The inverted funnel plot of Doucouliagos and Stanley is especially useful once discussions about elasticity at the low end of the labor market reach the "you're biased -- no you're biased!" stage:
Would you mind quickly summarizing what that plot is telling us? I looked at it but it looks like I've got to read more of the paper before I understand it.
The plot is showing that there is a negative selection bias in the reporting of stories about minimum wage. That is, that stories suggesting that increasing minimum wage has negative effects (increases unemployment, etc) are overreported relative to stories showing a positive effect from an increase in minimum wage.
I am only repeating what the paper says; I don't claim to have validated their methodology or sources.
That is an incomplete summary. Their conclusion is that despite this larger than normal selection bias, the minimum wage appears to have no impact on unemployment. The paper's abstract, discussion, and summary all mention this as part of the central thesis - why leave it out?
I think summaries (by their nature) must leave something out. Considering the abstract mentions what you said (and that it's reasonable for me to have read the abstract), I think it was reasonable for the responder to focus their attention on the plot alone (which was the focus of my question).
The obvious starting position is that raising minimum wages has a negative effect on the number of low wage employees hired; because the money from higher wages has to come from somewhere and might not be available - leading to reduced business activity. This is also the classic economics position. With that in mind, there is going to be a bias towards publishing the 'surprising' results that there is no impact/a positive impact from minimum wages. The bias that this paper is identifying is surely a real thing, but it might potentially be a bais against, eg, poorly run studies that pick up spurious effects.
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.
It's not an HN commenter's obligation to post everything a reader might want to see, certainly not highly technical point about the distinction between "this paper claims that evidence for an employment effect is over-reported" and "this paper claims that employment effect is approximately 0". They linked to the whole paper for the curious, and answered a particular question about it.
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"
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.
I, too, have a commenting rate-limiter applied to my account. I can only post about 5 comments in a day before HN tells me to "Slow Down, You're Posting Too Fast".
‘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).
>‘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).
It's formatted as a code block, saying don't wrap these lines. But that's not a good idea when it's a long piece of English text.
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?
Email-style quoting doesn't work that well for a paragraph exceeding one line, and even worse for multiple paragraphs.
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).
> Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Pellentesque dignissim enim sit amet venenatis urna cursus. A iaculis at erat pellentesque adipiscing. Elementum eu facilisis sed odio morbi quis commodo odio. Porttitor rhoncus dolor purus non enim praesent elementum facilisis leo. Natoque penatibus et magnis dis parturient. Vestibulum lorem sed risus ultricies tristique nulla aliquet enim. Tempus urna et pharetra pharetra. Neque laoreet suspendisse interdum consectetur libero id faucibus. Semper quis lectus nulla at volutpat diam ut venenatis. Etiam dignissim diam quis enim lobortis scelerisque fermentum.
> Quisque non tellus orci ac auctor. Ut sem viverra aliquet eget sit amet tellus. Scelerisque mauris pellentesque pulvinar pellentesque habitant morbi tristique. Fermentum posuere urna nec tincidunt praesent. Quis vel eros donec ac odio tempor orci dapibus ultrices. Feugiat in ante metus dictum at tempor commodo. Leo vel orci porta non pulvinar. Tempor nec feugiat nisl pretium fusce id. Eu lobortis elementum nibh tellus molestie nunc non. Platea dictumst vestibulum rhoncus est pellentesque elit ullamcorper dignissim. Tortor at risus viverra adipiscing at in tellus. Lobortis mattis aliquam faucibus purus in massa tempor. Turpis egestas integer eget aliquet nibh. Facilisi morbi tempus iaculis urna. Donec ultrices tincidunt arcu non sodales neque sodales. Ipsum dolor sit amet consectetur.
How many of the people arguing for keeping the minimum wage unchanged were arguing that in good faith?
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.
There's still the challenge of overhead that comes with onboarding and managing a new full-time or part-time worker.
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.
What job skills exactly are you learning doing minimum wage jobs in 2019? That always seemed like a bit of a meme to me, considering if you've already held one minimum wage job before then you've already learned everything they have to offer practically.
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?
Those aren't job skills. Those are all things you learn as part of your basic education.
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.
Those are definitely skills many at the bottom lack. They weren't part of my basic education, but I'm sure we went to different schools.
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?
I am very, very familiar with how the poor and poverty stricken live considering I've been there and have been very public about my and my family's experience.
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.
Because the way the American social safety net works, you often wind up losing more than $5/hour worth of benefits to get that $5/hour job.
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.
> Because the way the American social safety net works, you often wind up losing more than $5/hour worth of benefits to get that $5/hour job.
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.
> The bottom of the ladder is the unemployed, who make $0/h.
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...]
Canada, but it's the same in the States. Unemployment is for people who have lost a job. I would not have qualified.
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.
> For that reason, I support the government acting as an employer of last resort.
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.
You clearly do have a dog in the hunt because you're framing it as the government subsidizing the companies. All of your examples are jobs with a ground level bar for entry so low that people with zero skills or clear mental illness can still manage to learn them and become gainfully employed. Were these people not employed at all they'd require /more/ government support not less.
How will it improve your life to work 80 hours a week for 3 cents an hour, living in the USA? What can you purchase with your two dollars and forty cents (before tax) of weekly pay? What job skills will you be learning?
>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.
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.
> 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.
Exactly. Too low a minimum wage actually becomes a subsidy to employers.
I used to think this was bad. Now I’m not sure. The model where employers are responsible for employee well being leaves a lot to be desired:
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.
