OOTH, it's not as if one of the Berkeley author, Michael Reich, was a long time socialist. From https://en.wikipedia.org/wiki/Michael_Reich:
In 1968, while in graduate school, Reich was a founding member of the Union for Radical Political Economics (URPE).[5] In doing so, as Reich describes in a biographical compilation piece (A Biographical Dictionary of Dissenting Economists),[3] he helped "to organize an influential circle of radical economists." URPE’s agenda, as described by a spokesperson for the group, is to:
"support an American version of socialism, with public ownership of production and a government-planned economy to meet social needs rather than the needs of private profit."
So he's very clearly biased toward proving minimum wage increase's success.
We need to make the EITC (Earned Income Tax Credit) much more generous, removing the necessity for higher minimum wages to fix our demand issues. The EITC has better knock-on effects in terms of increasing competition for labor and serves as an employment subsidy for many small businesses that would, otherwise, not employ anyone. Plus, it is much, much easier to get a "10,000ft view" of the employment/demand situation at the Federal level, as opposed to a hodge-podge of local initiatives.
The EITC is a great tool for efficient re-distribution of resources to working Americans on the lower rungs of the economic ladder. It's efficient and we can turn the knobs to adjust it as necessary to fit our needs, such as not being as generous to teenagers that live in an existing household (something that minimum wage increases do not account for).
The only downside to the EITC is the once-a-year aspect to the distribution. It would probably be wise for us to develop a more reliable distribution of the money so that it provides a more even boost to the worker's regular paycheck.
Oh boy. Time to read another page of comments written by people who think that price elasticity is always linear and that markets are always efficient!
I'm more or less sympathetic to the idea that the Seattle minimum wage experiment can be having negative effects. Card/Krueger has to have a limit somewhere, and I suspect certain jurisdictions are approaching or exceeding that limit.
That said, excluding multi-location employers from a minimum wage study just seems to me to be so obviously flawed as to border on pure dishonesty.
I'm truly curious how things like this happen. Did UW publish this as a reasonable study with limited findings only to find the press massively misreported it? Or did the desire for media coverage lead the researchers to overstate the findings just to get in the press? I personally don't think political bias drove this. It looks like researchers at UW made a perfectly reasonable small limited study that added a small amount to our knowledge, but then either the researchers or the university or the press advertised it as an exhaustive answer to a complex question.
Two good marginal revolution posts on this: http://marginalrevolution.com/marginalrevolution/2017/06/sea... && http://marginalrevolution.com/marginalrevolution/2017/06/min...
"You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation." - Henry Hazlitt
What do the models say? I'm not an economist but I always feel like decisions and debates like this are based mostly on people's limited ability to reason about a very complex system (and probably more so, their biases and personal interests).
A minimum wage is likely to have a complex and unexpected impact. So what can be modelled? What experiments have been done where we can simply observe the impact?
Also what are the goals and how are they prioritized? Do the rights of wealthy individuals to keep every penny of their earnings outweigh (I hate that I can't use 'trump' anymore) a societal goal of eliminating poverty or making sure the poor have a decent standard of living (health care, education, safety, etc)? Obviously everyone wants both these things (right?) but how are the weighted?
Aaagghhh!! (Our world is so far away from anything sane I just can't stand it this morning.)
Short version. A member of the San Jose teacher's association thinks one of two academic studies is wrong, because... we already have a consensus.
The one point raised in the article about multi-site employers is acknowledged by the article's favored Berkeley study: "some multi-site businesses report payroll and head counts separately for each of their locations, while others consolidate their data and provide information as if their business operated only at a single location."
Oh and by the way: "This report was prepared at the request of the Office of the Mayor of Seattle."
http://politicalcalculations.blogspot.com/2017/06/the-most-s...
If you'd like some real criticism of the UW study, the author of the Berkeley one has published a letter which goes over a lot of the methodological problems.
http://irle.berkeley.edu/files/2017/Reich-letter-to-Robert-F...
Here's the best points, I'd say the UW study is quite problematic.
The UW report excludes multi-site businesses from its dataset, which removes 48 percent of Seattle’s low-paid workforce out of their study.3 This major exclusion raises a big red caution flag about the representativeness of their sample and therefore about the interpretation of their findings. Yet the UW report provides essentially no evidence that their sample is representative of all jobs in Seattle and Washington.
