Job loss predictions over rising minimum wages haven't come true
axios.com
axios.com
https://www.ctdol.state.ct.us/lweab/Doucougliagos%20&%20Stan...
I am only repeating what the paper says; I don't claim to have validated their methodology or sources.
Also, the use of "despite" does not logically fit the contents of (my) grandparent poster and parent poster, as grandparent poster didn't claim mention employment as a possible positive effect of minimum wage, and even within context of my parent post, "beyond" is a better word choice that n "despite"
So the conclusions the paper draws w.r.t. elasticity aren't that interesting; we'd need to know why the bias exists before it is particularly useful. I'm a bit suspicious of using 'meta-analysis' at all because that just means that the faction that repeats themselves the most with low-quality research gets to pick what the elasticity is.
In theory we shouldn't need 200 studies to make a claim, we should need 1 or maybe a small suite (like, 5) of very high quality studies that intellectually honest economists struggle to rebut.
Because he summarized the plot, not the paper.
And thank you to killjoywashere for selecting out the part of the paper that answers my question; gowld for reformatting appropriate to my mobile device.
Apologies for not replying directly. I have a commenting rate-limiter applied to my account.
‘The simplest and most commonly used method to detect publication
selection is an informal examination of a funnel plot’ (Sutton et al. 2000a:
1574). A funnel graph is a scatter diagram of precision versus estimated effect
(such as estimated elasticities, regression coefficients or partial correlation
coefficients). Precision is best measured by the inverse of the standard error
(1/Se).
As the name suggests, the expected shape is an inverted funnel — in the
absence of publication selection. When there is no publication selection,
estimates should vary randomly and symmetrically around the ‘true’ population
effect. Because small-sample studies with typically less precision form the
base of the graph, the plot will be more spread out there than at its top.
However, it is the graph’s symmetry (or its absence) that is crucial for
assessing publication selection (see Figure 1).> As the name suggests, the expected shape is an inverted funnel — in the absence of publication selection. When there is no publication selection, estimates should vary randomly and symmetrically around the ‘true’ population effect. Because small-sample studies with typically less precision form the base of the graph, the plot will be more spread out there than at its top. However, it is the graph’s symmetry (or its absence) that is crucial for assessing publication selection (see Figure 1).
Is the platform supposed to run some ML algorithm on every code block to decide if it's actually code, and override the explicit don't wrap these lines syntax if it decides it's not actually code?
Yeah, but there's better hacks at least.
Obvious answer is just not to quote that much, but sometimes it's desirable to, especially as in the case above, where a block of external text is being quoted (as opposed to just quoting the particular part of another comment that you're addressing your reply to).
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Seems to look good to me.
In general, increasing pay into people at the bottom of the ladder has a much bigger economic effect than the opposite. Reasonable increases in the minimum wage, particularly ones that track inflation and cost of living are not going to harm the economy.
As many have pointed out, the minimum wage in many places has been eroded for years by inflation, so increasing it is really just making up for a lack of indexing on it.
The best solution appears to be to raise the minimum wage to a level that can support a person without government assistance and index it for inflation.
The reality for us every-day workers is that either the minimum wage is increased or we'll have to make up for it in taxes that support programs to compensate for the lack of a liveable wage.
We are much more likely to get a better deal via the minimum age than we are via the tax system; the latter of which is heavily skewed in favor of the wealthy and corporations. It's not big corporations paying non-liveable wages who will be paying to cover food stamps.
Those are problems for society, not for individual business owners. Those problems should be solved by taxes, not by forcing business owners to pay people more than they are worth to the business.
Some people also fail to realize that there will always be poor people. The only thing we can do is change the way we treat them. I support raising the minimum wage, but not as much as some. If there are really no other jobs, that’s what government assistance programs are for.
Mind you, I grew up dirt poor in the midwest. I’m now on my way to earning six figures by taking advantage of those aforementioned government programs.
Also: Some people are satisfied being poor. If they really wanted to get out, they would. I did. Those who argue that you can’t raise a family on minimum wage: You shouldn’t keep having kids if you don’t have a decent job. Of course uneducated people from lower socioeconomic backgrounds refuse to follow this rule, and this is why poverty is often generational.
The connecting thread is "some people are satisfied being poor" but it's pretty tenuous. If those people stopped being satisfied, what happens?
Do what grandparents on both sides of my family did - work hard as hell and provide more for your kids than you had.
Not waiting around for the roast duck to magically fly into your mouth on it's own...
It’s not about a “much more than comfortable lifestyle”. It’s about establishing a baseline where full time work pays enough to live without government subsidy and/or crippling debt. And addressing the stigma that surrounds minimum wage jobs.
565 room (5 ppl in one apt but in separate rooms)
800 car all in (I drove a bmw, wasteful luxury)
600 food (ate out all the time, wasteful luxury)
50 utilities (gas and internet were included in rent)
100 entertainment (not much time)
That’s about 2400 in 2019 dollars and if I had gotten a cheaper car or taken public transit like most students there would have been plenty of savings.
I live in an average city in utah. We rent a home for 1400. That's been our average for the past 4 places we've rented regardless of whether it was in a bigger city or rural. There are many rentals that are double or triple that w/ more room.
We generally try to go for 4-5 bedroom.. which includes a master, 2 kids rooms, and 2 offices for myself and my wife.
On top of that healthcare is about 1000/month. Kids grow fast we need to replace their wardrobe completely every 4-6 months. so say $200/month on clothes for two boys.
We're already at $2600/month. Add about $1000 for groceries (formula is $250 a month!). That's $3600. Add gas to get around town maybe $250/month. So $3800. Shouldn't people have some leisure? You said you lived a luxurious life, did you own a car? Go to social events? Go to movies ? how much per month was alotted for 'luxury'....I'd like to take the kids to Disney land that'd cost about $3000 or more.. so to budget that we'd need to break out maybe $300 per month into savings.
This is in Utah. San Francisco you're looking at a room going for 2x as much as our 5 br house. Cost of living increasing exponentially from there. I don't see how anybody in California exists on their minimum wages....
I'm a developer but I sometimes take crappy clients when jobs are low. Currently my most active client can only afford $25... I feel practically raped as I was used to $50/60 per hour doing laravel+vue, but can't figure out how to keep steady higher paying clientele. Summer left us almost homeless though, so I put out tons of lowball ads just to keep us housed. So now I'm essentially a senior-level developer earning $10 more than minimum wage. Depression and imposter syndrome don't help much with things either. Even for people w/ good skills times get hard in America. Higher minimum wages might make us freelancers be able to charge more, since we can compare our rates w/ low-skill workers.
- 400 taxes
- 600 rent (at least there's a listing for something at that price in San Jose, whether it's legit or not I don't know...)
- 0 car (Happy Birthday, college student)
- 100 gas
- 125 groceries (warning: not luxurious!)
- 440 health care
- 100 electricity
- 60 water
- 16 netflix premium (you said luxurious)
- 13 amazon prime
- 46 gym membership
- 30 internet
- 160 clothing
- 125 car insurance
- 0 car repairs (you lucked out this month)
= 285
Dating?
130 dating
= 155
- 350 car payment. (Happy Birthday, full grown adult.)
= -195
+ 130 impending breakup
- 0 alcohol (you lucked out this breakup)
= -65 savings
And a GYM MEMBERSHIP?!?! On minimum wage?!?! Prison workouts/calisthenics/military-style functional fitness. That stuff costs $0, and can be learned from free YT vids.
Here are some additional costs you haven't mentioned.
Medical insurance
Elder/child care
Student loan payments
Life doesn't always proceed exactly as you planned. Here are some situations that have happened to friends and acquaintances.
Husband became addicted to Oxycontin, sold most family assets to pay for it.
Wife moved to the opposite end of the country before the husband. She was told that she wouldn't have to work and to buy everything she needed on credit cards. He left the country with no forwarding address.
If it is for an entire family, then shouldn't there be a different, lower minimum wage for an individual without a family? What about a teenager with an after school job? What about a retiree who is just trying to keep busy but doesn't need a living wage at all?
Consider the fact that it is illegal in the US to ask an interviewee their age, marital status, and family status, among other things.
Replace "poor people" with heretics and you sound as self-rationalizing as an inquisitor.
> Reasonable increases in the minimum wage, particularly ones that track inflation and cost of living are not going to harm the economy.
My understanding is that plenty of the arguments against it are from people concerned about the areas of the country still near the federal minimum. It's absolutely a good-faith argument concerning what they see as an unreasonable jump, of ~double the previous amount, instead of a reasonable increase.