When you raise the minimum wage, it makes automation more effective in comparison. Which is why in NYC when they raised the minimum wage for fast food workers, most of the people at McDonald's who used to take orders just got replaced with kiosks. This is in effect a subsidy for the tech companies that automate labor, like the company that makes the McDonald's kiosks.
If a job can't be done for a livable wage, then we have to be willing to let those jobs go. Automate them, outsource them, let the companies who rely on exploitative labor fail -- the jobs are going to leave eventually anyway.
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.
>Which is why in NYC when they raised the minimum wage for fast food workers, most of the people at McDonald's who used to take orders just got replaced with kiosks
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.
They've been superior for a while. We had touchscreen kiosks at a Jack-in-the-Box (cheap burger chain) at near my university back in 2007.
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.
That automation is in competition with minimum wage is unsubstantiated. And if companies innovate to get rid of the need for minimum wage jobs when min wage is raised, the society's response should not be to throttle innovation or keep lower minimum wage, but to institutionalize changes to how we redistribute the gains of that innovation.
If this is true, then I would guess that eventually it would have happened anyways. Automation is only going to get more effective, and the costs to automate can only go down. So at the most, all this could do is speed up adoption (but I still question if it really has or is just a scapegoat).
Higher wages might make it easier to make a business case for installing kiosks, but it does nothing to lower the price of the kiosks. I don't see how it qualifies as a "subsidy".
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.
If minimum wage becomes a living wage then there are more people capable of accepting jobs that are needed and more difficult to automate - for instance, caregivers.
> How many of the people arguing for keeping the minimum wage unchanged were arguing that in good faith?
> 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.
How do you define “reasonable”? The bill that passed the House wouldn’t get to $15/hr until 2025. That would be a 4.6% annual increase (CAGR) going back to 2009 when the $7.25 rate was implemented. That might be a little higher than you’d like, but is it “unreasonable”? Maybe a compromise could include a longer ramp or a ramp to $13 or $14, but I haven’t heard that argument presented.
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.
Lots of people say "tracked inflation", but few understand that inflation is measured relative to a basket of goods, and which basket of goods you pick really matters. Which means that the inflation rate you personally experience will depend on your lifestyle.
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.
There's a long-standing folk wisdom that the rich pay less for things than the poor.
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.)
Indeed; it's certainly possible the people making that argument are misinformed about the ramp-up, or maybe they really don't think it's slow enough. And that's assuming they're wrong, maybe we just haven't seen the effects yet because we're not yet in 2025.
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.
I see your point and it’s true and reasonable. I would just add that at some point calling something unreasonable without educating yourself (or refusing to educate yourself) on the proposal is a form of bad-faith argument.
>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.
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.
Well, luckliy FDR himself discussed the concept in a speech as he signed one of the base laws to allow a federal minimum wage.
> 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.
It is worth noting that the rise of wealth in our society means that "decent living" by the standards of the 1930s means "extreme poverty" by today's standards.
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 measure it in calories or other form of nutrition, did it triple?
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?
As measured in calories it did not triple. But malnutrition went down a lot. And reduced malnutrition was one of the causes of rising IQ and physical stature over that time period.
The actual progress in standards of living in the USA from 1930 to 1980 is hard to overstate.
I agree with those statements, and still dispute your use of the word 'exploit' insomuch as it implies unfairness or some kind of wrongdoing on the part of society.
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.
Not exactly. While you could claim that due to technological advances a person working a low skilled job at full time in 2019 is better off than someone doing an equivalent job in 1980, you fail to take into account that in 2019 that person would be by major guidelines in a much worse position, ie, no hope of owning a house, taking public transit, can't support a family in a city, less likely to be in a supportive union, and so on. In the things that matter, the person in 2019 is worse off. And at the same time, a worker in 2019 has wildly increased productivity compared to one in 1980. So in a sense, purely by the standard of what they produce, they make more but has less baseline property and amenities. This is an issue. It's no coincidence that rich people have proportionally gotten much much richer in these 40 years, and it has 100% come at a cost to the majority.
The comparison that I made is not between 1980 and the present, it is between 1930 and 1980. This is a very different time period and saw very different trends than have happened since.
FDR would have very much been of the opinion that rise of wealth in our society needs to be distributed to everyone, particularly the least well off among us.
This is true, but people who argue for it most vocally refuse to acknowledge the fact that it’s not economically feasible to reward the lowest paid people with a MUCH MORE than comfortable lifestyle. The minimum wage is for two things: To prevent the exploitation of workers at a certain level, and to allow workers to support themselves.
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.
"Some people also fail to realize that there will always be poor people" and "If they really wanted to get out, they would. I did" are interesting beliefs to share at the same time.
The connecting thread is "some people are satisfied being poor" but it's pretty tenuous. If those people stopped being satisfied, what happens?
Minimum wage works out to about $2500/mo before taxes where I live. That’s not enough to pay for rent, utilities, food and incidentals. Not to mention insurance(s). Not to mention a car if your commute requires it. Not to mention family/dependents. Not to mention emergency savings. Not to mention retirement. The list goes on.
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.
Is a minimum wage intended to provide support for one person or for a family (including dependents)? You aren't really clear in your comment on this point, which is common confusion in much discussion of this topic.
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?
How does that work? If the minimum wage is intended to be sufficient for an "average household", then shouldn't it be less for a household without children, and smaller still for a single person?
So by your logic an employer would be required to pay every employee a wage that would allow them to support a family even if they don't have a family to support?
