful than an elegant illustration)
Full disclosure: if it were up to me, we would go with either a flat tax or something more sensible that an economist has proposed (i.e. Friedman's negative income tax). But that would, of course, largely abolish the need for the IRS and the thousands of jobs tied to figuring out taxes each year. In other words, I am definitely more keen on a strong vector toward Libertarianism.
An extreme case would be that someone who earned a billion dollars and paid a 99.9% tax on it would still be much better off than someone who earned 16K and paid a negative 1% rate.
The starting premise is that taxes should be judged based on how they impact your quality of life, not on how much quantity of money they take.
Logically then, progressive taxes are better.
This is a widely debated topic that usually devolves into an argument about whether property is some sort of natural right or if it is a societal construct. Even on the natural rights side of the argument you will find adherents that believe any taxation is a violation of their natural rights.
I'm pretty uninterested in traveling the paths of Hobbes and Kant on an internet forum, so suffice it to say that its pretty clear to most people that there is a societal benefit to taxes and a societal desire to make those "fair". Arguing over what is more fair is unlikely to be resolved by logical proof but a lot of people think quality of life impact is the fair option.
I read this to mean that the study therefore would exclude employers such as Seattle-based Starbucks, Seattle-based Amazon, Seattle-based Costco, Seattle-based Nordstrom, McDonald's, etc. Based on that reading, it seems like quite a leap to draw any conclusions from this data.
Am I reading this incorrectly?
But it does seem ridiculous to assume the validity of a study of low-wage workers in Seattle while omitting data from companies like Starbucks that presumably employ many people affected by the change.
Also, to quote from the study: "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2]."
No matter the reason for the cherry-picking, it does add uncertainty to the results. In the malicious case, the uncertainty is easy to predict in the direction it will go. In the "ease of picking" case, it is not.
Which is to say, it does not throw out the results. This is a useful paper and more folks should look at it. Hopefully someone has the necessary energy/effort to get all of the data and we can clear up the uncertainty that it introduced.
It seems to me that an alternate interpretation could be that:
I would have guessed that low paid jobs were already dominated by large corporations (however I do not have data to back this up one way or the other), it seems that small businesses are at least surviving (even if they were hurt somewhat), and small businesses can't compete on economy of scale so it would make sense for them to hire more skilled employees to compete on quality. In this case maybe higher minimum wages would still be a net good?
In addition: "we exclude observations with calculated wages below $9 or above $500 in 2015 dollars. We also exclude observations reporting under 10 or over 1,000 hours worked in a calendar quarter. These restrictions exclude 6.7% of all job/quarter observations."
Overall, as others mentioned in this thread already, they included 89.2% of firms and 62.1% of employees.
They mention survey data that suggests that the businesses they exclude are more likely to reduce jobs in Seattle than the ones that they include.
From the study via non-paywalled link posted by andrewla below: https://evans.uw.edu/sites/default/files/NBER%20Working%20Pa...
> we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs [...] while hourly wages in such jobs increased by around 3 percent.
Sounds like some pretty intense statistical manipulation. The second wage increase was ~18% ($2/$11) not 3%. So they've fished for a larger pool that only had a 3% increase in wage and arbitrarily designated these as "low-wage jobs". Also very conveniently they've chosen to highlight only the second wage increase; it sounds like no data massaging could make the first one look bad. If they were honestly aiming at statistical significance the best approach was of course to bundle the two increases together. An overall 37% change in minimum wage should have much clearer effects than its individual halves.
Proponents of a minimum wage need to believe that in this particular case, raising a price does not proportionally decrease demand. While this may be true (economics ain't physics), the burden of proof lies with the proponents, since it would be a contradiction of probably the most well established "law" of economics.
If you feel that the data in this and similar studies are inconclusive, to the extent that you respect the discipline of economics, you should oppose a minimum wage.
Pretending that it's a "law" of economics we can blindly apply to any situation is absurd.
