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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."
Either way. Why would you expect the effect of a minimum wage increase to always do the same thing, regardless of the size of the increase or other circumstances in the economy? I'd expect depending on the size and circumstance that the effects would vary.
It's kind of like how I feel about government spending. Politicians tighten the public belt when there's a recession and spend like crazy when times are good. They should do exactly the opposite. When times are good they're taking money out of an economy that's doing well at turning dollars to jobs. When times are bad they're keeping dollars in an economy that's not converting dollars to jobs very well.
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What other statistics matter? Isn't the point of an economy giving people the goods and services they want and need? The root word for economics comes from a Greek word meaning "household". If economic theory does not look at what is good for households it is not economics.
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On the local radio here in Seattle, the study's purveyors did mention that it hurt entry-level opportunities. Similar to what sounds like the case in Britain, employers focus harder on getting more for their increased payouts, holding out for more experienced employees when hiring, and pushing productivity higher. I would question whether that situation actually results in better value for the workers.
It seems a bit futile anyway. In an economic upswing, what the market gives, employers will tend to take, and what employers are then forced to give, the market too soon takes away when the cycle turns downward.
Strange things are afoot at the Circle-K.
That's the core of Keynesian Econoics, which most mainstream economists these days consider voodoo,;as you can't write up a nice, neat, overly clever set of equations to describe; but which is the only economics which has been proven to work in the real world.
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Yes, the Federal government should increase spending during recessions and save up when the economy is going well. As you point out, the politicians are stupid and mostly just give money to their donors... i.e. cut taxes for the rich and cut spending on anything that might benefit everyone else regardless of the economy.
State and local government does have the constraint that they have to have balanced budgets so they tend to spend less when tax receipts go down during a recession.
I don't read your sig. Why are you reading mine?
That is absolutely, 100% not true. As in false. As in bullshit.
https://benjaminstudebaker.com...
https://www.jstor.org/stable/4...
You are welcome on my lawn.
It's kind of like how I feel about government spending. Politicians tighten the public belt when there's a recession and spend like crazy when times are good. They should do exactly the opposite. When times are good they're taking money out of an economy that's doing well at turning dollars to jobs. When times are bad they're keeping dollars in an economy that's not converting dollars to jobs very well.
It depends on who you are, though. If you don't have a stable economic base or tax base (e.g. Greece) and/or don't have control over your own monetary policy (er... Greece again) then you don't really have a choice. You have to spend less when the economy is down because... you have less money to spend. Some economies are simply screwed up enough systemically that throwing more money into them will be a waste because they need to be fundamentally restructured. If your economy is totally based on something external you can't control (like oil prices or tourism) then printing more money is no better than a band-aid. There's no amount of money in the world that would make Venezuela's economy sustainable right now. So "austerity" is your only remedy if you don't have an economy that is fundamentally sound.
However, Keynesian economics will tell you that you should inject money into the economy when it slows down - much like FDR did in the United States during the Great Depression, or the "Obama stimulus" infrastructure spending in 2008. Keynesian thinking follows what you suggest, but it's only practical in cases where you have control over your own money supply and there is a reasonable chance that all the economy is missing is enough people spending money.
"95% of all Slashdot
There is no evidence to actually back up the idea that the rate of inflation is significantly accelerated through minimum wage rises when those rises have not kept pace with the rate of inflation in the first place for decades. This seems to be a common folk wisdom fallacy that might appear to make sense on its surface, but fails to actually be supported by real world data. I have my own theories on why this is, 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.
File under 'M' for 'Manic ranting'
You are assuming the cost of living for a fast food worker is tied to the price of the product they work to produce and sell. I don't think that is a valid assumption.
If I were working fast food at lower-end wages as a head of household, eating out would be a sometimes thing not an everyday thing. You can shop and produce far better burgers at home if you put even a slight amount of effort into it.
Fifty years ago in the US, even 25 years ago, that might have been a problem for the general economy. However for the last 20 years (at least) productivity gains and real wage gains have been transferred almost exclusively to households in the top 10% of income, and the wealth gains have been transferred almost exclusively to households in the top 1% (or even 0.5%) in wealth. So if general prices rise by 25% today that money is not going to be extracted from the pockets of those in the 80% range because they don't have it - it will mostly be paid by those in the 10% and then transferred down. Which is what our personal and corporate income tax bracket structure and reasonable dead-people-are-not-citizens inheritance taxes accomplished prior to 1980.
