States That Raised Minimum Wage See No Slow-Down In Job Growth

An anonymous reader writes: The U.S. Department of Labor has released data that some proponents of raising minimum wage are touting as evidence that higher minimum wage promotes job growth. While the data doesn't actually establish cause and effect, it does "run counter to a Congressional Budget Office report in February that said raising the minimum wage to $10.10 an hour, as the White House supports, would cost 500,000 jobs." The data shows that the 13 states that raised their minimum wages in January added jobs at a faster rate than those that didn't. Other factors likely contributed to this outcome, but some economists are simply relieved that the higher wage factor didn't have a dramatically negative effect in general.

Comments

Local testing works?

[Anonymous Coward]

So the federal government staying out of the way lets local laws be different and we can see if the changes are good or not? Then people can go to where the laws are how they like them instead of having bad ones forced on them at a federal level.

Its almost as if the whole system was set up like this so only the obvious non-controversial laws should be at the federal level and everything else should be local.
Screw that, its too hard to force your views on others in every location, they should just force eveything on a federal level without Congress so those people who don't agree with me don't get a say.

Re:Local testing works?

[BlueMonk]

Moving to the state whose laws work best for you may work for people who can move, but I expect the people affected by these laws are pretty closely representative of the set of people who can't move.

Re:Local testing works?

[CRCulver]

Then people can go to where the laws are how they like them instead of having bad ones forced on them at a federal level.

For one, not everyone wants to move. Many of the people who call for a hands-off federal government would be quick to emphasize the value of family and stable local communities. Conservatives everywhere deplore the brain-drain and family disruption that comes with people migrating away from an area for better work elsewhere.

But even when people want to move, there's a general expectation that things work more or less the same everywhere. Sure, there are still some cultural differences between large regions, but the US isn't 13 distinct colonies any more. If the American Revolution happened today in our hyper-connected world, there definitely wouldn't be the same call for devolution and autonomy as in the days of the Founding Fathers.

Re:Local testing works?

[Ol Olsoc]

Show me an area with a high minimum wage and I'll show you an area with a large illegal labor force making less.

I travel all around the country and that's a very constant result. If you want to increase wages then 1) invest in education, and 2) change Free Trade to Fair Trade.

Actually, why don't you show us? Give us the stats, man, or you're just one more trickle downer refusing to accept the idea that people who make some money, spend some money.

Re:Local testing works?

[rmdingler]

Not just for fun... cash for pelts augments my minimum wage income.

Re:Local testing works?

[BlueMonk]

I also wonder if some of our illegal labor problems could be solved if there were a law making an exception for illegal immigrant workers that required any employer caught hiring illegally to pay minimum wage to all such workers (with no option to lay them off or withhold payments until they found other work, returned home voluntarily, or the employer legitimately declared bankruptcy), and made those workers legal citizens to the extent that they would not fear reporting any employer paying them less than minimum wage. The goal would be not so much to improve or increase immigration (illegal or otherwise), but to deter illegal hiring by holding the employers participating in such practices responsible for the people they hire that way, if they haven't treated their employees fairly from the beginning (can't produce records of paying minimum wage for as long as evidence for employment exists).

Re:Local testing works?

[NicBenjamin]

How large is large?

I know places like NYC have lots of under-the-table employees, but almost none of them make less then the $8 an hour minimum wage because if you only make $5 an hour in Manhattan you starve to death. They're under-the-table because the employer does not want to pay Social Security and Medicare taxes, or do the paperwork required to issue a 1099. Most of the employers are actually upper-middle-class to rich employers who could easily do the paperwork, they simply don't bother because none of their friends bother.

I actually work at a Home Depot, which the anti-immigration activists are convinced means I know hundreds of Salvadoreans working for below the minimum wage. It just doesn't happen. It probably happened back in 2008, before the economy went to hell, but since then nope. It's probably much more common in areas with low (or no) minimum wages simply because the cost of living is low enough that somebody who is used to a lower-class standard of living in Mexico or Central America could get by on $6 an hour and still have enough left over to send a couple hundred a month home.

Re:Local testing works?