If we tracked inflation since 2009, the $7.25 would be around $8.65. Some might consider a stagnant rate as unreasonable in the face of annual inflation.
But misinformed isn't bad-faith. I was pointing out that, yes, actually listening to the other side does reveal real good-faith arguments against the increase.
The result is that the inflation rate as experienced by the well-off (who consume more luxuries) is generally quite different than the inflation rate as experienced by the poor.
There is no good data that I know of over a long period of time for this. But https://www.chicagofed.org/~/media/publications/working-pape... has estimates for recent years, and it appears that inflation for low income groups is currently significantly higher than for high income groups. Mostly because price differences have been rising between stores available to low income groups versus high income groups.
How well that stands up to scrutiny I don't know, though I encountered it recently on an old (probably 1960s / early 1970s) Studs Terkel interview, as a guest comment.
(Guests were Willard Moss, pioneer amateur filmmaker, & John Dubay.)
It found that, indeed, the rich pay less for the same good than the poor. And that the gap is increasing over time.
I am agreeing with you.
Minimum wage debates in economics aside, there is a core ideological issue where some people really do like the idea of controlling other people, and some people prefer to keep those relationships nimble and organice.
As someone clearly on one side of the ideological debate, I would much prefer that government employees are banned from consuming any product or service produced by workers that earned wages below minimum wage, just to put skin in the game, and let the rest roam free.
I don't think the government should dictate exactly what a person's wage should be but setting a minimum makes perfect sense because otherwise businesses pay slave wages and use taxpayer money to subsidize their labor expenses.
As a taxpayer I don't want to my taxes spent on food stamps for employees working 40 hours a week just because some greedy company wants to put money that should go to those workers into their own pockets.
As a government, I wouldn't want the limited amount of available welfare funds going to people who are working to support themselves just because companies don't want to pay them a living wage.
You can argue all day that workers should be able to negotiate higher wages on their own and refuse to work for anyone who doesn't give them wages they consider fair, but we know that isn't an accurate description of reality. Some of the largest employers in the country have been a net drain on tax payers and directly contribute to high numbers of welfare recipients. Anti-union actions have weakened employee's ability to negotiate for fair compensation. Large corporations enter areas and eliminate competing businesses leaving local residents with fewer options for employment.
Like many cases, if companies hadn't exploited the system to the point where it is hurting people and causing a widespread harm I'd be more inclined to agree government should stay out of it, but that's where we are now.
Why is being unemplyed at 30U$S better than employed at 3U$D? It is clear that there are non-salary benefits to work that arent covered in MW. Thats why internships exist. Places that serve housing or food, like colleges, shelters, kitchens etc could afford to hire more people.
> As a taxpayer I don't want to my taxes spent on food stamps for employees working 40 hours a week just because some greedy company wants to put money that should go to those workers into their own pockets.
That is a complaint to the government. A private business has no control over subsidy policy. When you say you dont want to pay for those subsidies, why would businesses want to do it for you? You are merely transferring a burden from yourself unto another.
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Another important thing: MW is taxed significantly. Why doesn't the gov raise actual wages by reducing the tax burden? MW in california is taxed at 20%!
I do want to pay for them though. I just want them to go to people who aren't working. People temporarily between jobs, people physically unable to work, etc. If someone is working they should be making enough to provide for themselves, anything less is a slave wage.
I do agree that people who are poor should be paying very little in taxes. However, most of the income taxes people making MW pay now are returned to them at the end of the year.
That's no way to treat people, but I assure you, many executives would not hesitate to sentence their employees to such fate if they could. They would squeeze the poor out like lemons and just throw them out when they're done. That's because companies are authoritarian and their ruling class have no obligation at all to people at the bottom instead preferring to enrich themselves. That's why trickle–down economics is fiction. The government however is democratic and supposed to prevent exploitation of its people. Hence the minimum wage.
Those employed at shitty pay disagree very strongly about this.
But for society overall it's better to have even the most mundane jobs pay a living wage AND a safety net for those in between jobs.
This isn't a complicated question but it's strange you're proposing it like it's unanswerable. We have plenty of models that help us understand price. I imagine you could easily establish a basket of goods which would be used as a proxy for a 'fair' market rate. Regardless, the means do not dictate the ends. If a minimum wages is deemed an effective way to increase economic growth, the solution might be an iterative one.
Additionally, the Government isn't deciding what 'Your' salary is. They are setting a floor for the labor market. Without a floor for wages the economy would devolve into feudalism. Employers are a cartel and they would use size to suppress wages at the benefit of shareholder profits.
Personally I'm all for the free-market. There are certain instances where two parties are not negotiating from an equal foothold. I think the labor/employer relationship is one of those systems.
> Additionally, the Government isn't deciding what 'Your' salary is. They are setting a floor for the labor market. Without a floor for wages the economy would devolve into feudalism. Employers are a cartel and they would use size to suppress wages at the benefit of shareholder profits.
If you want to do X and someone tells you you cant, they are telling you what to do. But if gov is so concerned about those in the lower end of the tax bracket, why do they tax them at 20%?
Exactly. Too low a minimum wage actually becomes a subsidy to employers.
By which mechanism?
Meanwhile, we should funnel some of those productivity gains to build a robust social safety net (including education and job retraining) to give the displaced some dignity, and the ability to retool and become productive again if they so choose.
Given a constant demand for, say, fast-food ordering services, there are two competing supplies addressing that need: minimum-wage labour, or automated kiosks.
By raising the minimum wage, you're shifting the supply curve up, which if sufficient, kicks the advantage to the kiosk manufacturer(s). Advantage: automation.
The kiosk vendors get a windfall benefit as they can now capture this share of the market.
The restaurateurs may wish to consider what their new market position vis-a-vis suppliers is. With minimum-wage labour, any one unit of input (worker) is fungible for another, and the employer has considerable leverage over the supply in that whilst a worker is out of a job, the employer need only find another replacement worker.
Up against a (likely) automation oligopoly or monopoly, the restaurateur is now at the short end of the market stick, and may face future price (or other) demands or concessions from the automation vendor(s). At least to the point of substituting back in human labour.
Is it really true though? When you actually look at the real world, you'll find those kiosks at McDonalds in airports too, despite not being in districts that raised minimum wage. And what about McDonalds in other wealthy countries, that often have state mandated living wages much higher than in the US? They don't particularly seemed to have rushed to automate any quicker than in the US.
In fact, I think it's more likely that you are overlooking the myriad of other benefits: The kiosk can take orders in any language, for example. Perhaps the Kiosk was always the superior option for McDonalds to use for their store. It just took until the coincidental timing for the technology to become cheaper, and robust enough, to use in practice.
It was a pilot program, and the CEO said they found that young people preferred to wait in line for the kiosk rather than place their order with an actual human, but older people preferred the opposite, so they decided to wait before rolling it out to all their locations. I think touchscreen devices are finally omnipresent enough that the older age demographics can handle ordering via a touchscreen.
A more sinister take would be that the larger restaurant chains anticipated minimum-wage increases, and timed the rollout of touchscreen devices to coincide with the rollout of minimum wage legislation, so their lobbyists can make the argument that minimum wage increases cost jobs, because they're still going to have to pay the cooks in the back and the people to keep the place clean.
a) The employer can always get out of the obligation by just not employing the person, reducing their hours, switching to a contractor relationship, etc. It only benefits employed people.
b) It creates pressure for everyone to be employed by a corporation, as opposed to retirement, entrepreneurship, or whatever else people might want to do.
c) It favors large employers over small ones.
If we want everyone to have something, we should provide it at public expense, not attach it as a condition of other relationships. Yes this might be “a subsidy for employers” but progressive taxation takes it from the employer’s beneficial owner anyway.
Which person? I contend that the person should be a 4 person family(so that I can throw out the oft proposed $15/hr rate fitting pretty closely with the US federal poverty rate of a similar family after taxes.) Other people say minimum wage is only for teenagers entering the work force.
> In my Inaugural I laid down the simple proposition that nobody is going to starve in this country. It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By "business" I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-I mean the wages of decent living.
Given that (and the context of these words in the late '30s), I'd say supporting a family of four is closer than teenagers who don't need the money.
More precisely the real value of median income tripled from the 1930s to the 1980s. Lower income brackets did likewise.
So it is historically incorrect to hear FDR say "decent living" and map it onto current notions of a decent living. Separately, we have many decades of experience with the program that FDR didn't, and therefore our opinions today can be better informed than his way. Therefore there is no particular reason that we today should feel bound to agree with his original views.
