The California job-killer that wasn't
theatlantic.com
theatlantic.com
So this is simply also a case of lack of bargaining power of workers.
The pie did grow, so it’s a benefit to society. It just didn’t grow enough that giving the employees a larger slice didn’t slightly shrink the owner’s pie. However, The owners pie shrunk less than it would have had the pie not grown due to increased efficiency.
I wonder how these studies captures the way the workers have more money that immediately flows back into the economy, benefiting everyone.
I think you left out the part about, "and at what point that creates inflationary pressure."
Is wage the only cause of inflation we care about? Guess so.
On the other hand, if people were going into debt with high interest credit cards, then it's very possible that demand doesn't actually change. Instead credit card debt gets paid off, or surplus income is banked as savings.
From the article:
The authors calculated that about 62 percent of the wage increase was absorbed through higher prices, while the rest was likely absorbed by a mix of reduced turnover and, crucially, lower profits for franchisees—hence the massive industry resistance.
Bargaining power is undoubtedly an issue here, but the success of the increase in minimum wage can probably be attributed to it being uniform across similar businesses and in an industry that can't exactly move to the next state over (without loosing business).
The last big CBO analysis on results of min wage does a better job summarizing all the literature. They also made a nice tool to visualize results https://www.cbo.gov/publication/55681
The results are pretty much what one should expect.
H1B visas are an extension of this. H1B visa workers are allowed in the country, but have a minimum wage in excess of 90k.
I guess the silver lining is that this law made me go grocery shopping more often and as a result I eat healthier.
https://investor.starbucks.com/news/financial-releases/defau...
https://www.mcdonalds.com/corpmcd/investors/financial-inform...
Only if they decide to pay shareholders less.
And shareholders are not going to accept getting paid less in order to pay labor more. That's a quick way for CEOs get fired.
You're forgetting the other option they have - invest their money elsewhere.
So instead of having a job that pays $18/hour, there is just no job at all. Is that better?
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
By the time robots have replaced large swathes of labor, we will need to consider taxes on automation, which unions will hopefully support.
Do you have any evidence of CEOs being fired by shareholders because workers got a payrise? Starbucks has been handing out payrises of a couple of percent this year but I don't see shareholders firing the CEO. Likewise many other public companies.
https://x.com/RBReich/status/1828187954290008180
https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/prof...
I think what you're experiencing might be "business owners charge what the market will bear" and you, as part of the market, are bearing price increases.
You should go and complain during the company's annual meeting that shareholders should get less profits.
https://reason.com/video/2024/12/19/no-californias-20-minimu...
Is this an opinion piece or news? It's categorized as "ideas" at the top of the page. I do not know what that means. But the advocacy at the end makes it seem not like straight news.
It’s almost magical that simplified, reductionist economic models don’t always play out in the real world.
Additionally, this research has historically yielded mixed results (likely due to the difficulty of isolating the effect of minimum wage in a highly dynamic marketplace for labor). Here's a good article on the topic from the SF Federal Reserve: https://www.frbsf.org/research-and-insights/publications/eco...
All that to say, I prefer the simple intuition that people want less of a thing when it costs more. This is a basic fact of life that most everyone seems to accept until policy gets mentioned.
And still, Apple got to be the biggest company in the world by charging more, constantly and systematically.
Maybe there are more things in heaven and earth than are dreamt in your philosophy.
A better example of quantity demanded paradoxically increasing with price is in the designer hand bag market. The value of luxury goods is in part due to the signal they send that the owner can afford such an expensive item.
However, that is just an exception proving the rule. Your point about Apple makes no sense because they've also increased the quality of the goods they ship in conjunction with their price. Unless you're suggesting that minimum wage laws somehow enhance the laborers' productive capacities.
It's even in TFA: higher wages means lower rotation, which means less constant re-training from scratch, which means higher output quality.
I'm poking fun at the line of reasoning of course. Those who find the opportunities to invest 10 for 30 tend to win in a free market system. That is the beauty of competition.
Merry Christmas!
