8 ms·

Historical Data of Minimum Wage Increases and Employment Levels (2016) [pdf]

34 points by fouc 9y ago

wolco 9y ago
I believe this to be true overall. McDonald's or bigger places wouldn't hire less people, if they could get away with lower staff levels they already would have lowered them. For small business it's one percent or less change per employee.
- privong 9y ago
  > McDonald's or bigger places wouldn't hire less people, if they could get away with lower staff levels they already would have lowered them. To zeroth order, that seems reasonable. But the added expenses might shift the cost-benefit analysis enough to add motivation to explore automation or other changes to reduce the workforce. The necessary R&D or capital costs might have not been attractive with lower wages, but could become attractive with higher wages.
  - mtgx 9y ago
    Do you believe there's a somewhat fixed wage threshold (for now or 20 years later) that when it's passed McDonalds begins to consider replacing workers with self-service machines? Or that the self-service machines are going to arrive regardless of the wage, with the only difference being McDonalds keeping workers on $10/h wage 3-5 years longer than they would keep the $15/h workers? What happens when the entire self-serving machinery costs as much as it does to pay one or two employees for a year? Does it make sense for McDonalds to keep human employees at any wage?
    - wolco 9y ago
      It does if it produces more sales. If people stop coming because they dislike the machines 15/hour can be a small cost. On the other hand if people like the machines more they might raise prices.
  - mjn 9y ago
    Automation is already being explored essentially everywhere, so I'm not sure motivation is a big part of it. The question is more whether it's feasible, both technically and economically, in a given case. In principle, yes, a minimum wage helps the economics of automation by making the "competition" more expensive. But with the kinds of modest wage changes typically proposed, it's a pretty marginal impact: +10% to wages might move up automation that was going to happen anyway by 6 or 12 months, but it's not the kind of change that meaningfully impacts the progress of automation on a larger scale.
  - deleted 9y ago
    [deleted]
  - crdoconnor 9y ago
    >To zeroth order, that seems reasonable. But the added expenses might shift the cost-benefit analysis enough to add motivation to explore automation Automat restaurants have existed since the 1890s and were first touted as a cost cutting measure. Ironically enough, they were most popular around the 1930s and disappeared roughly when the minimum wage was highest (1970s) and are now making something of a comeback, when the minimum wage is again, historically very low.
  - Noos 9y ago
    You can't automate to a level to replace them. You can automate order taking, but the human order taker who does it also cleans the store, fills and packages orders, leaves the store to clean the outside and dumps trash, answers customer questions about food, troubleshoots register issues, balances their drawer, and more. And something as simple as checking straws and napkins or making sure the floor by the soda machine is clean can't be automated cheaply. Automation in general is too fragile to handle the demands of that kind of work.
    - setra 9y ago
      These are all environments designed for humans. Vending machines already get warm food, and fresh coffee to me. The system once automated will not look just like the current human paradigm.
      - bmelton 9y ago
        Agreed. Watch "The Founder". The amount of workplace efficiency brought by the McDonald brothers would have been, and almost certainly was considered inconceivable by other restaurateurs of the era. "The system" was so good that it revolutionized the fast food market to the point that almost every attempt to buck the trend is now considered some sort of synonym to 'craft' or 'artisanal'. (Note: I'm taking the movie as canon, which is basically stupid, but I have a grandfather who would gladly tell you the story of his first McDonald's visit, and how revolutionary it was relative to everywhere else he'd been, but for his passage a few years back.)
      - Noos 9y ago
        There's a lot to operating a physical establishment that machines can't do without reducing the experience. Something as simple as cleaning the tables will not be automated. You need people to provide service in a restaurant, which is why automats generally never take on. And we already have a model of what it will look like, laundromats. That's what people are aiming for, the patron doing a lot of the work with maybe one person to oversee and provide special services like dry cleaning. I don't think that would be an improvement in food service.
    - 9y ago
bmelton 9y ago
At the risk of coming across like a naysayer, this paper omits a lot of crucial details. The obvious, and most usually contested metric is not whether or not the economy goes up or down, but by how much it might have gone up or down in the absence of a minimum wage policy. A year-over-year growth of 82% might be meaningful, but without knowing whether it would have been 60% or 120% otherwise, doesn't really tell us what we need to know. Less obvious is the effect this has on any individual business. If there are 10 restaurants in TownX, and TownX raises the minimum wage, we don't know how many of those restaurants survived or thrived as the result of the wage increase just because the restaurant economy went up whatever percent. If six of the smaller restaurants had to close, with the other four expanding to fill the holes they left, is it a net good if we're simply concentrating the wealth away from the small business owner into the hands of national chains?
trendia 9y ago