If you define poverty not by an absolute standard of living but the poverty trap (the range where the rest of society trivially exploits you, intentionally or not, and you cannot advance as they do), does it triple?
Society has implemented welfare safety nets and minimum wages for the express purpose of improving the lot of the poor, at a non-trivial cost to the rest (i.e. financial net-contributors) of society. The wages that the poor are able to command (above the proscribed price floor) are the result of market forces of supply and demand; the prevalence of unskilled labor results in low pay--not society or greedy business owners.
The fact that society doesn't do even more to put money in the pockets of the poor can't be 'exploitation', unless you're 'exploiting' a homeless man when you put a dollar in his cup, when you could've put two.
Unless you're talking about loansharks, pay-day-lenders, and that sort of thing, in which case you're right, screw those guys.
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
The actual progress in standards of living in the USA from 1930 to 1980 is hard to overstate.
The bottom of the ladder is the unemployed, who make $0/h.
The good faith argument for no minimum wage is that those people would have a much bigger chance to find jobs and build job skills.
Most companies hiring for minimum wage positions want a respectful employee who will show up on time. I don't think they'd bend on those requirements for cheaper labor as the management overhead would quickly eat into any cost savings.
So, while I understand it's a "good faith argument", I don't think it holds much water. Companies will just use a no-minimum wage environment to negotiate cheaper deals with employees they would have hired anyway.
Also, one's salary is in large part due to one's ability to negotiate. A manager who hires dozens of workers a year is probably pretty good at negotiating while a low-income worker might not be experienced in that area. The minimum wage also helps correct that imbalance in negotiating power.
That isn't a good faith argument at all. That the "nice job you have there, stop asking for a living wage; it would be a shame if anything happened to it" argument.
This might be different if companies were interested in training employees but they aren't. So what happens with no minimum wage is that you have a class of workers who work over 40 hours a week yet have to survive off of government assistance.
The government is literally subsidizing the profits of that company at that point. So why should companies get away with being a drain on society?
- Getting to work on time and every day.
- Functioning in a workplace without getting in fights.
- Sobriety.
- A basic knowledge of English.
Once you've mastered those, McDonalds will be happy to hire you.
So again, what actual skills do you learn on the job? If your argument is that we should remove the minimum wage to help people who can't make it through the educational system, I think the actual argument is that our educational system is fucked and needs to be fixed. Even then, most of the unemployed have those skills you've mentioned but aren't hired for any number of reasons unrelated to their competency or wages.
Regardless, people without those skills exist. Us HN people never meet them, and have a hard time imagining their lives, but they're still out there.
I completely agree that our educational system is fucked and needs to be fixed. I don't see how that would help the people who already went through the fucked up version, even if it ever got fixed, which I think we can agree isn't likely the next decade at least?
To learn about how the "permanent underclass" lives, You could do worse than reading "Dignity": https://www.amazon.com/Dignity-Seeking-Respect-Back-America/...
Which is precisely why I find framing arguments around removing minimum wage as some benefit to the poor to be rather disgusting, because it does absolutely nothing to solve the problem.
A job which can't pay shit isn't going to help you survive when the rent is due and you're earning $5 or less an hour. Even moreso if you're disabled and companies further take advantage of your desperation to work you into the ground until you break.
This isn't about helping the poor, it's about allowing companies to fleece them harder.
I'm not being sarcastic. It's such a bizarre mental contortion.
Many low wage jobs are physically demanding, have terrible (or no dependable) schedules, and offer limited hours so as to avoid having to offer benefits. It's not uncommon for low wage workers to juggle two or three jobs in order to get enough hours of paid work to survive. The problem then is that it is very hard to manage schedule conflicts between the jobs when they occur. Too many conflicts can cost you your job. I've seen this happen many times.
Check out this article in Atlantic: https://www.theatlantic.com/business/archive/2016/07/life-af...
Also highly recommend On The Media's multipart investigation into poverty in America: https://www.wnycstudios.org/podcasts/otm/projects/busted-ame...
Yeah, the marginal tax for the underclass is a huge problem!
If you lose $12/h in benefits by taking a $10/h job, most people won't take the job. Not because they're lazy, but because they're sensible rational people.
That's a big poverty trap we've built.
If government programs are included, the unemployed definitely don't "make" $0/hour. As is often pointed out, taxpayers are effectively funding the underpayment of workers Walmart, McDonalds, etc because of government subsidies.
I don't have a dog in this hunt but the issue is much too complicated by government action to say unequivocally that the unemployed "make" $0. I'm not sure if it's good or bad but I definitely lean toward "we've made it too complicated".
[Now I'll go back to sorting through baffling health insurance complexity...]
I'm thankful that I will never be in that situation again. It was awful.
But that's exactly my point: it's very difficult to discuss this when policy is such a swirl.
What stuck with me was that everything required that I already had a job. Maybe it was the economy at the time, but nobody wanted to hire someone without work experience. When I discovered that even unemployment required I have work experience, it felt like I was living in Catch-22.
For that reason, I support the government acting as an employer of last resort. Everyone should be guaranteed a job if they're willing to work.
I like that concept as well. But there are problems. Quality of work is one. Another is the complication of getting something useful out of that manpower. Would probably be done by lending that workforce to companies... subsidized if necessary, but with significant bargaining power. Still this could end up becoming a nightmare with incompetent / corrupt governments. It would be a great natural minimum wage, though, since you'd be stupid to work for less than you could get at you gov job.
Somebody or something was providing you liquidity.
The last minimum wage hike was in 2009, when the minimum wage was increased to $7.25. Inflation adjusted to 2019 dollars, that would be about $8.70.
In 2016, both main Democrat candidates supported a $15 minimum wage, which would be an increase of around 10X the required inflation adjustment.
What is it that you were saying about arguing in good faith?
In inflation-adjusted dollars, in 1970 the minimum wage was $10.66. So it is very accurate to say that the minimum wage has eroded due to inflation; currently it is $7.25, which is significantly lower.
Some Democrats propose raising it even higher than it was in 1970, but that doesn't refute the claim that modern, current minimum wage has been eroded — it has, significantly.
To look at it another way, even if the 15$ minimum wage is passed, that doesn't mean that the future minimum wage will be 15$ on average.
Picking the highest of the highs over 80 years is the definition of cherry picking. Why not simply pick the average over time? Or any other peak if you desire peaks?
Picking 1970, before many women entered the workforce and competition was more global, is likely not a good value to pick. It's probably better to let states, which have vastly different costs of living, set state or local wages to account for those disparities. Forcing a mom and pop in the middle of nowhere to pay what a worker in NY or SF gets by law will hurt many.
As others have said elsewhere, in most cities, labor is at about $!5/hr already.
Why isn't there a minimum wage for computer engineers?
The debate isn't just whether we should raise minimum wage, it's whether we should be cutting it. By allowing it to remain stagnant we're making the default decision to cut.
Where the point of inflation is to force people to spend or invest their money today over keeping it as a store of value.
But by continually raising the floor, we make sure it doesn't get too far below the median or mean. That should be in everyone's best interest, both in terms of keeping the economy going by consumer spending and in terms of fairness and not having a desperately poor underclass.
You cannot get people to show up for less than that.
Source, wife owns a business and that's going rate to answer phones.
Serious question: Why would you want to run a business that can only survive by paying people poverty wages?
But there are many cases where it make more sense to pay 4 low skilled workers to do a job instead of paying the costs of automation plus the cost of the higher skilled worker to use the automated solution. It's why so many jobs in India are still entirely manual labor -- it is simply more cost effective than a more technical, automated solution.
My wife works in international developmental economics, and providing jobs to the wide swaths of unskilled labor of the world to incrementally lift them out of poverty is an essential part of economic development. Sure, it would be nice if those people could just leapfrog in their education and consequently their levels of development, but that just isn't realistic.
Your comment indicates you are only looking at a very small subsector of the labor market and economy. Not everyone can be software engineers and highly skilled labor in the present.
With the minimum wage I suspect a similar effect. The effects increasing wages have on employers red ink doesn't wholly comprehend the positive effect more money in people's pockets has on black ink & overall productivity. A well invested grand in the hands of the poor is DRAMATICALLY more impactful than in a well invested grand in the hands of the rich due to diminishing returns. A company making a new product can deliver more value for society making some wonderful new invention the poor and middle class can spend their income on rather than some out of reach luxury good.
This logic by the way underpins the very unpopular around these parts notion of affirmative action.
This utterly breaks down at the upper end of income, so why is everyone gnashing their teeth about keeping it intact at the bottom end?
