Los Angeles Makes A Risky Bet With Its Minimum Wage Increase

Los Angeles became the latest major city to increase its minimum wage. It's a risky bet that is likely to do more harm than good.

Minimum Wage

Earlier this week the City Of Los Angeles became the latest major city to approve an increase in the minimum wage to $15 per hour:

LOS ANGELES — The nation’s second-largest city voted Tuesday to increase its minimum wage from $9 an hour to $15 an hour by 2020, in what is perhaps the most significant victory so far for labor groups and their allies who are engaged in a national push to raise the minimum wage.

The increase, which the City Council passed in a 14-to-1 vote, comes as workers across the country are rallying for higher wages and several large companies, including Facebook and Walmart, have moved to raise their lowest wages. Several other cities, including San Francisco, Chicago, Seattle and Oakland, Calif., have already approved increases, and dozens more are considering doing the same. In 2014, a number of Republican-leaning states like Alaska and South Dakota also raised their state-level minimum wages by ballot initiative.

The effect is likely to be particularly strong in Los Angeles, where, according to some estimates, almost 50 percent of the city’s work force earns less than $15 an hour. Under the plan approved Tuesday, the minimum wage will rise over five years.

“The effects here will be the biggest by far,” said Michael Reich, an economist at the University of California, Berkeley, who was commissioned by city leaders to conductseveral studies on the potential effects of a minimum-wage increase. “The proposal will bring wages up in a way we haven’t seen since the 1960s. There’s a sense spreading that this is the new norm, especially in areas that have high costs of housing.”

The groups pressing for higher minimum wages said that the Los Angeles vote could set off a wave of increases across Southern California, and that higher pay scales would improve the way of life for the region’s vast low-wage work force.

Supporters of higher wages say they hope the move will reverberate nationally. Gov. Andrew M. Cuomo of New York announced this month that he was convening a state board to consider a wage increase in the local fast-food industry, which could be enacted without a vote in the State Legislature. Immediately after the Los Angeles vote, pressure began to build on Mr. Cuomo to reject an increase that falls short of $15 an hour.

“The L.A. increase nudges it forward,” said Dan Cantor, the national director of the Working Families Party, which was founded in New York and has helped pass progressive economic measures in several states. “It puts an exclamation point on the need for $15 to be where the wage board ends up.”

(…)

Much of the debate here has centered on potential regional repercussions. Many of the low-wage workers who form the backbone of Southern California’s economy live in the suburbs of Los Angeles. Proponents of the wage increase say they expect that several nearby cities, including Santa Monica, West Hollywood and Pasadena, will also approve higher wages.

But opponents of higher minimum wages, including small-business owners and the Los Angeles Chamber of Commerce, say the increase approved Tuesday could turn Los Angeles into a “wage island,” pushing businesses to nearby places where they can pay employees less.

“They are asking businesses to foot the bill on a social experiment that they would never do on their own employees,” said Stuart Waldman, the president of the Valley Industry and Commerce Association, a trade group that represents companies and other organizations in Southern California. “A lot of businesses aren’t going to make it,” he added. “It’s great that this is an increase for some employees, but the sad truth is that a lot of employees are going to lose their jobs.”

The 67 percent increase from the current state minimum will be phased in over five years, first to $10.50 in July 2016, then to $12 in 2017, $13.25 in 2018 and $14.25 in 2019. Businesses with fewer than 25 employees will have an extra year to carry out the plan. Starting in 2022, annual increases will be based on the Consumer Price Index average of the last 20 years. The City Council’s vote will instruct the city attorney to draft the language of the law, which will then come back to the Council for final approval.

Not surprisingly, the news of a victory for the forces that have been lobbying for an increased minimum wage in the nation’s second largest city is being viewed as good news in many quarters, not the least of them being the Editorial Page of The New York Times, which describes the vote as a challenge to Congress and other states where the issue is being debated. The editors at Bloomberg are far more sanguine:

A scholar whose work is often cited in support of a higher minimum wage is Arindrajit Dube of the University of Massachusetts at Amherst. He argues that moderate increases are unlikely to have much effect on jobs. What’s “moderate”? Dube says a minimum set at half the prevailing median wage, plus a cost-of-living adjustment, would strike a prudent balance between raising the incomes of the low-paid and maintaining employment. For metropolitan Los Angeles, this suggests a figure of maybe $12 an hour, not $15.

Some researchers are less optimistic than Dube about the employment effects. At least one councilman who voted for the measure is also concerned. Gil Cedillo, who represents some of the city’s poorest districts, said he would have preferred to see the most prosperous residents, rather than small-business owners, carry the burden. “Instead, it’s going to be coming from people who are just a rung or two up the ladder here,” he told the New York Times. “It’s a risk that rhetoric can’t resolve.”

That’s true.

(…)

Raising the incomes of the low-paid is a worthy goal. And if wage mandates aren’t the best way to do it, they might be one feasible way. By all means, let Los Angeles find out. Other big cities should wait and see what happens.

While the argument in favor of minimum wage increases have typically relied more on emotion than reason, in recent years there have been some efforts by advocates of the idea to push back against the traditional economic argument on the issue that states that, on average, an increase in the mandated minimum wage is more likely than not to lead employers to cut back on hiring to engage in other measures designed to save labor costs such as cutting back on hours for individual employees or investing in automation that has the effect of replacing human workers. According to these new studies that have been advanced by advocates, an increase in the minimum wage has no real impact on employment or wages and that its positive benefits outweigh any of the minimal negative impacts that economists have talked about in the past. As Peter Suderman notes at Reason, though, those studies are of dubious value in the current context:

For the past few years, liberal economists and policy wonks have been increasingly vocal in arguing that that it’s not true that increasing the minimum wage costs jobs. As senior administration econ adviser Jason Furman said last year when President Obama called for a national increase in the minimum wage, “Zero is a perfectly reasonable estimate of the impact of the minimum wage on employment.” Echoing the sentiment, The New York Times editorial boardwrote around the same time that “the weight of the evidence shows that increases in the minimum wage have lifted pay without hurting employment.”

The evidence for this isn’t nearly as overwhelming as boosters sometimes like to suggest. Economists David Neumark and William Wascher, for example, have surveyed the literature and found that, overall, most studies still show that wage increases cost jobs. And the Congressional Budget Office (CBO) estimated that raising the federal minimum from $7.25 to $10.10 over a three year period would probably cost about 500,000 jobs, and perhaps as many as 1 million. But the CBO also said it was possible that the number of jobs lost would be minimal, pointing to some studies suggesting that the wage floor could be increased with very little effect on jobs, at least in certain circumstances, up to a certain point.

(…)

Assume, just for a moment, that liberal wonks are basically right and it is possible to hike the minimum wage without significantly reducing employment. Fine, sure. But this only gets you so far, because at some point, a high enough minimum wage would eventually start to cost jobs. There’s no serious person who thinks that employment will remain the same if you, say, raise the minimum wage to $100 an hour, or even $40 an hour. So the question becomes: If it’s possible to raise the minimum wage some amount without significantly reducing employment, then how big a hike would it take to have a meaningful effect?

Megan McArdle makes a similar point in her column at Bloomberg, and points out that the impact of the kind of large-scale increase in wages that the Los Angeles law contemplates isn’t something that would be readily apparent in a short period of time:

When the minimum wage goes up, owners do not en masse shut down their restaurants or lay off their staff. What is more likely to happen is that prices will rise, sales will fall off somewhat, and owner profits will be somewhat reduced. People who were looking at opening a fast food or retail or low-wage manufacturing concern will run the numbers and decide that the potential profits can’t justify the risk of some operations. Some folks who have been in the business for a while will conclude that with reduced profits, it’s no longer worth putting their hours into the business, so they’ll close the business and retire or do something else. Businesses that were not very profitable with the earlier minimum wage will slip into the red, and they will miss their franchise payments or loan installments and be forced out of business. Many owners who stay in business will look to invest in labor saving technology that can reduce their headcount, like touch-screen ordering or soda stations that let you fill your own drinks.