I don't deny that there are exceptions, I just claim that they _are_ exceptions, and that therefore the burden of proof is on the one arguing that a particular case is exceptional.
I'm not familiar with those offsetting benefits. If they exist, please enlighten me.
No, it's a contradiction of it; in conventional economics, a price floor has no effect on supply or demand, but reduces quantity traded iff the market clearing price without the floor is below the price floor. (One of the most annoying recurring things, to me, on HN is people making economic arguments and confusing either “supply” or “demand” with “quantity traded”, especially when discussing the effect of price controls which result in quantity traded not being the intersection of the supply and demand curves.)
They're not leaving out things that are "hard to measure." They're being honest about the limitations of their data:
"Employers are required to report actual hours worked for employees whose hours are tracked (i.e. hourly workers), and report either actual hours worked or total number of hours assuming a 40 hour work week for employees whose hours are not tracked (i.e. salaried workers)" [1].
These data allow these researchers to make incredibly accurate measurements about the price and quantity demanded of labour. Because "the data identify business entities as [unemployment insurance] account holders...firms with multiple locations have the option of establishing a separate account for each location, or a common account." This means the researchers could only "identify business location only for single-site firms and those multi-site firms opting for separate accounts by location." Excluding multi-site single-account businesses from the analysis avoided muddying the precision of the hourly and quarterly wage data with geographic uncertainty.
In any case, the study only purports to measure employment effects amongst "single-site businesses," which "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2].
[1] http://www.nber.org/papers/w23532.pdf page 13
[2] page 14
* The study uses more precise data than similar prior studies and comes to a sharply different conclusion.
* Economists generally want to disbelieve this study, because the results aren't promising, but the method used is largely credible and the data is more precise.
* The impact, according to the study, is that to compensate for the higher wages employers are continuing to hire but only highly skilled candidates thereby displacing the lowest wage earners or "removing the bottom rung".
https://mises.org/system/tdf/Henry%20Hazlitt%20Economics%20i...
It is like 2-hour reading, but very enlightening.
The lesson of the book is more than the ideology of its author.
It is hubris or naivete in the extreme to assume that someone you disagree with has nothing valuable to say.
You think you disagree with me, and you clearly disagree with Austrian economics. Yet, with less than one page's worth of reading, you can identify the core lesson of the book, excerpted below. That the author then applies this lesson in ways you find objectionable is no judgment on the lesson itself.
Chapter 1, Paragraph 1:
While certain public policies would in the long
run benefit everybody, other policies would benefit one
group only at the expense of all other groups. The
group that would benefit by such policies, having
such a direct interest in them, will argue for them
plausibly and persistently.
there is a second main factor that spawns new economic
fallacies every day. This is the persistent tendency of
men to see only the immediate effects of a given policy,
or its effects only on a special group, and to neglect
to inquire what the long-run effects of that policy will
be not only on that special group but on all groups. It
is the fallacy of overlooking secondary consequences.
Universal basic income is also ideologically biased (in the other direction); however, it has this fine distinction that it is actually technically impossible. Even retirement schemes are falling all over the world; UBI is 10-20 times more expensive.
>Just because Hazlitt has no formal credentials in economics does not render his views fallacious or superficial. There are other highly respected economists, in the modern era, who do not have a PhD in economics: David Friedman (physics PhD), Henry Manne (law degree), Gordon Tullock (law degree). Gary Becker wrote a lot about sociology, but his PhD was in economics. Several non economists actually won Nobel Prizes in economics, several with degrees in psychology. Nobel Prize Winner Elinor Ostrom’s PhD degree was in political science, not economics. Many economists in history had no formal training in this subject. This disproves their views?
[1] http://www.economicpolicyjournal.com/2017/05/a-response-to-i...
The irony of this citation is that we're commenting on a paper that opens by observing that the theory of minimum wages, derived in effect from economic first principles, hugely oversimplifies the empirical reality. And as support for that study.. Hazlitt.