Define "value". Or more specifically, how do you measure "value" for jobs that don't directly generate revenue?
How much value does the janitorial staff create?
How much value does your IT team create?
What's the dollar value of your cybersecurity team?
What about HR?
None of these teams directly create revenue for the company, but certainly they created value. Meanwhile, Amazon has workers that pack boxes. They are directly contributing to revenue by doing the actual work that is core to the business. If cybersecurity, HR, the janitors, or IT were to disappear for a week, theoretically packages would still get sent to customers and Amazon still makes money.
And yet they're having to fight for fair wages? They're the most valuable labor in the company!
The idea that income should be derived from value is incredibly naive. As I mentioned in another comment, that mentality is what leads to managers laying off the entire IT team because they're seen as a money sink.
When the company hires them, the company has decided that the company obtains enough value for the transaction. So does the janitorial staff.
>And yet they're having to fight for fair wages? They're the most valuable labor in the company!
Not if someone else is willing to do the job for the same pay - this is market clearing. They're paid what it takes to fill the position, and they show up for that wage. Both sides benefit, otherwise the side without getting benefit would not show up.
Wages are a function of value created. As a trivial example, wages are capped by total cost to employ, which is driven by wages and legal requirements. There is no way around this on a large scale without a business losing money, i.e., dying.
>which is a completely unrelated number to value
No, this is untrue. Marx had the same thought, but didn't understand that employers also compete for workers, which is why the poorest workers are vastly richer than Marx could have understood.
A simple way you can check it empirically is to take a dataset of companies, compute mean revenue per employee, and correlate to mean wage by company. You'll certainly find that these numbers are completely related.
You can do the same thing using work sectors using BLS data on pay by job type, then revenue generated in those jobs. Again, you'll find a strong correlation between revenue generated per employee and per employee wages.
These empirical tests you can do yourself should convince you wages are tied to value added.
If you then do proper factor analysis to account for other costs varying between companies, such as cost for materials or equipment, the correlation between wages and value becomes stronger.
Edit: here's a dataset to get you started [1]. 1000 companies with # of employees and median wage. Find revenue per company and you're all set to do an initial analysis.
[1] https://www.wsj.com/graphics/how-does-your-pay-stack-up/
On what other basis do you propose it be derived?
Non-revenue generating roles provide value by allowing the revenue-generating roles to generate revenue. This is the basic concept of specialization. You could likely even take a stab at quantifying this: time spent freeing up revenue-generating roles to generate revenue combined with some kind of supply-and-demand factor.
For example, if I'm a one-man widget shop, hiring a janitor to sweep the floors for me means I can spend that time generating more widgets instead of sweeping floors. The value provided by that janitor is proportional to the additional revenue I generated from those extra widgets, scaled by the large supply of janitors in the labor market.
The idea that income should be derived from value is only naive if you take a fixed view of "value == revenue". No doubt some middle managers have this view, but that's a sign of ignorance and incompetence, not a flaw in the underlying theory itself.
This is an ideal with no basis in reality. Wages are, to a first approximation, set by supply and demand, not "value generated". If I hire somebody, I pay the going rate for that type of employee, but only if I estimate that I can still make a profit. I take all the profit, I don't pay more than necessary just because there's more profit, unless I expect to generate even more profit as a result. If I estimate I don't make a profit, I don't hire at all.
Of course I want the most productive workers, so in theory I would be incentivized to reward more productive workers. In practice, actually measuring productivity is extremely difficult in most cases. Also, paying workers differently sows discord. Further, let's say I run an assembly line, I actually have no use for workers that are more productive than the average.
There's a narrow band between minimum wage being completely ineffectual (i.e. real wages are already higher than minimum wage) and pricing people out of the market (i.e. business becomes unprofitable). Only within that band, workers get higher wages, paid for by business profits. There can't be any one "correct" number here for all regions or all professions. Without a safety net to take over those priced out of the market, raising minimum wage is therefore completely irresponsible.
We ran a pottery studio for 15 years whilst we raised our kids; very low wages, below minimum wage but paid our workers minimum wage (despite not needing to, because of age [in UK]).
The market we wanted to serve, a relatively poor UK city, couldn't take higher costs. So to provide that service - which brought us and many others much joy - we could only do it by accepting poverty wages. More money would have been good, but money isn't everything.
In cities, companies almost always have to pay more, so Walmart's wages on average are even higher in Detroit than in the middle of nowhere. They hoover up a lot of labor near or above $15/hr in places like Detroit.
Basically his wife's business is competing with massive labor absorbing machines that will pay at or above $15/hr. They also offer benefits. Small businesses (mom & pop types) that pay low wages and have tight margins often struggle to offer even basic competitive benefits, it's a very large additional cost in a business. So if she wants to take employees away from Walmart in Detroit, she might have to offer $18/hr instead.
To expand a bit more on this, large companies in America can negotiate rates with the insurance companies they interact with (assuming they don't own one in house). This creates a scenario where a dollar into the insurance budget yields more than a dollar worth of value and so it makes much more sense to invest heavily in the insurance than in outright wages because a dollar paid to an employee only ever yields a dollar with of value to the employee.
If salaries are going down due to inflation, then you may have a point but it's a perverse one; medical costs are going up way faster than anything else.
Both are reasons to support socialized medical coverage, but they don't really enter into this particular line of discussion.
If you don't like that, it's a social issue and a policy question, but it's not evidence what wage (how much employer is paying for employee benefits) is stagnant or droppiing.
Using this same logic, a better use of that dollar would be spending it on taxes as the even larger government can negotiate even better rates with healthcare providers, providing even more value to the employee.
Instead, the company fights to keep that dollar so they can spend it as they see fit, and the employee wants that dollar so they can use it as they want to.
You could of course do as you propose, but that same logic could also be used to argue that we simply shouldn't let healthcare providers negotiate with employers and instead restrict them to dealing directly with State entities (since otherwise the bargaining power becomes slanted against individuals).
Edit: I didn't clarify well, the reason I mentioned the point about production taxes is because many minimum wage employees work in places like Walmart that sell commonly needed items and thus some of the benefit is lost because you've increased costs for the people you're helping. In theory this isn't a problem for luxury goods but that's more complicated so I haven't talked about those much.
This is nonsensical. If paying that one dollar in taxes necessitated raising the prices, then the company spending it on insurance would also necessitate raising prices.
Yes. Up to a point. It's true that in general, the government currently pays less than private insurers.
What's not clear is what happens if/when the government is the only one paying hospitals to keep their doors open. At the reduced rate, hospitals will have hard choices to make. Only about 20% of hospitals are for-profit. For the other 80%, less money coming in the door will result in changes of some kind. I can't imagine how hospitals can do that, and make things better for patients at the same time. Something's got to give.
What isn't clear about this? The government pays the hospitals to keep their doors open.
A certain pay rate creates supply. Conditions make it hard to switch jobs. And every year you ever so slowly reduce the effective pay to those employees and they slowly give up little luxuries to make ends meet. And when demand outstrips supply, you raise the minimum wage, pulling in a new group of people.
If you're paranoid or cynical, you might call this class warfare instead of unintended consequences.
We've had the term "working poor" for a while. I suspect that we'll have "working homeless" in the decades to come.
In the UK several BBC documentaries have covered exactly this phenomenon. I don't doubt it is already more common in the US then you suspect.
"A 2010 longitudinal study of homeless men conducted in Birmingham, Alabama, found that most earned an average of ninety dollars per week while working an average of thirty hours per week[192]"
https://en.m.wikipedia.org/wiki/Homelessness_in_the_United_S...
"Employees at Amazon's base in Dunfermline, Fife, were apparently so worried they’d lose their jobs if they were late they decided to sleep rough in the woods nearby."
https://metro.co.uk/2016/12/10/desperate-amazon-workers-forc...
This line of thinking is what leads to managers firing the entire IT team because they don't generate revenue, and then panicking when the email server crashes.
These workers can easily be moved from “profitable to employ” to “unprofitable to employ” by the increase in minimum wage, either entirely or by cutting those hours which would become unprofitable.
In a micro sense: each company will try to reduce labor costs as much as possible, since costs are the enemy of profit.
But when we look at the macro situation then: employees are much of the demand curve. Less income means less demand.
This is the reason for much of the talk about UBI and job automation.
https://www.kqed.org/news/11690325/thousands-of-californians... https://www.latimes.com/opinion/editorials/la-ed-economicall...