[captbob2002]

screw fines - passed along to consumer. JAIL TIME for those that hire the undocumented.

Re:Local testing works?

[Ash Vince]

Moving to the state whose laws work best for you may work for people who can move, but I expect the people affected by these laws are pretty closely representative of the set of people who can't move.

Even when people are supposedly more mobile, moving is a big thing for most people so they do not do it.

Here in the UK we had a 50% tax rate imposed on the very richest a few years ago. There were lots of stories about how this was going to drive away people who were successful abroad but in the end it made very little difference because while these sort of exceeding rich people might threaten to take their family somewhere else, but then when they talk to their wife and she refuses to move more than a 20 minute drive from her family and refuses to move the kids out of school and away from their friends.

A few years ago I wanted to move to the states as there were few companies that I could have worked for that might have appreciated a few niche skills I had picked up in their field. Although I would have been a ton financially better off in the states and we could have bought a much bigger house to start a family in than the 3 bedroom London house we have now, my wife would not have moved that far away from the family support. I could have explained how the US tax code would have benefited us until I was blue in the face but she simple wouldn't have cared enough to pay attention.

The idea that people will move is just a scare story that the rich use to try and maintain the ability to pay less in taxes or employers use to justify being able to pay as little in wages as possible.

Re:Local testing works?

[volmtech]

I grew up in a farming area in the 1950's. Before welfare blacks and poor whites picked the produce. They were the migrants, working South to North. After harvesting apples and potatoes in Maine and Vermont they went back to south Florida for the winter. After welfare they didn't need to do that so the growers who had depended on them made agreements with work crew leaders to bring in illegals.

Re:Local testing works?

[The Evil Atheist]

A strict libertarian would expect infrastructure to be paid for by user fees.

Which is what we call TAXES. That's why the GP is right to call it a fantasy. It is a fantasy to think individual user fees would be an efficient way of paying for widely used necessities.

a libertarian would be extremely opposed to slavery.

Libertarians that oppose the notion of a fair minimum wage is using slavery.

I used to be very libertarian. I'm not anymore because a healthy libertarian society requires people to be intelligent and rational,

And intelligent and rationality requires education on mass, which libertarians also don't want to pay for, making libertarianism a self-defeating system.

Re:Local testing works?

[Albanach]

Allow me to take these blinders off of you and show you the entire industry that is hiring illegals to pick your produce. In fact, do a search for "H2 workers" and be amazed by the wonders of our legal system.

You seem thoroughly confused. You talk about an industry of illegals and then suggest we look at those legally here on H2B visas as an example.

Are you suggesting that there's a huge amount of US workers just waiting to pick fruit and plant pine trees? And the only thing holding them back is that the minimum wage is too high?

Re:Local testing works?

[BarC0d3z]

The outlook that states the pie is only so large - if I get rich someone else has to get poorer - is a fallacy perpetuated by progressives to justify redistribution. It's simply not how our economy works. But it is an economic reality that increasing the minimum wage decreases profits which increases costs to the consumer. That being said, if we are going to have a minimum wage at all, it should be reasonable with adjustments for inflation.

I have no idea how you came up with the number 80% of Wal-Mart employees are on government assistance, but a report Wal-Mart: A Progressive Success Story, by Jason Furman - Obama's own advisor, states that the number of employees on public assistance is "in line" with other companies of its size.

During the depression there was a continual migration of low-income workers as they looked for work. My grandfather in any given week was a hard-laborer, shoe repairman, piano tuner, and musician at night traveling around the Midwest, gone for weeks at a time. He'd go where he could find work. Choosing to live in places with insane home prices or property / sales taxes when you're out of work should be motivation to relocate to a place that can support you and work is plentiful.

As an aside, there's plenty of above-minimum-wage jobs out there if you know where to look. The mikeroweWORKS foundation is a wonderful organization that promotes scholarships and training for those willing to work in skilled trades that are hurting for people.

Re:Local testing works?

[mysidia]

Why not got one step further - the fines imposed on the employer could be set at the difference between the actual wage earned and the (minimum wage + $1/hour).