These sorts of decisions take a while to make. They still add up, in the end, to deadweight loss – that is, along with a net transfer of money from owners and customers to employees, there will also simply be fewer employees in some businesses. The workers who are dropped have effectively gone from $9 an hour to $0 an hour. This hardly benefits those employees. Or the employee’s landlord, grocer, etc.

(…)

There’s no way to say until the new wage is fully phased in and we have years of data. But it seems unlikely that you can increase the minimum wage by 65 percent, mandating higher wages for almost half of your workforce, and be confident that the other effects will be small. If I had to lay money, I’d put it the other way: The effects will be significant. The long-term result will be higher wages for many low-wage workers, but the desperation of unemployment, or a forced relocation, for many others.

Even if the outcome that McArdles foresees come to pass, it’s likely that few people will make the connection between a higher minimum wage and fewer available jobs at the lowest end of the employment spectrum. Not every low wage worker will be harmed, of course, but the ones who are will become part of what Frederic Bastiat called “the unseen,” meaning the people who are on the losing end of an idea that, while good intentioned, has some very bad unntentioned consequences. The studies that the supporters of the Los Angeles minimum wage increase, and similar proposals across the country, rely upon all basically stand for the proposition that a “moderate” increase in the minimum wage will have a minimal impact on the economy. As it stands, this seems like an axiomatic proposition. If a wage mandate increases by some small amount then it probably won’t have that big of an impact overall. However, the increase that was just approved in Los Angeles constitutes a 66% increase over a very short period of time followed by increases tied to the Consumer Price Index on an annual basis going forward. That hardly sounds like “moderate” to me, and while it’s true that many major employers will likely be able to absorb these additional labor costs quite easily, it’s also probable that we will see some efforts by employers at this level to curtail labor costs. As I said, this can amount to anything from cutting hours or reducing planned hiring to replacing order takers at fast food restaurants with computers, something that is already becoming quite common. For example, Panera Bread Co.’s CEO has said that he hopes to have touchscreens replace cashiers in all the company’s stores by 2016.  McDonald’s began moving to replace cashiers with touchscreens in its European restaurants four years ago. Eventually, technology like this is going to make its way to the United States. If and when that happens, the fact that the minimum wage is now $15 per hour will mean very little to people who are earning less because they aren’t being giving as many hours as they used to, people who aren’t being hired, or people who have been laid off because their employers discovered that a touchscreen doesn’t make any minimum wage demands at all.

As I said above, though, the minimum wage debate is more about emotion than it is about a rational discussion of economic consequences, and it’s understandable that it would be that way. Everyone can agree with the general idea that people ought to earn more money, and $9.00 per hour even for a menial job certainly doesn’t sound like a lot of money. That’s why the people making the argument in favor of raising the minimum wage succeeded in Los Angeles, and why they are already talking about using their victory there to achieve the same thing elsewhere.However, public policy ought to be made based on something better than emotions and feelings, especially when there is incontrovertible evidence that the policy being advocated has the potential to cause harm to some of the most vulnerable people in society.  Given that, one would think that people would want to approach the issue with something more than blatant appeals to base emotions that don’t even bother mentioning facts. In any case, Los Angeles has now made itself a test case, and other cities will likely follow. Perhaps the predictions of doom will be wrong, but I suspect that they won’t be. If you end up ordering your Big Mac off a touchscreen in five years or so, you’ll know why.

FILED UNDER: Economics and Business, US Politics,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. teve tory says:

    Every time the minimum wage is raised, conservatives predict the end of everything. No reason to start believing them now.

  2. wr says:

    Yes, prices may rise to meet the actual cost of providing a service or good, instead of keeping prices artificially low by stealing money from labor. I don’t have a problem with this, and neither should anyone else who doesn’t believe that the sole purpose of an economy is to make sure the richest get everything.

  3. Mu says:

    You could of course think of a more nefarious purpose on these laws. A lot of minimum wage people are still costing the city in the form our rent vouchers and other social support cost. If you can push lowest percentile of these people, those that really don’t justify a $15 wage, into the surrounding “cheaper” communities the cost for LA itself might actually go down. Think of it as another version of moving people to the suburbs, just this time by making them unemployable in the city center.

  4. teve tory says:

    A significant body of academic research has found that raising the minimum wage does not result in job losses even during hard economic times. There are at least five different academic studies focusing on increases to the minimum wage—including increases ranging from 7 percent to 12.3 percent made during periods of high unemployment—that find an increase in the minimum wage has no significant effect on employment levels. The results are likely because the boost in demand and reduction in turnover provided by a minimum wage counteracts the higher wage costs.
    Similarly, a simple analysis of increases to the minimum wage on the state level, even during periods of state unemployment rates above 8 percent, shows that the minimum wage does not kill jobs. Indeed the states in our simple analysis had job growth slightly above the national average. […]
    All the studies came to the same conclusion—that raising the minimum wage had no effect on employment.

    -Center for American Progress

  5. David M says:

    We’ve been venturing into uncharted territory a little with these minimum wage increases recently, where it’s a just a city that’s raising the minimum wage. If it were a state or national level increase, then the impact probably would be little to none, but a city is small enough geographically that it may be hard to predict the exact outcome.

    However, given the wage stagnation and theft of profits from labor over the last 20 or 30 years, it’s worth trying.

  6. HarvardLaw92 says:

    There are 87 independent cities in LA County other than Los Angeles in which this vote has no effect. I can’t help but wonder whether the net result will be that businesses who can reshuffle themselves into lower paying municipal islands will do so.

  7. Ron Beasley says:

    Low wage jobs are actually a form of corporate welfare. The state is forced to support the workers through food stamps, medicaid and rent subsidizes. Without those the employees would not be employable. How many employers would want to hire someone who is sick, hungry and lives under a bridge? If employers insist on paying low wages they should be taxed to pay for the social services the state is required to provide.

  8. DrDaveT says:

    And, of course, a mild reduction in the number of jobs available would not be a bad tradeoff if it became possible to live on the proceeds of a single job, rather than needing two or three. The raw number of jobs is not the statistic that matters; it’s the number of people able to earn a living.

  9. Matt says:

    I find it funny that conservatives are trying to blame a minor bump in minimum wage as the driving force behind business’s trying to cut headcount. As if businesses never ever tried to cut back on their headcounts ever before..

    If only we would reduce minimum wage to 2 dollars an hour then businesses would go on a hiring spree and our god awful high unemployment would be solved!! /sarcasm

    As stated before the small reduction in jobs isn’t a big factor if people are able to live with one job. Currently I imagine most minimum wage workers in that area are working at least two jobs.

    I had two jobs for a while because the minimum wage here is just not enough. Once I found a job that effectively pays 13 an hour I was able to quit my other jobs.

  10. David M says:

    On the subject of the minimum wage, there is an easy policy solution. Raise it to an appropriate level and then index it to inflation. Then it’s an issue that doesn’t need to become a huge problem before it can be addressed.

  11. teve tory says:

    @David M:

    No problem. I’ll just run that by the party who thinks a snowball’s existence refutes global warming….

  12. Slugger says:

    Dr. Mataconis, when you say that there is “inconvertible evidence” what is it that you are referring to? I hear people making hypothetical arguments pro and con. When real life empirical evidence is sought it is generally rather equivocal. I would be interested in good hard evidence.
    I agree with Mr. Beasley that defenders of the current minimum wage ignore the subsidies that we are all paying to the employers in the form of food stamps, health care, and things like subsidized housing. Another cost of low wages that all of us pay is the social pathologies that attend poverty like crime, substance abuse, poor school performance, and homelessness. Is it possible that higher wages would lead to fewer car break-ins and save all of us money in this way?
    Let’s keep an eye on what actually happens.