"The number of workers making over $19 an hour increased abruptly"
This is the bad news.
> The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city.
"No thanks, I prefer to keep my skills low, so the politicians have screwed me."
We'll see if the city ever commissions them again!
total payrolls have fallen to where some are impacted more than a hundred dollars a month, loss.
This is the bad news.
It does not appear that the survey involved has the degree of resolution to make the statement that "the individuals comprising the pool of low-wage workers earned $125/month less on average after the change", then it is problematic, but it is far from clear that this is what the study says.
The GP's quote seems to capture the only hard data given -- that employers employed as many people at higher wages as they unemployed at the lower wage, meaning a net increase in wages paid by employers given that unemployment did not change.
Total payroll fell, so your explanation is not consistent with the data.
Here's the initial justification for the $19 bucket:
> While the preponderance of evidence suggests that a low-wage threshold slightly above the statutory minimum poses little risk of miscoding jobs as lost when they have really been promoted to higher wage levels, in our preferred specifications we report findings based on a relatively conservative $19 threshold. The $19 threshold is roughly twice the initial value of the minimum wage, a level beyond which cascading effects are less likely to occur.
And here's the payroll falling statement (from the abstract):
> Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016.
Table 3 contains more of the breakdown, but does not refute my point -- the assumption about the threshold and mobility around that is not obvious, and the "reduction in payroll" only makes sense if we restrict the payroll changes to just $19 and hour or lower, the exact thing that I am pointing out as potentially a bad assumption. Under the alternative model, payroll reduced for that group of jobs (less that $19/hour) because that payroll was still spent (potentially on the same people) but at a higher wage class.
[1] https://evans.uw.edu/sites/default/files/NBER%20Working%20Pa...
If it isn't the same people being employed at higher wages, it is still interesting that a sufficiently large pool of more skilled workers exists to take those jobs.
I wish they did the same all wage levels analysis for all workers that they did for the restaurant industry. Without that analysis it isn't clear if the net zero overall effect applies broadly. If it does, that would seem to indicate that wages in general are being held artificially low due to the availability of low wage labor.
Also, since it is a significant increase in a relatively short time, I wonder if the results of the change have stabilized yet. Hopefully they will repeat the analysis in the future.
It is interesting that one of the tests they thought might show a difference ended up failing their falsification test. I wonder what is going on there.
Since housing rental prices have been going up rapidly in Seattle, I wonder if their result could be explained by a sufficient number of low wage workers fleeing the Seattle area and moving to other parts of Washington (or a slower influx of new low wage workers than previously). Maybe something else to look into for someone who knows where to find that kind of data (if it is gathered).
Closing the capital gains tax loophole is, presumably, a reference to stopping some or all of this favorable treatment.
2. Changing that would not do anything to solve this problem (even if you think it should be solved through more government spending, it wouldn't raise much money)
(I have advocated better aligning the treatment of capital, labor, and generic other income, but the details involve more than just counting long-term capital gains as ordinary income.)
Maybe those better solutions have the same dynamics. Economics is all about trade-offs; many of them are hard to evaluate and some of them are not worth making. Minimum Wage increases to $15/hour seem more and more to be not worth making.
Taking a job which provides no on-the-job training, and takes no skill keeps someone where they are. Because they aren't learning anything they are stuck doing jobs at this level forever.
If a person is prodded into learning a skill in order to reach the bottom($15/hour) rung, and then at the $15/hour level, the person is doing skilled work, they will be defacto receiving on-the-job training, since they are providing some skill.
As long as there is a big enough social safety net, and access to resources like the library and the internet, unskilled and unemployed people will at least have the opportunity and a motive to learn.
It's really too early to tell whether a higher minimum wage will result in a more skilled, educated populous in the long run. But it does fit the data that most (all?) first world countries have a relatively high minimum wage and social safety net. It could be argued that a high minimum wage is partly how they got there.
