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Seattle Minimum Wage Study Has Serious Flaws (washingtonpost.com)
"Remember the story from last week about how the new Seattle minimum wage law was hurting workers?" writes Slashdot reader PopeRatzo. "Well, it turns out that there are some problems with the study's methodology." The Washington Post reports:
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. Almost 40 percent of workers in Washington state work at multi-location businesses, and since Seattle's minimum wage increase has been larger at large businesses than at small ones -- right now, a worker at a company with more than 500 employees is guaranteed $13.50 an hour, while a worker at a company with fewer than 500 employees is guaranteed only $11 an hour -- these workers' exclusion from the study's results is an especially germane problem (note that low-wage workers in Seattle have had an incentive to switch from small firms to large firms since the minimum wage started rising).
In earlier work, in fact, the University of Washington team's results were different depending on whether these workers were included in their analysis; including them made the effects of the minimum wage look more positive. 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 Seattle labor market is not necessarily comparable to other labor markets in the state, and given some of the researchers' implausible results, it's hard to believe the comparison group they chose is an appropriate one.
Suggesting Seattle's booming labor market may have skewed the study's results, two nonpartisan economists concluded it "suffers from a number of data and methodological problems that bias the study in the direction of finding job loss, even where there may have been no job loss at all." And the Washington Post also notes the researchers' findings are suspiciously "out of step with a large body of research," including another study from U.C. Berkeley researchers [PDF] which determined Seattle's wage increase "is having its intended effect."
In earlier work, in fact, the University of Washington team's results were different depending on whether these workers were included in their analysis; including them made the effects of the minimum wage look more positive. 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 Seattle labor market is not necessarily comparable to other labor markets in the state, and given some of the researchers' implausible results, it's hard to believe the comparison group they chose is an appropriate one.
Suggesting Seattle's booming labor market may have skewed the study's results, two nonpartisan economists concluded it "suffers from a number of data and methodological problems that bias the study in the direction of finding job loss, even where there may have been no job loss at all." And the Washington Post also notes the researchers' findings are suspiciously "out of step with a large body of research," including another study from U.C. Berkeley researchers [PDF] which determined Seattle's wage increase "is having its intended effect."
This new story is nothing but a bunch of liberals saying "oh crap! Our policy went bad! Let's quickly discredit the story revealing our blunder!!" When will someone try to poke holes in Obama era policies with the same fervor?
>And the Washington Post also notes the researchers findings are suspiciously "out of step with a large body of research
As in, "the large body of research" where 79% of economists agree that "a minimum wage increases unemployment among young and unskilled workers"? This is undergrad economics at any college worth its salt.
As with code "smells", the response to the Seattle study suffers from study "smells."
It seems the people want a certain outcome, namely, that increasing the minimum wage puts more money in the pockets of working persons trying to get by. I mean, who can be against that apart from some mean-spirited Conservatives and clueless Libertarians, no?
But isn't science supposed to be about where the data lead instead about what we want the outcome to be? This study isn't what we want to hear so oh noes, the study has flaws and it doesn't agree with all of those other studies.
I am sure this study has flaws along with every other data-collection and interpretation effort in the social sciences. My concern is with the confirmation-bias-y tone of the parent post, like the Wild West prospector who sees a few yellow sparkles and starts hopping up in down, "There's goooolllld in them thar heels!"
Most businesses pay minimum wage because they can. Not because they have to in order to stay in business.
When Walmart raised their worker's pay to $10/hour, they didn't go out of business and they are still very profitable.
There are a lot of desperate people out there who really want the work and will just about work for any pay. I've seen them wait in line at 5AM with the hopes of being called in and working on the line packing video games. Those bastards took advantage of them. They make a killing on those games and they couldn't pay a decent hourly rate?
Oh, and if there wasn't any work, sorry! Come back tomorrow and see. And they had to wait in security unpaid and wait until the line started - unpaid. So, they were at work for at least an hour and half every day - unpaid. 2 or more hours if they actually worked.
No, the lowest levels of our working people are being shit on because they can be shit on.
Thanks RIght Wing Guy!
No it doesn't make sense. Here's why.
Businesses need to pay people a MODERN working wage regardless of the profitability of the business. YOU DO NOT GET TO REDUCE YOUR WAGES TO BELOW POVERTY LEVELS JUST SO YOU CAN MAKE A PROFIT.
That is all.
You have to explain to journalists at the WaPo that "Maybe hurting some hourly workers", and "Some companies maybe cutting hours" meant that it didn't include all businesses such as McDonalds and Starbucks who play by a special and exclusive set of rules. They are part of that "elite" and "special" group and comparing them to smaller mom and pop businesses is like comparing apples and oranges.