  13. Tony W says:

    @Slugger:

    Is it possible that higher wages would lead to fewer car break-ins and save all of us money in this way?

    Not a concern, crime is useful to the political right. Car break-ins help reassure folks that those thugs are different than us. We clutch our collective pearls and proclaim that we’d never resort to that because we were raised by people with morals and ethics.

  14. stonetools says:

    Doug bases his argument on analysis by the McSudermans? Have we already forgotten McArdle’s misadventures in math?:

    Megan McArdle sees someone suggest that Bush’s tax cuts for the rich should be eliminated and the money used for better purposes, and she decides that it just wouldn’t make any difference. McArdle’s problems with the argument:

    Dylan Matthews at the Washington Post has asked what we might be able to do for the economy if we repealed the Bush tax cuts for the wealthy and spent the money on something else. The result is a nice post full of graphs, but the answer seems to be “not much”–the very best estimate is that we get about $75 billion in added economic activity, or about $25 for every person in the country.

    The first two commenters correct her math. “Or $250, whatever,” says the first. The second: “Using current census data, I get $244 per person, but yes let’s call it $250, Megan was off by a factor of 10.” McArdle and math are two ships that pass in the night, never to have contact. Fortunately her commenters are available to do her long division for her.

    There’s a lot more at that site. Suffice it to say that Suderman and McArdle aren’t the gold standard of economic analysis.

    Tell you what, Doug, there are some actual economists out there-Look them up…

    Safe prediction: a year from now, when there is no evidence that this mimum wage hike has had any effect, there will be no posts from Doug pointing out how wrong the McSudermans were…again.

  15. PogueMahone says:

    What would people making an extra $240 ($6 increase + 40 hour work week) do with their extra money?
    They’d spend it.
    Where?
    In their community.
    On what?
    Rent, utilities, food, other consumer goods.

    In short, they’d pump it right back into their own local economy. Spurring growth.

    Anyone remember when Papa John’s lamented having to raise the price of their pizzas about 11 cents per pie in order to afford healthcare for their employees?

    Look, if raising the minimum wage a few dollars would (maybe) raise the cost of a pizza or a hamburger, or any other consumer good you could imagine, by some marginal amount means that the employees can make rent, buy food, maybe even take their family on a modest vacation…

    Oh, the humanity!!!
    (oops, didn’t mean to get emotional)

  16. David M says:

    @teve tory:

    Are you going to get the GOP to cooperate in implementing a broad policy to help the not-1%? No. But it isn’t required, as the minimum wage is a policy where they are seriously out of step with the country.

    Here are the states where it’s already happened:

    Arizona (by voter initiative)
    Colorado
    Florida (by voter initiative)
    Minnesota
    Missouri
    Montana
    Ohio
    Oregon (by voter initiative)
    South Dakota
    Vermont
    Washington

    Give voters a choice on the minimum wage, and they’ll usually do the right thing.

  17. Gustopher says:

    Anyone else expecting a Republican proposal to raise the federal minimum wage $2/hr, but preempt any state or local minimum wage laws? And then ignore minimum wage forever after that?

  18. HarvardLaw92 says:

    @Gustopher:

    No, because that would be unconstitutional.

  19. Stan says:

    If economic studies were published showing a) that increasing the pay of McDonald’s and Walmart employees to $15/hour would lead to an x% increase in prices, b) that this would cause McDonald’s and Walmart sales to decrease by y%, and therefore c) z% of McDonald’s and Walmart employees would lose their jobs, I would reconsider my support for minimum wage increases. But no such studies exist, and the evidence from other countries contradicts McArdle’s argument and Doug’s post; for example, McDonald’s workers in Copenhagen make a minimum of $21/hour, and even though Big Macs cost 10% more there than here, I haven’t read anything to indicate that Danish McDonald’s outlets are in trouble. Furthermore, I can’t see McDonald’s and Walmart moving their outlets in search of low labor costs. Manufacturers can do do this, sellers of fast food and groceries can’t; they have to have stores where their customers live. So, as usual, I can’t see anything useful in the libertarian point of view.

  20. Scott says:

    I think the future is going to be further automated anyway. And we will have too much labor. Since we can’t get rid of people (to reduce the surplus labor), we will have to do some redistribution of income. I think it is better to redistribute income through increased prices than through the tax code. The more people we can get off food stamps, Medicaid, etc by giving them better incomes the better all around. I would rather pay a dollar or two extra than pay more taxes.

  21. Gustopher says:

    If you end up ordering your Big Mac off a touchscreen in five years or so, you’ll know why.

    Because businesses will automate any job away they can, as paying something for labor is a lot more than paying nothing for labor.

  22. Gustopher says:

    @HarvardLaw92: Why is setting a minimum minimum wage (which is what the federal minimum wage is now) constitutional, while setting a maximum minimum wage unconstitutional?

  23. wr says:

    @Stan: Perhaps if Walmart is forced to raise salaries, instead of raising prices they could either pay their executives less or give less back to their stockholders.

  24. Tyrell says:

    2020 is a long time, a lot of things could happen. If the Federal Reserve raises interest rates, inflation could take off and $15 / hr would take care of groceries – for two days. Hopefully food prices will not go into a rage like they have been the last five or so years. $1.50 for a 20 oz. soft drink is outrageous, wasn’t that long ago they were 75¢. And $4 for a bag of Doritos ?!
    $15 an hour to flip burgers, scrape gum off of sidewalks, drve a wheelnbarrow, make popcorn at a movie theater, or drive a daycare van may seem a bit much: around here that is about what a beginning teacher with a four year degree makes.
    Of course in California they will need that to buy a 600 sg. ft. 1 bedroom house that costs $700,000 and to help pay for Governor Brown’s high speed choo-choo train.

  25. Grumpy Realist says:

    @Tyrell: I can tell you’ve never ridden on the TGV or the Shinkansen.

    Actually, there are sections of the US that would do quite nicely with a Bullet Train. And with the whole security kabuki we have to go through at the airports plus the ever-decreasing seat size on airplanes, I submit the train alternative may be more appealing to a lot of people.

  26. PogueMahone says:

    @Gustopher:

    @HarvardLaw92: Why is setting a minimum minimum wage (which is what the federal minimum wage is now) constitutional, while setting a maximum minimum wage unconstitutional?

    It wouldn’t be. SCOTUS would dream up a commerce clause fiction, just like they did with the Controlled Substance Act (Gonzales v. Raich, 545 U.S. 1 (2005)).

  27. Jc says:

    So giving more money to people who spend all the money they earn is bad policy? They spend more, more competition for those new dollars, competition keeps prices from unreasonable territory. The sky will not fall and their local and fed gov will benefit. I don’t think the sky will fall.

  28. superdestroyer says:

    @teve tory:

    Do you have any cites from .edu or .gov instead of a liberal advocacy groups.

    The Washington Post had an article this week that showed that Puerto Rico was harmed by the a rise in its minimum wage in the past http://www.washingtonpost.com/blogs/wonkblog/wp/2015/05/19/the-best-indication-of-what-a-federal-12-minimum-wage-could-mean-for-poor-places-comes-from-puerto-rico/

    Also, NPR reported that some restaurants in Seattle are planning on closing because franchises have to pay a higher rate than mom-and-pop. Also, some restaurants plan on operating fewer hours since there is no point of being open 11 am to 9 pm when you have to pay $15 dollars an hour during the slow period. Also, some restaurants are planning on instituting a no tipping policy since servers will make $15 per hour.