In the UW data set, workers who leave a single-site business for a multi-site business to benefit from the higher wage mandate or because they received a better offer are not counted in the wage gains, but are counted in jobs lost. Seattle's policy essentially sets a higher minimum wage for all multi-site businesses, counting them as large employers.4 The exclusion of multi-site businesses, which is not standard in studies that use these data, may therefore create major biases in their results. Of course, some employees may move from multi-site businesses to single site businesses, but this mobility direction is likely to be smaller. It is not possible to estimate the size of this bias without access to the underlying data.
The UW report focuses only on jobs that had paid less than $19, which surprisingly is much too low. Table 3 of the UW report indicates that the number of jobs paying under $19 in all single-site businesses fell by about 6000 between 2014 and 2016. Yet the number of single-site jobs at all pay levels in Seattle increased by about 44,000 in the same period. This pattern of average higher pay and more employment appears also in food services: a decline of about 150 jobs paying under $19 from 20014 to 2016 and a simultaneous increase of about 4,500 jobs in all pay levels at single-site food service establishments. These numbers represents very good news: Seattle’s pay levels and job numbers both went up, at least among single-site businesses. We want to know, though, how much of this upgrading in overall pay and employment at all pay levels can be attributed just to the minimum wage policy.
The UW report nonetheless finds an unprecedented impact of wage increases on jobs, ten times higher than the average in 942 published minimum wage and non-minimum wage estimates, and triple that of minimum wage critic David Neumark
Thrilled that Seattle is giving this a try. Great that it's being analyzed so other areas can learn from and improve upon.
> It’s not entirely clear why the University of Washington team gets such a weird result — since their data isn’t public, we can’t check it — but it’s worth noting at least two important issues with their study.
I cannot understand how economic studies are supposed to be credible when the data they use is not provided along with their methodology.
Is this for privacy reasons? If so, surely we can come up with obfuscation standards?
The UW researcher, Jacob Vigdor, whose research is dismissed in this article, has responded to common criticisms in this interview: https://www.seattlemet.com/articles/2017/6/26/what-should-we...
words missing from this article: 'delivery', 'outsource', 'manufacturing', 'offshore', 'manual labor'.
Seattle is the headquarters of starbucks (low-wage high-labor coffee shipped from overseas) and amazon (manufactured goods shipped from wherever). They can raise the minimum wage because a big piece of their economy is already happening elsewhere.
If I'm not mistaken the new minimum wage is not yet fully implemented and small businesses got a temporary reprieve.
As to WaPo: the new release of Google News finally lets you ban the news sources you don't like. After removing WaPo, HuffPo, CNN and NY Times, my news feed is borderline useful again. Thank you, Google!
My take away has been that it is not clear beyond doubt that higher minimum wage is better in the long run. If both the studies had agreed that it is better, yes, it makes sense to enthusiastically adopt it. However if studies have results that dont match, then I think there is a reason for caution.
As far as what I understand, only Seattle adopted higher minimum wage, now many people with that minimum wage can get services (may be not directly, but in the supply chain) from other states which don't have the minimum wage which can give the impression that their life has improved. However, if the whole country adopts it, the parameters of that might be different.
I hope somebody sheds a light on wage dilution as well. If somebody was incentivized to learn a skill that pays them 20$ an hour, will that incentive still be there?
I'm more of an UBI fanboi, but it seems MW is working, at least here in Germany.
Turns out, most jobs that had wages below MW were still lucrative for the companies even when paying 8,84€/h
This reminds me of: http://slatestarcodex.com/2014/12/13/debunked-and-well-refut...
There's a complicated issue where theoretical predictions go one way and empirical evidence is mixed. Result: everyone looks at the studies that suggest they're right, and claims that they "debunk" the studies that suggest they're wrong. You get to look at all the weaknesses of the studies you don't like, and ignore the weaknesses of the studies you do like.
In this case of course the UW study was commissioned several years ago by the city of Seattle. Then, apparently, in mid-June, after seeing the results of the UW study (but before they were publicly released), the mayor of Seattle commissioned this second study, this time from UC Berkeley's IRLE.
(Why the IRLE? It certainly couldn't be because their previous work suggests that they very strongly believe the minimum wage has no disemployment effect.)
The IRLE's study said the minimum wage increase had no disemployment effect. Whew. Debunked and well refuted!