Let's also set a higher than normal minimum wage for illegal/undocumented workers, a so called "employer penalty minimum wage" of 25% higher.

Also.... for each illegal: if the farm employer paid them in cash or cannot otherwise prove beyond a shadow of doubt any particular payment, then it shall be assumed the employer made every effort to defraud the employee of wages and hours worked and that the payment was actually $0, so the entire minimum wage is due fir the maximum conceivable number of hours the employee might have worked.

Similarly... if they cannot show affirmative documentation of the hours worked: then it will be assumed an illegally numerous 16 hours a day for every day since hiring. Burden of proof on the employer to show what was paid and how many hours or days the employee worked.

Re:Local testing works?

[Anonymous Coward]

in their [conservative] "we will only be wealthy when you are as poor as possible" outlook,

The idea that economics is a zero sum game where one person can only get rich if they make others poor is a Marxist viewpoint, not a conservative viewpoint. Economic conservatives recognize that the surest way to increase the wealth of as many individuals as possible is to promote wealth creation by maximizing economic freedom through low taxes, low regulation and strong protection of private property rights.

Why would you accuse conservatives of having Marxist economic views?

giving any employee any raise immediately causes the economy to fail,

Conservatives don't oppose giving employees raises. They oppose govt mandates that force businesses to pay employees above labor market rates.

and causes employers to throuw up their hands in defeat, and close their food stand, and we all starve to death.

Spare us your histrionics. Forcing businesses to pay employees a wage determined by politics will either 1) be irrelevant because the the minimum wage is set below labor market rates or 2) cost jobs and, if the minimum wage is set very high, cause businesses to close.

If you don't believe 2), then consider what would happen if the govt required all McDonald's employees to be paid at least $300/hr. How much would fries and a burger cost at McD's if every one of their employees were paid that much? Would you buy a McD's burger if it cost > $15? Of course, you wouldn't and no one else would either and so a $300/hr. minimum wage would kill businesses and jobs. A less extreme minimum wage would have the same effect although the magnitude would be smaller.

But then there's that little thing of places like McDonald's giving employees directions on how to apply for food stamps and other Government assistance. ... Sounds kind of like business based socialism to me.

The usual terms for this are "corporatism" and "crony capitalism", but, yes, you seem to have recognized a problem, although you have drawn the wrong conclusions. Govt creates the problem by setting up all kinds of handout programs and then taxes the snot out of companies in order to pay for the programs. Then you come along and complain that the same companies that are getting shafted with taxes and burdensome regulations shift some of their labor costs by paying their workers less and telling them to sign up for govt handouts. (Obamacare is by far the worst example of this, by the way, as everyone will see once it is fully in place and every company has dumped its employee health insurance plans.)

In a world of greater economic freedom, the govt would dramatically decrease regulations and taxes and roll back handout programs, the economy would thrive, more companies would be created, jobs would be plentiful and wages would be bid upward as companies competed for workers by offering higher pay. Sadly, the statists have control of the political system and the country is getting f***ed up because of it.

... WalMart, ... WalMart ...

WalMart is a great company and its employees are generally satisfied working there. Why the hate?

Re:Local testing works?

[ShanghaiBill]

JAIL TIME for those that hire the undocumented.

Jailing non-violent people is idiotic. America already imprisons more people than any other country. The solution to illegal immigration is to deal with the fundamental causes. Mexico is no longer a net source of immigration (as many Mexicans return home as arrive). The biggest net sources are Central American countries experiencing extreme drug gang violence, such as Honduras and El Salvador. Ending the drug violence will allow these countries to stabilize and create local jobs for their people. And the best way to do that is broad legalization, which is already successfully happening in Colorado and Washington. Other states will hold referendums on legalization this November. We should be jailing a lot less people, not more.

Re:Local testing works?

[The Evil Atheist]

typical socialist mind-rot.

Gotta love libertarian logically fallacious reasoning. Calling something a name constitutes an argument, apparently.

Here's the test - can you decline to pay the fee, and therefore to use the service? No? It's a tax.