  29. Jc says:

    @Tyrell: how does inflation take off if the fed raises interest rates??? Look at how many major cities have bumped their min wage. It’s reality, just like gay marriage will be. People want common sense, not fear mongering nonsense

  30. superdestroyer says:

    @teve tory:

    The flip side is how many times have progressives argued that people really can get something for nothing and there really is a free lunch. Raising the price of labor relative to other prices will, in the long run, cause companies to substitute capital for labor.

  31. Jc says:

    http://www.ritholtz.com/blog/2015/05/city-minimum-wage/

    The trend is just starting. Also read the Seattle debunking as well

  32. Tyrell says:

    @Grumpy Realist: I agree about the trains. Opportunities there.
    To get from where I am by car to Disney Work takes about ten hours. By train, two days is involved, counting a long layover for a connection.

  33. Andre Kenji says:

    The United States has a low unemployment number, but relatively low wages. Increasing the unemployment and increasing wages is not a bad deal.

  34. michael reynolds says:

    @superdestroyer:

    how many times have progressives argued that people really can get something for nothing and there really is a free lunch.

    How many times? None.

    Glad I could answer that for you.

  35. HarvardLaw92 says:

    @PogueMahone:

    Hence my objection – the Commerce Clause, properly examined, does not empower Congress to regulate wages, either as a minimum or a maximum. . Trade, yes. Wages? No. I’m pretty comfortable with the idea of a living Constitution, but commerce clause legislation & jurisprudence since and including Darby requires twisting the clause itself beyond any reasonable interpretation of what is and is not interstate commerce. It has become, instead, the federal “why we can do whatever we want” clause.

  36. HarvardLaw92 says:

    @Gustopher:

    IMO neither is constitutional.

  37. MBunge says:

    Obviously and inarguably, a minimum wage could be raised to a level that would produce seriously disruptive consequences. Is there any evidence or even intelligible argument that $15 is that level?

    And to be fair, there are plenty of neo-liberal economists who are exactly the same way on trade. That some level of restriction on trade would undeniably be a net negative does not mean that all restrictions on trade are net negatives.

    Mike

  38. gVOR08 says:

    @teve tory:

    A significant body of academic research has found that raising the minimum wage does not result in job losses

    But, but, I thought this was all based on “emotions and feelings”.

    Actually, I’m not convinced the effect on employment will be as small as hoped. But is it so terrible that we might, just once, err on the side of generosity?

  39. Hal_10000 says:

    @teve tory:

    Yes, you see the problem is that there have been more than five studies done on this. And when you take into account all of the literature, you find that the law of supply and demand is not magically suspended for low-wage labor.

    (You’ll further find that many of the studies arguing that minimum wage hikes don’t cost jobs are theoretical analyses, not based on data.)

    Low wage jobs are actually a form of corporate welfare.

    Or a way of subsidizing entry-level jobs. The “we have to pay welfare/medicaid/etc for minimum wage employees” is a circular argument. The income levels at which at which one can gain Medicaid, for example, have been deliberately raised in order to provide benefits for the working poor. So you can’t 1) raise benefits to cover more people; 2) claim that the existence of those benefits mandates a wage hike.

    The idea that raising the minimum wage will somehow fix our economy is religion. There’s no evidence to support this, but people believe it anyway.

  40. An Interested Party says:

    The idea that raising the minimum wage will somehow fix our economy is religion.

    As opposed to the conservative idea that raising the minimum wage is bad for low wage workers…I suppose it’s much better to pay them as little as possible…

  41. An Interested Party says:

    By the way, it is rather amusing that a libertarian is complaining about blatant appeals to base emotions that don’t even bother mentioning facts…

  42. Franklin says:

    @Slugger:

    Another cost of low wages that all of us pay is the social pathologies that attend poverty like crime, substance abuse, poor school performance, and homelessness. Is it possible that higher wages would lead to fewer car break-ins and save all of us money in this way?

    You’re almost on to something that no one has mentioned here: if you raise the minimum wage, then there’s suddenly a bunch more people that can spend more money, which helps the overall economy. Has anybody measured THAT?

    EDIT: Nevermind, Jc did mention this and pointed out how this help *everyone*. The rich people selling goods have more people to sell to, for example.

  43. Hal_10000 says:

    @An Interested Party:

    As opposed to the conservative idea that raising the minimum wage is bad for low wage workers…I suppose it’s much better to pay them as little as possible…

    So it’s best for them to just to not have jobs at all? It’s best to raise that lowest rung of the economic ladder to the point where people can’t reach it? I’m glad that there are some pet liberal economists who will claim that raising the minimum wage doesn’t cost jobs. But even those only claim the effect is minimal for small increases. CBO estimates half a million for the federal increase. This increase in LA is much more massive than that. One economist called the Robot Employment Act of 2015.

    It’s not best to pay employees as little as possible. It’s best to pay them what they are worth. I don’t pay minimum wage. I believe in paying more. I don’t believe in mandating it because, unlike you, I don’t believe that I can run other people’s businesses better and more fairly than they can.

  44. An Interested Party says:

    I don’t believe in mandating it because, unlike you, I don’t believe that I can run other people’s businesses better and more fairly than they can.

    Ahh, so people who run businesses should be able to pay whatever wage they want…

  45. DrDaveT says:

    @Hal_10000:

    It’s not best to pay employees as little as possible. It’s best to pay them what they are worth.

    Best for whom?

    If your business is only viable if it pays wages that are not enough for anyone to actually live on, is the economy (or the nation) really better off for the existence of your business?

  46. David M says:

    If people are going to make a policy mistake, a slightly larger minimum wage increase is probably the one to make.

    I’m not sure there’s a contradiction between wanting people to be able to earn a living wage and also being willing to provide a safety net for people earning below that level. If anything, I keep wondering why the GOP doesn’t support any policies that would help people be less reliant on the social programs they disparage. (Cutting said programs doesn’t mean the people are any better off.)

  47. anjin-san says:

    @Hal_10000:

    more fairly than they can.

    Where do you get the idea that running their businesses “fairly” is a goal that is common amongst business owners?

  48. JKB says:

    Well, it isn’t theoretical that higher minimum wage mandates cost jobs. There have been several businesses that this has happened or was only forstalled due to charity. The bookstore in SF for one. Granted bookstores claim a specific limitation since the prices are printed on the book by the publishers. But also, when the higher wages went into effect in the SEATAC area, employees found that parking subsidies and free/reduced priced meals disappeared. Not to mention work hour cut backs.

    I’ve just been reading a book from 1875 on the economy of running a machine shop. The author made a good point regarding apprentices, i.e., unskilled workers. The more skilled the work the apprentice is learning, the less value the apprentice can bring to the job compared to the more muscular/routine jobs. Thus the more valuable the “training” is to the worker, the less they can demand in cash wages, whereas the less skilled work can justify paying the low skilled worker more of the value they bring to the job.

    So a higher minimum wage may reduce training/apprentice opportunities in their work and push more of the potential employee to have to expend more time, effort and unpaid labor (school/training) in order to gain employment.

  49. JKB says:

    @JKB:

    An apprentice exchanges unskilled or inferior labour for technical knowledge, or for the privilege and means of acquiring such knowledge. The master is presumed to impart a kind of special knowledge, collected by him at great expense and pains, in return for the gain derived from the unskilled labour of the learner.

    An apprentice is different than just an unskilled worker doing an unskilled job, but is still impacted by the minimum wage law because the apprentice provides inferior labor that commands a lower wage while learning new skills.

  50. Hal_10000 says:

    @DrDaveT:

    If your business is only viable if it pays wages that are not enough for anyone to actually live on, is the economy (or the nation) really better off for the existence of your business?

    Should we shutter all the liberal magazines, websites, NGOs and orgs that are providing unpaid and sub-minimum wage internships? The minimum wage is not intended for anyone to raise a family on. It’s intended to be an entry level wage that allows marginal workers to find their way into the workforce and eventually get better jobs (as indeed two-third do within a year of starting work). What you are effectively saying is that people are better off unemployed than making less than $15/hour.