Yeah, I only need a few millions to invest /s
> Those who find the opportunities to invest 10 for 30 tend to win
There are so many factors at play, in a modern "free market system", that believing simple principles will always apply perfectly is just another ideology. In any case, very few businessmen will ever admit that paying more for labor can have good results - even when they directly benefit from those same results - because most of them fundamentally resent having to pay for it in the first place. And so ideology prevails.
Merry Christmas to you too!
It’s no different than when politicians pass a law that the police union doesn’t like, and crime goes up. Look! Proof that the law was bad. It’s remarkable that anyone would say otherwise. Of course it has nothing to do with the fact that the police just stop doing their job until they get the law changed.
Is there evidence of that, that you know of?
To illustrate, if a McDonald's location can sell 1000 big macs a day at $2 per burger, do you expect they'll sell more (or even as many) if they raise the price to $3?
Of course not. This intuition is obvious to everyone until policy gets involved. It would not make sense for employers to want just as much labor when the price goes up. This would imply a perfectly inelastic demand for labor.
Ceteris paribus is Latin for "holding a cat by its paws to look under its tail", named so because it tells you how long you can "hold other effects equal" before you'll be made to regret the attempt.
This is to say, the economy is a system of tight feedback loops, not independently random effects. This is the part I rarely see emphasized wrt. "ceteris paribus". You're trying to hold constant the very effects that will react to change under discussion, which both severely limits the range of a single forecasting step, and should invite conversation about those other effects.
As you've pointed out, any economic policy proposal should consider 2nd/3rd/ith order effects.
I mean, there are other factors in employment decisions. Raising the price to $3 may reduce volume but increase revenue.
People need to eat. If McDonald’s is the cheapest food or only food available (say because they are the only one available) it won’t matter that they raised their price.
To say it another way, if businesses could reduce labor, they would have already done it. They don’t have fixed labor budgets to use up. Their ideal labor spend is $0. So in some sense it doesn’t matter what the labor cost is as long as the business isn’t losing money.
It's too early and too narrow an observation to draw conclusions. The article is better summarized as "minimum wage doesn't lead to the short term drop in employment and exploding inflation as expected".
Companies can shift around inventory, hiring, funds and more to address labor inflation in the short term. we won't see the real consequences of this policy for a year or two until the industry runs out of other tools.
Comparing In n Out (high wages, low marketing costs) to McDonalds/Carls/Burger King etc (low wages, high marketing & product development costs) -- companies can deliver a better service at a low price point if they are managed well.
I don't expect minimum wage to turn McDonalds into In n Out though.
As an indicator for what other states should or shouldn't do, California's unique situation simply doesn't matter .
I wonder if they would have run the article had they known these facts all along. It seemed like interesting new perspectives when I first read it. But now it seems very weak compared to the opposing perspectives.
Where this really hits home is trash. So many US cities just have litter everywhere, even in well-trafficked areas. One solution is an army of people to clean up the garbage.
What matters more than the minimum wage amount is the cost of living overall. This is something CA is finding out the hard way. You can raise minimum wage to $30 an hour, even with regular hours (usually minimum wage restaurant workers have different hours every day) it won’t make housing affordable in the Bay Area. On the flip side if real estate is cheap it means rent is cheap for workers (willing to accept lower wages) and businesses (willing to hire more).
An HCOL city provides a different kind of pressure (you need to make more money to live comfortably in one), while a LCOL provides some opportunity to explore and experiment with less risk (since rent is cheaper, starving artists can survive).
> Simply comparing each month’s job growth with the same month the previous year, which avoids the problem of picking a start date, reveals that California’s fast-food sector gained jobs in all but one month since September 2023.
As for who the losers are, the data is quite clear: Mostly corporate profits. The rational response of a corporation when faced with a law that reduces its profits is to lobby against the law and invest in propaganda that disparages the law.
