Hacker News Reader

The study did look at loss of employment as well. The conclusion states:

> Evidence indicates that these workers experienced no significant decline in their likelihood of being employed and a modest reduction in their hours worked over the six quarters following the first and second wage increases.

Right. You can quit your third job if you're making more from the first two. This is a plus, not a minus.

Was it the employee or the employer who reduced the employee’s hours? I interpreted it as the latter.

On the other hand, if that fired worker was working 2 jobs just to afford rent, but keeps their other job and now makes enough per hour to get by doing just one job - and can spend more time with their family or studying or whatever - that isn’t necessarily so bad.

Not to mention that more disposable income in the area likely means more people spending more money at your business. Chances are that not only your revenue will go up enough to employ that 10th person, but that the workload will increase enough that you’ll need the extra pair of hands.

I think there is a relatively easy calculus here: calculate the amount of government spending required to get to "make everyone whole", subtract any new tax revenue/decreased benefits spending. If you're losing money, then you're probably better off not doing it.

The goal with the minimum wage is to provide a baseline. The same goal as general poverty reduction programs, so one should probably look at what is most effective from a government cost perspective.

This does shift the burden onto consumers, but this is probably for the best in the long run.

If you’re concerned about and increase in minimum wage, I’m confused about why you have extra staff.

Alternatively you’re saying that the remaining 9 workers are going to be doing an additional 1/9th of the work, so presumably the hours.

So all you’ve done is kick someone onto the street (I do love the claim that you are on their side, while fighting against wages rising), while paying the same amount - possibly more due to overtime wages.

So yeah, if your business is poorly run you may get a significant impact from a fairly minor wage increase, but mostly because your business was already poorly run.

I think most people simultaneously underestimate the cost of labor and overestimate the profit margins of companies, often by quite extreme margins. I think that's because many here view things like Apple as typical where they make something like $400k in profit per employee. Excessive profit margins aren't really a sign of a well run company so much as silly huge markups. Apple sells phones worth around $300 for $1000 in large part because of extremely effective marketing. This is not how a normal business works.

A company that offers competitive prices is often going to run on razor thin profit margins. For instance WalMart, opinions of the company/owners aside, certainly qualifies as well run. Yet their profit per employee is just $4,200. That just ends up being a whole lot of money due to scale. At the same time just $4,200 per employee means their entire profit margin is heavily dependent on labor costs. Give everybody a $2.50/hour raise and they've gone from an incredibly profitable company, to a company on the path to bankruptcy.

And in these two extremes WalMart is far closer to a typical business. While I do think we should do what we can to help ensure good jobs for qualified applicants, I also think we should not move towards a world where the survivors in business are obligated to move more and more towards Apple level markups just to cover their costs. And those increases in turn often doing a great job of then stripping away real gains in come.

If you evaluate companies by free cash flow, the numbers look even worse. Even if a company is not engaging in accounting tricks that make themselves look very profitable, what the paper margins say usually do not reflect the real cash remaining in the bank accounts.

Certainly this turns in to a double edged sword for a certain segment of wealthy people. They do all of these things to make themselves look like they have a tremendous amount of money yet they sit right on the brink of failure.

In reality, while the margins are slim, a company may be able adjust costs when mandated by law. Maybe restaurant portion sizes are way too large, maybe the quality or purity of raw materials is too high, maybe there are just too many employees. Some companies just have more room to do these things than others.

Presumably you don't have extra staff; you have the amount of (relatively unskilled) staff that can (and will) do the job in the time allotted. As soon as you have to pay them more, you expect more from them. The workers that can't deliver $15/hour in value get let go. The ones that can deliver stay on. This is great for the existing workers that were already delivering that value but were underpaid. For the workers that can only deliver $7.25/hour ... they're never going to get (or keep) another job.

Note: I've owned restaurants for decades.

This is absolutely true. As wages have gone up over the years, especially this year, and my managers have been more willing to let someone go because they don't perform as well as others or don't show the potential. We have always had a higher bar--and paid higher accordingly--but cheap extra staff might take some of the burden off the others if they could accomplish some parts of the job till we could find someone else. Some years, like now, that can take months.