    We’ve been down this road before with innumerable policies that were intended to help the poor that ended up hurting them. “Urban renewal” that gutted inner city neighborhoods. “Investments” in inner cities that drove out businesses and burnt government money (most notably publicly-funded stadiums for billionaires). “Support for public schools” which condemned generations of kids to the same broken system. Fierce opposition to the 90’s welfare reform that lifted million out of poverty.

  51. Xenos says:

    I live in a European country that had a minimum wage that is much higher than the US. Fast food is more expensive, but people still buy it. The difference comes out of shareholder returns, in the end, which is why the right wing is so dead-set against it.

  52. Kari Q says:

    Perhaps we should be honest and say that the evidence on the impact of increases in the minimum wage is far from clear. Look at these recent increases as an opportunity to learn more and develop enough data to help clarify. If it turns out that the net effect is negative, we should see that easily enough.

  53. David M says:

    Let’s say the pessimists are correct, and the minimum wage increase causes a small increase in the unemployment rate as well. Increased unemployment isn’t necessarily a difficult policy problem, as the effects could probably be mostly mitigated with increases in unemployment benefits, public works employment, etc.

    Seems like a win-win scenario at that point.

  54. Rafer Janders says:

    @Hal_10000:

    I don’t believe that I can run other people’s businesses better and more fairly than they can.

    There aren’t many business owners who want to run their business “fairly.”

  55. Rafer Janders says:

    @Hal_10000:

    Should we shutter all the liberal magazines, websites, NGOs and orgs that are providing unpaid and sub-minimum wage internships?

    Um, yes, if they’re cheating their employees of pay. Shutter them all.

    The minimum wage is not intended for anyone to raise a family on.

    A flat out filthy lie, and one not supported at all by the history of the minimum wage. As FDR, the architect of the minimum wage, himself said:

    “By living wages, I mean more than a bare subsistence level — I mean the wages of a decent living.” (1933, Statement on National Industrial Recovery Act)

  56. David M says:

    @Hal_10000:

    The minimum wage is not intended for anyone to raise a family on. It’s intended to be an entry level wage that allows marginal workers to find their way into the workforce and eventually get better jobs (as indeed two-third do within a year of starting work).

    That sounds great in theory and all, but doesn’t stand up to the real world conditions in Los Angeles. If the market was working properly and the minimum wage were set at an appropriate level, and relatively few people were making it, then this increase shouldn’t have much of an effect at all. The fact that this should give a raise to somewhere near half the employees in Los Angeles is a pretty good indicator that the market needs some serious correcting.

  57. anjin-san says:

    @Hal_10000:

    The minimum wage is not intended for anyone to raise a family on. It’s intended to be an entry level wage that allows marginal workers to find their way into the workforce and eventually get better jobs

    Just in case you are not aware of it, the current year is 2015, not 1972.

  58. anjin-san says:

    @JKB:

    Well, it isn’t theoretical that higher minimum wage mandates cost jobs.

    Really? Prove it.

  59. anjin-san says:

    If you end up ordering your Big Mac off a touchscreen in five years or so, you’ll know why.

    Because employers are always looking to replace labor with automation when it is feasible to do so, irregardless of the minimum wage?

  60. anjin-san says:

    @ Doug

    it’s also probable that we will see some efforts by employers at this level to curtail labor costs. As I said, this can amount to anything from cutting hours or reducing planned hiring to replacing order takers at fast food restaurants with computers, something that is already becoming quite common. For example, Panera Bread Co.’s CEO has said that he hopes to have touchscreens replace cashiers in all the company’s stores by 2016

    Well, let’s follow the link you provided and learn more:

    “Our mission is to never have a customer wait,” says Panera founder and CEO Ron Shaich, in a phone interview. He’s acutely aware of — and frustrated by — the current series of lines that customers must often stand in to order; pay for and pick up food in most of Panera’s 1,800 restaurants. “It’s like a game,” he says.

    In a new twist for Panera: food orders will be delivered directly to tables. Some employees who worked at registers will, instead, move to delivering or preparing food, says Shaich. There will be no jobs cut, he says.

    So the move to automated ordering at Panera has nothing to do with increases in the minimum wage, and the CEO predicts no jobs will be lost.

    So which is it Doug? Are you being deliberately dishonest? Too lazy to do the research? Or do the facts just not fit into the strange alternate universe of Reason magazine?

  61. David M says:

    @anjin-san:

    I don’t doubt that increasing the minimum wage a meaningful amount will probably cause a small increase in unemployment. When conservatives complain that raising the federal minimum wage to $10.10 / hour could result in 500,000 workers losing their jobs, they are ignoring the 25 million who are getting raises.

    So the tradeoff to discuss is whether it’s worth it to trade 25 million crappy jobs for 24.5 million better paying jobs. Simply discussing how many jobs will be lost by itself is a distraction.

    I wonder if the GOP will believe their own rhetoric here, and realize that people are losing their jobs due to public policy decision. And if they are unemployed through no fault of their own, maybe they don’t need to be punished…even if Republicans don’t agree with the decision to raise the minimum wage, they need to design policies for the reality that exists, not the reality they wish existed.

  62. Tyrell says:

    I wonder what the effects of this are on prices. I am not going to go to a fast food joint and plunk down $1.50 for a regular hamburger. Their prices on most items is too high now. So there goes a lot of business.
    Higher wages could have the effect of a more qualified, educated, experienced, and motivated work force. That is the good part. The bad part is that students and others on the low end of qualifications and skills will be left out. And there will be more automation. Self serve ordering technology is coming to the fast food industry.

  63. wr says:

    @anjin-san: “Just in case you are not aware of it, the current year is 2015, not 1972.”

    Hey, at least he’s drawing on right-wing economics from this century, unlike JKB, who has apparently decided that nothing that’s happened over the last 150 has any bearing on our current state of being, and thus guides us to take our economic cues from a book published in the 19th century.

  64. James Pearce says:

    @Tyrell:

    I am not going to go to a fast food joint and plunk down $1.50 for a regular hamburger. Their prices on most items is too high now.

    A buck fifty is nothing. I’ve paid more for a cold soda from a vending machine. I don’t think the problem with fast food is their prices are too high. It’s too low. The only way they can make any money is by serving this slapped together slop, ketchup squirted with this gun, mustard with that gun. Open this drawer and get the top patty.

    It’s disgusting.

    And in a world where you get a meal twice as good from the roach coach for only a buck or two more than it would cost at Mickey D’s, it’s no contest.

  65. stonetools says:

    @Hal_10000:

    “Urban renewal” that gutted inner city neighborhoods. “Investments” in inner cities that drove out businesses and burnt government money (most notably publicly-funded stadiums for billionaires). “Support for public schools” which condemned generations of kids to the same broken system. Fierce opposition to the 90’s welfare reform that lifted million out of poverty.

    Ah yes, the usual RW litany of “failed” liberal policies. There are actually fiece disagreements about all these policies, with many liberals arguing that the biggest problem with these policies is that they were never fully funded.

    In any case ,the solution for a bad policy is not to ignore the problem (the conservative approach) but to try a better policy.
    As to the minimum wage, it has been conservative dogma for eight decades that minimum wage laws hurt the poor by substantially increasing unemployment. I’ve heard this recited by Milton Friedman, Thomas Sowell, Walter Williams, etc, etc. In all that time, conserrvatives have yet to produce a study proving this. Meanwhile, there are an increasing number of studies pointing the other way. Maybe it’s time for you guys to re-examine your unstinting allegiance to this dogma.

  66. JKB says:

    @anjin-san:

    I gave you examples. Please improve your reading comprehension.

