Slashdot Mirror
Authors of Controversial 'Seattle Minimum Wage' Study Revise Their Conclusions (bloombergquint.com)
Seattle's increase in the minimum wage "brought benefits to many workers employed at the time, while leaving few employed workers worse off," reports the New York Times -- citing a new study by the same researchers who'd claimed last year that workers were hurt by the wage increase.
"The dire warnings about minimum-wage increases keep proving to be wrong," argues a Bloomberg columnist, in an article shared by gollum123: The authors behind an earlier study predicting a negative impact have all-but recanted their initial conclusions. However, the authors still seem perplexed about why they went awry in the first place.... The increase was an "economic death wish" that was going to tank the expansion and kill jobs, according to the sages at conservative think tanks... Despite their dire forecasts, not only were new restaurants not closing, they were in fact opening; employment in food services and drinking establishments has soared...
As we noted in 2017, the study's fatal flaw was that its analysis excluded large multistate businesses with more than one location. When thinking about the impact of raising minimum wages, one can't simply omit most of the biggest minimum-wage employers in the region, such as McDonald's and other fast-food chains, or Wal-Mart and other major retailers... There were two other glaring defects in the first study that are worth mentioning. The first is that its findings contradicted the vast majority research on minimum wages. As was demonstrated back in 1994 by economists Alan Krueger and David Card, modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way. Ignoring that body of research without a very good reason made the initial University of Washington study questionable at best. Second, there potentially is a problem with having a lead researcher -- economist Jacob Vigdor, whose affiliations among others include the right-leaning Manhattan Institute -- whose impartiality is open to question. Long-time Slashdot reader Martin S. writes that "When the UK introduced the minimum wage we had the same doom and gloom scenarios," adding that "the reality was very different." He argues that increasing the minimum wage "increased productivity so business did not suffer, reduced government spending on benefits, and increased the the velocity of money improving the overall economy.
"It had no measurable effect on unemployment."
"The dire warnings about minimum-wage increases keep proving to be wrong," argues a Bloomberg columnist, in an article shared by gollum123: The authors behind an earlier study predicting a negative impact have all-but recanted their initial conclusions. However, the authors still seem perplexed about why they went awry in the first place.... The increase was an "economic death wish" that was going to tank the expansion and kill jobs, according to the sages at conservative think tanks... Despite their dire forecasts, not only were new restaurants not closing, they were in fact opening; employment in food services and drinking establishments has soared...
As we noted in 2017, the study's fatal flaw was that its analysis excluded large multistate businesses with more than one location. When thinking about the impact of raising minimum wages, one can't simply omit most of the biggest minimum-wage employers in the region, such as McDonald's and other fast-food chains, or Wal-Mart and other major retailers... There were two other glaring defects in the first study that are worth mentioning. The first is that its findings contradicted the vast majority research on minimum wages. As was demonstrated back in 1994 by economists Alan Krueger and David Card, modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way. Ignoring that body of research without a very good reason made the initial University of Washington study questionable at best. Second, there potentially is a problem with having a lead researcher -- economist Jacob Vigdor, whose affiliations among others include the right-leaning Manhattan Institute -- whose impartiality is open to question. Long-time Slashdot reader Martin S. writes that "When the UK introduced the minimum wage we had the same doom and gloom scenarios," adding that "the reality was very different." He argues that increasing the minimum wage "increased productivity so business did not suffer, reduced government spending on benefits, and increased the the velocity of money improving the overall economy.
"It had no measurable effect on unemployment."
but perhaps there's someone with an economics background out there that can explain exactly why minimum wage increases don't drive inflation as much as some people fear it would or should.
Increases in the minimum wage likey do cause a small increase in inflation, but the effect is small enough that it is lost in the noise.
1. Most increases in the minimum wage are small, and they are one-offs, not tied to inflation.
2. Only 2 percent of full time workers earn the minimum wage
3. 2/3rds of min wage workers get a raise within a year if they stick with the job.
4. Many minimum wage businesses are not as labor intensive as you think. McDonalds spends about 25% of their revenue on labor, and many of those workers make more than min wage.
"Inflation" is not a very good argument against minimum wages increases. A better argument is that it doesn't do much to help the poor because ... most minimum wage workers are not poor. Most are part time 2nd or 3rd earners in their households. The average household income of a minimum wage earner in 2016 was $53,000.
A better policy would be to increase programs targeted directly at the working poor, such as EITC.
"Think about that for a minute. Why don't we just set minimum wage to $5,000 / hour?"
You throwing out a massively different number than what any serious human being is talking about is just ridiculous and meaningless in this context. Obviously there's an upward limit somewhere. Where exactly that is, as with many things in economics, we don't precisely know but as this report is pointing out we clearly haven't hit it yet.
I ignore Anonymous Coward posts. If you want to discuss something, that's awesome. Log in.
What's bizzare is watching all these economists try to come up with theories about why wages aren't going up during full employment. A few are finally saying "Unions are dead so workers have no bargaining power" but _very_ few.
Well, if there really was full employment, the lack of unions wouldn't be particularly important.
The real reason is because the economy isn't anywhere close to full employment.