That’s nuts, I lived a luxurious life in college on less than that. It’s certainly enough money for a room and food and a car and savings left over in nearly every US municipality.
Yay, must be nice being single all your life because you'll never be able to afford a family. Some people don't have the ability to get higher than min-wage jobs - ever because they lack the education necessary.
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.
I worked temp jobs without benefits for more years than I care to think about.
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 someone is spending $130/month dating while at the bottom rung of the income ladder, They're Doing It Wrong. If they can't talk someone out of their clothes after a $10 coffee date it's probably best for everyone that their genitals not come near another human being's until they've leveled-up their ability to intelligently utilize their available resources.
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.
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.
On minimum wage you are about 400 in the hole after taxes, and before health insurance, savings, retirement, SO, kids etc. Not to mention this is one rented bedroom, not even a studio apt.
With all respect to your experience, comparing a college roommate situation to a FTE earning minimum wage is a bit apples to oranges IMO. Students are eligible for many benefits including health care, and have a finite period of time (typically in their youth) until graduation. Whereas a minimum wage worker may be living on this amount with marginal raises for their whole life. Think about having a marriage and kids all while living in your college room indefinitely.
The implication is that minorities that have been historically discriminated against and are disproportionately poor will have fewer kids. This is a bad idea that people have 'tried' in the past and is ripe for abuse.
About 2-3% of hourly paid workers earn minimum wage. For the most part, it's not about the masses, but the skills necessary to get onto the bottom rung.
As others have said elsewhere, in most cities, labor is at about $!5/hr already.
It's not meant to provide a living. Companies don't exist to provide jobs, jobs are a byproduct of the business, not its reason to exist. Minimum wage jobs are people with no skills who are easily replaceable, usually teenagers learning to enter the workforce.
It certainly can be, but that's not a business problem, there will always be people who failed to prepare or lacked the necessary skills to prepare for old age or people who refuse to move somewhere they can find a job. Education doesn't equal skill; jobs pay for skills, not for education; if you have skills you can find a better than minimum wage job, but you might have to move.
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.
> 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 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?
Even in 2009 the adjustment wasn't sufficient to bring minimum wage back to 1970 levels, adjusted for inflation. Picking the last rate change isn't a good way to measure minimum wage.
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.
You've cherry-picked the highest (adjusted) minimum wage over an ~80 year period. The average is closer to $8 in current dollars, which is actually below the inflation-adjusted 2009 figure of $8.70.
That's not cherry picking. (Adjusted) minimum wages are raised to their peak, and then are gradually lowered due to inflation. If you're picking a point of comparison for the proposal to raise the minimum wage to a new historical peak, it's natural to look at the last time it was raised to a new historical peak.
To look at it another way, even if the 15$ 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.
Who is to say what is the best wage? Should the government decide what people's wages should be? Should the government come to you and tell you specifically that your salary is not what you got from the exchange of labor with your employer and change it unilaterally?
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.
> Who is to say what is the best wage? Should the government decide what people's wages should be?
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.
> minimum makes perfect sense because otherwise businesses pay slave wages
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%!
In fact, working for shitty pay is WORSE than being unemployed – you spend hours a day doing work that doesn't lead to any personal growth and just takes up your time and health AND still can't afford to live. But in desperation you'd still hang on to that, because what else to do? Beg on the street? Just die?
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.
> 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
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.
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.
Its not a complicated one, it's an ideological one. I do not believe in the use of coercion to set wages. It just happens to also tend to be the best course of action in pure econ terms.
> 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%?
Minimum wage isn't just flat for a decade, it's not being adjusted for inflation. This means minimum wage workers have been getting a pay cut over time.
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.
I'm old enough to remember this conversation happening three times, and wise enough to know that this conversation happens every ten years or so probably since the first wage was paid in currency instead of goods.
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.
I'm cynical. I think it's frankly worse than that. When we talk about economic and market forces, we don't talk about "greed" as a major economic force. We know it's the creation of capitalism, but economists seem to do everything in their power to ignore it. Standard economic models breaks down when people are powerful enough to create their own supply/demand curves.
We've had the term "working poor" for a while. I suspect that we'll have "working homeless" in the decades to come.
> I suspect that we'll have "working homeless" in the decades to come.
"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]"
"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."
And it's highly disturbing to me that people will defend these situations on this site. An alarming amount of HN commenters seem to believe that the cost of labor is a function of the money created by the labor. In other words, a job will only pay $X/hr because it creates $Y/hr in revenue where Y > X + some margin. They pretend that if Y goes up, then it brings X up and if X is low, then it means Y MUST be low as well. It has nothing to do with the greed of shareholders.
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.
The more logical claim reads more like "employers will logically try not to employ unprofitable labor", meaning that the wage paid to a worker will generally be no higher than the variable profit enabled by that worker.
Yet proponents of raising the minimum wage seem to disregard this truism when it comes to the case of workers who for whatever reason can only create variable profit at a rate between the old and new minimum wage.
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.
While not exactly homeless, employed people not being able to afford their own house is the norm instead of the exception in the majority of the world.
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.
UAE is not a poor country. They choose to provide for native citizens, not for expatriates. That's on them.
"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."
I come from Morocco. There, until recent times, most left the family house to go buy their first home, after their first real job. "Renter" was an insult because you had to be really poor to have to rent. Now that speculation and foreign investment is flooding the housing markets and land prices have literally went up 3000x in some cities, it's changing. It's not a first world dream, it's a problem that's rising everywhere around the world.
I don't understand why you're being downvoted (a comment which itself is likely to solicit downvotes). No serious discussion about the advantages or disadvantages of capitalism can be had without considering the role and utility of greed.