    Now, let us grant that there will be a disruption. How terrible life will be after the disruption is the question. Some businesses will close as they are not viable at higher staff wages and cannot raise prices fast enough to compensate. Other businesses will cut staff hours, cutback perhaps through attrition, or automate. The businesses most impacted will be small, one-off, enterprises such as unique restaurants, small shops, independent bookstores, etc. As a consequence, those who hate fast food and chain restaurants are going to see the biggest impact on their consumer choices.

    Automation has a cost. As wages rise, especially via mandated minimum wage increases which do not reflect an increase in worker productivity, the cost of workers will make the capital investment in automation more appealing.

  67. JKB says:

    @wr:

    Way to apply your non-existent critical thinking.

    The value of the observations on apprenticeships, even from the 19th century, is to see how the minimum wage laws have impacted the technical training of unskilled workers by firms. When discussing minimum wage laws these days most assume an unskilled individual in a low-skill job, e.g., one with a short learning curve. The loss of apprentice type training and the transition to the requirement that workers invest more in schooling can be see to be a direct consequence of minimum wage laws that deny individuals and firms from agreeing to lower wages + access to the privileges and training at a high skill firm.

    All in all, if you believe that market rate wages are to low for low skill workers, the more efficient and least employment impactful way to compensate would be through the Earned Income Tax Credit program or similar rather than putting marginal businesses out of business.

  68. JKB says:

    @stonetools: ” the usual RW litany of “failed” liberal policies.”

    RW = Real World ?

  69. DrDaveT says:

    @Hal_10000:

    Should we shutter all the liberal magazines, websites, NGOs and orgs that are providing unpaid and sub-minimum wage internships?

    Of course they should be subject to the same minimum wage laws as everyone else. Duh.

    (Volunteers at nonprofits are a separate category; nobody is trying to raise a family on their volunteer work.)

    The minimum wage is not intended for anyone to raise a family on.

    As others have pointed out, this is not merely false, it’s a damned lie. Since the 14th century, the explicit purpose of minimum wages has been to ensure a subsistence living for the employed. FDR was about as explicit as one could be about this when the US minimum wage law was first enacted.

    We’ve been down this road before with innumerable policies that were intended to help the poor that ended up hurting them. […]

    If we were discussing the efficacy of any of those policies, I would understand why you brought them up in a discussion of the pros and cons minimum wages. As it is, it just looks like another example of “Hey, look, a monkey!”

  70. stonetools says:

    @JKB:

    Ha, clever for once. Should have used the full acronym “RWNJ”, ( right wing nut job).

    Now, work on finding studies that support your assertions about the minimum wage (That might prove harder).

  71. wr says:

    @JKB: See, if you’d read anything published after the turn of the century — heck, any century, pick one — you’d see that businesses no longer have any interest in training workers, even at a lower wage. They only want to hire people with all the necessary, even specialized, skills — and then they want to pay them wages an apprentice would scoff at.

    Oh, and the “conservative” solution to this is that the government should provide training, so that corporations don’t have to spend a nickel of their CEO’s bonus on what’s actually necessary to run the business.

    Oh, and another way the world has changed since the 1870s — an apprenticeship system only works (for the workers) if there’s an assumption that once trained an apprentice will be employed for many years. Employers no longer offer long-term contracts, and tend to act as if they have absolutely no obligation to their workers.

    If you are advocating we return to a system under which it’s assumed that people will continue working for one company through most of their lives, we can discuss. But you want to let companies pay a sub-living wage during a “training” period with no obligation to ever pay full wages to skilled workers.

    So you may bitch about my critical thinking skills, but I am aware you can’t simply apply rules for working conditions from the 19th century to contemporary America without accounting for the great changes in technology and culture.

  72. wr says:

    @JKB: “All in all, if you believe that market rate wages are to low for low skill workers, the more efficient and least employment impactful way to compensate would be through the Earned Income Tax Credit program or similar rather than putting marginal businesses out of business.”

    That’s funny — I thought you were opposed to welfare. And yet here you want to shovel tax money at businesses that are so incompetently run they can’t survive if they have to pay the actual costs of their labor.

  73. DrDaveT says:

    @Hal_10000:

    Should we shutter all the liberal magazines, websites, NGOs and orgs that are providing unpaid and sub-minimum wage internships? […]
    We’ve been down this road before with innumerable policies that were intended to help the poor […]

    I have to note in passing that I’m always bemused by the amount of projection demonstrated by some conservative posters here. Conservatives want to exempt groups they like (e.g. Christians) from general policies, so progressives must be the same. Conservative policy positions come as a package deal, all or none, so progressives must be the same.

    I hate to break it to you, but there are more flavors of progressive than you can shake a small purple tasting spoon at. They agree pretty well on the goals, but differ wildly on the best means to accomplish them. Education is a perfect example — there is nothing even remotely approaching orthodoxy on the left about how to fix America’s embarrassing educational situation.

  74. anjin-san says:

    @JKB:

    I gave you examples.

    You made unsubstantiated claims. Is that “proof” in your book?

  75. aFloridian says:

    I really don’t understand how minimum wages beyond keeping up with inflation help anything. Prices of the services the increased wage workers are increased and the services and goods these workers buy (as well as the rest of us) will end up raised as a result. That’s what it seems to me, which is why I’ve always been suspect of minimum wage increases like this. So great for fast food workers and other minimum wage earners, but what happens to the bank tellers making $12 and hour and the security guards making $15, not to mention the medical/legal support staff making $15-20?

    What’s more alarming to me is the continuing onslaught of automation (and a separate issue, my fear of robotic overlords, which, apparently, some experts really do worry about in a manner of speaking) and how ill-prepared we are for what’s coming. I continue to be interested in the concept of a universal basic income and how this will interact with the increasing divide between uber-wealthy service providers and…the rest of us, i.e. service consumers. We are only going to see more and more jobs eaten up by computers – travel agents, salespeople, ashiers, and, ultimately, probably even things like painters, delivery-people, pharmacists, grass-cutters…

    So the idea that we humans are just going to become a race of idle gentry a la Victorian England may appeal to some, but what are we going to DO? And how are we going to afford it? Are we all going to become fat, legless beans as suggested by the film Wall E? These are real concerns as fewer and fewer of us are needed. Shoot – I’m worried about my field and fields like it – medical, legal, and economic professionals may not even be needed as computers advance. Esquire had an article this month about a supposed magical new service named Viv (see here: http://www.esquire.com/lifestyle/a34630/viv-artificial-intelligence-0515/) that was both meant to be alarming and successfully alarmed me. So good job Esquire.

    So maybe a UBI is part of the solution, but both liberals and conservatives I’ve talked to recoil at the idea of “something for nothing” and question how we’d pay for it. It’s more than answering those questions though – it would be a paradigm shift in the evolution of humanity akin to the first agriculture. Or not?

  76. David M says:

    @JKB:

    All in all, if you believe that market rate wages are to low for low skill workers, the more efficient and least employment impactful way to compensate would be through the Earned Income Tax Credit program or similar rather than putting marginal businesses out of business.

    That’s not altogether a bad recommendation. However, I notice it would need to be implemented at the federal level, and the GOP there shows now interest in doing anything productive. So even if you think expanding the EITC is a preferable solution, it should be obvious that raising the minimum wage here isn’t being done instead of that. It’s being done because it’s the only option the GOP can’t stop.

  77. Robert Reider says:

    The risk will be for cities that don’t raise wages. They will get the bottom of the barrel of job applicants. Bad employees=bad service=death spiral. Same for those businesses that slash staff. People pay not just for the product but their overall experience. As a former restaurant regional manager in the Bay Area I’ve been through this scenario 4 times. Oh the screaming from the restaurant association! All the same arguments each time and each time REVENUES INCREASED! Cost of a big mac will go up about 35 cents though. Is that such an outrage?

  78. JKB says:

    @David M: the GOP there shows now interest in doing anything productive.