Just for fun, you can use this handy guide to see which study has been refuted:
- if you want the minimum wage to increase, then excluding multi-location businesses from their analysis obviously damns the UW study, and proves that their results can be ignored.
- if you don't want the minimum wage to increase, then including only food-service jobs in their analysis obviously damns the Berkeley study, and proves that their results can be ignored.
This is a hack job, an out-and-out piece of propaganda trying to dismiss a study the author doesn't like the conclusions of.
> First, their data exclude workers at businesses that have more than one location; in other words, while workers at a standalone mom-and-pop restaurant show up in their results, workers at Starbucks and McDonald’s don’t.
The UW report actually discusses this:
> Multi-location firms may respond differently to local minimum wage laws. On the one hand, firms with establishments inside and outside of the affected jurisdiction could more easily absorb the added labor costs from their affected locations, and thus would have less incentive to respond by changing their labor demand. On the other hand, such firms would have an easier time relocating work to their existing sites outside of the affected jurisdiction, and thus might reduce labor demand more than single-location businesses. Survey evidence collected in Seattle at the time of the first minimum wage increase, and again one year later, increase suggests that multi-location firms were in fact more likely to plan and implement staff reductions. Our employment results may therefore be biased towards zero.
It's irresponsible to criticize the report for not including multi-site employees without mentioning the conclusions of this survey data.
> Second, the University of Washington team does not present enough data for us to assess the validity of its “synthetic control” in Washington — that is, the set of areas to which they compare the results they observe in Seattle.
The synthetic controls are probably the most complicated part of the report, and the part that seems the most open to criticism. But the UW report used two different controls for for changes in employment, and both of them lead to similar conclusions about the effects of the minimum wage. It's possible that there are other synthetic controls that yield different results. The WaPo article says that the "Berkely researchers take a better approach" to synthetic controls, but doesn't note that the UW study can't use that approach because the data that enabled the UW study isn't collected nationally.
Also, saying "the new studys' findings are out of step with a large body of research" ignores that the UW paper duplicated the findings of that large body of research, and discussed how the more expressive dataset they had (being able to actually identify low-income workers instead of using a proxy like "restaraunt workers" or "teenagers" is the biggest difference between this and other studies) leads them to different conclusions. And saying the UW study has "important limitations," but not saying the same thing about the Berkely study, which was only able to look at workers in one sector (restaraunts), is a pretty clear indicator of where the author's sympathies lie.
Some considerations of the minimum wage movement:
1) The higher it gets the more likely and quicker the minimum wage jobs will be replaced by AI/robots/automation.
2) The cost gets passed on to the consumer. So if everything costs more and everyone is paying more in taxes, that's not good either. Some companies may keep prices the same and take from profits, but the lower the margins, the less attractive creating and running a business becomes.
3) What works in one area like Seattle won't necessarily work across the country. There has to be a sweet spot in each area and we have to be honest with ourselves to say that the feel-goodness of a higher minimum wage does have its limits. And that limit is what we are debating. We don't need to do a study to know that a $50/hr minimum wage is unreasonable.
In any given city, what minimum wage provides fairness for individuals, businesses AND the local economy as a whole? And how can we develop a model framework for cities across the country to use?
The minimum wage is always $0
Very confused wapo published this https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-s...
I feel one of the real issues is incentivizing publicly traded companies to beat pressure from Wall street to keep cutting costs and workers be damned attitude. It might be worthwhile to experiment $30 per hour wages for all publicly listed and big companies, including temp workers. Overall it is better for someone to work 4h at $30 instead of 8h at $15.
Next week there will be a study refuting the MIT study, then another refuting that study, back and forth. It seems no matter the study academia publishes, and how much it is lauded for its clarity, breadth, and quality, another study will come along ripping it to shreds that another group will heap praise upon.
The average home price in Seattle is over $670,000.[1] This requires a salary of $182,000 per year [2] or $87.50 dollars per hour. At $15 per hour, a full-time worker cannot afford a house in Seattle. Therefore, to avoid the injustice of a homeless, full-time worker, the minimum wage should raised to at least $87.50 per hour.
[1] https://www.zillow.com/seattle-wa/home-values/ [2] https://www.redfin.com/how-much-house-can-i-afford?utm_sourc...
Until you start seeing low-income people in Seattle and around the country taking to the streets to demand lower minimum wages, don’t listen to anyone who tries to tell you otherwise.