Let me rephrase that last sentence for what you are meaning it as "If you call this class warfare instead of unintended consequences, in my opinion, you are being paranoid or cynical."
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.
Because people can't live much of a life on less. This is especially true of health care which in places is free at some level of poverty and ruinously expensive at other levels. At some points working harder actually earns you greater poverty.
Walmart is commonly paying $12-$13/hr to first year employees around the US, Target is at a minimum $13/hr ($15/hr in 2020), Amazon is at $15/hr. Those are, broadly speaking, the new floor in American wages.
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.
This is a very naive view of economics. Ideally everyone's income should be derived from the value they generate. So ideally wages continue to rise because productivity continues to rise.
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.
Generally I'm keen to believe the externalities of automation are not being passed onto its users. I.E. creating efficiency by taking away people's source of income & turning them into a tax burden.
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.
> Ideally everyone's income should be derived from the value they generate.
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.
> The idea that income should be derived from value is incredibly naive.
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.
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.
So then we are in agreement that wages are not a function of value created by the worker. They pay only what it takes to get the position filled, which is a completely unrelated number to value.
>So then we are in agreement that wages are not a function of value created by the worker.
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.
> This is a very naive view of economics. Ideally everyone's income should be derived from the value they generate. So ideally wages continue to rise because productivity continues to rise.
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.
Serious answer: to achieve a particular lifestyle that's not available to you any other way.
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.
Every business tries to pay people as little as possible. They are essentially obligated to do so by corporate structure, but just from competing in a free market this is usually the outcome outside of regulation (minimum wage) or collective bargaining. Right now there is a high demand for top end tech talent, but that too will pass, and we'll all see how our employers view us in a lower returns world. Stock options and grant comp is just a question of best outcomes and alignment.
I don't mean this offensively, but I had to roll my eyes at this one. This is the exact type of question I would expect from a tech startup focused board.
It's not a bad question per se. I've met so many people who complain how bad it is for their business because of low margins and etc. For instance, I'd never even consider starting a retail business,as unless you have economies of scale or sell water in the middle of a desert, you'd have to count every penny. However, having said that,I'm more than happy that people start all sorts of businesses,as otherwise we'd all end up selling CDOs to each other...
No, prices could still go down in real terms by remaining constant. The same for above minimum wage rates.
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.
inflation is used to drive economic activity by keeping people from sitting on money (because it devalues over time). so do you think putting more money in the hands of minimum-wage workers will cause them to hoard money? what do you think is the point of inflation?
Some would say that the debate is whether raising minimum wage even has a net beneficial effect for those at the bottom of society.
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.
Sorry, can you cite some of the "Some" who would say that? I'm not aware of any serious research showing that minimum wage laws actually hurt "some of the poor" (I mean, like all regulation, they aren't perfectly targetted), but would be curious to see it.
(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.)
In the US, for instance, you have a massive (and very deliberately created) population of illegal aliens who can’t legally work anyway, so are unaffected by minimum wage laws. Raising minimum wage has the effect of making legal employees even less competitive with illegal ones, and since the authorities have no interest in enforcing their own laws, legal employment at the unskilled end is a sucker’s game.
This, I suspect, accounts for much of the backsliding in the last few decades among black and poor white populations in the US.
I think you'll find those who support minimum wage laws also support the enforcement of those laws. I'm not sure if you're advocating for deportation, restrictions on immigrant labor, or something else entirely, but given that you're using terms like "illegal aliens," I'm going to assume you're not a fan.
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.
I'm not the parent, but as a second-generation immigrant, I broadly agree with all of this. I'm fine with whatever laws we all decide, and I think they should then be vigorously enforced.
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).
You think literally millions of people are sneaking across the southwest desert and risking having their children seized and put in cages[1] to be "abused and/or virtually enslaved"?. No, that's not how it works. Immigrant jobs tend to be poorly regulated (no taxes witheld, benefits delivered nor social services funded, etc...). But they're jobs and they pay what jobs pay, generally around minimum wage, because that's where the market chases.
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"...
I think that most illegal immigrants don't fully understand the downsides, yes. But whether or not that's true, I think it's unethical for us to tacitly encourage them to put themselves and their children in a position where they can be practically enslaved, or even raped or murdered, with little recourse to law.
> You think literally millions of people are sneaking across the southwest desert
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.
Right, but what's the evidence for that? I get the argument you're making (and the nativist agenda behind it), but... it's literally disputed by the linked article. I mean, at some point one has to give up and just admit that maybe the analysis was wrong, right? Political facts still have to be facts in the real world, eventually, and thus subject to reason, right?
> Minimum wage isn't just flat for a decade, it's not being adjusted for inflation. This means minimum wage workers have been getting a pay cut over time.
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.
I don't understand why this isn't a red herring. Minimum wage may be remaining stagnant but total employee compensation has been rising steadily, it's just that most of that compensation is in the form of spending on employee benefits like insurance. If people quit expecting employers to provide them with anything except for cold hard cash then you'd likely see wages increasing with time.
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.
It's rare for a company to offer health insurance to employees who are pegged to minimum wage.
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 medical costs increase more than the amount of general inflation's effect on both medical costs and the rest of wages, than covering those increasing costs while holding the rest of wages constant is a wage increase.
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.
If the workers aren't getting it in their paycheck it is not a wage increase. It is simply another tax, neither the employer nor the employee benefit from it so who exactly is this benefit for?