    Democrats controlled both houses of Congress from 2007-2011 and also the presidency from 2009-2011. What’s more they have an overwhelming majority. They could have passed it.

    I’d have to look it up but I pretty sure Scott Walker has discussed doing this with EITC and I think Ted Cruz has.

  79. JKB says:

    @wr:

    Actually, given that the minimum wage mandate requires businesses to overpay employees when they are not productive in apprenticeships and also gaining valuable training and experience in addition which cost the company time, money and productivity it is no wonder that companies no longer take on apprentices.

    And since the apprentice training has value in itself, there is nothing terrible if a company doesn’t pick up the newly skilled but it is possibly a missed opportunity. Also, apprentices can and do become competitors after getting the training. I read recently that after working in a nail salon and learning the job over about a year, an employee needs only about $30,000 to open their own competing salon. I remember reading similar happening to someone who had a window tinting business back in the day.

  80. David M says:

    @JKB:

    If conservatives think the EITC is a better solution than raising the minimum wage, then it’s their responsibility to actually attempt to pass it. The fact that they haven’t made any attempt is a pretty good indication that they do not actually support increasing the EITC, other than as a purely theoretical proposal meant to protect them while they oppose raising the minimum wage.

    This is similar to the health care debate, where they pretend to have an alternative to Obamacare, but actually don’t. They haven’t earned the benefit of the doubt on these policies, so they actually have to act before I will believe they are sincere.

  81. al-Ameda says:

    I’m surprised that Republicans haven’t queued up a: “elimination of the Corporate Income Tax would result in both more jobs and an increase in the minimum wage, not these misguided liberal attempts to kill jobs.”

    I’m of the opinion that whether or not increases in the MW results in fewer jobs is a function of location, location, location. If we’re talking about San Francisco, Los Angeles, Seattle, or another desirable metropolitan area I’m not sure that an increase in the MW has any negative effect. Also and after all, we’re talking about jobs that are generally in the food, hospitality and service industries, not highly paid technical or management positions. These are generally not in businesses that will reduce employment and/or relocate to another city. Here in the Bay Area, the cost of lease renewal has a lot more to do with operating costs than a $2-$3 per hour increase in the wages of some MW employees.

  82. Hal_10000 says:

    @stonetools:

    As to the minimum wage, it has been conservative dogma for eight decades that minimum wage laws hurt the poor by substantially increasing unemployment. I’ve heard this recited by Milton Friedman, Thomas Sowell, Walter Williams, etc, etc. In all that time, conserrvatives have yet to produce a study proving this. Meanwhile, there are an increasing number of studies pointing the other way. Maybe it’s time for you guys to re-examine your unstinting allegiance to this dogma.

    Uh, no. Numerous studies have shown this. Trip over to Cafe Hayek and you’ll see a series of posts that take apart the arguments in favor of a “living wage”, including quotes from Paul Krugman on the subject. You might also check out Warren Buffet on the subject, who might a thing or two more about business than you do.

  83. Hal_10000 says:

    Incidentally, here (PDF) is a meta-analysis of more than 90 studies showing that the Law of Supply and Demand does indeed exist when it comes to low-wage labor. So you can put aside the “all studies show it doesn’t” and “no study shows it does” nonsense.

    Honestly, on the subject, ya’ll make the global warming deniers look reasonable.

  84. DrDaveT says:

    @Hal_10000:

    Incidentally, here is a meta-analysis of more than 90 studies

    Thanks for the link. It’s a very interesting survey article; I look forward to reading all of it.

    I do find it interesting that the authors seem to accept without comment the assumption that any reduction in employment due to increased minimum wage will be felt principally by teens, and to a lesser extent “other youths” (ages 20-24). In fact, many of the studies seem to use the 25+ population as a control when measuring the effect of a change in minimum wage. At least, that’s how I read the first 10 pages or so.

    I’ll be curious to see whether that age distinction is universal, and whether the cited studies distinguish between effects on employment (number of jobs) and wages (dollars earned).

    But again — thanks for bringing data to the table.

  85. DrDaveT says:

    @Hal_10000:

    You might also check out Warren Buffet on the subject, who might a thing or two more about business than you do.

    Warren Buffet says (at the link you provide) that raising the EITC would be more effective than raising the minimum wage. He’s probably right; there’s no contradiction there. He also fails to account for either the multi-job effect or the transfer effect (of public subsidies for lost wages) when full-time wages aren’t enough to live on. It’s possible for employment to go down but for people to be almost uniformly better off.

    He also says some just plain silly things:

    Nor are the rich undeserving. Most of them have contributed brilliant innovations or managerial expertise to America’s well-being.

    Hogwash. Most of the rich are rich because their parents were rich. Mr. Buffet knows far more about running a business than I do, but apparently rather less about demographics. The myth of Deserved Wealth is one of those comforting bedtime stories we tell, right beside All Dogs Go To Heaven and the Noble Savage Living In Harmony With Nature and how anyone can achieve Rags To Riches Through Pluck And Hard Work.

  86. DrDaveT says:

    @Hal_10000: Reading Buffet’s editorial more closely, I note that he says nothing at all about how the expanded EITC would be funded — either for the transfers themselves, or for the enhanced scrutiny and enforcement he advocates. (“Fraud is currently a problem…”)

    So is he proposing a tax increase? A reduction in defense spending? Some other politically impossible Congressional action?

    Let’s suppose it’s a tax increase. Can we tax the wealthy to pay for that increased EITC? Sounds good to me, but Republicans insist that also kill jobs. So can we tax businesses? No, we’re told that kills jobs too. So what’s left? Taxing the personal income of the middle class and the poor, to pay for benefits to the even poorer. Which, of course, has a much harder impact on consumption than taxing the rich would.

    I’m not seeing it. Until we can get a Congress with the sense to tax the rich and the profitable to fund that greatly expanded EITC, I think we’re still better off with a simple increase in minimum wage. It might reduce the number of jobs, but might at the same time increase the number of people earning a living while (perhaps) not much changing the total number of people working at least one job.

    And that, in fact, is what Buffet advocates:

    But the goal of the EITC—a livable income for everyone who works—is both appropriate and achievable for a great and prosperous nation.

  87. JKB says:

    Don Boudreaux over at Cafe Hayek has posted a litmus test sort of question for those who support minimum wage mandates

    In this short post I ask a simple question of all advocates of minimum wages: If enforcement of minimum-wage policies were carried out in practice by policing low-skilled workers rather than employers – if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages? Would you be good with police officers arresting those workers who, preferring to remain employed at sub-minimum wages rather than risk losing their current jobs (or risking having do endure worsened employment conditions), refuse to abide by the wage terms dictated by the legislature? Would you think it an acceptable price to pay for your minimum-wage policy that armed police officers confine in cages low-skilled workers whose only offense is their persistence at taking jobs at wages below those dictated by the government?

    Now keep in mind today’s post about the couple shot dead by police for failure to stop.

    Are you willing to see low-skilled workers shot down in the street for working for less than the politicians feel appropriate?

  88. David M says:

    @JKB:

    I have no words to accurately describe how ridiculous that hypothetical is. I’ve made a mental note to assume Cafe Hayek isn’t to be taken seriously without another credible source backing them up.

  89. JohnMcC says:

    @JKB: Okay! I’m willing to consider increased redistribution through other means than the paycheck. Yes, I am a liberal and I’m willing (even eager!) to consider that Milton Friedman’s ‘Negative Income Tax’ (which we call EITC) is a reasonable response to the modern dilemma (most often mentioned here by Mr Beasley — bless his heart) of amazing amounts of production by fewer and fewer workers. We should all of us in our society benefit from the productivity of our society even if we ourselves don’t operate those highly productive machines.

    Just as we are told that the Pentagon has no use for millions of draftees we should acknowledge that modern manufacturing has no need for millions of assembly line people — because the assembly lines have machines that work better than people.