Letting someone go means others may get overtime, which is OK by me. I would rather have a good person there, and pay them extra, than an under-performing person there who only ticks everyone off and leaves a bad impression on a customer.

What I find interesting is people think the rising minimum wage has no affect on the cost to the customer. Recently, I sold one of my restaurants to someone whose first action was to raise prices by 20% because we paid more than his other restaurants do AND he cut hours by 25%!

Why weren't people paying the workers who deliver $15/hr in value that much money? Those people are getting fucked by the system.

where do you think profit comes from? The excess value generated by employees is extracted by the owners of the business.

If a food business is making close to minimum wage in value per worker, then they are going to fail anyway. Last time I was on minimum wage was being a kitchen porter, many moons ago. If minimum wage had gone up, the job would have not changed at all in the slightest. I mean, they were not going to serve the food on dirty plates and none of the chefs or owners were going to stoop to cleaning anything.

I'm using $15/hr and $7.25/hr in "value" for convenience here (though I didn't make that clear). Really, I mean $15/hr plus benefits + overhead + margin.

But, to my argument, I think that jobs will have to change. I'm regularly appalled by the quality of the service at fast food places: trash overflowing, dirty tables, dirty bathrooms, slow order taking, incorrect order taking, etc. Okay, you can't get the best employees for minimum wage, and some spreadsheet probably figured that the loss in customers due to poor service is more than made up for by the low cost of workers. Once that cost is cranked up, that cost/benefit ratio changes, and better service will be expected. Yay! That's a good thing. For employees that can deliver it. But for those that can't, especially those that struggle with English (many, where I live), they're going to be cost/benefited out of a job.

Fast food has good margins and a customer base that is surprisingly price insensitive, beyond that of choosing where to eat out. People who have time, skill, or inclination to cook at home usually already are, and those who are not take a lot of convincing to change their habits.

I very much doubt that at the level of fast food employee on minimum wage, you will see all that much of a change in the job, or for the people in those jobs to change all that much, purely because of a hike in minimum wage at that level.

Of course, if minimum wages were inflated high enough to make fast food businesses in general unprofitable, and not just the badly run ones, then this would cause economic problems, but I am not aware of this situation having occurred anywhere. If someone can tell me of a jurisdiction where McDonald's cannot run a restaurant, due to minimum wages being too high, then I'd love to hear, but it would seem to be an extreme exception, if it happens at all.

More importantly you're paying minimum wage: you clearly in no way value the skills any of these people bring to the business, otherwise you'd be inclined to offer more in the first place.

This is a weird claim. At the federal minimum $7.25 and 2000 hours per year that's $14.5k. Overhead on an employee (taxes, insurance, equipment, office space, etc.) is at least another 50% of that, call it $20k total.

So just hiring someone merely to break even means you estimate they can generate something worth $20k over the course of a year. That's just about the price of a new mid-size economy sedan.

It's not a weird claim, it's minimum wage. It means you're operating a business where you are either fine with a long lead time to fill positions (since you're looking for someone who can execute a skilled job of some sort but will work for the absolute bottom-dollar of the market), or it is close to totally unskilled work which anyone can do, and which the moment they have any marketable skills (say, from just doing the job for any length of time) they have every incentive to move to another company.

Literally every bit of improvement your employees make in their ability to do the job, implies that they should be paid more because their value per hour proposition, as you put it, is going up.

It's easy to see the logical flaw here by considering a reduction to absurdity. Imagine a minimum wage of $200/hour. This would of course lead to mass unemployment and collapse the market, except for a very minuscule percent of the labor force in extremely high skill high value positions. Just because somebody would now be earning $200/hour most certainly would not mean they were not valued. Instead you'd have simply squeezed everybody out of the market except these most incredibly valuable employees.

But you can also see the same flaw by just considering a mathematical distribution of wages. That distribution would resemble a bell curve. There will be a small number of very low skill positions with very low wages. And on the other end there will be a small number of very high skill positions receiving very high wages. And in between you reach the fat of the market with average skill positions reaching average wages. The effect of the minimum wage is to create a clumping on the left side of this curve as the people earning wages for extremely low skill work are now earning exactly the same as the wages for those doing more skilled work. And those abnormally low skill jobs that cannot afford to be paid anymore simply disappear.

