Historically, when the minimum wage has increased, did overall levels of poverty go down? Or was there much effect?
Historically, when the minimum wage has increased, did overall levels of poverty go down? Or was there much effect?
I don't know the answer, but suggest it might be impossible to know as the methods of measuring what is or is not poverty are constantly changing (unlike the minimum wage).
More importantly, the majority of studies disprove the criticism that as min wage goes up companies lay off or dont hire.
Go into any fast food chain/walmart. The average worker is not a high school kid, but a 40-50 yr old.
Common sense should tell you that an additional $100 a week would go a long way for these people. And guess what! These same people turn around and have a bit more money to spend, and so other merchants benefit as well.
Obviously books and theses have been written on this subject, but the simple ,objective answer is that raising the minimum wage is a good thing.
A better question is do minimum wage changes decrease the amount of government aid handed out?
another canuck wrote:
The average worker is not a high school kid, but a 40-50 yr old.
BS.
You conveniently omit the class that has multiple children when they couldn't afford it, and complain employers aren't lining up to hire them at a high salary.
The same class that sucks up tax dollars paying for the kids they can't afford.
another canuck wrote:
More importantly, the majority of studies disprove the criticism that as min wage goes up companies lay off or dont hire.
Go into any fast food chain/walmart. The average worker is not a high school kid, but a 40-50 yr old.
Common sense should tell you that an additional $100 a week would go a long way for these people. And guess what! These same people turn around and have a bit more money to spend, and so other merchants benefit as well.
Obviously books and theses have been written on this subject, but the simple ,objective answer is that raising the minimum wage is a good thing.
Everything you say could not be more wrong. But just think about it very simply like this. If the minimum wage goes up to $15 - the McDonald's employee/recipient of the huge wage increase will of course have much more money. But almost everywhere he or she goes he or she will have to pay much more money - because all the former $7 an hour employees at Taco Bell, Starbucks, Cineplex, Exxon gas station have now had their salaries DOUBLED - and each of those stores will have to raise their prices considerably to pay for the huge wage increases. So the McDonald's employee will now pay $8 for a STarbucks, $4 for a burrito, $18 for a movie ticket and $5.50 for a gallon of a gas.
There was no one around to confuse the issue by telling me that I was somehow “entitled” to what other people had produced, whether at the expense of the taxpayers or the employer.
There was a minimum-wage law, even back in those days. But it had been passed 10 years earlier, and inflation had raised both prices and wages to the point where it was the same as if there were no minimum-wage law.
Thank heaven! The unemployment rate among black teens back then was a fraction of what it would become in later years, after “compassionate” politicians repeatedly raised the minimum-wage rate.
In 1948, the year I left home, the unemployment rate among black 16-year-olds and 17-year-olds was 9.4 percent, slightly lower than that for white kids the same ages, which was 10.2 percent.
Over the decades since then, we have gotten used to unemployment rates among black teenagers being over 30 percent, 40 percent or in some years even 50 percent. Such is the price of political “compassion.”
Whatever the good intentions behind minimum-wage laws, what matters are the consequences.
another canuck wrote:
More importantly, the majority of studies disprove the criticism that as min wage goes up companies lay off or dont hire.
Another thing you conveniently leave out is who exactly is behind this "movement".
Of course the politicians are pandering for votes, but the unions are as usual the biggest scumbags.
During the "protests" a couple weeks ago I got the urge for a burrito and noticed all the fast food joints were fully staffed. I asked the girl that took my money at the burrito joint and she said "that's the union protesting and they hired other people to be out there".
So it became crystal clear, the union (SEIU) is fully behind the "movement" so they can unionize these morons.
do yourself a favor, don't be so naive in your analysis of the situation.
they raised the minimum wage in Seattle to $15/hr. Not sure how long ago that was, but it was this year. It might be too early to extrapolate data from that, but I think in time we'll be able to look at Seattle as an "experiment" to see what affect raising the minimum wage to $15/hr actually has in practice and not just in theory.
Does anyone know what results have come out of Seattle so far regarding this?
vbas wrote:
another canuck wrote:More importantly, the majority of studies disprove the criticism that as min wage goes up companies lay off or dont hire.
do yourself a favor, don't be so naive in your analysis of the situation.
"The majority of studies disprove the criticism that companies lay off as min. wage goes up" - please provide some of these studies or you just making stuff up willy nilly? Take a small ma-and-pop operation. Do you know that 90% of new businesses go belly-up the first year from lack of capital. And a small business struggling to pay its expenses will have its employees wages DOUBLED and they will pay those increased wages without laying people off?? Really?
Good post. Liberals were not always unanimously in favor of the minimum wage the way they are today. There used to be a time when many liberals opposed minimum wages for the very reason quoted above: it makes it harder for many people, especially minorities and young people, to get a job. This isn't to say there aren't benefits to raising the minimum wage but the costs are substantial and too often ignored.
I don't think it really matters. The corporations will raise the price of goods to cover the additional expense. The buying power remains roughly the same.
Of course the cost of goods has been increasing for years without a bump in wages, but any excuse to price gouge.
