Minimum wage increases

[billvon 2,991]

I am not, in general, a fan of high minimum wages. While some level of minimum wage is important to prevent exploitation, a high minimum wage can cause the very problems it is trying to solve. It can cause layoffs as business owners can no longer afford cheap labor, and must instead rely more on automation and more efficient employees. It can cause rapid inflation as the economy moves to match a higher minimum income.

However, there hasn't been much conclusive data on what actually happens when you raise the minimum wage, partly because such raises have been incremental, and often occur during events like recessions or rapid inflation where it is difficult to separate the two effects.

Recently San Francisco voted to increase its minimum wage significantly during a time of relatively level economic growth; Seattle did something similar. Thus it may be instructive to see what happens in these cases, because the effects may be easier to isolate from other effects. And so far it's not looking good.

"Higher minimum wages increase overall exit rates [i.e. layoffs] for restaurants. However, lower quality restaurants, which are already closer to the margin of exit, are disproportionately impacted by increases to the minimum wage. Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating.)"

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2951110


"When Seattle officials voted three years ago to incrementally boost the city's minimum wage up to $15 an hour, they'd hoped to improve the lives of low-income workers. Yet according to a major new study that could force economists to reassess past research on the issue, the hike has had the opposite effect.

The city is gradually increasing the hourly minimum to $15 over several years. Already, though, some employers have not been able to afford the increased minimums. They've cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found.

The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city. The study, published as a working paper Monday by the National Bureau of Economic Research, has not yet been peer reviewed.

On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum."

https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/?utm_term=.2ca58e5c295f

[kallend 2,027]

Turns out the study had a lot of selection bias (aka "cherry picking").

www.washingtonpost.com/news/posteverything/wp/2017/06/27/seattles-higher-minimum-wage-is-actually-working-just-fine/?utm_term=.e0ac175e2f1c

...

The only sure way to survive a canopy collision is not to have one.

[TriGirl 318]

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Recently San Francisco voted to increase its minimum wage significantly during a time of relatively level economic growth; Seattle did something similar.

This the issue right here. These are two of the most expensive cities to live in the US, considering home prices and rents. Compared to the cost of living in New Orleans, Detroit or Boise, or somewhere else you could get 4x the square footage for a quarter of the cost*, a national minimum wage for workers to compete in these markets is unreasonable, and comparatively speaking that same wage would make all workers in the places with lower costs of living practically middle-class.

For those two markets in particular, a better course of action would be to determine what is driving the cost of living so high, and address those issues, so that workers are earning a living wage. A higher minimum wage might be appropriate as a later course of action, AFTER those other factors are addressed. The high cost of living very likely also hurts the small business, cited in your article, that were burdened by being required to pay their employees a higher wage (adding to their already high cost of business).



*rough estimate -- I saw a comparison recently (Economist, maybe?) of housing prices/sizes across the US.

See the upside, and always wear your parachute! -- Christopher Titus

Shut Up & Jump!

[billvon 2,991]

>Turns out the study had a lot of selection bias (aka "cherry picking").

Some notes from the article you posted:

"The Berkeley study also squares with the lived experiences of people across the country who overwhelmingly support making businesses provide fairer pay for a hard day’s work."

Whenever I hear rhetoric like this (i.e. "why not make greedy companies pay fairly for a hard day's work?") the likelihood of objective reporting goes way down.

"But the idea that raising the minimum wage has a much larger effect on hours than on wages strains credulity, especially since, as economists Ben Zipperer and John Schmitt have noted, Seattle’s increase “is within the range of increases that other research has found to have had little to no effect on employment.” "

This doesn't "strain credulity" for me at all. Very few businesses around here pay minimum wage for all (or even most) of their employees, especially of the sort that the studies concentrated on (service industries.) Commonly new hires are paid minimum wage and get raises from there.

So I would fully expect an increase in minimum wage to not affect MOST employees; if the average wage at your Kinko's is $14.25 then increasing the minimum wage to $14 will not impact most employees, and most will not see any increase in income. The only ones to be affected will be the newest employees, who might go from $11 or $12 an hour (WA existing minimum wage) to $14. That's, at most, a 27% increase. If, as a result, 30% of Kinko's newest employees are let go due to the increased labor cost (which might represent 5-10% of their total workforce) that's a net loss to that group of people.

[gowlerk 2,192]

What strains credibility for me is the idea that raising the minimum wage is a bad thing in any way. If this were true, why is there a minimum wage at all? How much better off low wage workers would be if only this barrier to employment would be gone! They could work for $5/hr or even less. Think of all the advantages.

