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Higher Minimum Wages Bring Automation and Job Losses, Study Suggests (axios.com)
An anonymous reader shares a report via email: As of the start of the year, 19 U.S. states had raised minimum wages, dramatizing a long simmering debate: Do minimum wages kill jobs, and make the working class worse off in the end? Or do they simply make them a little richer, with little or no loss to overall employment? In a new paper, economists Grace Lordan of the London School of Economics and David Neumark of UC Irvine parse 35 years of census data and come down on the worse-off side: For lower-skill jobs like bookkeepers and assembly-line workers, they say, higher minimum wages encourage employers to automate -- according to their calculations, a $1 increase can cost tens of thousands of jobs nationally.
We know how many jobs will be lost. Do we know how many workers will benefit from a $1 per hour increase? I think that number will be larger than the number of jobs lost.
Why is this concept so controversial ?
Why do those advocating the $15 hamburger wage not see this ?
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Anything that encourages labor automation is a net benefit to the world. That tech is the only thing that has the potential to fundamentally alter how the economy works.
And a fundamental alteration is exactly what we need, because the status quo is "a tiny group of wealthy at the top, sitting on top of a smallish group of workers living comfortable lives, sitting on top of an enormous mountain (80% of the human population) of people who suffer in abject poverty for their entire lives."
No amount of law, religion, or charity has made this balance budge, and never will. Labor automation is a game-changer. Sure, there is risk that it might make things worse....but it is a risk well worth taking given how shitty things already are.
We know how many jobs will be lost. Do we know how many workers will benefit from a $1 per hour increase? I think that number will be larger than the number of jobs lost.
Be careful of that calculation.
The justification behind Chinese off-shoring was that the benefits of reduced prices outweigh the domestic loss of wages. For example, the damage from losing one worker at $50K is more than compensated if 10 million people spend $1 less on some product. That frees up $10 million to be spent on other things, and the economy gets stronger.
The problem is that the benefits are not linear. You can easily see that by going to the limits of the policy - when all manufacturing is done in China and all workers are out of a job, for instance.
If you assume a fixed or shrinking pool of available jobs, then you quickly come to the point where there are more job-seekers than there are jobs. In this case the economic benefits can still be argued, but the cost of doing so is the loss of the $50K job and the extra burden of having an unemployed person in the labor pool.
It's not a linear function, and you can't rely on past economic studies that were done based on a previous historical situation.
So... be careful with that calculation.
They aren't supposed to be providing a living wage. They are entry-level jobs. They are *supposed* to be filled by college students and people just getting started in the work force.
Once you increase the cost of those jobs, the value proposition changes, and they aren't "entry level" anymore. Most employers won't think twice about hiring someone at $4 to clean up a restaurant. If you have to pay them $15/hour, then they are going to need more value out of them. They are probably going to have the waiters and line cooks start cleaning up during their shift, and eliminate the position of cleaning person. Or they are going to hire a company to come in and clean up at night for $20 instead of paying someone $15 an hour all day.
Know who is going to get hurt the worst? Lousy employees making minimum wage. When it takes ten minutes for someone at McDonald's to get me an iced tea, that person isn't going to have a job at $15/hour. It might be worth it to hire them at $8/hour, but nobody is going to hire someone who performs at that level for $15/hour.
Where I live, $15/hour is still too low to live hear. (A one bedroom shit apartment is over a $1,100 a month) What folks do is commute an hour or more one way from the poor areas. So, two hours a day is just traveling to and from the job. Plus work the 8+ hours and try to do the things that one has to do to live.
That's a shitty life. But they do it because there's just Walmart as an employer and some small businesses that have no job openings.
Yeah yeah yeah, they made "poor life choices" - they should have went to medical school.
See, the trouble with our society is that a person's worth is based upon their economic value. Can't make a living with the intelligence you are stuck with? Well, you're stuck as a poor slob eeking out enough to eat - just a like a Third World country,
I think there is at least some truth to this study. It does make sense that businesses will automate whatever they can and raising the minimum wage may hasten that. But the thing not talked about is that as time goes on these technologies will come down in price and be cheaper than the current minimum wage and businesses will automate then anyway. So yes, it may hasten it a little bit, it certainly isn't the reason businesses are automating. So the choice is basically to keep the minimum wage where it is and have these jobs for an extra couple years while people still make less than they need to live or to raise the minimum wage and hasten the loss of these jobs but get everyone else closer to a wage they can survive on. If we wait, businesses will still save money with automation and will save money by continuing to pay wages people can't live on.
What needs to be addressed is how to help everyone who is pushed out of their job via automation. There needs to be some type of job training or something to help people adjust to the new economy, but that isn't happening. No matter what we do, people are going to lose their job to automation, it is just a matter of when. I think we should at least make sure that the people who don't lose their job to automation make enough money to live on.
"Information wants to be expensive" - Stewart Brand, the same guy who said "Information wants to be free"
If the only job someone can get doesn't make them enough to pay rent, utilities, and buy them sufficient food to eat, then there's a problem. Saying "Well, those people should go find a better job", or "Well, those people should go back to school and get a better education so they can get a better job", and similar comments, just are not helpful at all. Saying "Well, that's why we need Universal Basic Income" is even less helpful, because it just plain won't work on the scale of a country with 300,000,000 people in it, and even if it's only 10% (i.e. 30,000,000 people) who need a big handout from the government in order to actually sustain their lives, the other 90% are going to scream about it being unfair -- and I don't totally blame them. I think the real problem is capitalism; it can work if managed properly, but in it's current state capitalism is totally out of control, and it's creating an ever-widening gap between the poor and rich, destroying the middle class in the process. Whether it's out of control by chance or by design is a matter that should be investigated, but just like the problem of homelessness, this isn't going to go away just by ignoring it. You can't just throw people away, not and continue to call yourself a human being. We're supposed to be better than that.