2. The assumption that minimum wage jobs are dead-end by default is decidedly not true. Even the most menial minimum wage job provides people with employment history, which is very important for the poorest people in society to establish in order to get other jobs.
3. The logic here assumes that everyone who is displaced by the high minimum wage is capable of becoming a higher skill worker as long as their current employment opportunities are taken away from them. This is may be true for teenagers who are still in school. This is very much not true for all sorts of other minimum wage workers. Such as:
* Old people who are working to get a little extra money during their retirement.
* Single mothers, who often choose to take lower-paid work because many jobs have more flexible scheduling.
* People who have already been displaced from another high-skill job mid-career and have no where else to go to make ends meet (e.g. factory workers).
* People with disabilities that prevent them from pursuing high skill work.
4. The logic here also assumes that, even if someone does improve their skills, that there are enough high skill jobs that exist to employ all of these people. Higher skilled workers tend to be more productive than lower skilled workers, which in turn often means there are fewer high skilled jobs available than lower skilled jobs.
5. The problem with a large social safety net is that it acts as an alternative to working. You might find that trade-off to be acceptable, but you need to be aware that the likely choice many people will make isn't going to be to go to their local lending library to learn Javascript; it's going to be to stay home and not work. It's not because they're lazy or whatever people say; it's because the structure of the benefits incentivizes not-working over working for $X/hour or $Y/year. The values for X and Y go up when the safety net becomes more generous.
Another solution to help low wage/low skilled workers, is a negative tax rate: https://en.wikipedia.org/wiki/Earned_income_tax_credit
Kind of sounds like this study might be looking at only half the story.
Minimum wage workers are usually the lowest skilled workers in the economy. When they're displaced they have the fewest alternative jobs available to them, so they tend to drop out of the labor force. Either temporarily, while they go and learn new skills, or permanently.
This study seems interesting, and I'm open to the idea that this wage hike and it's effects could be an example of unintended consequences. But more than anything else in the article, the above quote rubs me the wrong way. Based only on what is reported in the article, this appears to be an abuse of statistics. They intentionally left out large employers, and are focusing on a narrowing wage range, so you can't say anything about the effect on the average low-wage worker. Not only that, it's a purely bimodal distribution. If what this study says is true, then there were no people who lost $125, there were people who gained some money, and people who lost jobs, and nothing in between. It's so misleading to cite an average.
Let's not make this an "us" and "them" issue. A study can cast doubt on a means, but not on an ends. The fact is that those low-skill jobs will disappear, McDonalds is already replacing its employees with self-order kiosks, Uber isn't trying to hide its plans.
Minimum wage is not the answer, because it doesn't go far enough. Minimum wage doesn't work? Great, let's do universal basic income then.
A minimum wage worker in the US is likely working 2-3 such jobs to cover food, rent, and other such necessities.
I mean, we have collective bargaining in the US, so I'm trying to understand how exactly that is different from Scandinavia.
Assume that the average minimum wage worker was working 2 different jobs for a total of 40 hours a week with no benefits. That's a total of 160 hours a month, or $1440. A loss of $125/month equates to $1315, or 102 hours a month at $13/hour. [1] So the worker loses $125/month and gains 58 hours. To translate that into one dollars example, childcare in Seattle costs around $10/hour.
There are of course lots of ways to save money with that free time. More sleep means fewer minor accidents leading to injury and sickness around the house. Childcare costs around $10/hour in this city, so by that metric there was basically no point in going to work before this wage increase if you had children to take care of. Saving 50 hours of work equates to saving $500 dollars. Obviously, it's not going to be 1:1, but even assuming you were spending just 15 hours in childcare would make our hypothetical worker better off, with an extra 35 hours to go to school, or just relax and keep their health.
[1] It sounds like this study is looking only at small businesses, for whom the rate is $13/hour. Since it ignores most businesses that actually must pay $15/hour, the headline seems wrong by definition.