Always remember the brave children who died defending your right to bear arms. Freedom is not free.

[billvon 2,991]

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Compared to the cost of living in New Orleans, Detroit or Boise, or somewhere else you could get 4x the square footage for a quarter of the cost*, a national minimum wage for workers to compete in these markets is unreasonable, and comparatively speaking that same wage would make all workers in the places with lower costs of living practically middle-class.

Well, in the Bay Area it's even worse than that, but yes - that's the problem. A "free market" approach would say that the unaffordable costs of living would drive low-income workers out of the area, forcing companies to increase wages (and costs in that area) to compensate. But clearly that's not a complete solution, because then you get people commuting from 80 miles away, 8 people living in a one bedroom studio etc.

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For those two markets in particular, a better course of action would be to determine what is driving the cost of living so high, and address those issues, so that workers are earning a living wage.

That's a much better solution in theory - but how to implement that in reality?

Affordable housing is one angle, but that's hard to do in a free market. You can create housing with means testing and the like, but in areas like the Bay Area, companies can make the valid argument that such housing should be made available to (for example) new-hire programmers and engineers, since they will contribute more to the economy than a Starbucks barista.

Better mass transit is an option as well. Good mass transit makes it possible to live in an area where housing IS affordable and commute - and the better the mass transit is (i.e. higher speed commuter rail, more dense light rail) the more distant those employees can live.

Education is another angle, but that's not complete either. While someone with a master's can certainly do more valuable work, the service industry still needs someone to pour coffee - and having a master's doesn't make you any better a coffee-pourer. (Or more importantly, doesn't increase your value or efficiency as a coffee pourer to your employer.)

[tkhayes 348]

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...It can cause layoffs as business owners can no longer afford cheap labor,...

already a flawed assumption from the get-go.

EVERY economic decision has some fallout. EVERY economic policy creates some bad for someone somewhere. This study looks pretty fucking narrow in its scope.

While there is some short/long term benefit and short term harm to minimum wage increases, the overall evidence is that there is NO damage whatsoever to the overall economy, society, business or otherwise....ever in the history of the recorded economy. minimum wage increases DO NOT cause harm to the economy or to the people that they serve

I cannot stand these fucking generalizations like they are 'fact'.....they are opinion and belief structures.

It is an obvious conclusion when you ask a business owner to pay more money for wages that automatically the reaction is "well that is going to hurt my business"

but the reality and the history of economics says otherwise. And if EVERYONE in that economy is affected in the same way, then the net is zero effect.

what is 'firm exit'? So many other papers I have read talk about the high turnover rate of employees in the foodservice industry anyway, and this seems to indicate that the rate of turnover increases....which is far different from the rate of EMPLOYMENT, or the rate of 'not being able to find workers' for employers.

without more information this is fairly narrow and fairly inconclusive. Turnover rate could just mean that people are moving from one job to another to find better wages. good for them - that is what the American dream is...as so is the concept of businesses failing because they suck when it comes to taking care of employees if their product is shit and they cannot compete.

[billvon 2,991]

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EVERY economic decision has some fallout. EVERY economic policy creates some bad for someone somewhere. This study looks pretty fucking narrow in its scope.

Agreed. It looks specifically at one location (San Francisco in one study, Seattle in another.) That's it's value - it is a narrow study looking at one effect during a time when other effects are minimized.

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. . .there is NO damage whatsoever to the overall economy, society, business or otherwise....ever in the history of the recorded economy. minimum wage increases DO NOT cause harm to the economy or to the people that they serve

I cannot stand these fucking generalizations like they are 'fact'.....they are opinion and belief structures.

Which fucking generalizations? The generalizations that they do no damage to the economy, or harm to people?

We have not before seen such a significant increase in minimum wages in specific areas in the absence of other confounding factors (like a recession.) Thus we have not had this data set before - which is why we haven't seen effects like this before.

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but the reality and the history of economics says otherwise. And if EVERYONE in that economy is affected in the same way, then the net is zero effect.

That's absurd on the face of it. If you bankrupt every business in the US, the net effect is certainly not zero.

If your DZ is driven out of business, the fact that neighboring DZ's were also driven out of business does not fix your problem. Likewise, the fact that a barista lost her job is not fixed by the fact that other baristas lost their jobs.