This report suffers from a serious flaw: it uses federal minimum wage increases rather than state or local increases. By doing so, they have no control to compare to and thus cannot show causation. For instance, suppose that federal min wage hikes only occur during periods of economic strength. It would seem that periods following min wage hikes have better outcomes than otherwise. However, the economic growth is not the cause of the economic strenfth but a response. The proper way to do min wgae testing is by comparing neighboring districts. If one county has a min wage hike its neighbors do not, then you can compare the outcomes of the affected county and use the other as a control. When this is done, the effects of min wage hikes become clear: in the short run, employees are not immediately fired because businesses stay open. However, in the long run, fewer employment opportunities are available. This suggests that in some areas, a min wage hike can cause disemployment effects over the long term [0] [0] http://voxeu.org/article/long-run-employment-effects-minimum-wage http://voxeu.org/article/long-run-employment-effects-minimum...
- crdoconnor 9y ago
  http://nelp.3cdn.net/98b449fce61fca7d43_j1m6iizwd.pdf http://nelp.3cdn.net/98b449fce61fca7d43_j1m6iizwd.pdf This has been done. Dube, Lester, Reich is a very rigorous study that compares all minimum wage increases across all state borders between 1990 and 2006. It controls for most things. No effect on employment was found, period.
  - deleted 9y ago
    [deleted]
  - jjoonathan 9y ago
    Also worth mentioning is the inverted funnel of Doucouliagos and Stanley, which suggests that there's considerable publication bias in favor of the traditional economic narrative. [1] Page 31 of https://pdfs.semanticscholar.org/49f8/49647aec895a598869113bb71e11cf34444c.pdf https://pdfs.semanticscholar.org/49f8/49647aec895a598869113b... [2] Annotated version of the key figure here: http://ethicussions.blogspot.com/2014/05/inequality-and-its-relevant-costs-to.html http://ethicussions.blogspot.com/2014/05/inequality-and-its-...
strathmeyer 9y ago
Yes the correlation is lawmakers are more likely to raise the minimum wage when employment levels are high.
- jbuzbee 9y ago
  Agreed. In a robust employment market, lawmakers will raise the minimum wage to a level that is still lower than the market rate. The effect is pretty much zilch except for the lowest of the low-level employee. For them, the minimum wage acts as a safety net.
jbuzbee 9y ago
No matter the methodology in this report, common sense tells otherwise. It's a basic economic tenet that as the price of a good or service raises, less is purchased (Except for Giffen goods [1]). As a thought exercise, consider the effect of raising the minimum wage to $100 in a town. What would happen to restaurants in that town? They would have to raise their prices drastically to cover the new expenses. Customers who were accustomed to eating out would flinch at the much higher prices and either eat at home or go to a neighboring town. The end result would be closed restaurants in the town and fewer jobs. Of course with a much smaller raise in the minimum wage in the town, the effect would likely be lost in the standard noise of restaurants closing and opening but the effect would still be true. [1] https://en.wikipedia.org/wiki/Giffen_good https://en.wikipedia.org/wiki/Giffen_good
- beefield 9y ago
  I have always thought that spare time is quite clearly a giffen good for significant amount of people. (If it was not, people would work shorter days in sweatshops than western middle class jobs.) And if spare time is giffen good, it is quite natural that increase in minimum wages does not increase unemployment.
- deleted 9y ago
  [deleted]
  - deleted 9y ago
    [deleted]
- Analemma_ 9y ago
  > No matter the methodology in this report, common sense tells otherwise. And it's common sense that the mercury in vaccines is neurotoxic, no matter what those studies say. We don't need any fancy book-learnins here! > It's a basic economic tenant that as the price of a good or service rises, less is consumed. We're all familiar with Econ 101, thanks. But there is in fact a great deal of empirical evidence that the real world in general, and labor markets in particular, do not adhere to these extremely simplistic models.
deleted 9y ago
[deleted]
arkis22 9y ago
>In the 22 instances when the federal minimum wage went up, the change in total private employment after one year was positive 15 out of 22 times >What’s more, looking more closely at the relative handful of instances in which employment decreased—whether total employment, or employment in our key indicator sectors—it is also clear that those declines were likely driven by factors other than the higher minimum wage. The factor they mention that drove those declines is recession. Good for them for looking at that, but it doesn't look like they checked the flip side of this: those increases in employment they're using as evidence were driven by factors OTHER than the increase of minimum wage. What was the economy growing at during those years where employment went up? If the falls accompany recession, maybe the increases coincide with crests in growth rates. Was employment starting off a low base? Was the growth rate high enough for employers to easily eat the cost increase? How much was the increase and what was the wage increased from? How does it compare to inflation in the area? >Significantly, the study finds that, unlike small wage increases, a $15 minimum wage generates billions in new consumer spending that offsets most of the higher costs to businesses. So they're admitting it doesn't offset all of the higher costs? Why would that then lead to increased employment? I understand that people making minimum wage find it almost impossible to save money, but this doesn't solve that problem. Even if you have more people making $15 an hour, businesses are offsetting that cost by raising prices. It seems like all you've done is create arbitrary inflation. So who's better off after the wage increase? Looks to me like the only winner is the government. They just sneakily mandated nominal tax increase. But even then that's just the short term.
- matt4077 9y ago