Truthfully I agree but I'd argue this seems more like a reason to decouple healthcare from employment entirely. Such as with socialized medical coverage like you suggest.
Large US Companies are incentivized to keep healthcare something they solely provide because it ties their employee's health coverage to their employment status, putting pressure on them to keep their job or face paying their hospital bills in full.
And yet people go and vote for them with hopes that some random real estate billionaire will bring prosperity to their homes. The entire thing would collapse after first election if people would vote with brains instead of feelings.
>This creates a scenario where a dollar into the insurance budget yields more than a dollar worth of value
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.
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.
The same thing will happen as in almost every other developed country: average well-being will go up but some people will have to wait longer for treatment. It’s not like this is some novel, utopian idea. Public heath care is the norm in most western countries with plenty of variations and lessons-learned to choose from.
That's not entirely true. Taxes on production and services are ultimately taxes on consumption, this is part of why many economists have advocated for a mix of raising income taxes on specific income brackets and having a more generous EITC.
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.
> and thus some of the benefit is lost because you've increased costs for the people you're helping
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.
Increased spending on employee insurance is due to increasing healthcare costs. Even if companies are spending more on their employees healthcare, employees are still paying more on healthcare than ever before. So, that still means less money available for everything that isn't healthcare, and is functionally equivalent to a pay cut.
An increase in spending is an increase in spending, it is still a part of the total compensation an employee has received. My point was purely that lensing the issue through minimum wage by itself seems like a distraction in terms of understanding employee wealth, I'm not arguing that employees should stop wanting more because they're getting enough.
Which is great. Wages are sticky, making it difficult to reduce nominal wages. Inflation helps prevent layoffs by allowing for some real reduction in wages in a weak economy without having to reduce nominal wages.
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.
No, you are making the straw man argument. The argument is not that the exact same people have been holding the exact same jobs with exactly the same pay the whole time. There's a reason you found it so simple to lampoon. That reason is you chose to view the argument as naively as possible.
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.
You might not lose your job, but you may see your hours reduced or you might not get the opportunity in the first place. Technically the employment numbers don't change, but you shouldn't think of of minimum wage employees like salaried employees. Minimum wage earners can lose fractional percentages of their jobs unlike salaried employees.
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]
Countries with a social-democratic (Sweden, Norway) or conservative-corporatist (Germany) welfare state traditionally do not have minimum wage laws, because relatively strong unions and a somewhat robust social safety net have the same effect - you won't find someone willing to work for less than social security benefits which creates a lower bound.
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?
Collective bargaining agreements are private agreements, aren't they? I meant that the legislature and regulators me not decide the wages; and your reference seems to directly indicate that.
The countries you cite are able to have a minimum wage of zero because it's coupled with a robust social safety net (sometimes along with other backstops--Norway, for instance, is heavily unionized). This pairing is important, and is absent in the US.
They are unrelated; countries need a social safety net regardless of what the minimum wage is.
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.
There are about 40 countries without a minimum wage. I cherry picked countries that most people on HN would recognize since I'm assuming people would not know much about the economies of Tuvalu, Tonga, or Rwanda.
Not sure what your point is anymore. Are those examples of countries without social welfare and no minimum wage? That seems to strengthen the point above your comment.
Your fundamental assumption is that labor economics works like an economics 101 course. It doesn’t, that’s why it has it‘s own field of study. As an example, free markets depend on equal information and workers don’t have the same information as employers, so their ability to negotiate isn’t nearly as robust as you imply. Also, many companies enjoy a monopsony on local labor which distorts the traditional relationship between supply and demand. Those are just two examples.
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?
While no system works exactly like models do, there is nothing magical about the economics of labor.
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.
This article isn’t a justification for raising the minimum wage, it is a commentary on how the arguments against raising the minimum wage have proved false in the recent wave of minimum wage increases. You seem to ignore that to attack strawmen and throw arguments at the wall.
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]
"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.
Those same researchers went back and added a ton more nuance to their findings: They Said Seattle’s Higher Base Pay Would Hurt Workers. Why Did They Flip? https://nyti.ms/2AmgaNr
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.
To compare the US model with any of those countries is laughable at best. First of all, most,if not all, of them made long term investments in their people in terms of education, which took decades before they could reap the benefits.The economies transformed into service and high end manufacturing. Secondly, they do have very strong welfare systems,that take care of pretty much everything. Public healthcare is free( through taxation) or inexpensive. These factors create society,where people aren't desperate to lose jobs because they won't be able to go to hospital or buy food. That's why they don't and won't work for a fraction of what it costs to at least exist in those countries.
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.
Axios cherry picked the Bureau of Labor Statistics data for the 12 states that confirm the writer's bias. They should have analyzed all states with low minimum wages vs high minimum wages for the overall picture. Reports are out there showing while many of the minimum wage earners who have not lost jobs from the hourly increase are reporting weekly scheduled hours being cut back across the board.
I've read reports of Target, and similar companies, cutting back hours of many employees. I take such reports as anecdotal, but I didn't catch them talking about this in the article at all.
I work part-time stocking shelves at a Walmart, and I can say from first-hand experience that while there is talk of cutting hours, the reality is that it won't happen at this time.
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.
> The CEO of Walmart even advised the feds that they should raise the minimum wage.
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.
It will hurt small/medium businesses that can't afford to not exploit their workers.
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.
It's not like Amazon/Walmart don't exploit workers, they just do it farther away. And are you really claiming they are not engaged in a race to the bottom? McDonalds is going to be better positioned to invest in automated ordering kiosks than any independent diner... is this because they are a beacon of chivalrous capitalism, or because they have been much better at exploitation?