[tkhayes 348]

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If your DZ is driven out of business, the fact that neighboring DZ's were also driven out of business does not fix your problem.

equally absurd....all that happens is a price increase to the customer. I have 10 employees and I pay them each $12/hour or say $25K per year. My wage burden is $250K per year. example, not reality

We do 75000 jumps each year, our primary product, so average of $3.33 per jump go to wages. way oversimplified.

Wages go to $15/hour, so a 25% increase in the price of pay....raising the cost per jump to $4.16/hour, so I raise jump prices to $26 instead of $25 to cover it.

These are not things that 'put companies out of business'..... Especially when to factor in tandems jumps which could go up by a couple dollars (hardly anything) to offset the increase for regular sport jumpers.

Even a small shop with a handful of employees can manage that. Already determined that McDonald's would raise burger prices by a few cents. Your Walmart goods would go up by pennies. A small convenience store could choose to raise prices on cigarettes and beer more than milk, gas soda and coffee and do similar dynamics to solve the problem with little impact.

And the benefits to society as a whole? Get Walmart employees off of Welfare, more spending power, more money driven INTO the economy not less.

The downside? It drives inflation, but so does a shareholders greed for dividends arguably..

And most places are not looking for $15/hour minimum wage, these are a few extremes. Florida is just over $8. How about $10.50? What about $11? The problem with the nay-sayers is that they are not willing to move by ONE NICKLE on the issue, not a single cent. So people remain poor and unable to have the opportunity that the wealthy have.

And wage increases for sure have not kept up with inflation (Except at Skydive City) where they have exceeded inflation for years because we believe in better employees, happier employees, and it has not hurt our business model at all, at the same time holding down costs to remain competitive.

It's called 'running your business'

[airdvr 210]

I'm in favor of raising the minimum wage. One of the problem employers have (in this area) is finding workers who want to get off SSI. As it is a job paying $9/hr isn't enough of an incentive to motivate people to get back in the workforce.

That, and doing something about child care expenses. Many women on SSI who would actually make less money by taking a $9/hr job and having to figure out what to do with the kids.

Please don't dent the planet.

Destinations by Roxanne

[rushmc 23]

Another story following the theme of your thread

[url]http://www.foxnews.com/food-drink/2017/06/29/maine-restaurant-workers-successfully-lobby-to-lower-minimum-wage.html

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[TriGirl 318]

billvon

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For those two markets in particular, a better course of action would be to determine what is driving the cost of living so high, and address those issues, so that workers are earning a living wage.

That's a much better solution in theory - but how to implement that in reality?

Affordable housing is one angle, but that's hard to do in a free market....
Better mass transit is an option as well....
Education is another angle, but that's not complete either....

All good issues. Other issues include city planning/engineering -- zoning new neighborhoods/construction to reduce the need for transit, and create business opportunities (jobs above and beyond service industry) in the outer areas of cities, so fewer people need to commute over those mass transit lines.

Higher city/state tax rates for the highest wage earners, to pay for that. Larger companies that want to minimize benefits and maximize profit should be supplementing the infrastructure to keep those top-tier earnings sustainable (free market doesn't pay for roads/mass transit/utilities and other societal infrastructure).

As someone else mentioned, good schools and affordable child care.

Etc., etc.

As I said, a lot of other variables to reduce the cost of living and ensure everyone can have the opportunity to earn a living wage. Yeah, it's tough.

See the upside, and always wear your parachute! -- Christopher Titus

Shut Up & Jump!

[billvon 2,991]

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All good issues. Other issues include city planning/engineering -- zoning new neighborhoods/construction to reduce the need for transit

That can work - to an extent. The problem is that opening a new business center, then putting high density housing around it, doesn't ensure that the people who work there will live there. In areas where there is already a housing shortage, such new housing will typically be bought by the people who work far away, because it's better than their currently even-farther-away home.

But in new areas that can work, at least until the area becomes so desirable that you run into the same housing shortages.

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and create business opportunities (jobs above and beyond service industry) in the outer areas of cities, so fewer people need to commute over those mass transit lines.

We tried that here (not a planned experiment, but still . . .) There's an area in northern San Diego called University Town Center that grew up in the middle of a residential area, because there was a school nearby (UCSD.) Then, next to UTC, a bunch of big companies (including Qualcomm) set up shop in a place called Sorrento Valley - mostly because it was so cheap since it was so far from San Diego.