Can you decline to use the service? Can you decline to use the economic benefits from having interstate highways? Can you decline to benefit from having clean water and safe food? Can you decline to benefit economically from a nationally enforced currency and social stability from a commonly applied law?

Actually, yes you can. You decline to use the service by leaving society. Don't like it? Tough. You can actually leave, and you won't pay taxes. So by your very own definition, they are just as much fees as any other fee.

Quality of life is not an entitlement and is only possible through joint investment from every member of society.

What is fair can only be determined by consensual transactions arrived at in a competitive environment.

Circular reasoning. By whose rules do you say that is the only possible definition of fair? Only if you buy into libertarianism do I accept those rules. I don't, so I don't.

Furthermore, what constitutes a "consensual transaction"? Under contract law, consent does not exist if made under duress. Someone who accepts a job way below minimum living standards because they are pressed to do so is under duress, yet that is what libertarians like you like to take advantage of. Or do you mean to restrict consent to the consent of the employer, and not the employee? Only consent matters for the poor put-upon employer?

Education is critically important, yes, which is exactly why we need a competitive market for it

A non-sequitur if there ever was one, and also a tautology because, again, you'd need to assume libertarianism to accept your conclusion. Why do Americans continually ignore the examples of Scandinavian and German public education, as though other people have not already figured out how to make schools valuable without introducing social darwinist forces into education?

You know the models of other countries are ALSO competition in principle, and your ilk's ideological and puritanical approach has failed compared to the competition. Like I said, your ilk's systems are self-defeating.

Re:Local testing works?

[Captain Segfault]

There's a large gap between the economy not being zero sum and an infinite pie.

Re:Local testing works?

[kosh271]

Are you suggesting that there's a huge amount of US workers just waiting to pick fruit and plant pine trees?

I would say for for a thousand bucks an hour, you'd have people lined up around the bloc to pick fruit and plant pine trees. (1000$/hr is a silly high wage, but it makes a point that higher wages will drive workers to a job)

The problem is that with the glut of ultra-cheap labor, the wages for picking fruit and planting pine trees has not increased enough to drive workers to these jobs. When a business utilizes the ultra-cheap labor, the only way for other businesses to match their competitor's prices is to also utilize the ultra-cheap labor. Businesses following the rules will struggle to get by and possibly close down - being unable to cut costs as much as the businesses that aren't playing by the rules.

Unless the government steps in and severely punishes the use of illegal immigrant labor, the problem will persist.

Re:Local testing works?

[guises]

Namely, our native poor aren't as desperate as they used to be.

Re:Local testing works?

[Rob Y.]

This whole attempt to steer the discussion to one of illegal immigration is a cute trick, but it skirts the real issue. The minimum wage (which hasn't been adjusted for inflation in decades) isn't enough for someone working 40 hours a week (whether picking fruit or stocking aisles at WalMart, etc) to live on without some form of public assistance. So either:

1) Accept this - and lobby for public assistance to make up the difference instead of against it.
or
2) Accept that the wage needs to be raised, because it's more important to the American ideal for a full time worker to be able to support themselves - if not themselves plus their children, than it is for employers to be able to squeeze every last bit of profit from their labor.
or
3) Admit that you're okay with America not being a place where all people who work can afford food, shelter and health care (i.e., perhaps not The Greatest Country On Earth (tm)).

But the point of the article is that the argument that 'raising the minimum wage will kill jobs' has been disproved. To continue to scream it is to lie. But many of those are the same ones still touting that 'lower tax rates raise revenue' - despite the fact that that's not really what the Laffer curve says - and experience shows that we're on the part of the curve where that's not true anyway. In other words, it's a lie, based on a fantasy and/or propaganda - in the face of actual experience that demonstrates the opposite. That letting gays marry will destroy marriage and hurt children. I could go on...

Re: Local testing works?

[guspasho]

It's called basic human dignity, and if you think working a full-time job should not by itself be enough to support oneself, you clearly do not believe in it.

Crazy

[drsmithy]

Economic activity is increased by more people having more money to spend ?

Inconceivable !

Re:Crazy

[Mr D from 63]

States with the healthiest job situations were the first to increase minimum wage.

Inconceivable.