  The consequences are hard to predict because it involves multiple antagonistic feedback loops, and even whatever you define as "value" at the beginning might end up shifting over time. Here's one way of looking at it that I think cuts a bit through all that. It starts with the following assumption: - People earning minimum wage now, as well as people earning the higher minimum wage in the future spend a larger fraction of their income than average. I believe this is almost axiomatically true: Minimum-wage earners by definition have below average income, and the fraction of income that goes into savings and investments rises with income. Now answer the following less-obvious question: What (rough) % of jobs currently paying less than 15$ actually produce value exceeding those 15$? Example: someone at McDonalds get 7.25$/h. Their work serves 16 customers in that hour (in reality they may prepare the food for 30 customers, but split those with a cashier etc, but that doesn't matteR). That means each customer currently pays $7.25/15 = 50c for that labor. Raising the minimum wage would double those costs to $1. Let's say the meal comes out at $12.50 instead of $12. If people still feel they're getting more value out of that meal they will continue to buy. That will result in a net transfer of wealth to below-average earners, who are more likely to spend it, leading to the projected increase in employment. If people balk at the price and start cooking their own food, people working at McDonalds will lose their jobs. In reality it's almost certain to be a combination of both
ctw 9y ago
Ontario recently announced raising minimum wage from $11.40 to $15 by 2019. I've seen a negative response to this by everyone I know, as many of them say there will be less jobs available and consumer prices will go up. I thought the change would be great though, so I found it interesting that the first source in the further reading section of this report has this in its conclusion: > "Businesses will absorb the additional 3.3 percent in payroll costs partly through savings on employee turnover costs, higher worker productivity gains, and some automation (the substitution effect). Most of the increase in costs will likely be passed on to consumers via increased prices. Since labor costs make up only about one-fourth of operating costs, consumer prices will increase only slightly—about 0.14 percent per year over the phase-in period." [0] So yes, there will be automation, and yes, there will be increased prices, but neither of those negative points come close to negating the huge benefit of increased pay. > "Based on our analysis, we conclude that the proposed minimum wage will have its intended effects in improving incomes for low-wage workers. Any effects on employment and overall economic growth are likely to be small. The net impact of the policy will therefore be very positive." [0] [0] http://irle.berkeley.edu/files/2016/The-Effects-of-a-15-Minimum-Wage-in-New-York-State.pdf http://irle.berkeley.edu/files/2016/The-Effects-of-a-15-Mini...
gregw2 9y ago
My concern with minimum wage increases is that landlords then suck up much of the gains. They stand the most to gain moreso than workers. Is there any truth to that?
wonder_er 9y ago
Related to raising minimum wages - why is the purchasing power of our current wages always falling? If the purchasing power of $10 was constant over ten years, minimum wage would not need to go up. If the purchasing power of $10 went UP over ten years, that would be good for the poorest among us, yes?
- walshemj 9y ago
  Deflation is not good for an economy or poor people either
wordsarewind 9y ago
In addition to the lack of a control and the sole focus on the federal minimum wage which in many cases is simply irrelevant, the basic failure in this study is the use of nominal instead of real wages. The inflation-adjusted federal minimum wage has not changed significantly in decades, falling below, only to be corrected up to, the 1990 level.[1] Honestly, any empirical evidence that challenges the classic economic models by including the potential effects of increased purchasing power on job growth, among other things, must use inflation-adjusted wages. Furthermore, littering a report with quotes from conservatives, as if to show their inexplicable obsessions with an obviously absurd position is pathetic. This is not some crackpot theory bandied around to keep the boot on the poor beggar's neck, it follows from a logically sound, although perhaps overly simplistic, model which is the basis of our understanding of price controls, including minimum wage. [1] https://fredblog.stlouisfed.org/2015/07/the-real-minimum-wage/ https://fredblog.stlouisfed.org/2015/07/the-real-minimum-wag... (Edited wage level analysis and cited source.)
timbuckley 9y ago
There must be SOME minimum wage level at which jobs would be lost. (If you doubt this, consider how a $100 minimum wage would work.) The question is, what is the maximum minimum-wage before jobs are lost?
sbuttgereit 9y ago
I see something like this and first look at the source. My first question is why would I trust a study from any interest group any more than I would trust a study from our favorite boogeyman on biased studies, the Tobacco industry? Without reading the study I can already guess the conclusion. Naturally, their being an interest group doesn't mean the conclusion is wrong, but it does seem unlikely they would push a study that had mixed conclusions or found something contradictory to their study. I wonder how many times, for example, they rebut nameless "critics" of their position and set out uncited positions of those critics rather than specific examples and studies.
edoceo 9y ago
Recently Seattle did a min-wage increase. Many small businesses complained loudly but they are still open, they simply raised their prices. My fav pizza joint had their price increase rolled out before the pay rise went into effect. Which gave the owners a nice little spread for a few months, to invest in tools to reduce labor requirement. At $12/hr I earn enough to buy 2 lunch specials (at $6/ea). Now at $15/hr I earn enough to buy 1.875 specials at $8/ea! And that one manager I didn't like got fired. Yay economy! /s
- neuland 9y ago
  This may be me suffering from Poe's law, but it seems to me that you are demonstrably worse off, even if the restaurant stayed open and you kept your job. Before the min-wage increase you could afford 2 lunch specials and now only 1.875, despite your income going up. Inflation gobbled up all of the gains.