Now, 25 years later, the rush hour here is primarily towards UTC in the morning and away from UTC in the evening. Between UTC and San Diego the rush hour is effectively backwards. It hasn't solved the problem of affordable housing, but it has helped a lot with traffic, because the freeway capacity is effectively doubled - the people who live near UTC who commute to the city have one set of roads, and the people who live near San Diego and work in UTC have the other direction to themselves.

[CygnusX-1 43]

It is plainly obvious that the science of minimum wage increases is not settled. Some say it will be beneficial other say not so much. Therefore, what should be done about it? What we need to do is absolutely nothing until the science is settled. Or maybe even decrease the minimum wage to the level of the good old days when I had a minimum wage gob earning $3.35/hour. All this discussion is pointless and we should not be burdening small (and large) businesses with this until the science is settled.

[nolhtairt 0]

TriGirl

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Recently San Francisco voted to increase its minimum wage significantly during a time of relatively level economic growth; Seattle did something similar.

This the issue right here. These are two of the most expensive cities to live in the US, considering home prices and rents. Compared to the cost of living in New Orleans, Detroit or Boise, or somewhere else you could get 4x the square footage for a quarter of the cost*, a national minimum wage for workers to compete in these markets is unreasonable, and comparatively speaking that same wage would make all workers in the places with lower costs of living practically middle-class.

For those two markets in particular, a better course of action would be to determine what is driving the cost of living so high, and address those issues, so that workers are earning a living wage. A higher minimum wage might be appropriate as a later course of action, AFTER those other factors are addressed. The high cost of living very likely also hurts the small business, cited in your article, that were burdened by being required to pay their employees a higher wage (adding to their already high cost of business).



*rough estimate -- I saw a comparison recently (Economist, maybe?) of housing prices/sizes across the US.

For the reasons you listed, is why the minimum wage should be set at the state level, not the national level. There could be exceptions where a city could set its own (higher) minimum wage but not unreasonably high, due to the cost of living.

[tkhayes 348]

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What we need to do is absolutely nothing until the science is settled.

we do not solve problems by doing nothing, and the 'science' will never be settled, as you pointed out in the rest of your post...since it will never be settled, therefore we can and will never do anything. Would be awesome if we ran the entire govt like that.....not.

I would rather 'try something' and see if it works because doing the same thing expecting different results definitely does not work. That is why we hire experts to do the thinking and planning and then legislators to do the law writing - or something like that.

While there may be no settled science to say that a minimum wage offers great things, there is plenty of historical evidence to say that it certainly does no harm, or very little harm to a few people while benefiting many people.

[billvon 2,991]

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I would rather 'try something' and see if it works because doing the same thing expecting different results definitely does not work. That is why we hire experts to do the thinking and planning and then legislators to do the law writing - or something like that.

Agreed. And that has been the value in the laws passed in SFO and Seattle - we tried something to see if it would work. And at best it has had mixed results.

[tkhayes 348]

that has more to do with a stupid tip law than a minimum wage law. tip workers get shafted in this country and exploited by employers and customers.

If tipping is a great way to offset the wages, then I guess it would be OK for me to ask my car service dept to drop the price and allow me to pay them 'what I feel like' based on the service I got.

I bet I do not get the car back.... another broken part of the system.

Bottom line is that the Maine workers were voting for the system that they felt was going to pay them more money. How about we just solve that by paying them more money?

[billvon 2,991]

>For the reasons you listed, is why the minimum wage should be set at the state
>level, not the national level.

That's effectively what we have right now. The national minimum wage is pretty low, with states mandating higher minimum wages on a per-state basis. Most states have a higher minimum wage than federal.

[billvon 2,991]

>then I guess it would be OK for me to ask my car service dept to drop the price and
>allow me to pay them 'what I feel like' based on the service I got.

It would certainly be OK to tell them "I'll pay you the absolute minimum for this job, but an extra 50% if you can get it done by Friday." (which is how the minimum wage for tipped employees work.) I've done that myself with contractors and it works pretty well - they (usually) get more money for the work they do, and I (usually) get the work done faster.

>Bottom line is that the Maine workers were voting for the system that they felt was going to pay
>them more money. How about we just solve that by paying them more money?

It sounds like Maine workers have realized that forcing their employers to pay them more money will result in them getting less money on average (which is what is happening in Seattle and San Francisco.)

[rushmc 23]

tkhayes

that has more to do with a stupid tip law than a minimum wage law. tip workers get shafted in this country and exploited by employers and customers.

If tipping is a great way to offset the wages, then I guess it would be OK for me to ask my car service dept to drop the price and allow me to pay them 'what I feel like' based on the service I got.