And yet inflation remains stubbornly near historic lows.
In theory, I would've expected inflation and unemployment. But that's not the actual outcome we've seen at all. And if there's ever a time to increase the minimum wage, it's when unemployment and inflation are exceptionally low. Keep increasing the minimum wage until we start to see some movement on the inflation and unemployment numbers, and that's when we'll know we've found the right number and can freeze it for a while.
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Profits today benefit people tomorrow. Don't believe me? Ask yourself if the country you want to live in ten or twenty years from now is one with a decade or two of high corporate profits under its belt or a decade or two of dismal performance. Hell...do you want to work for a company that's making money or one that can't run two nickels together?
The study's mostly raw data. The other possibility is that higher wages are drawing more experienced workers the new workers can't compete with. But if that's the case the problem goes away if you make $15 the national wage; e.g. what's actually happening is those less experienced workers are stuck getting jobs outside of Seattle for less pay.
Basically, Seattle's big enough that they're are probably outlying suburbs that have incorporated to dodge taxes and minimum wage laws (my city does just that). They're soaking up the new workers right now, probably right on the boarder. Heck, where I am right now I've got political signs for a proposition to pay for roads in the rich neighborhoods right down the street from me because those neighborhoods are technically another "city" than me. It's so they don't have to pay into the general fund but can take advantage of the city proper's amenities. Crap like this is why we have a national minimum wage.
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Not so much, as has been proven by many economic studies and real world cases over the past 50 years.
This gets more money flowing into the economy where it's needed, at the lower end.
That in turn increases demand for pretty much everything, which increases sales, which increases demand, etc.
Don't forget that this money is already in the system, but now instead of going to the top of the economic food chain where it mostly sits static or in stocks, bonds, or off shore accounts where it does absolutely nothing for the economy, it's now flowing through many hands at the base of the economic chain where it actually does good.
The rich don't create jobs, they stifle the economy. The richer they get, the worse it becomes. These are very well known and studied economic realities among economists. Many of them, including winners of the Nobel Prize for Economics have talked about this in language us non-economists can understand.
As to it violating what is often called "common sense". That's pretty common with reality not conforming to what uneducated humans expect.
On the day that minimum wage went up 15%, all of the fast food restaurants increased prices by 25%.
This makes no sense, and I think you just made it up. The cost of labor went up less than 15%, since not all workers were below the threshold. Other costs, such as COGS, rent, utilities, did not go up at all.
At fast food restaurants labor is about 25% of revenue. So a 15% rise in wages is less than a 4% rise in total cost.
So maybe they just used the wage increase as an excuse to raise prices? No, that makes no sense either. Businesses can change their prices anytime they want, and they do it all the time. They don't need an "excuse". If the market would bear a 25% increase, they would have raised prices long ago.
Your entire scenario sounds like made up bullcrap.
Their cost of living would be tied to whatever the cheapest rent, food, etc. that they could procure would be. That doesn't necessarily mean that those options are provided by businesses where labor is a majority of costs, in turn mandating a raise in prices in response to increases in wage as well. Over the long term, I would expect those costs to decrease, or at least remain stable, even if the way in which services are procured (i.e., people buying from Amazon instead of locally) changes.
then the business (or the customers of the business) would have that money instead.
The amount of money these people earn allows them to become customers to others. The business can simply raise costs to cove the increase in wages. Also, businesses can use the increased cost of wages to deduct from their taxes. Overall, the velocity of money increases since more is being put into circulation.
If the business keeps all of it, they pay more taxes on the extra profit.
Businesses don't want extra profit. Any extra profit means paying more taxes. To limit their taxes, business will find anything to lower their bill. Thus, having higher salaries lowers a businesses tax bill (see above).
Also, the argument for cutting taxes isn't quite that people have more money to spend, it's that they have more money to invest.
That's a semantical argument. Whether spending the money (which means more overall taxes collected as well as increased business) or investing it, people who earn more will use that extra money one way or another. This breaks down somewhat at the extreme income level (the 1% don't buy a new house every year or buy any more clothes than you or I would normally do), but overall, people who make less than $75,000/year (the amount beyond which most people say doesn't increase their happiness or add anything to their lives) will spend their money on a regular basis. People who make substantially less than that amount (i.e fast food workers) will spend more of their money than others because they now have the money to spend.
It's not hard to see how giving people more money will allow them to spend more. This in turn increases overall economic activity. Exactly as the Seattle experiment has so far shown.