In the "East" and Middle East, many employed young adults live with their parents instead of moving out, even after getting married. In the UAE for example, many expats live in crammed conditions with as many as 6 people in a single room! and sharing a single bathroom.
Employment == Your Own House is largely a first world expectation.
"The wealth gap between rich and poor in the UAE is one of the worst in the world, largely due to the amount of welfare and protection afforded to native Emiratis and the amount of neglect towards migrant workers."
https://borgenproject.org/top-10-facts-about-poverty-in-the-...
Neither "paranoid" nor "cynical" are absolute terms to base your argument on.
As the old saying goes, "Just because you're paranoid doesn't mean they aren't out to get you."
Actively plotting this outcome? That's a movie plot, sure. But negligence - even willful negligence - and microaggression? We know this happens all the time.
Getting rid of this mechanism would be bad.
Perhaps minimum wage should be indexed to median wage or something, but it should absolutely not be indexed to inflation.
This here is the strawman of the argument. Very few employed continuously for ten years continue to make minimum wage / don't move on to better jobs.
The argument is that any minimum wage earner is worse off than a minimum wage earner the year prior, and the year prior, and the year prior, etc. By holding the minimum wage fixed, we are making the default decision that a minimum wage earner tomorrow should have less effective purchasing power than a minimum wage earner today.
A quick Google search says that a dollar in the year 2000 is worth half as much as a 1980 dollar. Yet, during that time, federal minimum wage went from $3.10 to $5.15, an increase of only about 66%. That means my parents had an easier time surviving off of minimum wage than I did.
How is that fair at all?
The fact that we still have no clarity after looking at this closely for decades suggests that it's probably close to a wash, randomly benefiting some of the poor at the expense of others.
(As to whether there are losers as well as winners when the minimum wage is implemented, this seems obvious, and I doubt anyone on any side would seriously try to dispute it. The question is the relative effect.)
This, I suspect, accounts for much of the backsliding in the last few decades among black and poor white populations in the US.
We've already got mechanisms to crack down on black-market labor. Tax-dodging, not paying workers minimum wage, and subjecting employees to unsafe work conditions should be punished as such. In addition to punishing employers who exploit immigrant workers by paying them illegal wages, we should have much larger programs to allow unskilled undocumented immigrants to legally participate in the above-ground economy so the legal citizens aren't undercut. It's the same reason why we don't allow employers to pay teenagers below-minimum wage. Sure, teenagers don't have to support themselves (let alone a family) and might be happy to work for less, but if employers are allowed to pay kids five bucks an hour, they'd only hire kids and the minimum wage would completely fail.
In short - the only way to reduce black and gray markets is to punish the exploiters and decriminalize the exploited. Punish the pimps instead of the prostitutes, the drug-lords instead of the addicts, and the business-owners who skirt sensible labor regulations instead of the immigrant workers.
Our current wink-wink scheme, supported by both major parties, is bad for a lot of people, and in many way most harmful to illegal aliens (who are abused and/or are virtually enslaved).
I'll leave the both-sides-do-it argument. It's wrong, but there's no way to argue that on this site without getting myself banned.
[1] A policy very much not "supported by both major parties"...
No, even without the later qualifications; unique illegal border crossers aren't that high, and aren't all “sneaking across the southern desert”. It's not 2000 anymore.
All while necessities like rent / housing has increased faster than inflation.
No wonder lots of minimum wage people have multiple jobs. Pay stays the same, but rent goes up $50/month every year - without any changes.
Most proponents of raising the minimum wage cite the Card & Krueger paper which has aged quite poorly. It turns out that chain fast food restaurants are a poor proxy for the minimum wage labor market. If you want to know the most up to date data backed perspective on the minimum wage, look to the Seattle minimum wage study.[0][1] In short, the benefits of raising the minimum wage go to experienced workers at the expense of inexperienced workers.
We know that price controls don't work. Having a minimum wage limits the freedom to negotiate the value of your labor at a rate that you'd be willing to take. Instead of a wage that they are willing to accept you force them to have a wage of zero. I don't believe there are any situations where people are better off when a third party eliminates economic opportunities for them.
The national minimum wage should be zero, as is the case in countries like Iceland, Norway, Sweden, Finland, Denmark, and Singapore. You could also argue that the minimum wage is unconstitutional considering the history of supreme court decisions on the issue.[2]
[0]: https://evans.uw.edu/sites/default/files/webform/w25812_summ...
[1]: https://www.econtalk.org/jacob-vigdor-on-the-seattle-minimum...
[2]: https://en.wikipedia.org/wiki/The_switch_in_time_that_saved_...
You might even argue that the higher you make min wage, the more important social services are, because you have taken away the ability of low-skilled workers to support themselves.
As soon as these states move towards a more liberal welfare model (USA, UK) , they have been forced to offset the worst excesses of the labor market with mandatory minimum wage laws. I think the last was Germany, which recently introduced mandatory minimum wage in 2017.
My understanding is that these come from private agreements, not legislation. Are you saying that there are a handful of industries where there is actual legislation?
https://www.arbeidstilsynet.no/en/working-conditions/pay-and...
It isn’t inherently negative if your hourly wage is increased but number of hours decreased. Doesn’t that give you more economic freedom? You can use that extra time for leisure or fill it with other hourly work. You might even make the same on fewer hours, which sounds like a win for low wage workers.
I’m not sure why you are redirecting to another study on minimum wage while also trying to “debunk” the Card & Krueger study instead of commenting on the substance or data in this article. Do you disagree with the headline or any of the analysis presented within?
Free markets do not depend on equal information. Almost every single market has some level of asymmetric information, and yet markets function. Plus it's not like a lot of information is hidden by minimum wage employers, almost every single job description will include expected wages in the description. It's fairly easy to map a skill set to wage earning potential. The ability to negotiate is mostly affected by the ability of a company to find substitute labor.
Almost no companies in the first world are monopsonies, this is just flat wrong. Almost all real world monopsonies are based on government procurement. The classic example being government purchasing of military equipment due to civilian bans on ownership. (the government is the only one who can buy a fighter jet)
My economic freedom is dependent on the decisions I can make, not the amount of money in my pocket. By raising the minimum wage you are removing the ability to sell my labor at a rate lower than the minimum wage. This limits my economic freedom.
The real affects of a minimum wage increase are not uniform. As stated above, more experienced minimum wage workers benefit to the detriment of less experienced minimum wage workers. Some people will benefit, but the data shows that most people will be worse off in terms of take home pay.
This article is garbage. The conclusion it comes to is not based on any relevant data contained within the article and has not made any persuasive argument to back up their claims. There is no analysis in the article, just stating a bunch of facts and hoping that people don't understand correlation and causation.
The reason why I point to Card & Kruger is due to the fact that every single justification for the raising of the minimum wage is hinged on the validity of that paper. The paper is wrong and it's causing our most vulnerable populations to live in poverty.
Monopsonies certainly exist, it’s why we study them in labor economics courses.M and why economists write reports about their existence. [0] Buyers and sellers having equal access to information is a foundational aspect of free markets. [1]
[0] https://eh.net/encyclopedia/monopsony-in-american-labor-mark...
[1] https://www.thebalance.com/market-economy-characteristics-ex...
"Opposition to higher minimum wage laws is increasingly based in ideology and orthodoxy rather than real-world evidence, economists say."
The article does not make a persuasive argument or provide any relevant data to prove this point. At best there are quotes from two economists and takes that as consensus. I would want to see at least a longitudinal survey of those who oppose the minimum wage and why in order to make that statement.
I didn't say that monopsonies did not exist, but that they are extremely rare. I think that "many companies enjoy a monopsony on local labor which distorts the traditional relationship between supply and demand" would be considered a fringe opinion by most professional economists. Even the article you've linked does not agree with that statement.
"Monopsony does not appear to have been important in company mining towns, a standard textbook example, or in markets for teachers and nurses, early suspects. In fact, the largest plausible estimates of monopsony exploitation to date are not for blue-collar workers but rather for professional athletes and possibly college professors."
Information dictates the efficiency of markets not their ability to exist. In reality there are plenty of asymmetries that can exist within functional markets. Trade secrets for example, are quite common in industry and give advantage to firms that can keep them. Markets can develop in surprising places, for example kidnapping is a surprisingly orderly business when you consider the circumstances.
Broken in to 3 groups, high hour min wage, low hour min wage, and new entrants, both the high and low hour workers were better off and it's inconclusive how new entrants were affected, though there was a flattening of hiring new entrants.
There was also a lot of push back on the original paper which failed to account for a lot of cofounding factors.