I bet I do not get the car back.... another broken part of the system.

Bottom line is that the Maine workers were voting for the system that they felt was going to pay them more money. How about we just solve that by paying them more money?

How about we just let the market take care of it?
And keep the government nose out of our business.

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[wmw999 2,447]

With SSI and/or TANF (welfare), one gets health insurance (Medicaid), low-hassle food stamps, and no need to pay for child care. Those are HUGE add-on benefits. One also gets predictability, without wondering how many or which hours one is going to have to work/arrange child care for/work appointments around/get paid for.

These are not inconsequential. Especially when you add in the likelihood that people on SSI and/or TANF probably have far less reliable transportation than most.

Wendy P.

There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)

[PhreeZone 20]

One of the issues with the majority of minimum wage jobs is the scheduling aspect of it. Many employers use flexible scheduling where someone may be a "Clopener" where they open the store in the morning say an 7-11 shift and then also have to close the store so they are brought back at a 5-9 shift. The employee is getting 8 hours a day but if they are trying to use public transit or have child care needs it is nearly impossible to be able to find affordable child care that can deal with this type of a schedule. Coffee shops and similar establishments tend to use this type of scheduling since they need full staff at the morning and evening rushes but do not need full staff at 2 pm.

A second issue is the "block scheduling" or "on demand scheduling" aspect. In this area the employee is expected to be on call and report to work to start their shift when the demand for the day starts picking up. Restaurants are really bad about this since they will tell their staff to be ready to come in but if customers do not show up they don't need to show since there is no need to have 10 people standing around doing nothing and having to pay them to stand there. This is hell trying to find reliable last minute transportation if you are on minimum wage or do not live close to your job. Its even worse if you have child care issues that need to be considered since you don't know if you need to report in at 3 or wait until 5 today and might not find out until 2:45. I have family in this situation that they would be sitting around and get the phone call asking them to show up early or late any given day due to the demands of that day. Some times they would add up the hours at the end of the week and find out they were only getting 30 hours since demand was slow that week and they were not needed much and were told to come in late. Flip side of that is the sending people home early part. Back in school I used to love getting sent home early from my min wage job since I really did not want to be there and it was really only gas and date money for me but if I was trying to make a living and my manager just started cutting my hours on a random basis it would be a massive impact to my finances.

Last issue around scheduling is the tendency for some employers to have unstable schedules. I saw the schedule of another family member for is a low level store manager making around $14 and its something stupid like this:

Week 1 Sunday Off Monday 7-4, Tuesday Off Wednesday 7-4, Thursday 11-8, Friday 6-3 Saturday 3-9
Week 2 Sunday 8-5 Monday Off Tuesday 11-8 Wednesday 11-8 Thursday Off Friday 7-3 Saturday 6-3

Computers now create the schedule and take lots of variables into account such as customer traffic patterns, historical demands, sale events, skill levels of employees but its rare to see these automated staff scheduling applications also take into account the needs for the person to arrange for child care or transportation with such an erratic schedule. Just trying to arrange childcare with that schedule would be a nightmare if you could even find a single program that could it. Employers do not really care since they are trying to be profitable and spend only what they need to on staffing which is what they need to do so they remain in business. Raising the min wage for an employee in this situation is not going to help them as much as creating a more predictable work schedule.

Here is a good write up from a few years back that showed that potentially 17+% of the total US workforce was in this irregular scheduling bubble and it tended to effect 45% of those making less than $22k a year. http://www.epi.org/publication/irregular-work-scheduling-and-its-consequences/

When you look at some of the situations and thresholds for SSI, Food Stamps, etc there is a very thin edge where you can actually work, get ahead and start to make a better life before you end up having the assistance pulled out from under you and now you are not making enough to actually get ahead at all and its easier for you to just quit working and ask for assistance again. I am not a big fan of having people being on assistance permanently but at the same point I think they we need to be creating programs

Yesterday is history
And tomorrow is a mystery

Parachutemanuals.com

[nolhtairt 0]

I've always viewed restaurant minimum wage jobs as an entryway to gain experience and a working background to build towards something better later on, even if it means going to school at the same time. I've done it. Worked at a few fast food restaurants and hot food delivery services while working toward my degree. Then I left that bullshit behind when I got into the workforce based on my degree. Haven't looked back since.

Gotta start somewhere though.

[billvon 2,991]

>How about we just let the market take care of it?

We tried that. Didn't work. Fortunately, we learned from our mistakes.