The minimum wage hasn't really been "raised" with respect to inflation. Minimum wage is also a driver of inflation. So, in a way, it doesn't have much effect.
The voluminous literature on minimum wages offers little consensus on the extent
to which a wage floor impacts employment. For both theoretical and econometric
reasons, we argue that the effect of the minimum wage should be more apparent in new
employment growth than in employment levels. In addition, we conduct a simulation
showing that the common practice of including state-specific time trends will attenuate
the measured effects of the minimum wage on employment if the true effect is in fact on
the rate of job growth. Using three separate state panels of administrative employment
data, we find that the minimum wage reduces net job growth, primarily through its
effect on job creation by expanding establishments. These effects are most pronounced
for younger workers and in industries with a higher proportion of low-wage workers.
The question of how a minimum wage affects employment remains one of the most widely
studied – and most controversial – topics in labor economics. During the recent recession,
the employment rate for younger or low-skilled workers (who are more likely to be paid
wages at or close to the minimum) worsened disproportionately, and following the recession
the unemployment gap based on education remains large (Hoynes et al., 2012; United States
Bureau of Labor Statistics, 2013). A more conclusive understanding is needed of the effects
of the minimum wage if it is to be evaluated alongside alternative policy instruments as a
method of increasing the standard of living for low-income households. Moreover, in recent
years a number of states have indexed their minimum wages to adjust for inflation, and –
despite growing state and federal pressure to continue this practice – there is little evidence
on how inflation indexing might alter any effect of the minimum wage.
To date, nearly all studies of the minimum wage and employment have focused on how
a legal wage floor affects the employment level, either for the entire labor force or a specific
employee subgroup (e.g. teenagers or food service workers). We argue that, in a Diamond
(1981)-type worker search and matching framework, an effect of the minimum wage should
be more apparent in employment dynamics – that is, in the actual creation of new jobs by
expanding establishments and the destruction of existing jobs by contracting establishments.
Diamond argues that transitions to a new employment steady state may be slow, such that
it may take some time for any effect of the policy to be visible in the employment level.
The question of how a minimum wage affects employment remains one of the most widely
studied – and most controversial – topics in labor economics. During the recent recession,
the employment rate for younger or low-skilled workers (who are more likely to be paid
wages at or close to the minimum) worsened disproportionately, and following the recession
the unemployment gap based on education remains large (Hoynes et al., 2012; United States
Bureau of Labor Statistics, 2013). A more conclusive understanding is needed of the effects
of the minimum wage if it is to be evaluated alongside alternative policy instruments as a
method of increasing the standard of living for low-income households. Moreover, in recent
years a number of states have indexed their minimum wages to adjust for inflation, and –
despite growing state and federal pressure to continue this practice – there is little evidence
on how inflation indexing might alter any effect of the minimum wage.
To date, nearly all studies of the minimum wage and employment have focused on how
a legal wage floor affects the employment level, either for the entire labor force or a specific
employee subgroup (e.g. teenagers or food service workers). We argue that, in a Diamond
(1981)-type worker search and matching framework, an effect of the minimum wage should
be more apparent in employment dynamics – that is, in the actual creation of new jobs by
expanding establishments and the destruction of existing jobs by contracting establishments.
Diamond argues that transitions to a new employment steady state may be slow, such that
it may take some time for any effect of the policy to be visible in the employment level.
To implement our analysis, we use a state panel difference-in-differences approach in
which we allow for state fixed effects, region-by-time period effects, and state-specific time
trends. We examine effects of the minimum wage on employment dynamics and levels
using three administrative data sets: the Business Dynamics Statistics (BDS), the Quarterly
Census of Employment and Wages (QCEW), and the Quarterly Workforce Indicators (QWI).
These data sets vary in their strengths and weaknesses (discussed at length below), but
together they encompass a long (1975-2012) panel of aggregate employment metrics for the
population of employers in the United States.
Our findings are consistent across all three data sets, indicating that job growth declines
significantly in response to increases in the minimum wage. However, we do not find a
corresponding reduction in the level of employment, particularly in specifications that include
state-specific time trends. For reasons discussed below and illustrated in our simulation
exercise, we view this null effect for the employment level as neither surprising nor likely to
be an accurate reflection of the effect of the minimum wage. Additionally, we decompose
the negative net effect on job growth and find that it is primarily driven by a reduction in
job creation by expanding establishments, rather than by an increase in job destruction by
contracting establishments. These are among the more policy-relevant outcomes related to
employment: the change in the number of jobs in the economy, rather than, for instance,
the turnover of individuals within existing jobs.
We perform numerous robustness checks to test the vallidity of our identification strategy,
which requires that the pre-existing time-paths of outcomes for states which increase their
minimum wages do not differ in an off-trend manner relative to states that do not see an
increase. We evaluate this possibility in Section 5.4 by including leads of the minimum
wage into our specifications; if increases in the minimum wage showed a negative effect on
employment dynamics before their implementation, this would suggest that the results are
being driven by unobserved trends. This is not the case. Indeed, for our results to be
driven by confounders, one would have to believe that increases in the minimum wage were
systematically correlated with unobserved shocks to that state in the same time period, but
not other states in that region, unrelated to existing state-specific time trends, and that
these shocks are not reflected in measures of state-specific demographics or business cycles.