34 points by fouc 9y ago

I believe this to be true overall. McDonald's or bigger places wouldn't hire less people, if they could get away with lower staff levels they already would have lowered them. For small business it's one percent or less change per employee.

privong 9y ago
> McDonald's or bigger places wouldn't hire less people, if they could get away with lower staff levels they already would have lowered them. To zeroth order, that seems reasonable. But the added expenses might shift the cost-benefit analysis enough to add motivation to explore automation or other changes to reduce the workforce. The necessary R&D or capital costs might have not been attractive with lower wages, but could become attractive with higher wages.
- mtgx 9y ago
  Do you believe there's a somewhat fixed wage threshold (for now or 20 years later) that when it's passed McDonalds begins to consider replacing workers with self-service machines? Or that the self-service machines are going to arrive regardless of the wage, with the only difference being McDonalds keeping workers on $10/h wage 3-5 years longer than they would keep the $15/h workers? What happens when the entire self-serving machinery costs as much as it does to pay one or two employees for a year? Does it make sense for McDonalds to keep human employees at any wage?
  - wolco 9y ago
    It does if it produces more sales. If people stop coming because they dislike the machines 15/hour can be a small cost. On the other hand if people like the machines more they might raise prices.
- mjn 9y ago
  Automation is already being explored essentially everywhere, so I'm not sure motivation is a big part of it. The question is more whether it's feasible, both technically and economically, in a given case. In principle, yes, a minimum wage helps the economics of automation by making the "competition" more expensive. But with the kinds of modest wage changes typically proposed, it's a pretty marginal impact: +10% to wages might move up automation that was going to happen anyway by 6 or 12 months, but it's not the kind of change that meaningfully impacts the progress of automation on a larger scale.
- deleted 9y ago
  [deleted]
- crdoconnor 9y ago
  >To zeroth order, that seems reasonable. But the added expenses might shift the cost-benefit analysis enough to add motivation to explore automation Automat restaurants have existed since the 1890s and were first touted as a cost cutting measure. Ironically enough, they were most popular around the 1930s and disappeared roughly when the minimum wage was highest (1970s) and are now making something of a comeback, when the minimum wage is again, historically very low.
- Noos 9y ago
  You can't automate to a level to replace them. You can automate order taking, but the human order taker who does it also cleans the store, fills and packages orders, leaves the store to clean the outside and dumps trash, answers customer questions about food, troubleshoots register issues, balances their drawer, and more. And something as simple as checking straws and napkins or making sure the floor by the soda machine is clean can't be automated cheaply. Automation in general is too fragile to handle the demands of that kind of work.
  - setra 9y ago
    These are all environments designed for humans. Vending machines already get warm food, and fresh coffee to me. The system once automated will not look just like the current human paradigm.
    - bmelton 9y ago
      Agreed. Watch "The Founder". The amount of workplace efficiency brought by the McDonald brothers would have been, and almost certainly was considered inconceivable by other restaurateurs of the era. "The system" was so good that it revolutionized the fast food market to the point that almost every attempt to buck the trend is now considered some sort of synonym to 'craft' or 'artisanal'. (Note: I'm taking the movie as canon, which is basically stupid, but I have a grandfather who would gladly tell you the story of his first McDonald's visit, and how revolutionary it was relative to everywhere else he'd been, but for his passage a few years back.)
    - Noos 9y ago
      There's a lot to operating a physical establishment that machines can't do without reducing the experience. Something as simple as cleaning the tables will not be automated. You need people to provide service in a restaurant, which is why automats generally never take on. And we already have a model of what it will look like, laundromats. That's what people are aiming for, the patron doing a lot of the work with maybe one person to oversee and provide special services like dry cleaning. I don't think that would be an improvement in food service.
  - 9y ago