For instance gas stations used to regularly be full service - you park, pay, and an attendant would fill you up or take care of any routine maintenance you needed. Those jobs went away, in the US at least. And similarly we're currently in the process of gradually phasing out cashiers, which I imagine our grandchildren will look back on with similar quaintness as we might full service gas stations. The point there being that you're left with a higher and higher skill level as the baseline just to enter the job market. And just because somebody's being paid the new minimum, does not mean they're not substantially more valued than others.

Wage distribution certainly does not resemble a bell-curve. It's a long-tail distribution. This is observed consistently across different economies. This US figure is from 2015, however it should give the right idea:

https://www.census.gov/library/visualizations/2015/demo/dist...

Doesn’t your argument apply for any value of the minimum wage, whether it is $7, $15 or $100?

It applies anytime minimum wage is a separate number to market rates for work when there's a competitive hiring environment.

The target demographic of HN, for example, we all value ourselves well above minimum-wage rates.

You can always make the numbers really stupid if you want to get bizarre looking answers, but that's not the reality we live in - minimum wage just barely covers living expenses sometimes.

So your claim that "you clearly in no way value the skills any of these people bring to the business, otherwise you'd be inclined to offer more in the first place" is true whenever you're paying (the minumum wage that is) less than market rates.

That's seems quite uncontroversial. If you pay less than market rates you may have a problem (in a perfect market, at least).

I'll note that much of what you site as overhead doesn't increase with minimum wage. There are a few taxes that are higher, sure, but they are only a portion of the increase. If their pay goes from 15k to 20 k, it doesn't mean your costs jump from 7.5k to an evne 10k. Your portion of the taxes on the employees doesn't go up that much per employee.

Equipment, office space, insurance, payroll costs, and so on do not increase with wage increases. I'll note that these are things you are likely going to pay no matter what the employees make as a minimum wage. At least one of these - insurance - can mostly be passed off onto the employee (save some time telling employees about the plan and even that can be passed onto someone else for a fee).

Overhead on an employee (taxes, insurance, equipment, office space, etc.) is at least another 50% of that, call it $20k total.

I think you are wildly underestimating that portion. It's at least as much again, and possibly a lot more. 2-3x isn't unusual.

Having run a small business myself I know, the hard way, it can be much higher :) I was just trying to pick a small uncontroversial figure.

It depends. It can be way less than 50% for so low wage positions too.

Are you counting the cost of some expensive piece of industrial equipment used by a minimum wage person as part of those overheads?

Or are you just putting minimum wage people on for more hours, using the same office space others are using at different times?

you clearly in no way value the skills any of these people bring to the business

If you didn't value their skills in any way, you wouldn't employ them at all.

Well no, it means you value their skillset at less than or equal to minimum wage, but since you can’t actually hit the “true” value, you end up at minimum wage.

Of course, they still have to bring at least that much in value to the business for the hire to be worth doing in the first place. And obviously increasing the minimum pay also means increasing the minimum value extracted

Chances are the slack will be taken up by people on a salary so they won't get anything extra pay wise -- managers and whatnots.

Or they cut the service level so maybe the table will be wiped down before you sit there and maybe the garbage will be taken out before it gets so full you can't throw stuff in there.

But the most likely scenario (which I witnessed the last time they raised the minimum wage in the AZ) is they just raise the prices on everything storewide. Well, that and reduced "amenities" like mopped floors and clean parking lots.

> Or they cut the service level so maybe the table will be wiped down before you sit there and maybe the garbage will be taken out before it gets so full you can't throw stuff in there.

Anecdotally, this seems like a common route for businesses to take. I was shocked moving from the Midwest to the Bay Area at the low cleanliness of tables at fast food and fast casual restaurants. Prices aren't as much higher as I expected them to be, but a dirty table at a restaurant was basically unheard of where I came from, and it's expected in San Jose.

So you have 10 salaried employees and 1 hourly?

Also most salaried jobs have hours written into the contract, so you can’t make a salaried person worked longer just because your business is poorly run.