Our results are additionally robust to varying the specifications to account for finer spacial
and temporal controls, the recent financial crisis, and inflation indexing of state minimum
wages, as well as across different panel lengths and time periods.
Up. But it has to be a concerted effort between labor and industry. Henry Ford single handely invented the consumer revolution when he jacked up wages to $5 per day but he coupled the raise with a very strong suggestion that employees use most of the funds to buy a Ford car for the family. Likewise jacking up the minimim wage for fast food employees should be coupled with massive upgrades to the fast food industry, moving forward robotics, self-service kiosks, just-in-time distribution, smart phone ordering, etc. Just simply jacking up wages will destroy the franchise sector of the fast food indistry. Moms and Pops will return and can be profitable if they incorporate automation. The bottom line is, competition is enhanced, technology advances, and more jobs are created, with an increase in the minimum wage for fast food workers.
It's been a while, but if this were my econ 101 exam, this is what you would write:
In the short-term, a minimum wage increase transfers money from owners (capital) to employees (labor). This may lead to a short term increase in consumer spending in the region, possibly increasing aggregate utility. However, the increase in consumer demand will likely be offset over the medium term by price increases (i.e. inflation) unless new producers enter the market to increase supply to match the higher demand. This is unlikely given the relatively higher cost of labor.
Over the medium term / long-term, owners will decrease the number of employees by: 1) becoming more efficient, 2) moving operations somewhere else, 3) shifting from labor intensive practices to capital intensive practices (e.g. use machines instead of people); 4) ceasing operations because the enterprise is no longer profitable.
In conclusion, manipulation of the labor market by increasing minimum wage creates lower employment because a lower quantity of employers are willing/able to pay the higher wage. Overall, the region is worse off because of dis-equilibrium in the labor market and the resulting deadweight loss.
agc5k wrote:
they raised the minimum wage in Seattle to $15/hr. Not sure how long ago that was, but it was this year. It might be too early to extrapolate data from that, but I think in time we'll be able to look at Seattle as an "experiment" to see what affect raising the minimum wage to $15/hr actually has in practice and not just in theory.
Does anyone know what results have come out of Seattle so far regarding this?
Seattle, or individual cities, raising their minimum wage makes far more sense than increasing a national minimum wage. Cost of living and unemployment levels vary so greatly depending on where you are, it's extremely difficult to set one number that makes sense in all places. The minimum wage level that makes sense in Seattle or NYC is very different than the one that makes sense in small town Alabama.
another canuck wrote:
A: [T]he majority of studies disprove the criticism that as min wage goes up companies lay off or dont hire.
B: [O]bjective answer is that raising the minimum wage is a good thing.
A: So, you think those self-serve checkout counters at the grocery and drugstore--and the auto-order kiosks at certain fast-ish food restaurants--are related to this issue?
B: Yes, for the makers of automated, labor-replacing solutions
Other beneficiaries: Automated grape sorters in Cali (yep: 24/7, never on strike--and BETTER at sorting); automatic tree-shakers/harvesters; automatic TRASH data (Enevo One, bay-bee!), automated made-to-measure clothing, 3-D printers for orthotics, robot LASIK and heart surgery.... Yep.
More on automation:http://www.aei-ideas.org/2014/09/realistically-wouldnt-a-15-per-hour-minimum-wage-significantly-accelerate-automation/
Min wage as compulsory unemployment (min wage CREATES no jobs, but it sure does OUTLAW some):
http://www.aei-ideas.org/2014/03/murrary-rothbard-on-the-minimum-wage/Former Enron consultant Paul Krugman here:
http://www.aei-ideas.org/2014/09/paul-krugman-on-the-minimumliving-wage-1998-vs-2014/Heart-warming story of a young boy in need of a prosthetic arm. Such prostheses used to cost up to $40k -- and employ a number of skilled technicians. They now can be printed for $50, putting skilled orthotic technicians increasingly in jeopardy of LOSING THEIR LIVING WAGE!
You know, local shops in my town are upping their game, focusing on customer service or custom work--things that Amazon can't deliver via drone. Why? They don't want to be replaced--and they want to earn money.
You know, I worked in a min wage factory one summer; know what I learned? STUDY HARD!
Min wage jobs are to get your foot in the door: they don't pay a so-called living wage because you aren't SUPPOSED to raise a family flippin' flippin' burgers.
Coupla good quotes:
"An average quick service restaurant spends $13k every year on LABOR for the production of hamburgers. Not only does our machine ELIMINATE NEARLY ALL of that cost [aka jobs], it also OBVIATES the associated MANAGEMENT HEADACHES [aka min wage activists].
and
"Because we have ELIMINATED line cooks, we have also eliminated the kitchen."
Why?
"Because of the MONEY SAVED through OBVIATED LABOR and reduced real estate needs of the kitchen, the restaurant can SPEND MUCH MORE on HIGH QUALITY INGREDIENTS and CUSTOMER SERVICE than a competing restaurant [e.g., strike-sufferin', tax-dodgin', Warren Buffet's ownin' BURGER KING].