The article ending on this note kind of soured the whole thing. The average person will be perfectly okay with higher wages so long as they don't take into account things like inflation and other knock-on effects - and most won't, because those effects are subtle over time.
The money's gotta come from somewhere at the end of the day. And if the company doesn't want to or can't raise prices (franchises are especially hit by this, since a lot of their pricing flexibility is dictated by a corporate office), the next thing to be cut will always be labor.
"There's lies, there's damned lies, and then there's statistics..." Mark Twain
Very confused wapo published this: https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-s...
Frankly, I'll be happy when the US gets out of this mandatory tipping culture BS.
A lot of people are getting fired due to increased minimum wage. The employers will take their money and pay it to you and me to build automated solutions that do what the now-too-expensive people once did. That's what McDonalds is finally doing with self-order kiosks.
5000 fewer jobs, not in the article is it?
the min wage hurts low skilled workers. period.
Didn't realise so many HN commenters were anti-minimum-wage
Whether any government mandated minimum wage boost "works", depends upon who you are. Who benefits from it?
If you are currently in a minimum wage job, you may benefit. You're making more money, because the government says so! (But your employer might just decide wage costs are too high and lay you off...)
If you are unemployed and looking for a minimum wage job, the bar just got raised. The higher the minimum wage is set, the harder employers look at how badly they need the work done. The job they might be willing to pay $10/hour for might not be worth $15/hour to them. Your quest to get a minimum wage job just got harder.
And if you are willing to accept less money, because some money is better than none, it doesn't help you, because employers aren't legally permitted to pay you less, even if you would be happy to accept it. So you likely get a substantial underground economy of "off the books" employees, getting paid in cash that doesn't get reported to the government. And those folks may actually take home more than minimum wage employees because taxes don't get deducted from their wages.
(I live in the NY metropolitan area. I see a lot of that. And there are employers who would pay the higher minimum wage, but the employees don't want to be on the books. Many are undocumented aliens, and being on the books leaves a trail pointing to them and possible deportation.)
If you are the government that mandated the higher minimum wage, you might not benefit financially, because the amount of taxes you see is less than what you might see if minimum wage was lower and more people had minimum wage jobs. (Of course, for government who do this, it's about getting votes, and impact on tax revenue isn't a consideration.)
And bear in mind that what the employee gets in a minimum wage job is rather less than what the employer has to spend. The employer must deduct and remit taxes, and must maintain the appropriate records for legal purposes, and that costs money.
Ultimately, "it takes two to tango". There must be workers looking for minimum wage jobs, and employers offering them. The government can't require employers to hire workers they don't need, and increases in minimum wage will tend to decrease the number of minimum wage jobs available.
Ultimately, minimum wage increases have the effect of decreasing total employment, but this seems to get missed in such discussions.
The goal of minimum wage increases is to insure workers can make a survivable income. But value is relative - something is worth what someone else is willing to pay for it, and that includes the worker's labor. Minimum wage jobs are minimum wage for a reason. They are low skilled/unskilled labor, and what the worker does simply isn't worth that much to those who need it done. What the minimum wage folks need is to be able to acquire the knowledge and skills that are worth more to employers and be able to get better jobs. Increases in minimum wage by themselves don't aid that.
We are seeing all sorts of commentary elsewhere about job losses to automation. The only reason many minimum wage jobs still exist is because it's more expensive up front to automate them than employers want to spend. At some point, minimum wage boosts might just make it worth the employer's while to spend the money needed to automate those jobs. Then what do the job seekers do?
The existence of this Washington Post article was determined yesterday by the existence of an article critical of Seattle's minimum wage in the Wall Street Journal. Andrey Markov is sleeping soundly in his grave.
Welcome to the modern news cycle, where alternative realities are only a click away! Sit back and enjoy your daily deluge into the fantasies of some revenue-pressured writer seeking to capitalize on the latest zeitgeists us citizens consume each day as if they are fact.
WaPo is being contradicted by a recent report from the National Bureau of Economic Research...
https://evans.uw.edu/sites/default/files/NBER%20Working%20Pa...
"Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016"
Convenient of this article to ignore that the Berkley study only looked at food service workers while the UW study looked at a much wider range of jobs than previous studies.
I'm sickened by my "pro science" party rushing to ignore results that don't agree with our ideological intuitions. Obviously the UW study has flaws. Let's give economists a little time to figure out WHY the results are so different from previous studies before we draw any conclusions.