This is the weirdest defense of oligopoly. I've never understood it.
Well everyone just wants to buy from three companies anyways, right? Just like everyone only wants to visit 3 websites? And everyone really only wants 1 ISP to choose from. /s
It's not altruistic at all. In ten years Amazon (and likely WalMart) will be out of that labor market entirely and their competition will be left with the baggage.
I think the unethical part we get into with Target/Walmart/et al is the staffing of multiple shifts of part time work when it's obvious by the numbers that they're avoiding paying benefits for the hiring of fewer full time workers. The systemic question here is if we should allow it to be a financial advantage for companies to do that - especially large profitable ones with a footprint all over our nation.
>The systemic question here is if we should allow it to be a financial advantage for companies to do that - especially large profitable ones with a footprint all over our nation.
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.
Ironically, consolidating the same amount of hours in fewer employees suffers the same effects people say raising minimum wage does -- reducing the total number of people involved. Some people get more hours and benefits, others get fired.
Yes that's a poor and hopefully temporary side effect - but it would get more people covered with medical benefits. It may also not be that bad en effect because unfair scheduling practices for the part time hires. The part-time scheduling is reported to take up essentially full time commitments to be on "standby" with poor stability in the scheduled times on/off. So if one wasn't instantly available to come off standby, one would get penalized - to avoid that, you couldn't take other part time work.
That's to avoid paying for health insurance (two 20 hour employees with no insurance vs. one 40 hour employee with insurance). Minimum wage applies across the board, so cutting hours wouldn't change anything.
So for these companies, it might make sense to hire more part-time employees and keep people under full-time if crossing that full-time threshold costs more.
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.
To me this is still positive. If one was making 40h x $10 and now does 31h x $13, it means the person has more time to invest in oneself,maybe do some community college course or whatever. I'd be more than happy if my CEO would give me Fridays off instead of giving a pay rise.
It might work out for you personally but it still doesn't address the issue of not making a living wage. If their weekly paycheck isn't any more than it was, they're still coming up short on their monthly expenses.
Yes,I'm not disputing that, however it then becomes possible to find a second job,or some side gig. Also, I'm not sure I follow the logic of reduced hours.For instance, a company employs 10 people full time.Then the state hikes up the min wage and suddenly thy all cost 10% more to the company.If the company reduces the headcount,it also reduces its productivity if nothing else changes, so it ends up costing even more to the company. Am I missing something?
And if they're not making enough, they may need to work two jobs where they were working one, which results in less time (though maybe a little more money).
There are a lot of variables here that need to be examined before we can decide whether it's largely a success.
This maybe leads to the question of why we should favor any business to continue operating in a space that may be a net negative contribution to our 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.
> This maybe leads to the question of why we should favor any business to continue operating in a space that may be a net negative contribution to our society
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.
If a business can only exist if you exploit your labor force, then maybe your business shouldn't exist.
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.
Businesses need cheap labor from outside of the US because everyone in x industry is using cheap labor that has an artificial ceiling due to years of unchecked illegal immigration. Competition in x industry is now centered around this new labor price point and in some cases is far below minimum wage. At that point, many drop out of the labor force instead of working a difficult and manual labor job that pays less than minimum wage. This is a failure of government to have a coherent and sensible immigration policy and an additional failure to deal with the spillover effects of not having one.
No reason to say goodbye to them. It would just mean that the price would have to increase, or the industries that produce them will have a smaller profit margin.
> Some businesses cannot be profitable and therefore will not exist at certain minimum wages, though.
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.
> 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 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.
> 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.
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.
> Americans would starve and die of exposure on those wages.
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.
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.
>> Americans would starve and die of exposure [in America] on [Bangladeshi] wages.
> 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.
Are you implying that the people currently starving and dieing of exposure living in bangladeshi-style slums right on the streets of San Fransisco is an acceptable outcome? We should be paying more people a wage that forces them to live like that?
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.
What do you have against landlords? Every situation has an economic element to it. It shouldn't be assumed that every person who is a boss, landlord or business owner is assumed to be some sort of crook for having money. Maybe the landlord is upside down on his property and takes a loss every month. You just don't know.
"Some businesses cannot be profitable and therefore will not exist at certain minimum wages, though"
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.
The markup on most products is such that US businesses could easily manufacture their products in the US at current minimum wages and still handily profit.
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).
> The markup on most products is such that US businesses could easily manufacture their products in the US at current minimum wages and still handily profit.
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?
If you were a small business you should be spending your time lobbying for tariffs against exploitative international manufacturers or even local subsidies instead of lobbying to pay your employees less out of your bucket of gold every year.
I think that's precisely the issue. Economists thought that driving an open market would push up wages as efficiencies come back around, thus both driving for cheaper goods and higher wages. But they didn't anticipate exactly the effect of globalism and the exodus to China happening so quick.
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.
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 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?
> > This maybe leads to the question of why we should favor any business to continue operating in a space that may be a net negative contribution to our society
> What does the minimum wage have to do with contribution to society?
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.
On the contrary, many of the lowest-paid jobs are lowest-paid because they're non-profits, volunteer organizations, or other organizations that provide some social benefit. Raising the minimum wage prevents these organizations from doing as much good for society.
The people being hired are not the ones having their hours scaled back. If demand for labor rises at a natural average over time in an area then minimum wage could reduce scheduled hours while overall growth still creates job demand. It'd be more interesting to see the effects of minimum wage increases on the average yearly income for employees in the area for that reason.