When minimum wage goes up by a buck, the pizza joint owner knows his pay roll is going to up by 2000$ per employee per year. But all the people who buy pizza from him, their income goes up by 2000$ too. At 20$ a sale, if 100 more pizzas per employee get sold per year the payroll increase has been met. This is two additional pizza per week! Instead of asking, "would you pay your employees 1$ more per hour?" if you ask, "Would you like all your customers to get 1$/hr pay increase?" they might answer differently.
But the small business people are extremely cautious. Especially the ones that inherited their business. The ones who started from scratch are less risk averse. The only certainty is the payroll going up. Customers might buy 2 more pizza a week, or they might affluent and go the steak joint once a while and his sales might not go up. So they discount any positive outcome that might happen due to increased purchase power of the customer base, and oppose minimum wage increases.
Small increases, gradually done, automatically going up to account for inflation would be the way to introduce it. Real wages have been declining in America since the 1980s. Slightly higher than inflation adjustment, something like 3 or 4% every year, year after year, would help the economy.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Historically many societies have done that, and as noted even under current US law when a person dies they are no longer a citizen. However, since we use open markets (which have mostly evolved into capitalism) to organize our economy it is considered a matter of incentive to allow some percentage of the accumulated wealth no longer owned by the dead body to pass to designated heirs - helps keep the rich at the coalface. Metaphorically speaking of course - the rich send others to die at the coalface for them.
And yet Seattle is still doing better than Portland. Portland only had a larger recovery because it was worse off.
Your logic suggests that if you stub your toe, you should break your femur with a hammer so you can have a bigger recovery./
Fuzzy headed thinking like that would be really really funny except that it needlessly increases suffering in the world.
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.
Profits today benefit owners today. That's all.
If you expect any loyalty from a company where you have sold your soul, you are very naive.
I don't read your sig. Why are you reading mine?
"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.
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we can't raise wages because then prices go up. It's obvious bullshit since if it were true then we'd still be living in the gilded age. Obviously there is a way for wages to go up faster than prices.
The answer is productivity. As productivity rises one of two things happen. Wages go up and we're all better off, or wages stagnant and decline and only the folks at the top are better off.
Productivity has more or less doubled since the 70s with wages staying the same, so anyone want to guess which of the above happened?
Oh, and be careful when measuring productivity. Right now "productivity" is technically down because there are fewer start ups producing less money in the economy, but raw manufacturing and farm outputs are way, way up, which is the type of productivity that most effects wages.
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. The right wing figured out some time ago they need to control the media narrative so they just bought everything. You can do that when you're the last man standing after an economic crash you caused and got bailed out of.
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"Costs change all the time. For example, the price of tomatos changes weekly. Fast food places don't change their prices daily by 1% or 2%. Instead, every couple years they change prices. The minimum wage hike was significant enough that it forced a price reset. That reset included othet actual or expected cost increases."
Cool, so if they were already so close to a price reset then it wasn't really the increase in minimum wage that did it at all. A bad tomato harvest would have done just the same.
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That reset included othet actual or expected cost increases.
Yet, after waiting for years, they all increased their price by the exact same amount on the very same day? That seems wildly implausible.
And if the price rise had little to do with the min wage increase, they why bring it up?
The law destroyed a bunch of local businesses that couldn't make it on the new margins.
But a bunch of big multi-state/national corporate conglomerates hung on and expanded their reach...
Okay, good for the conglomerates and all.
But that means the profits are, eventually, leaving the state.
As opposed to remaining local the way it did with smaller owners...
Not sure that's something to crow about and celebrate.
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Why not just set the inheritance tax at 100%?
After all, the person is dead and the government has better uses for the money than giving it needlessly to the spouse, children or other family members who didnt make it.
Note the presumption here that it's the government's money to give in the first place. And nevermind that the now-deceased has already paid taxes on those earnings or properties over his or her entire working life.
There are just so many things that are morally wrong with this argument. You seriously just argued that a widow should not inherit his or her spouses assets? What about children who's parents die young? Kick the kids into the streets, because screw you kiddies, the government deserves whatever savings or property they have? Note that this would have little effect on the rich, who can afford all the lawyers and accountants in the world to set up legal mechanisms that would avoid these problems. But it would definitely cause problems lower and middle class family wealth, and make it all that much harder to climb the economic ladder over successive generations.
Beware unintentional consequences to simplistic feel-good solutions. This is the same shallow thinking which launched the luxury tax in the early 90's, then saw it repealed as the disastrous unintended consequences came to light.