I'm not sure what country you're referring to, but in the US salaries employees explicitly do not have hours written into their employment agreements. If there are hours written in, they are legally classified as hourly employees and legally eligible for things like overtime. Lots of companies have run afoul of this but the courts have been very clear on the matter. If you treat your employees as hourly employees they are hourly employees, and you better track and award overtime according to hourly regulations.

To add to this, in the US the Fair Labor Standards Act governs topics like minimum wage and overtime, and it provides a number of exemption criteria [1] for managerial, professional, creative, and computer employees. Most employers take advantage of these exemptions for qualifying jobs, and classify these jobs as 'exempt' from FLSA rules about wages and overtime. Therefore, most US professionals, managers, and computer programmers are not paid according to hours worked [2], but given a fixed salary, and their job description avoids mentioning an expectation about hours worked.

[1] https://www.dol.gov/whd/overtime/fs17a_overview.htm [2] https://www.monster.com/career-advice/article/whats-the-diff...

Except I'd be fired if I decided I didn't feel like working 40 hours a week every single week without taking paid time off. Hours are tracked for full time salaried employees, of course, that's been the case for literally every single job I worked. (And I'm no spring chicken)

If it worked the way you claim, then what would prevent me from working 2 hours a week and be like "lol, I'm salaried, pay me a full time salary for those two hours?"

https://www.shrm.org/resourcesandtools/tools-and-samples/hr-...

>The Department of Labor (DOL) states in the 2004 overtime exemptions preamble to the final regulations that employers may require exempt employees to record and track hours and to work a specified schedule: “We agree that employers, without affecting their employees’ exempt status, may take deductions from accrued leave accounts; may require exempt employees to record and track hours; may require exempt employees to work a specified schedule; and may implement across-the-board changes in schedule under certain circumstances.”

"Exempt" employment status largely works against the employee in practice.

If you are a salaried (paid per unit of time other than hourly) employee but not exempt (from overtime) then you still need to record your hours. For example, inside retails sales positions allow for overtime exemption, however in order to determine if they are exempt you need to determine their hourly wage. The only way to determine thier hourly wage is to know how many hours they work. So these salaried employees need to record their hours.

I had a salaried job a long time ago and there were no hours written into my contract. Ended up working mon-fri and every third saturday up until my boss quit and I had to take over all his responsibilities with no increase in pay since I was, wait for it...a salaried employee. Didn't last more than a week or two under those conditions.

Imagine you're an enterprising, privately operated F1 pit crew. You shop your company around to teams, which hire you to be their crew. The teams promise you $10,000 per race because you have built a reputation for being fast, and there are 20 races a year. You have gathered a team of 10 crack race-car mechanics, and you agree to pay them each $16,000 a year each (equivalent to ~$800/race). This leaves $40,000/year, some of which you use to buy the uniforms and replace equipment. The rest goes into your pocket. This is a part time thing for all of your pit guys, since they only need to be there for some practice and the race-days - not a 9-5 type of job.

Now, somebody decrees that nobody should be paid less than $20,000 a year, because anything less wouldn't be enough to live on. This argument doesn't really hold for your mechanics, but they're subject to the rule just like everybody else. You increase all of their wages as required by law.

Now what do you do? The economics don't make sense anymore. You're getting the money from the team, then giving it directly to the crew. There's no money left to properly service the equipment, so it starts coming out of your own pocket. The F1 teams won't budge - the prize winnings for each race have stayed the same, so they're still going to pay you the same amount. Your SO is starting to wonder why you're now _paying_ money to spend your own time working. You consider telling the team that you're going to shut down the team, but they urge you to re-consider, because this is a source of income for them and they've built a rapport. With great hesitation, you ultimately convince yourself that you might be able to get away with 9 crew-members if you drop one of the less essential crew functions. You tell him the bad news, and now you've opened up $20,000 to plug the money leak.

But when you get to the next race, you discover that the guy you let go was absolutely essential. The windshield scrubber job may have seemed less important than the guys removing the wheels, but the driver can't see after he leaves the pit, and gets into a crash. A total disaster.