Re:Crazy

[Overzeetop]

So the $600 pre-refund of taxes that Bush2 put in place (which made a negligible increase in per paycheck take-home) and the SS 2% rebate by Obama (which had a similar result) were useless? No, they weren't, they were identified as having an impact on the economy, even though the money wasn't even in consumers hands when it was announced/started.

Minimum wage has nothing to do with minimum ability. It sets a price floor for labor. The people who lose out are those just above the minimum wage floor who see their less skilled/experienced/tenured coworkers elevated to a higher wage while theirs remains stagnant. (This happened to me, btw, and it sowed a short period of discord in that company)

For businesses with very small margins, the costs will be transferred pretty much one for one. As the margin of the business increases, the cost will be passed on in a proportionally smaller magnitude. People are (almost) never hired because they're "cheap" but because work needs to be done to meet demand. Just as nobody hires people if their taxes go down, or fire people if taxes rise. Might it delay hiring? In some instances it makes greater efficiency more valuable, with businesses investing in machines (which are built by people) instead of people. However most of the time it's just a cost of production. If you need to make more silk shirts and the cost of silk goes up, you don't buy less silk - you buy as much as you need to meet demand.

Re:Crazy

[drsmithy]

Nonsense and propaganda. You cannot state anything until those increases actually kick in and are in effect for some time.

Actually I feel pretty confident stating that if more people have more money, economic activity will increase.

Minimum wage is actually minimum ability.

No, minimum wage is setting a floor on living standards.

It cannot extract non-existing money from small business, but it can prevent people with abilities that are below minimum wage from finding jobs.

If a business can't employ someone for minimum wage, then their business model is broken. They are basically saying that their product or service is of such little value, that people will not pay enough for it such that the workers involved in delivering that product or service can live a bare existence lifestyle.

Re:Crazy

[Ichijo]

Economic activity is increased when wealth is transferred from people who "hoard" money to people who put it right back into the economy as soon as they receive it.

Re:Crazy

[nctritech]

Unemployed college age kids appreciate your benevolence and your prevention of them becoming "gas station slaves." They are happy that you have made the choice for them to remain unemployed and "free," and they certainly will not read your comment and think "being paid something is better than being paid nothing and going nowhere in life." /heapsofsarcasm

Re:Crazy

[ranton]

States with the healthiest job situations were the first to increase minimum wage.
Inconceivable.

Well, it should be noted that only 5 of the states that raised the minimum wage this year have a Gross State Product per person above the national average (Connecticut, New York, New Jersey, Washington, Colorado). The other 8 have below average economies, but are still gaining jobs at a faster rate. Also if you look at the job growth in 2013, these 13 states may have outperformed the average by 0.065% but they are on track to beat the average by 0.3554% this year.

So it looks like these states do not have the healthiest job situations, but still performed better than those who did not raise the minimum wage (by this ridiculous metric that is).

A better metric is comparing how job growth is growing or stalling. The four states with the highest minimum wages are California, D.C., Oregon, and Washington, who all have minimum wages about $9 per hour. Of those four areas, job growth has slowed by 27% on average year over year (comparing June 2013 - May 2014 to June 2012 - May 2013). If you look at the four states with the lowest minimum wage (Arkansas, Georgia, Minnesota, Wyoming), their job growth has grown by 26% on average year over year. So if you want to compare the trend of job growth increasing or decreasing, it looks like raising the minimum wage does hurt significantly.

source

Re:Crazy

[drinkypoo]

So if you want to compare the trend of job growth increasing or decreasing, it looks like raising the minimum wage does hurt significantly.

What kind of jobs are being created? Are they minimum-wage jobs that you can't actually live on?

Re:Crazy

[sjames]

One huge beneficiary of food stamps is WalMart. Without food stamps, their workers would be half dead from malnutrition and would frequently die right there in the store (bad for business). That would force them to raise pay. Thanks to food stamps keeping their worker units alive for them, they don't have to pay so much.

So since WalMart isn't real commerce (being a huge welfare recipient), we should jettison it. Fortunately, by raising the minimum wage, we may yet salvage it as an actual contributor to commerce.