This is false, and it is misusing the language to make your point stronger. A wage is what you get in return for working. A wage of 0 is work with no payment. Minimum wage does not allow that.
This is just hyperbolic. This would throw out all labor laws, safety laws, worker protections, unemployment benefits, and child labor laws.
What does the minimum wage have to do with contribution to society?
> Without enforcing minimum wage, and perhaps least minimum full time to part time employment ratios, we face businesses competing on prices by undercutting labor instead of other avenues of improving operating efficiency.
Some businesses cannot be profitable and therefore will not exist at certain minimum wages, though. The US minimum wage is a big part of why manufacturing jobs have moved out of the US, for instance.
That might be a trade we're willing to make. There may be good reasons to make it, but it is not without cost.
They simply choose not to, because that means they have to pay their executives and owners less money and no executive wants to forego their country club membership, each of which is equal to the salary and benefits of 3 or more line workers, or their annual bonus, which is equal to the salary benefits of between 5 and 20 line workers. Or hell, the excess of what their salary is over the value they actually provide to the company (usually just a lit bit over an individual line workers' contribution).
Is that for every CEO at every corporation? How are you measuring and making that determination? Does that hold true for other executive positions?
What data are you basing this on?
You're also ignoring the most important part - consumer choice. People buy cheap shit because it's cheaper. It's the foundation of Walmart. So let's say the companies here did manufacture here, but then a foreign competitor offers a significantly cheaper product - how do you reconcile that without going out of business?
Foreign industries could be taxed to some level relative to what their workers are paid and their working conditions to even out the domestic companies disadvantages maybe. That's already happening to some extent.
I don't know if that or fixed minimum wage is the solution by the way. But I'm saying clearly that's the problem. Companies don't all start with an equal footing, and that can put out of balance the free economy.
https://foreignpolicy.com/2019/10/22/economists-globalizatio...
Edit: Eh, I forgot that you can't really have rational discussions on slightly political topics. If you think something I said isn't logical or true, please partake in the conversation.
This actually works -- cheaper goods for developed countries and higher wages for China. On the balance this is a win economically. Environmentally it is the opposite -- better for developed countries and worse for manufacturing ones.
The portion of people that work jobs for fun or a little extra income are a minority. There are more examples of people working several minimum wage jobs just trying to survive.
Maybe there is a compromise somewhere though. How about if you pay the minimum wage, then the owners/stake holders cannot make more than the lowest paid person.
The head(s) of a company making good money(so I'm lumping some small businesses in here too), while saying that they just can't afford to pay their workers a decent wage, leave a bad taste in my mouth.
Off topic, but I feel the same way about all the businesses saying we need cheap labor from Mexico or South America for the businesses to survive, since Americans won't do the job. It creates an underclass of people. If you can't find workers due to wage, and you cannot afford to pay more, the solution isn't to find a class of people that have it so bad, that living in poverty in America is a good option.
Say bye-bye to your iPhone and all of your other beloved gadgets.
Apple has $245 billion in cash right now.
In what sense is offering someone money to do something for you exploitation?
It's also worth noting that some businesses probably can't be profitable without chattel slavery, though it's hard to find examples since the practice has been illegal for so long.
> The US minimum wage is a big part of why manufacturing jobs have moved out of the US, for instance.
No. I'd say the bigger part of the reason was free trade agreements with countries with substantially lower wages, which encouraged job movement for little more than wage arbitrage reasons, minimum wage or no. The average income per capita in Bangladesh is apparently $600/year [1]. Americans would starve and die of exposure on those wages.
[1] https://www.ceicdata.com/en/indicator/bangladesh/annual-hous...
No, they wouldn’t. Americans survived on wages lower than that in the past. They would simply have to adjust their lifestyle to look more like the one of Bangladeshi —- unless you assume that Americans are somehow extremely inept compared to Bangladeshi.
> No, they wouldn’t.... [Americans] would simply have to adjust their lifestyle to look more like the one of Bangladeshi
I appreciate your honesty, but listen to what you're saying. No one "simply" accepts massive regressions in living standards across large swaths of the economy, and that's exactly what you'd need for Bangladeshi wages to be livable in the US. That kind of thing leads to revolutions, and rightly so.
Or do we look at the growing inequality in this country and realize we can definitely afford to add a couple bucks to a poor guys hourly rate so he doesn't have to give 60% of his income to the parasite landlord every month.
The only way to survive on $600/year is to live somewhere that’s a viable income. There’s nowhere in the US where you can do that, unless you count unofficial homeless encampments, and I’d wager anyone living there who only brought in $600/year in government benefits and other sources would quickly die.
The difference between slavery and wages is that one of them is enforced by violence. The other is an offer, that may be taken or left. That difference is supremely important, and makes those things completely incomparable.
> No. I'd say the bigger part of the reason was free trade agreements with countries with substantially lower wages, which encouraged job movement for little more than wage arbitrage reasons, minimum wage or no. The average income per capita in Bangladesh is apparently $600/year [1]. Americans would starve and die of exposure on those wages.
I mean, I think we're saying the same thing. Those free trade agreements are what enabled the labor to be off-shored, because the labor is cheaper. I don't think we disagree here.
> The average income per capita in Bangladesh is apparently $600/year [1]. Americans would starve and die of exposure on those wages.
No they wouldn't. Nobody takes a job at a wage that causes them to starve and die of exposure. Therefore such jobs do not exist. You take a job so as to avoid starving and dying of exposure. If you are going to starve and die anyway, you might as well not be working.
Sorry, they're not "completely incomparable." You just selectively pulled out some context for slavery to make that claim, but left the wage-work situation in an idealized context-free zone. The context for wage-work can be starvation or death by exposure, if the offer isn't taken. The fact that there's some side that can be reckoned to have made some nominal choice is not sufficient to legitimize it, just as similar choice is not sufficient to legitimize someone voluntarily selling themselves into chattel slavery. Also, contracts and property rights are enforced by violence, and I highly doubt you think they're illegitimate, so being "enforced by violence" doesn't seem to be that significant of a differentiator here.
If we're supposed to wring our hands about the poor businesses that are unprofitable due to the minimum wage, I see no reason why we should not do so over ones that are unprofitable for other reasons, like slavery, child-labor restrictions, and worker safety laws.
> I mean, I think we're saying the same thing. Those free trade agreements are what enabled the labor to be off-shored, because the labor is cheaper. I don't think we disagree here.
No we're not. Minimum wage laws are minimally relevant to offshoring because the wages in countries were the work moved are simply unlivable in the US.
> No they wouldn't. Nobody takes a job at a wage that causes them to starve and die of exposure. Therefore such jobs do not exist. You take a job so as to avoid starving and dying of exposure. If you are going to starve and die anyway, you might as well not be working.
Exactly. There's no way Americans could compete for jobs on price with Bangladeshis. So in a free trade regime, jobs are going to move to Bangladesh regardless of any American minimum wage laws. By itself, free trade is necessary and sufficient for extensive offshoring of American jobs.
If they require lower wages in order to be sufficiently profitable, but those lower wages mean the employees have to rely on taxpayer funded safety nets to survive, maybe the business shouldn't exist?
Because otherwise this is essentially a demand for taxpayers to subsidize the profits of a private enterprise.
If Target and Walmart need employees on food stamps in order to make a profit, maybe we should just fully nationalize them instead of just subsidizing their profits.
Seven years ago, the McDonalds corporation issued memos to employees instructing on how to file for SNAP (food stamps). Rather than paying employees what they need to survive, McDonalds was effectively shifting that cost onto taxpayers. https://www.theatlantic.com/business/archive/2013/10/instead...
A system where jobs provide money to consumers who participate in the economy, pay into social security, etc. is one that makes a "positive contribution" to societal balance sheet. One that hoards its income and doesn't pay into the system costs society money, hence "a net negative".
"Some businesses cannot be profitable and therefore will not exist at certain minimum wages, though." Right, but some businesses can pay minimum-wage-or-higher and be profitable, but the CEOs figured out that they can just keep that money for themselves and shift it onto the welfare system.
This is why a lot of critics of modern capitalism claim that we already have socialism, we're just not doing it efficiently.
Shelves don't stock themselves. Robots are a long way away, no matter what you hear, as the current process is inefficient enough to make it difficult for automation. Robots won't clean poop out of the urinals, or off the floors (yes, people do take a shit where they are not supposed to).
I can also guarantee you that Walmart is not hurting by paying people 11 bucks an hour, and they still won't be hurting if they raise it by a couple of bucks. The CEO of Walmart even advised the feds that they should raise the minimum wage.