    But lets keep in mind that nothing in this issue would result in some apocalyptic self-destruction of society that would lead to people being shot down in the street or assassinated by mentally ill police people who jump onto the hoods of our cars and shoot us to pieces because…. well, because it seemed like what all the other police people were doing.

    I speak for most liberals, I bet, when I say that if an economic equality existed in modern society there would also be a racial and class equality. Save the MadMax images for the movies and comics and — I suppose — your dreams.

  90. Hal_10000 says:

    Hogwash. Most of the rich are rich because their parents were rich.

    False. According to BLS, the top 1%, top 10% got about 15% of their wealth from inheritance. According to Brooking,less than 40% of the top quintile had parents in the top quintile and that number shrinks the further you go up the income distribution.

  91. JohnMcC says:

    @Hal_10000: Wow! That would be great news to me — that the great middle-class-machine that I grew up in is not dead. Please cite some specifics.

  92. Tyrell says:

    It does seem logical that a wage of $15 would raise the quality of the work force in the lower skilled jobs. Think about going into a fast food restaurant and experiencing: employees that speak clearly and use proper grammar, employees that are courteous (“yes mam, thak you sir, have a great day”) instead of just throwing food at you, employees that can handle basic math skills, employees that can handle special orders without going into a panic (“hold the onions, extra mustard on the Big Mac”), employees that show pride in their work and will continually upgrade their skills. It could even bring a return to serving real, cooked food instead of preparing everything with a microwave timer! Back in the ’60’s fast food was just getting started. For a while the food was actually good, and real. Now the burgers are thin as paper, there is a dab of ketchup, and the meat is tough. I wouldn’t mind paying a little more for real cooked food. The fries and apple pies were a lot better too. Some where along the line the fast food joints changed how they prepared the food.

    “Have it your way”
    “You deserve a break today”
    “Supersize that”

  93. DrDaveT says:

    @Hal_10000:

    According to BLS, the top 1%, top 10% got about 15% of their wealth from inheritance.

    I’m having trouble parsing that sentence, but I’m pretty sure it doesn’t contradict what I said, because
    a) growing up rich has many other benefits beyond direct inheritance of wealth, and
    b) it doesn’t matter if only 15% of my wealth was inherited if that 15% was already enough to make me rich.
    To put it another way: if you start rich, you have to be incredibly inept to not end up much richer. Simply sticking most of your money in a passively-managed brokerage account works fine.

    According to Brooking, less than 40% of the top quintile had parents in the top quintile

    That’s more to the point, though it’s Brookings so I’ll need to double-check the facts.
    I don’t have quintile boundary figures, but I can see from the census data that in 2011 the 70th percentile of household net worth was a little over $200k, and the 90th percentile was about $630k. Interpolating, that puts the lower edge of the top quintile at somewhere around $350k. When the national median is less than $70k, that clearly still counts as rich. If mom and dad were only 70th percentile, you still grew up rich. (“Rich” is a shorthand for “not having to deal with most if not all of the issues that tend to prevent people from building wealth in the first place”.)

    Shorter DrDave: if I inherit $300,000 and let it grow to $3,000,000 passively, I did not earn my wealth, even though I inherited only 10% of it.

    Did Brookings also have figures for what percent of people in the third quintile had parents in the first or second, etc?

  94. stonetools says:

    @Hal_10000:

    Thank you for responding with data. I did skim through the study, focusing most on on the conclusion. I’ll look at it more closely later, but here are my thoughts.
    First, I never said ( and don’t believe) that the minimum wage laws are unaffected by the law of demand and supply. Here is what I said:

    s to the minimum wage, it has been conservative dogma for eight decades that minimum wage laws hurt the poor by substantially increasing unemployment

    Now, if you look at the conclusion of the study you quoted, It does say, triumphantly, that the studies do show that minimum wages increase unemployment. What it also says, somewhat more softly, is that the effect is to increase teenage unemployment one to three percent.
    With all due respect, this is not a substantial effect. Moreover, it does not support Sowell’s ( and your ) rhetoric of “cutting off the bottom rugs of the ladder of opportunity,” etc. And of course, neither you, Sowell, or the authors mention the beneficial effect it has of boosting the incomes of millions of older workers, many of whom support children. Finally, if the issue is one of helping minority teenagers find employment ( not something most conservatives are concerned with, I find), then there are other policies that can be implemented that would better achieve that goal.
    I am somewhat amused at your citation of Cafe Hayek. I have actually read the real Friedrich von Hayek, not conservative Internet icon Hayek. The real Hayek favored a national health insurance program and a guaranteed minimum income. I bet most of the denizens of Cafe Hayek oppose both ideas, but are happy to latch onto Hayek’s criticisms of the minimum wage.

  95. wr says:

    @JKB: It’s nice to know that you can make an argument even dumber than citing an 1870s manual on employee relations…

    No, I would not support this. I would also not support laws against rape being enforced by having police surveil every woman all the time, arresting her if her behavior was something they felt might lead to an assault. And I wouldn’t support anti-theft laws being enforced by having police confiscate all property that might be stolen.

    I have no idea why you think this insight is so deep and telling that it’s worth quoting in depth. But in case the concept is really difficult for you, no, I do not believe that laws should be enforced by punishing the victims.

    Next question.

  96. wr says:

    @Tyrell: “I wouldn’t mind paying a little more for real cooked food”

    Then why don’t you try, I don’t know, eating somewhere better?

  97. JKB says:

    @wr:

    You seem confused. If an employee agrees to work at less than the minimum wage, then they are in violation of the minimum wage laws. That the penalties are applied only to employers doesn’t alter the fact. I is the same if an employee agrees to less monetary compensation and a greater proportion of “pay” in training and skill improvement.

    Right now, no person may enter into a contract with a business to exchange low skill/inferior labor for access to observe a high skilled business as well as instruction which the individual feels would provide them with skills they could later use and sell.

  98. wr says:

    @JKB: What is your point, aside from obfuscation?

    The point of minimum wage laws is to help working people. It’s assumed that anyone working for less than minimum is being exploited, either through their ignorance or their desperation. The employer is the one profiting here. So why would you want to punish the victim?

    Oh, wait. I know. The victim is poor. So of course we should punish him. You’re a “conservative.”

  99. David M says:

    @JKB:

    I’m not sure you are describing a real problem. Assuming they are learning a real trade, it will result in them earning more than the minimum wage. So the minimum wage protects the employees from being taken advantage of during the apprenticeship, but is still lower than the wage they will earn after the training, so the economics still work for the company during the training.

    It is only a problem for employers who would take advantage of employees during the apprenticeship. I’m sensing a pattern to the objections to the minimum wage increase. Either it’s worrying too much about potential problems that will only have a very small impact, or it’s worrying that employees will have more freedom.

  100. JKB says:

    @David M: So the minimum wage protects the employees from being taken advantage of during the apprenticeship, but is still lower than the wage they will earn after the training, so the economics still work for the company during the training.

    Actually, the minimum wage makes it to costly to set aside time to train apprentices in the most skilled trades where it takes more time for someone to start being productive. After the training, they should earn more but that has nothing to do with them being overpaid during training unless their post training wage is reduced.

    Essentially, with the minimum wage, apprenticeships no longer make financial sense for a company so they only consider hiring those who’ve spent (or gone into debt) a lot of their own money for schooling. This is obviously a problem for those who do not have the financial resources for academic/vocational training, i.e., the poor.

  101. David M says:

    @JKB:

    That would indicate the minimum wage should have a very narrow exception for apprenticeships, not that it shouldn’t exist or even be raised.

  102. Mikey says:

    @JKB: @David M: Here is an interesting piece that lays out in some detail the problems America could encounter in instituting an apprenticeship system (assuming we try to emulate Germany’s successful system).

    Why Germany Is So Much Better at Training Its Workers