I'm not familiar with Axios, but this article had a rather strong taste of propaganda to me.
"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.
Agreed. But that wasn't the end goal for the $15hour movement. The entire effort was touting 'living wage' so making the same take home check isn't helping anyone except for maybe less money spent on day care for their kids.
> Cities like New York, Seattle, Chicago and San Francisco have raised local minimum wages
> 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?
> "> Cities like New York, Seattle, Chicago and San Francisco have raised local minimum wages"
> "> 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.
He's not arguing with Axios facts. He's saying the fact that Illinois is gradually ramping to a $15 statewide minimum is not evidence that a $15 minimum is nationally appropriate, because the economy of Illinois is not the same as the economy of Kansas or Wyoming.
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.
>He's saying the fact that Illinois is gradually ramping to a $15 statewide minimum is not evidence that a $15 minimum is nationally appropriate, because the economy of Illinois is not the same as the economy of Kansas or Wyoming.
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.
yes, and at the very least something went very wrong with the choice of quoting.
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.
The single blanket federal minimum wage is the whole argument on this thread. It's not my argument, it's Rayiner's. I mean, it's a lot of people's, it's a very well-known argument, but he's the one who introduced it to this thread.
I feel a lot of government laws and process discussion is better served at the state and local level. A law that makes sense in NYC but can actually be harmful at less populated areas shouldn't be created at the federal level. I think a lot of people huge cities don't consider how laws will affect people who don't live in huge cities when discussing federal level laws.
One reason could be because almost nobody makes minimum wage.
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.
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.
I think the confusion you're talking about when you guess that people will over-estimate the number of "minimum wage workers" is due to slippage between the term "minimum wage" and "federal minimum wage". There are 29 states that have a state minimum wage that is higher than the federal minimum wage [1], so if we defined "minimum wage worker" as someone worker working at their state's minimum wage, then we'd be including far more (probably >100% more) people in the category.
Minimum wage affects the pay of people earning close to it. When a business decides it can make more money by hiring better workers, they have to pay more than the competition.
When I started my first job flipping burgers I was paid “over minimum wage” ($6.50/hr at the time). My pay? $6.51/hr.
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.
When I had a burger flipping job, the automatic yearly raise was like a dime an hour. So unless you were a new hire, hardly anyone at burger flipping jobs right now are making minimum wage.
I feel like this is a perfect example of people trying to apply a "one size fits all" band-aid to a complex issue because it sounds nice on the surface. Obviously, Johnny French-Fry would be better off making $15/hour, but there's more to it than that.
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.
People (including researchers) always use data from mega corp retail shops to measure the effectiveness of minimum wage while ignoring the thousands of other industries and lower end of the market of small companies who are not hiring at all and can’t be easily recorded.
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.
It seems that a lot of economics as it’s used for political decisions is way oversimplified to the point of being useless or just plain wrong. The minimum wage issue is an example where reality is much more subtle and complex than what a lot of economists in the news say. Same for tax cuts for upper incomes that were supposed to spur investments in new technologies but seem to have done more to drive up asset prices. Or the argument that lower health care prices will drive up utilization.
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.
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.
There are plenty of ways to view the role of businesses in society.
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.
"Asset prices" is kind of a codeword for land titles and artificial scarcities. Inflation in general doesn't occur as a result of tax cuts, but rising prices are confined to those particular areas... which is a clue on where to focus policy.
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.
> a lot of economics as it’s used for political decisions is way oversimplified to the point of being useless or just plain wrong.
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.
I think typical economists like to think of the world as a perfectly rational system. They look at the world from the lens of some bullshit econ 101 nonsense.
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.
This has been a long standing argument from a certain "trickle down" group in politics. And like the groups that promote austerity as a cure for economic woes, they have been proven wrong.
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.
> And like the groups that promote austerity as a cure for economic woes, they have been proven wrong.
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.
No, it's not a straw man. Austerity has very much been promoted as a cure; it was not an inevitable consequence of the economic situation.
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.
Krugman doesn't believe that there's any problem with unlimited debt, so of course, he's not going to want austerity. Why would you make sacrifices when you get everything you want, today, for free?
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.
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.
You're caricaturing Krugman's view. First, he doesn't advocate for "unlimited debt" or think that there is no problem with it. He says that with the current interest rates, for many countries it would be better to take on additional debt than to engage in austerity, both in the short and in the long term. Second, he argues that the Kenneth/Rogoff paper showing some sudden onset of bad consequences at some magic level of debt/GDP is mistaken and misguided.
> 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.
Thanks. It's good to challenge your views, so I'll listen in a bit. However, I must say that as an ex-libertarian (that left the creed because of its serious flaws) I am apprehensive about the neutrality of a show hosted by Tim Wood, a "Rothbardian anarcho-capitalist and paleolibertarian" (Wikipedia) that's received fellowships from the Institute for Humane Studies (funded by the Scaifes, Kochs, etc.).
> I am apprehensive about the neutrality of a show...
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'd personally categorize Paul Krugman as an idealogue. You might think the same of Bob Murphy and Tom Woods, but the aim was to offer a counterpoint to Krugman's ideas.
I believe you'd find the intellectual engagement and critiques within the podcast, not the subtitle.
> 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.
> ...from a certain "trickle down" group in politics...
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.
What possible reason could you have for writing it this way and not just saying "Your point seems to be that better paid workers leads to worse paid executives..."
Not being a native speaker, probably not being as fluent as you in English, and not wanting to misunderstand that the OP made more complicated than needed, IMHO.