The real story on this should be about how USA Today failed to make the bias known to readers. But then we wouldn't be feeding those snarky know-it-alls at the Washington Post now would we?
Even if the study has flaws, it makes sense in economic theory. .
But showing that the study has flaws gives a large swath of people reason to dismiss it. Those same people will readily accept similarly flawed studies claiming the benefits of min wage.
News for all you idiots; there are pros AND cons to min wage. If you can't see both you are not very intelligent.
...This is taught in introductory economics courses...
...and makes intuitive sense...
... to some people it makes intuitive sense that the earth is flat but gut feelings are not a scientific method.
sudo rm -r -f --no-preserve-root /
Since forever.
A person can't simply decide not to work and die instead.
Labor isn't a supply & demand market; it's supply (laborers) is fixed, giving the demand (employers) limitless bargaining power.
That is why there are things such as social wellfare and minimum wages.
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Imposing a minimum wage that's greater than what results from an efficient market should result in higher pay but fewer workers.
This is where things get muddled. There's a difference between an optimally efficient market and an optimally efficient organization. An optimally efficient organization may do things like pay workers the least amount possible, avoid paying corporate taxes by moving assets to offshore accounts, and automating many jobs. Now, if many workers are give poverty wages, that may pad employment statistics but it certainly doesn't provide the market as a whole with an optimal solution. When people don't have much of a discretionary income they can't buy many things and they certainly can't take out loans (if you want an optimally efficient marketplace, you want people to be able to take out loans because loans are what create more money).
The problem with companies relocating money into offshore accounts to avoid taxes compounds this problem because their poverty-wage workers need welfare to provide them with healthcare, food supplements, and other aid such as childcare that they can't afford with their job. This problem is further compounded by the hoarding of liquid assets by executives. Without a strong progressive tax system (and all the many loopholes that allow one to avoid the intentions of our weak progressive tax system), those who make the most have such a surplus of liquid assets that most of them just sit in a bank account. While this looks good on paper, as the interest they gain increases the money supply, this surplus of money doesn't help the economy because it's not being exchanged on the marketplace. This is the problem with wage disparity. If executives made less and low-wage workers made more, then more money would be exchanged in the economy and it would create more wealth. It's a fallacy to assume that corporations and millionaires reinvest their excess profits. At some point one has all they need/want and excess wealth just gets hoarded in bank accounts.
Finally, when it comes to automating new jobs, this rarely (if ever) results in the remaining jobs reaping the benefits of the increased efficiency. The money saved goes to the top, to those executives who are already hoarding more money than they come close to spending.
The problem with a lot of the formulas you learn in introductory economics is they are based off assumptions. Furthermore, economics can make an abstraction of human life. What may look good on paper can be a miserable existence for many. I find economics to be an extremely interesting field that provides tools for evaluating systems that cannot be adequately assessed using science, but perspective is necessary when applying these ideas. Too often we can't see the forest for the trees.
"From the depths of my skeptical and rationalist soul, I ask the Lord to protect me from California touchie-feeliedom."
Actually it's nearly but not quite as bad as OP's argument.
This is basically what Ford did in his production plant back when the Model T was the craze. He paid an insanely high wage, which led to very few sick days and near perfect retention, because people would have rather killed themselves than losing a job that paid about twice of what they could otherwise earn. This in turn led to very high productivity because people knew what they were doing, which also led to much higher product quality and very low waste.
Higher wages will make people move to the area if possible, and they will also want to keep their jobs. And people with money spend it, and spend it locally which in turn drives the economy.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
I bet climate change is settled science, though, right? Much better understood than supply/demand, amirite?
That doesn't work any more thanks to entitlements. The reality is that making twice of minimum wage isn't worth it. All it does is reduce your government assistance.
Yes, that's just another argument in favor of MGI. If everyone gets it, not only do we not need a minimum wage at all, but people aren't motivated not to do work so that they can keep their assistance. They won't lose it if they make some money.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
This is an entirely baseless claim. There is an external correction system and economists have been well aware of it for quite some time. The term being externalities. This typically refers to parts of the economic process that cannot be regulated by supply and demand mechanisms alone and require collective action, i.e. a government. A classic example of this is pollution controls. You can't expect the individuals to, as people like to say, "vote with their wallets" on whether the factory next to them should be pouring poison into a nearby river. By electing official to represent them and agreeing to abide the authority of the said individual, the externality can be addressed, e.g. through fees per barrel of poison added to the river, and the externality is said to be internalized.
I would suggest you actually take a course in a subject before you lambast us for being as smart as you.