> That doesn’t mean raising the minimum wage had no negative consequences. Reich and his co-author, Denis Sosinsky, found that the higher minimum wage caused menu prices in California fast-food chains to rise by about 3.7 percent. That number is far lower than the “$20 Big Macs” that critics of the law warned of, but it’s still significant at a time when many consumers are deeply upset over the post-pandemic spike in food prices. Even so, Reich points out that this number pales in comparison with the 18 percent raise that the average fast-food worker received because of the new law. (The authors calculated that about 62 percent of the wage increase was absorbed through higher prices, while the rest was likely absorbed by a mix of reduced turnover and, crucially, lower profits for franchisees—hence the massive industry resistance.)
Finally, why a shell game? There is nothing hidden here, there is no con. No money is secretly moved around. Workers have more money. Owners and consumers less (the latter very slightly so).
This statement is literally false if you include november.
The whole bit about comparing employment numbers to the corresponding month a year prior doesn't make any sense. One reason is that the law has only been in effect since April and another is that the employment trends in 2023 in fast food restaurants match trends in overall employment which you can look at here: https://data.bls.gov/timeseries/SMS06000000000000001?amp%253...
I suppose arguing over whether this redistributive scheme constitutes a shell game or simply wise governance isn't very interesting.
look at other states, they also had a decline in fast food employment from October 2024 to November 2024. E.G. Nebraska had a 0.62% decline and California had a 0.29% decline.
https://fred.stlouisfed.org/seriesBeta/SMU31000007072259001S...
Amongst the problems I have with the policy are around reducing profits being presented as something purely beneficial or at no cost, and claiming that we have seen enough to "call it good" within 6 months of implementation. Corporate profits drive investment and investment grows the pie. You won't see these impacts over 6 months but you will see them over 1-5 years. Restaurant closures in response to these policies can take 6 months to few years because the medium/large size franchisees will run a franchise operating at 0 profit for a year or two until the franchise requires capital investment (replace the parking lot, buy a new grill etc) or their financing situation changes against them such that they can't maintain working capital. "20 dollar big mac" is and was unrealistic fanfare, the most likely scenario is languishing for a while.
2024 was the most profitable year McDonald's has ever had.
https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/gros...
As for if it was effective: if the point of the law was to increase the money flowing to fast food workers it managed to increase their wages without decreasing employment, so I think it was pretty clearly a success. Now if that is a worthwhile thing to try to accomplish is completely a matter opinion.
I didn't check all states, but most show a decline in fast food employment from Oct to Nov 2024, based on "All Employees: Leisure and Hospitality: Limited-Service Restaurants and Other Eating Places in X" data from St Louis Fed.
Nevada Oct 2024: 65.424 Nov: 65.192 0.35% decline
California Oct 2024: 740.069 Nov: 737.886 0.29% decline
Utah Oct 2024: 69.571 Nov: 69.406 0.23% decline
Nebraska Oct 2024: 37.732 Nov: 37.4999 0.61% decline
For capital owners, no redistributive policy can ever be a success, by definition.
Other restaurants may absorb lost labor, and the negative impact may not be immediately visible. If you are not cooking at home, and McDonald's is the same price as table service, then table service is the better value. It has been for me, anecdotally. We'd not see those choices reflected in overall employment stats, because another restaurant will need to hire, a seemingly net zero change in employment rates.
But, it's very likely that fast food chains, including privately owned fast food franchisees like many McDonald's locations will have lost market share. Those locations may reduce their workforce, forcing people to change jobs. In the interim while the workforce is shuffled about, the losses would be invisible except in unemployment claims. And without being able to tie those claims to any profession, since those claimants aren't skilled in one, we can't make any conclusion about whether or not those claimants are the result of a higher wage requirement.
The eventuality I might expect would be a loss of competition in the fast food sector, if the above is true.
Of course, that's all hypothetical.
https://irle.berkeley.edu/wp-content/uploads/2024/09/Sectora...
Nowhere does it say minimum wage jobs increased or that minimum wage workers earned more per year
Cartel is explicit— Cali homeowners do a lot to try to limit production to keep prices high.
It’s one reason I no longer live there. The only rational move is to leave.
That's 7 months of data. Maybe a bit early to make any claims?