True. It comes from a zero-sum game view of the company. But there are true inefficiencies that may be solved by A that make B actually more likely. For instance, if A causes lower attrition and therefore training costs, it _may_ cause sufficient higher productivity across the board for every organization as a worker gets skilled and stays in his job for longer. And that increased productivity may manifest as better company performance. It is plausible that we could have A & B.
I didn't even consider the time-axis myself (implicitly assuming zero-sum) so that's a good objection.
What is the time frame for these claims? The last few years when the new minimum wages are coming in are also times of dropping unemployment. The area I live in has not been raising minimum wages any, and the local "minimum wage" has nevertheless become a de facto 11-12$/hour for zero-skill jobs just due to a tight labor market.
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.
The point I think is that the anti-increase people would have predicted that raising the minimum wage would be such a dire threat to business that it would decrease employment regardless of the wider economy.
Not exactly. If the market-clearing price for low-skill labor is already above the minimum wage, it will have no effect. If the market price is far below the minimum wage, it will have a large effect - positive for the workers with jobs, negative for the ones who are priced out or have their hours cut.
But there is an effect. We're telling people "you both want to enter into this contract, and there's nothing illegal or fraudulent about it, but if you do it, at least one of you is going to jail." That's morally indefensible.
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.
I haven’t read the article. Every discussion about minimum wage seems so murky and confusing I think it is overwhelmingly likely this article won’t increase my knowledge of the topic in a meaningful way.
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.
Even in the best markets for job-seekers such policies are not without downsides. In every city in America small long-running mom & pop and ethnic restaurants and shops are closing down in favor of two types of places that can afford to swallow the regulation-imposed economic deadweight loss: 1) Luxury hipster establishments that charge $20 for entrees and $10 for beers; 2) Fast food/fast casual chains dependent on leveraged buyout money.
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).
"The bottom line: Opposition to higher minimum wage laws is increasingly based in ideology and orthodoxy rather than real-world evidence, economists say."
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. 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.
I consider myself a fairly educated fence-squatter on this topic but I think it's too early to tell and any assessment is highly confounded by our central bank's actions. That said, I have talked with SF restaurateurs and they're very concerned (but this, too, is confounded by the "SF Employee Mandate" and by the effect of the tradewar on China's funding of US trade tourism (group reservations at SF restaurants are trending way down))...
Perhaps if they made the minimum wage a function of inflation, these shock changes wouldn't even be a blip on any company's collective minds? Set and forget.
That kinda defeats the purpose of inflation though. Part of why Keynes was in favor of some inflation was to diffuse the effect of sticky wages, if that's the case you don't want to ensure wages stay sticky via law.
To the degree that low value work activity cannot be outsourced to areas where the wage is more closely aligned with value, the “gig economy,” the “shadow economy ,” or firms small enough to be exempt from min wage then it will be supported by systems of cross subsidies best implemented by large corporations. The work will get done at a cost not too different from the value created. Outlawing low wage work is like outlawing drugs—it feels like the right intervention to folks who like interventions and like any barrier is only effective insofar as human ingenuity has limits.
It is a bit fast to claim that rich and full employment cities raising their minimum wage have no adverse effect, while it might have just compensated cost of living raising too.
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.
Peg it so full time hours is 3x the local 1br apartment rent, then it would make a difference for so many people currently working 60-80 weeks to live paycheck to paycheck, unable to save enough to even afford the proportionally massive upfront cost of moving to a cheaper area.
Ha. 3x the local 1br apartment rent would put minimum wage higher than my current salary as a software engineer in the bay area (granted, I'm a government software engineer, not a FAANG software engineer). I don't know how many localities this would work for, but given the comically high wage (~$55/hr) you would get in many bay area cities, I'm guessing it's not many.
Yikes. LA area those numbers look more like $24 an hour on average. Perhaps in exceptional places like the SF bay area it would make more sense to invest in large scale public housing projects, with rents capped to 1/3 full time at minimum wage.
I am not educated enough about the topic to pick a side about if higher wages will lead to less jobs, but from my perspective I would imagine the evidence to reveal itself in a recession, not the current economy.
I think part of this is linked to not being at market equilibrium in low skill jobs. For example there are over 6 million jobs not filled in America most of which are low skill, some of which are due to structural unemployment like server staff turnover after the busy season.
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.
The jurisdictions selected for study already had market labour rates near or above the new minimums, so the expected effect should be something approximating zero.
All it seems to prove is that the hikes haven't caused problems yet. And we'd better all hope that they don't, because it actually is impossible to lower the minimum wage, no matter what.
I really wonder if this narrative existed the last probably 30 times minimum wage was raised with (presumably) no adverse effects that I or anyone else can parse out. Yet the 31st time minumum wage is raised comes around, and an ominous cloudy fear falls over neoliberal news outlets. Funny how that works.
hmm this was the case Ontario, Canada. I am curious if they are counting people exiting job market or simply looking at unemployment rates. Personally I can certainly see how a small business can become unprofitable when forced to raise wages with it's employees simply disappearing off the market and stats due to skills/opportunities mismatch.
I think there's another explanation than the one given in the source article. And that's assuming the base claim is true (that the expected unemployment hasn't taken place). And that's a big assumption because I don't know much about this site but I see that its founders come from Politico so they might very well have a bias and want to agree with this result.
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%.
This is leftist propaganda. Increasing minimum wage pushes more people into poverty. The majority of people in poverty vote left.
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.
https://www.ctdol.state.ct.us/lweab/Doucougliagos%20&%20Stan...