After this incident, you find that teams are much less interested in hiring you for races. You fail to book a race for any team the next month, and after that you have to accept a lower race fee to convince one of the needier teams to hire you. Now you're making even less money relative to the salaries you've promised the crew members, but they are still owed their salary. By the end of the year, $100,000 of your own money in the hole, you give it up. One of the other crew members tries to take over the business in your stead, but he doesn't have any contacts with the team leadership, so he struggles to make the same contracts. Plus, he doesn't have any way to buy the equipment he would need to keep running - you took back all of your drills and jacks, since it was yours after all and you needed to sell it just to keep from being _two_-hundred thousand in the hole.

That's how it works. Some businesses just need a lot of hands at a low price. If you can't get that, then the business eventually won't make sense. You can try to limp with fewer employees, but what's going to happen is that the quality of your product/service will fall, or you'll just do less business overall.

That’s a lovely analogy, but let’s cut to the chase. If a business owner cannot run a business (say a restaurant) without exploiting their workers, then maybe they shouldn’t stay in business.

So your takeaway from my example is that the pit crew was being exploited? Even though they didn’t know it, and even though literally everyone was worse off after the wage hike?

Why would you have 10 workers if the job can be done by 9? There wouldn't be 10 workers to start with in your fake scenario.

Generally speaking, you should have more employees than the bare minimum required to operate. That way, you have enough staff available to, say, cover when someone calls in sick, gets in an accident and takes short-term leave, goes on vacation, quits unexpectedly, etc.

When wages are already close to the marginal value add, increasing the wage floor means needing to cut hours. When wages are not, then increasing the wage floor has little effect on hours or people hired. If there's already sufficient buffer, it might even result in fewer jobs over time as companies attempt to get by with less wiggle room in headcount.

Just a thought.

You’re also assuming that there is no price elasticity. When all parties see the cost of resources go up, the prices go up or margin goes down.

Anyplace with a geographic monopoly demonstrates this. Rest Areas, large institutions and places like airport usually require a cut of the gross sales are part of the lease agreement.

I know of one where that cut is 15%, but the restaurant charges a 30% premium since it is also a near monopoly within the institution. People are still buying coffee and burgers.

If you can manage with 9, but do better with 10. It’s not like starbucks needs three people behind the counter; its just a hell of a lot smoother and faster order processing, and better service in general (eg cleaning more consistently)

> Why would you have 10 workers if the job can be done by 9?

Because not all work is the same. If you clean the equipment weekly it breaks down less often than cleaning it monthly. If the cost of an employee increases then the cost of more employees can exceed the cost of more equipment failures, so you cut staff (or hours).

Sounds like that one guy should look for a job at the equipment factory.

Unless the primary cost of the equipment failing is lost business from having to clean it during operating hours, without any profit going to the manufacturer.

Most dev teams above 4 or 5 probably could do the same amount of work if one of their co-workers got the axe. But it'd probably come at the expense of other factors: employment fatigue, tech debt, less reliable quality.

Or of course the response is: sure I’ll work 20% more hours, what is the comp?

This doesn't seem relevant, as the article is about minimum wage.

It is relevant. I think the implication of the commenter two layers above was that the 10th worker wouldn't be fired because if 9 workers were sufficient the business would have only hired 9 in the first place. This may not always be correct. 9 works may indeed be sufficient, but at wages lower than the mandated minimum the 10th worker is better. For that reason, a wage hike can indeed cause workers to lose employment.

> Or just making a narrower claim that the minimum wage hike increased some workers.

Not only that, it's a specific type of workers, namely those that work for large bureaucracies that can absorb the cost. It seems like a pretty good argument for having the minimum wage only apply to companies with more than 500 employees.

>If you have 10 workers ...

That was the argument against the minimum wage being introduced in the UK, it turned out to be false.

And your 9 remaining just saw their work demands go up 11% (with no additional hours), to cover the departed's work which still needs doing. Sure, 20% more pay for 11% more work is a deal, but it's still more work than originally signed on for.

That's not how it works. If they could get 9 people to do the work they would. Wage increase or not.

Exactly. Still an Employer's market. With less jobs, employees have to compete harder to keep theirs.

Where are you getting "less jobs"?

"For low-wage workers with less experience — a high-school student looking for a summer job, say — the wage increases have led to fewer job opportunities, the researchers found." [1]

1. https://www.seattletimes.com/business/local-business/a-tale-...

People working fewer hours and bringing home the same amount overall also benefited.