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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."
You misunderstand what a free market is.
Free market means that governments or regulatory bodies cannot set the PRICE of goods and services. There's nothing wrong in setting minimum acceptable standards.
Ex: Sure.. mandate $150/Hr. then businesses can choose to either sell at existing price+$150, get rid or replace some employees and sell at same price.
Get it? the final PRICE is what's free to be decided by businesses.
Minimum wage and free markets can co-exist. Imagine if businesses said "Hurr-durr how dare government say I have to keep my premises clean huh? this is a free market dammit!"
So reading between the lines, the study's results were largely correct when talking about small businesses, higher minimum wage hurts small business. But it doesn't matter, according to these idiots because McDonalds isn't affected by it as much as true small businesses. Since when are we vouching for McDonalds and Wal-Mart as good corporate citizens?
You can't lump in McD and Starbucks because even though they do employ minimum wage, they will employ minimum wage regardless of the cost. They are large enough enterprises with high enough profit margins to absorb these costs and in the process drive out any competition from small business, which is exactly what McD and Walmart do when they're coming to a new market anyway, they operate at a loss until all the competition has starved out.
I'm surprised actually that McD, Starbucks and Walmart don't actively drive minimum wages up just so they can completely drive out every other local business. If I were an 'evil CEO', I'd do that and then when I have 90% of a market, I'd lobby to get it reduced again or even just to get my company excluded.
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So, you are saying that people should be "free" to work for low wages where they can't afford food or shelter?
So, you are saying that people should be "free" to work for the highest wage they can obtain? Perhaps Seattle should introduce a maximum wage bill that caps wages at something reasonable, like $30/hour. I mean, if the government gets to decide what the minimum standard is for someone to live and how much they should be paid, then why not also define, set, and enforce a maximum standard as well?
This is actually a known and well understood problem in engineering disciplines. The optimum for an entire process is NOT the same as the optimum for each part of a process. Usually the two are not even related. That is why we have things like Whole Process Optimization. This was a basic part of my classes for chemical engineering and drilled home in quite a number of assignments and projects.
What I don't get is why is this a surprise to people in other fields or in economics. If you want a system to work efficiently you have to optimize for the entire system not just tiny parts of it. With society that is a very complex problem and requires a lot of analysis so you do have to simplify to some extent but the more variables you take into account and MEASURE the more likely the system is to work.
Right now I see companies doing what is best for them and then trying to justify that it means it is also best for the system. This is a losing proposition and without some kind of external correction the system will end up tearing itself apart.
Computer modeling for biotech drug manufacturing is HARD!
How is the UW study to be considered flawed for excluding multi-site businesses while the UCB study ONLY looks at restaurants, where in many of which, minimum wage doesn't even apply?