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For the folks at the lower to middle end of the economic spectrum, some inflation can be really nice. The propaganda against it is based more on the concerns of the upper class.
I remember the days of hitting more than 10% in the late 70s-early 80s. In the middle class, wages managed to mostly keep up while many of the bills did not - especially their fixed rate loans on homes and cars. My parents did well during that time. In a short time, inflation reduced the lifetime costs of their homes and cars by a double-digit percentage. That became a significant amount of extra spending money in their pockets for years to come due to the reduction in the proportion of their income going to those major bills.
Moderately higher inflation, especially for short periods as in the adjustment after sudden raises, can be a boon for the struggling worker class and even for large corporations with heavy long-term fixed rate debt. It is publicized as bad because it hurts financial institutions holding those loans, reducing the profit they make off of the less affluent.
I wish you guys would stop talking about the "rich" and the "minimum-wage" as thought it was some sort of binary thing.
You need everybody with _some_ money to spend, you do _not_ need multi-multi-billionaires. You need _some_ millionaires, more who are _"pretty well-off"_, even more who are _"reasonably well-off"_ and as many as you can get of people who manage OK and sometimes have a bit over for something extra.
The fabulously rich just tie up money that mostly does nothing useful to society, the "minimum-wagers+" are the _core_ of your economy.
Mac
According to the CPI The price of a cheeseburger went up from 80 to 81 cents in 1993 and then down to 78c in 1994. If you saw a 25% increase in your area it sure wasn't widespread
Generally speaking about 30% of the cost of a restaurant food item is labor So if labor costs go up by 15% it seems unlikely that would mandate a .25% price hike to break even.
If you have facts to share, please link to them.
Nullius in verba
Profits today benefit people tomorrow. Don't believe me? Ask yourself if the country you want to live in ten or twenty years from now is one with a decade or two of high corporate profits under its belt or a decade or two of dismal performance. Hell...do you want to work for a company that's making money or one that can't run two nickels together?
Why does it have to be one of those two options? How about a country where the corporations have been making a moderate profit?
I think what most people who believe raising the minimum wage should crash the economy miss is, that we are not talking about the difference between a company making money and loosing money, but rather we are talking about the difference between being dirty filthy disgusting rich and being merely dirty filthy rich. I get it, some smaller businesses will struggle with it, but the vast majority of minimum wage workers work for companies like Walmart and McDonald who will certainly not go out of business because the minimum wage goes up to $7.75 an hour.
The minimum wage increase directly caused 30%-50% of the price increase through increased costs.
4/25 = 16%
plus the price of hamburger buns, lettuce, cups etc, all made by low-wage employees, went up.
Agricultural workers are exempted from minimum wage laws. Manufacturing workers are not paid the minimum wage. 2% of full time workers earn the minimum wage, and they are not working in cup factories.
taken from existing profits so that business expansion plans get reduced.
Taken from needed equipment upgrades. So any competitive advantage is lost.
What does the business get for that finding money to pay for new wage spending? The same quality of worker.
The way out of that is to move to a much better city and state that allows a business to grow rather than be wage taxed.
Domestic spying is now "Benign Information Gathering"
as a tech worker I'm happy to have fewer H1-Bs. But that said, I don't expect to see your guys out in the fields picking strawberries. Even for $15/hr. That's not just because it's shit work, it's also work that's hard to have a life around.
Also, well, we are going to need some kind of immigration because Americans, like the rest of the first world, just aren't having enough kids. If you want your 401k to not collapse you're gonna have to let them in. A better economy can only do so much for birth rates.
What you really want and need is more social programs paid for by the wages those immigrants earn and the wealth they generate. Single Payer health care's a great start. How about a federal jobs program? Infrastructure spending? The real problem with immigrants is that you as a worker don't get any benefit from them (me neither, btw). The best way to change that is with Democratic Socialism. Let 'em come here and work, but make sure the money they bring in doesn't just go to the top.
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You should account in your theory somewhere for the fact that in constant dollars per capita, federal total revenue has gone up 3x over the last 60 years. So maybe we're actually on average being required to pay 3x as much as we used to for a not significantly improved "product" from the federal government.
But don't worry, spending measured the same way over the same time period has gone up almost 4x
The federal deficits aren't a revenue problem, they're a spending problem. Congress spends more and in the process the government manages to waste more.
The party of stupid and the party of evil get together and do something both stupid and evil, then call it bipartisan.