As for the comment about cleaners, good luck selling food in a filthy restaurant that gets closed by the health inspector. The fact is, you would be forced to stop mooching off of the food stamp program and actually paying a living wage if you want to stay in business.

Duh

[Anonymous Coward]

That is because the additional money goes back into the local economy and not into an offshore account.

Re:Duh

[BonThomme]

but who will speak for the unemployed Swiss Bankers?

Economists

[Intrepid imaginaut]

It's a bit baffling how "some economists" weren't fully cognisant of what would happen when the minimum wage was raised. I mean it's not as though it's the first time it has happened, the effects should be well known by now. Kind of reminds me of the old joke:

A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathemetician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says "What do you want it to equal?"

10.10 per hour

[rmdingler]

Although it still sounds a bit low for subsistence living, it's still better than what we have now.

Depending on where you live (state taxes?), that's at best a cool $350-$365 after payroll taxes (259-270 Euros) per week for a family of two to four.

After necessities like food, rent, electricity, phone, transportation, clothing, and so on, it's going to take some wicked budgeting skills to have any disposable income at all. Get it together Washington.

Re:10.10 per hour

[rmdingler]

Believe it or not, there exist poor people who are too proud to take the welfare. Imagine having to work two minimum wage jobs to make ends meet.

I am not supporting a hand out as much as a hand up, but if a person shows up to work everyday and does the job well enough to keep it,

he or she shouldn't have to apply for assistance to enjoy the basics of survival.

Re:10.10 per hour

[Nimey]

Just so. When the minimum wage is so low that one can't support a family on it without government aid, then government aid to the worker is effectively subsidizing the employer's business model; it's socialism for capitalists.

Was there really an increase?

[tomhath]

Nine of the 13 states increased their minimum wages automatically in line with inflation

In other words, in most states there was no increase. The minimum wage wage boost followed the economic growth.

9 States automatically increased

[Ngarrang]

Um, yeah, talk about misleading.

"Nine of the 13 states increased their minimum wages automatically in line with inflation: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington. Four more states - Connecticut, New Jersey, New York and Rhode Island - approved legislation mandating the increase"

Correlation really does not indicate causality when you read the entire article. North Dakota has an oil boom, which is spiking employment. Ohio still grew, despite a MW of $7.95. The whole complaint by the CBO was that jobs would be lost if MW was increased to $10.10 across the ENTIRE COUNTRY. In these 13 states, most are no where close to $10.10/hr.

Florida Best Performance.

[trout007]

The best performer is Florida which only raised it's minimum wage to keep pace with inflation by 14 cents/hr.

"The number of jobs in Florida has risen 1.6 percent this year, the most of the 13 states with higher minimums. Its minimum rose to $7.93 an hour from $7.79 last year."

In reality inflation is much worse for low income people in Florida so in real terms the minimum wage decreased for those people.

Re:Short-Lived?

[Ardyvee]

If you read the rest of the summary, they do make the note that while they can't say that that growth is the result of increasing the minimum wage, it doesn't negatively affect it either.

So what?

[Anonymous Coward]

In Germany the unemployment rate used to be higher 20 years ago, with industry-wide minimum wages, several protections against unfair dismissals and no short-term contracts. Unemployed people had generous allowances, that's also why companies had to offer decent wages for them to accept to work.

Now, after the neoliberal Hartz "reforms", the unemployment rate has decreased, but also the average real salaries for the newly employed, factory workers and employees. And workers' rights have dramatically decreased too. In general, the lower/middle classes' life quality has dramatically worsened.

People and the media must stop watching metrics like GDP, you need to look at its distribution instead, with the Gini Coefficient for example. I prefer a country with a GDP increase of 1% a year evenly distributed than one with a 3% GDP increase with the first tenth of the population having a 30% income increase and zero for the remaining 90%.

Give us back protectionism, big state-owned companies, the welfare state and "socialism", please. We don't like this alleged new "freedom" (of the rich from the poor).

Re:Short-Lived?

[Bengie]

When it pays more to be unemployed, just having jobs isn't enough, you need jobs that pay a livable wage.