Do you realize how privileged you sound saying this? Do you really think these people made enough money to pay for child care to "enjoy" the cost savings now that they're sitting around at home? What does America look like from inside your limousine? Do you have any Grey Poupon?
1. Employment stayed about the same.
2. Employees overall were payed a lot more.
3. The number of low wage employees (which I assume means those making the new minimum wage) dropped. However employees overall were payed more. My understanding is that this means that employers switched to paying more of their employers above the minimum wage.
4. They say that the average low payed employee made $125 less. However, its not clear to me what that means in light of the other points.
5. The study did not include larger corporations that have employees in multiple cities.
Several different interpretations were suggested:
1. Companies are hiring more skilled employees for higher wages and pushing less skilled employees out of the market.
2. Small businesses are being hurt and large businesses are taking their place.
3. Companies are paying employees more.
4. The results are due to some aspect of the economy that wasn't controlled for.
It seems to me that the conclusion that this is bad for those who advocate for higher minimum wages isn't very strong unless they could show that it was actually pushing low skilled employees out of the market.
If there are labor participation rate statistics available (probably not yet), you'd see the drop there.
Very eloquent.
At my local grocer in Manhattan, some prices suddenly went up 25% or more on a number of items and I was told by a senior manager of the food store chain (I was calling to complain about something else and inquired) who said it was because of the first minimum wage increase for not only the stores but the distributors which are also located in NY State.
NY State passed a minimum wage from $11 to $13 to $15 by 2018 or so. The current rate is $11.
A lot of people receive food stamps and/or are on a fixed income (think retirees) and this puts a substantial increase in their cost of living. This is only the first hike. One can only imagine how much higher food prices will be when it finally goes up to $15.
Meanwhile neither NY State nor NY City has dealt with the real problem which is the high cost of living which is very hard on low-wage people in particular because of zoning density restrictions and overuse of historic landmark status. These zoning density restrictions are a huge windfall for wealthy landlords as they make renters pay far, far higher rates for apartments than they would in an efficient market. It is a huge regressive "tax" that makes landlords like Donald Trump far wealthier than they otherwise would be in a efficient, functioning real estate market.
Wait, so are places like corporate McDonalds, Starbucks, Subway, etc excluded from the study? ...What about grocery stores? ...Clothing stores, mall shops, etc?
It seems like failing to include those would be a major bias in the effects of the study.
Edit:
"Indeed, while employment overall did not change, that was because employers replaced low-paying jobs with high-paying jobs. The number of workers making over $19 an hour increased abruptly, while the number making less than that amount declined, Vigdor and his colleagues found.
Vigdor said that restaurateurs in Seattle -- along with other employers -- responded to the minimum wage by hiring more skilled and experienced workers, who might be able to produce more revenue for their firms in the same amount of time."
Oh, so their "loss" to low-paying jobs can be explained by a rise in jobs paying above their cutoff for "low-paying"?
I have a lot of questions about this study; particularly since it doesn't agree with the other study mentioned in the article (with this study using "new" methods and the other using more "traditional" methods).
Seems like time would be better spent ensuring that everyone has food, housing, and healthcare no matter what they do (easier said than done, of course).
Yes, it would be better if they used high quality hull repair equipment, but sometimes it's not available and insisting that's the only thing you're allowed to use while the ship is sinking and people are struggling to survive is not helpful at all.
Don't you think that good policy should account for human toxicity? You seem to believe that policy should not account for "human folly."
> the jobs [being] cut because of the collective actions of spiteful business owners who don't wish to pay their employees that much per hour
...just doesn't make any kind of sense. You might find an occasional individual small business owner who's willing to cut off his nose to spite his face in this fashion. To imagine it happening on a collective basis, whether in organized or spontaneous fashion, is fantastically absurd, and seems necessarily rooted in so little experience of actual business proprietors that it's hard to imagine any kind of productive conversation proceeding from this point.