%30 of the entire labor market is low-wage service jobs. The idea that these entry-level jobs are just stepping stones to higher level positions is a complete Conservative delusion. There is just not enough jobs up the ladder for them. The vast majority will be stuck at the bottom their entire working life
Why do those advocating the $15 hamburger wage not see this ?
Because you're making a detached economic argument in favor of business interests, and they're making a "I need enough food to survive" argument in favor of community interests and human rights.
In most areas of the country, especially near big cities, the cost of living is approximately $15 if not much higher (I've seen estimates of more like $20-25 in New York City, for example). This is the cost of basic rent, basic utilities like electric and water, food, transportation to a job (whether by owning a small used car or taking the bus - what you think buses are free?), and replacement clothing (nothing fancy, just new pair of jeans every once in a while as old one rips). Basically, inflation is increase in cost of goods and services, and if you took the minimum wage of the '60s and '70s and adjusted it for inflation, it really should be something like $15 per hour now. With the productivity gains of the average American worker due to increased education and technology, it should probably be even higher, but almost all of the profit gains have gone to top executives rather than increased the salaries of those that actually do the work.
So what does this mean? It means any job paying less than approximately $15 per hour is NOT LIVABLE. You will starve, or end up homeless, or some sort of big problem. It's not sustainable. What I don't understand is why people make the argument of the don't "deserve" $15. Who says? Who decided some arbitrary number is the cap? The REAL issue is: does every person deserve enough to meet basic needs in modern society? I think the answer is unequivocally YES. Every American deserves the dignity of basic needs met, especially when they're willing to work full time to do so. No matter what the work is, if it takes up a full week of work, then they deserve to have basic bills covered, end of story. Full time work is opportunity cost -- if you're working full time, it means you don't have free time to take other jobs, attend school or training, etc. IT HAS TO BE WORTHWHILE. It has to be enough to survive.
Having "more jobs" that pay starvation wages is not really an improvement. It makes job numbers reports and corporate profits look better, but those aren't the only metrics of the success of a society. In fact, I think they're bad metrics; a much better one is: do we ensure every American that works hard can take care of themselves, and has opportunity to improve their lives? By that metric we are failing disastrously.
In my view, businesses that cannot budget for and pay living wages are FAILING BUSINESSES. A business that requires its workers to starve for its owner to make a profit is a FAILING BUSINESS and deserves no sympathy or respect. They should have to drastically change their business strategy or go out of business and be replaced in the free market by business owners that DO pay a living wage.
As far as automation goes, do you think they'll ever decide "Nah, I don't need more profit!"?. At best, low wages slightly delay automation, but make no mistake: it's coming. It's the story of the industrial revolution and the Gilded Age, big business grew larger and larger until it controlled the economy and could automate or improve efficiency, and laid off many many workers once they were unneeded. The poverty and starvation was great, which is what lead to so many of our labor reforms and formation of unions. We have to start putting human interests first over corporate interests. Don't fall for their propaganda. Every American that works hard deserves to live without fear of where the next meal will come from or how to pay rent this month.
And really, we should be taking advantage of automation to work LESS. Lower the amount of hours for full time work. Give everyone more time to raise their families, get involved in the community and local politics, take classes and improve education, volunteer, etc. There's more to life than wage labor. We can make that happen if we stop obsessing with letting big business take more, more, more for themselves.
In a free market, demand is always a function of price: the higher the price, the lower the demand.
Labor does not, and has never, followed the principles of supply and demand. You wasted a lot of time typing out a thesis based on a demonstrably false premise.
That said, I'll skip right to the end:
The only way to increase wages is to increase worker productivity.
Worker productivity has increased steadily while wages have not. There is virtually no link between them any more. Part of the argument for increasing minimum wage is to correct this divergence.
=Smidge=
I'll play devil's advocate here. What right do you have to take money from somebody and give it to somebody else? That's essentially what you're doing. If somebody who has money wants to give it away shouldn't that be up to them?
I actually support UBI, but those are the kinds of things you'll have to have an answer for. And "But it's only fair" doesn't really fly. An appeal to fairness falls on deaf ears since taking money from me and giving it to somebody who doesn't work never 'feels' fair.
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...automation and job loss. Lack of a minimum wage for farming did not stop those plucky "automators" from reducing farm jobs by about 97% in a century flat. Nor were Luddite concerns related to 19th-century English minimum wage policies.
The automatiion/wage situation was really nailed to the wall by this fine journalism in The Atlantic five years back:
https://www.theatlantic.com/ma...
We are taken to hang-ten on the dividing line between automation and human-work in the case of Maddie Parlier, auto-parts worker who was next up for replacement. The nearly-empty auto-parts factory in which she works automates a job when the machine to do it falls in price below two years' salary. She makes $13/hour, or about $25K/year - and the machine that could replace her exists, but costs $100,000 so her job is "safe" - for a few years.
So this is really about your societal standards. "We don't work for less than $13 an hour" is no different conceptually from "We don't work full time before age 16" and "We don't let employers work people more than 16 hours at a time" and "We don't let our employers work people with no safety equipment" even though safety equipment costs money and therefore, mandating it costs jobs.
These societal rules of COURSE have prices: "forbidding child labour" caused 100% job loss for the affected kids, and serious financial hardship for their families, I'm sure there was a lot of smirking at the time about how much harm had been done by Good Intentions.
If you hate the minimum wage, consider reading "Utopia for Realists" by Rutger Bregman. One of the cases for Universal Basic Income is that the moral argument about minimum wage vanishes: with the minimum already taken care of, $1/hour for a job you enjoy might make perfect sense.
AKA the bootstrap and temporarily displaced millionaire delusion.
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