Employees are necessary, and will be for a while.
High minimum wages favor larger entities than can leverage economies of scale. Amazon has expressed similar support. I don't think this is entirely altruistic.
This will just hurt small/medium business.
If your business plan is reliant on having an artificially high staff due to exploiting an artificially low wage, then you don't have much of a business plan at all. "But what of all the poor businesses engaged in a race to the bottom to maximize personal profit?" Let's not think of the parasites here.
This is the weirdest defense of oligopoly. I've never understood it.
The tying of health insurance to employment is the core issue. We give massive tax breaks to corporations via tax-deductible health insurance which naturally favors those employers with larger labor pools (who can therefore negotiate the best discounts).
We need to move to medicare for all and then treat health insurance over and above that like any other taxable benefit provided by an employer.
In any case, jobs are created to fulfill a need. Companies don't just hire people in order to spend their new tax breaks or because they get to pay less - they do so to fulfill particular needs they have.
On the other hand, if a company was overstaffing due to being able to pay basically nothing, then sure, some minimum wage jobs may be lost. So the very worst-paying jobs might have been cut down slightly. But I'm doubting this is a major factor, as there's a lot of pressure to not overstaff no matter what wages are.
They haven't, though, and they won't.
So you're saying the minimum wage laws are leading to more jobs? (If everyone works less, then more people must presumably be hired.)
"The bottom line: Opposition to higher minimum wage laws is increasingly based in ideology and orthodoxy rather than real-world evidence, economists say."
I also see little acknowledgement of the fact that this sort of analysis is extremely complex, that there are many variables in play, in ways that are not terribly obvious or easy to measure.
Whenever I see people characterizing people who are increasingly suspicious of experts as ~stupid, I feel the urge to ask them if they believe this style of narratives-presented-as-facts plays no role in the phenomenon, and whether they've ever considered the idea prior to my question.
There are a lot of variables here that need to be examined before we can decide whether it's largely a success.
> Laws in New York, California, Connecticut, Illinois, Maryland, Massachusetts, and New Jersey will eventually increase minimum wages to $15 per hour.
I don't find this reasoning very convincing. The places that have raised minimum wages are some of the most expensive places in the country already. It may well be that the market wage floor is already pretty close to the raised minimum wage. The minimum wage here in Maryland is $10.10, and you can't get teenagers to work at that rate here.
But what about Des Moines? That's the basic problem with a federal minimum wage. The average rent in Des Moines is about a third of what it is in New York City. What would be the impact of a $15 minimum wage there?
Why should the "living wage" in expensive coastal cities dictate the minimum wage everywhere?
> "> Laws in New York, California, Connecticut, Illinois, Maryland, Massachusetts, and New Jersey will eventually increase minimum wages to $15 per hour."
> "I don't find this reasoning very convincing."
those are fact statements--what's to argue?
> "That's the basic problem with a federal minimum wage."
whether a federal minimun wage is good policy or not is certainly debatable. on one hand, states are the canonical unit of government and the fed should generally defer to states (other than for national defense and interstate/international relations). wages and cost of living does vary across states and even within states.
but trade (including labor, as a distinct market) is a federal concern because of interstate commerce and the interlinking of economies brought about by globalization. so it's not unreasonable to argue that the federal government has a stake here. you might argue that the fed should have differing minimum wages for different states, but that's fraught with political land mines too.
It also obviously factual that the prevailing lowest livable wage in NYC is higher than that of Des Moines; NYC's statutory minimum should be higher than Des Moines, not the same. It actually doesn't make all that much sense to push the ball forward on a living wage at a federal level.
Plus, its not even $15 dollars yet. It's $8.25 right now. You can't even get illegal immigrants to work for that under the table in rural Illinois.
But I have doubts whether the entire state economy can handle $15 dollars. A lot of Illinois is poorer than Des Moines.
I think they hope the poors and the rurals will move out to seek employment, at least, that's the impression I get from some Illinoisans.
your argument has validity against a single blanket federal minimum wage, but it fails to address the fact that the federal government has a legitimate interest in (living) wage levels (again, because of its jurisdiction over interstate/international trade). states also have an interest in wage levels. the balance being debatable is my point.
In 2017 just over 2% of workers made the minimum wage. When you only look at full time employees, it's less than 1%. When you include only people over 25 it's even less.
https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm
It's interesting how few people know this. When you ask people to guess what percent of people make the minimum wage, you'll likely hear estimates that are 10x or 20x higher than they really are.
So yes, I’m sure there are not that many people “on minimum wage”. I think a more relevant metric might be: what % of people saw their pay increase when minimum wage went up.
I don't believe the salient impact here is "job loss", but rather "wage erosion" at other levels within the organization. There is a zero-sum game at play here, and I think both sides of the argument can probably agree that the trickle-up financial impacts won't make it anywhere close to the executive level. I also don't believe that noticeable impacts will make it back to the consumer in the form of higher prices, or that companies would even consider letting it impact their profit margins. The easy-win here is for execs to restrain or chip away at the wages and benefits of employees currently making ~$30-$65 an hour (these employees are typically paid via "yearly salary", but want to keep everything in context). This issue will likely be compounded by employees currently making ~$16-$30 an hour demanding raises since they feel like they "just missed out" on a pay raise (especially since these individuals are typically in closer physical proximity to minimum-wage earners -- imagine how the fast-food manager will feel when Johnny French-Fry is now only making $1 an hour less). Then the same people arguing for a minimum-wage hike turn around and complain about the wage-gap. I agree that wages should be higher, but simply increasing the MINIMUM wage isn't a viable solution. Need to consider the 2nd, 3rd,...(n)th order effects.
I’ve seen a number of studies justifying minimum wage that only looked at major chain restaurants then used that to justify the hammer being justified on every company size, industry, full time/part time/temporary workers.
These are easy things to lie with statistics and cherry picked data.
I am sure there are a lot of economists that do great work but economics as it’s used in public discourse is just abysmal.
"A number of peer-reviewed academic studies have found little to no impact on hiring as states and municipalities have raised the minimum wage."
Those are economists doing that research.
Extraordinary economists figure out that reality is super complicated, often uncontrollable at all. All you can do is experiments.
A real example of this is the Bernanke asset inflation. All he could think about is assets and recovery of banking system. He thought like a middle aged man who just has a few more years to live. It never once occurred to him that his policies could eat up childrens future.
Even if it did occur, future monetary policies never went back to "normal" or equitable. As a result, the vast disparity today is just asset holders vs non-asset holders. This has nothing to do with wages.
I lay blame on monetary policies and politicians with zero knowledge relying solely on monetary policies to define a future. The govt needs more educated people.
But aside from that, I would generally agree with the consensus economics positions that, all else being equal, lower taxes on production will unlock more production, and lower prices on healthcare will increase demand for healthcare. And that minimum wage will reduce demand for unskilled labor.
TV economists are definitely a different breed. Most real labor economists acknowledge that the issue is tricky.
I (not an economist) don’t like the minimum wage since it’s really a poor tool for the job. Society agrees that people should have a minimum standard of living, but then place the burden of providing that standard on a very narrow range of businesses. That burden should just be spread across all of society by way of a negative income tax.
One particular way is "the triple bottom line": part of running a business is a responsibility for taking care of your employees, your community and the environment.
And minimum wage laws are a part of that.
Absolutely. A point well made by James Kwak in his book Economism: Bad Economics and the Rise of Inequality, where he complains about this caricature of Economics 101 that is often used to justify laissez-faire policies.
The economy grows when people can afford to spend. (If this spending is based on credit as was largely the case during the Bill Clinton years, then there is a later cost to pay - no doubt.) But the fact remains that when people can afford to buy things, the economy grows.
Better paid workers spend more money. People who cannot afford basic necessities actually do not blow their money on luxuries as is commonly promoted. Instead, they spend their money on housing, car gas and insurance (since there's been a perpetual movement against public transportation), and food. They're not out gambling and buying drugs in general.
What is not in doubt is that better paid workers means not quite as well paid executives. If you look at the US history, executive pay is at or near the highest multiple relative to workers compared to any time.
And while this is my speculation as I have not experienced living on 1 million dollars vs 100 million dollars (per year), I am inclined to believe that the difference in quality of life is not really terrible. Therefore, executive pay levels are not really a valid reason to suppress worker pay.
We have not even ventured into the tax avoidance that has occurred in the last 40 years. Somehow corporations and executives (and workers!) managed to survive quite ok in the 1950s and 60s, even while corporate taxes were effectively much higher.
This is a strawman. Austerity isn't a cure, it's a consequence. If you spend too much and have too much debt, you can't borrow more to make the problem go away; you're just delaying the inevitable.
The debate is maybe best exemplified by the debate between Krugman ("against austerity") and Reinhart/Rogoff ("pro austerity").
> Nobel laureate Paul Krugman refused to back down in a dispute with Harvard University economists Carmen Reinhart and Kenneth Rogoff over a 2010 paper they wrote that’s been used to justify austerity in the U.S. and Europe.
https://www.bloomberg.com/news/articles/2013-05-28/krugman-f...
https://www.theguardian.com/business/ng-interactive/2015/apr...
EDIT to add:
I'd also assume any show that bills itself as "Paul Krugman's column refuted, week after week!" is more of an ideological security blanket than real intellectual engagement or critique.
I believe you'd find the intellectual engagement and critiques within the podcast, not the subtitle.
No, I doubt it. If they think they can refute [1] like clockwork future columns they've never seen, it's almost certain they're just rehashing dogmas for the faithful. I have better things to spend my time on than that.
[1] a very strong word, by the way
There are consequences for overspending and overborrowing. We don't have a way to paper over that. You can pay today or you can tomorrow with interest.
> You can pay today or you can tomorrow with interest.
Yes, that's how it works with individuals or households. For countries, it's a bit more complicated than that.
Finally, note that Trump's uncalled for tax cut has significantly increased US debt for basically no benefit (except enriching corporations and the very rich), while those arguing against austerity would want to incur some debt for productive purposes, enhancing growth down the line.
You can pay today or you can have the next generation pay for it tomorrow with interest.
This is what we are seeing right now. Previous generations lived on public debt and funded their infrastructure, their services, and their retirements and pensions with debt which has to be paid out of current tax payers revenues. This has left us in a situation where so much tax money is being used to pay back debt in the form of bonds, pensions, etc. This has seen a reduction in school quality, in infrastructure maintenance, public services, etc because the money isn't there to pay for these things.
And then I see young people today cheering for Warren's plan to increase benefits for the elderly, unaware that this comes out of their pocket. That this will take away their services and their infrastructure and their future.
Something to back this, other than personal experience/opinion, would be nice.
A = better paid workers
B = better paid executives
Your point seems to be that A => ¬B. Which, even if statistically accurate, seems a bit weird as a causation.
I didn't even consider the time-axis myself (implicitly assuming zero-sum) so that's a good objection.
Far as I'm aware, "trickle down" is a pejorative association made by people who disagree that supply-side factors are the primary determinant of economic growth; and not an actual group of actual people.
If you happen to time your raising of the minimum wage to when the market was tightening anyhow and the market floor was going above your minimum wage anyhow, you won't see any negative effect, but not because you can just raise minimum wage with no effect, but because the market beat you to your raises. It's useful information, but not politically useful information, in the way that people are looking for. The question we really want answered is whether we can raise the minimum wage significantly above what the market would have done anyhow.
Grand schemes to fix society by making an income distribution curve on a spreadsheet look pretty don't mean squat compared to your neighbors' rights.
But chiming in here that the increase in NYC has not had anywhere near enough time for the effects to propagate.
Business owners aren’t perfectly rational AI constructs that respond in real-time to every input. People tend to gradually and iteratively change their employment practices while keeping an eye on their margins and profits.
It’s going to take a long time, if ever, for us to figure out the effects of minimum wage, but it certainly has affected my hiring practices so I’m sure it’s having some effect.
In the end there's only enough room in town for a handful of Katz's Delis to survive (and become expensive echoes of what they once were in the process).
We can't be treating all changes in minimum wages equally. Those quoted in the sources were very minor changes that may simply reflect what the market price for low-end labor already is.
It is common sense that raises in wages must result in either reduced profits or increased prices. Of course profits can be reduced, but not below zero, at least not indefinitely. Naturally, profit margins in industries employing lots of low-end labor are already low. Of course prices can be raised, but that erodes purchasing power and competitiveness.
Unprofitable companies signal wasteful allocation of resources, and higher prices tend to hit those at the bottom the most.
There is a sweet spot where surplus profits can be transferred to the workers through an optimum fixed wage, but that number would be different for every region and every industry.
Absent a safety net for those workers that may be priced out of the market, I concur with the following assessment[1]:
"One can find plenty of economists on the left and right who think that while $15 an hour may make sense for some companies, a one-size-fits-all approach for businesses big and small around the country is a “risk not worth taking,” as former Obama White House economist Alan Krueger has put it."
[1] https://www.aei.org/articles/a-15-minimum-wage-is-great-for-...
1. Federal minimum wage hasn't been increased. In a handful of liberal, urban locations it has been. How do we know the claim is true if it hasn't been tested in the majority of situations? Perhaps localities should be able to decide minimum wage for themselves! $15/hr might be the bare minimum in NY but in small town USA it is beyond what the market can bare for entry level.
2. The article mentions companies like Amazon are taking matters into their own hands and raising their minimum range. This is evidence the labor market does not need wage regulation when companies are making the decision to raise wages themselves.
3. The article mentions only hospitality related industries were studied. All service industries in the US are growing. What about entry level jobs in other parts of the economy?
4. I am not sure why they are comparing minimum wage to economic growth. Seems like apples and oranges to me, not useful. Of course if one economy is growing it can bare higher minimum wage than one that isn't.
The article only focuses on the fact that proponents of the status quo are proved wrong so far, but only scratches the other side of the coin that clearly says these results don't mean raising to absurd levels would have no adverse effect.
During a deflationary period people need to have the legal right to work for less when it's in their best interest.
Additionally, if companies are find paying a higher minimum wage, this article implies that workers should just negotiate higher wages.
The minimum wage right now is lower than it needs to be, which artificially create more businesses on the low end of the spectrum. If the minimum wage went up I think you’d see fewer small businesses with fewer openings, but the remaining workers would get a pay raise and the market could handle it.
For example perhaps instead of 6.5mm open jobs and $10 min wage on average and 3% unemployment you’d see 2mm open jobs and $15 min wage with marginal change in unemployment.
Just an illustration to explain my thought
That being said, let's assume the claim is true. I think there's a bit more to the outcome. A quick thought experiment should illustrate closely enough. If it didn't result in unemployment increasing overall, then why not just raise it more? $25, hell, $50 an hour? You intuitively know the answer - most businesses can't afford that, especially when you consider that everyone above those levels currently will also have to be scaled up as well.
So if we know there is a limit to where the minimum can be raised, what does this mean then? It means the underlying claim being made is really "government is smart enough to determine the acceptable mandatory raise in minimum wages that will not harm the economy."
Taking it a bit further, let's take a rational business person who is looking at hiring someone. What's the mental math they do, roughly? They look at how much monetary value the person could generate for the company and then they look at what they will need to pay that person (including benefits, payroll taxes, and all other fringe costs). If the costs are greater than the value, it's a hard no. If they are roughly equal, then it's a maybe since you still have more paperwork and general nuisance stuff to worry about when managing someone so it's a "is the juice worth the squeeze" scenario". And anything solidly in the green is a go.
So, for example, if you own a janitorial service where corporations hire you to come clean at night and you pay your cleaning staff $12 an hour, benefits are $3 an hour and you bill the companies that hire you $18 an hour, you have about $3 per person per hour to account for any fixed overhead for the business and profit. If your state suddenly says you have to pay them $15 an hour, you have to raise your prices. There's no other option unless you let people go and force the remaining to work harder, faster, or do a worse job and rush through.
If, however, your profit margins were much higher and you were charging $20-$25 an hour to the companies, you could simply absorb that difference and you will just be eating the added cost in the form of lower profits if you have a competitive business.
And I think that is where we're really at with this currently. Many of the big companies paying low wages have revenue per employee numbers that far exceed the cost of the employee and as such the increase can be absorbed for those companies. Or, their business is so large and the volume per employee is so much that the increase is negligible. Think Walmart - how much per item would the prices have to be to meet such raises? 3% maybe? I saw a study done in the farming industry that said they could double the low wages of field workers by increasing the cost only 7% because the labor cost of food is about 7%.
Why does increasing minimum wage push more people in poverty?
Because an increase in expenses does not guarantee an increase in revenue. If your expenses increase while your revenues remain stagnant, you have to decrease your expenses in order to stay cash flow positive. To compensate, you decrease the number of hours employees receive. Less hours translate into less employees required. When the people who are earning minimum wage can't find a job because of the lack of hours available or can't receive enough hours from their employer, they are falling into poverty.