bmelton 9y ago

At the risk of coming across like a naysayer, this paper omits a lot of crucial details. The obvious, and most usually contested metric is not whether or not the economy goes up or down, but by how much it might have gone up or down in the absence of a minimum wage policy. A year-over-year growth of 82% might be meaningful, but without knowing whether it would have been 60% or 120% otherwise, doesn't really tell us what we need to know. Less obvious is the effect this has on any individual business. If there are 10 restaurants in TownX, and TownX raises the minimum wage, we don't know how many of those restaurants survived or thrived as the result of the wage increase just because the restaurant economy went up whatever percent. If six of the smaller restaurants had to close, with the other four expanding to fill the holes they left, is it a net good if we're simply concentrating the wealth away from the small business owner into the hands of national chains?

trendia 9y ago

This report suffers from a serious flaw: it uses federal minimum wage increases rather than state or local increases. By doing so, they have no control to compare to and thus cannot show causation. For instance, suppose that federal min wage hikes only occur during periods of economic strength. It would seem that periods following min wage hikes have better outcomes than otherwise. However, the economic growth is not the cause of the economic strenfth but a response. The proper way to do min wgae testing is by comparing neighboring districts. If one county has a min wage hike its neighbors do not, then you can compare the outcomes of the affected county and use the other as a control. When this is done, the effects of min wage hikes become clear: in the short run, employees are not immediately fired because businesses stay open. However, in the long run, fewer employment opportunities are available. This suggests that in some areas, a min wage hike can cause disemployment effects over the long term [0] [0] http://voxeu.org/article/long-run-employment-effects-minimum-wage http://voxeu.org/article/long-run-employment-effects-minimum...

crdoconnor 9y ago
http://nelp.3cdn.net/98b449fce61fca7d43_j1m6iizwd.pdf http://nelp.3cdn.net/98b449fce61fca7d43_j1m6iizwd.pdf This has been done. Dube, Lester, Reich is a very rigorous study that compares all minimum wage increases across all state borders between 1990 and 2006. It controls for most things. No effect on employment was found, period.
- deleted 9y ago
  [deleted]
- jjoonathan 9y ago
  Also worth mentioning is the inverted funnel of Doucouliagos and Stanley, which suggests that there's considerable publication bias in favor of the traditional economic narrative. [1] Page 31 of https://pdfs.semanticscholar.org/49f8/49647aec895a598869113bb71e11cf34444c.pdf https://pdfs.semanticscholar.org/49f8/49647aec895a598869113b... [2] Annotated version of the key figure here: http://ethicussions.blogspot.com/2014/05/inequality-and-its-relevant-costs-to.html http://ethicussions.blogspot.com/2014/05/inequality-and-its-...

strathmeyer 9y ago

Yes the correlation is lawmakers are more likely to raise the minimum wage when employment levels are high.

jbuzbee 9y ago
Agreed. In a robust employment market, lawmakers will raise the minimum wage to a level that is still lower than the market rate. The effect is pretty much zilch except for the lowest of the low-level employee. For them, the minimum wage acts as a safety net.

jbuzbee 9y ago

No matter the methodology in this report, common sense tells otherwise. It's a basic economic tenet that as the price of a good or service raises, less is purchased (Except for Giffen goods [1]). As a thought exercise, consider the effect of raising the minimum wage to $100 in a town. What would happen to restaurants in that town? They would have to raise their prices drastically to cover the new expenses. Customers who were accustomed to eating out would flinch at the much higher prices and either eat at home or go to a neighboring town. The end result would be closed restaurants in the town and fewer jobs. Of course with a much smaller raise in the minimum wage in the town, the effect would likely be lost in the standard noise of restaurants closing and opening but the effect would still be true. [1] https://en.wikipedia.org/wiki/Giffen_good https://en.wikipedia.org/wiki/Giffen_good

beefield 9y ago
I have always thought that spare time is quite clearly a giffen good for significant amount of people. (If it was not, people would work shorter days in sweatshops than western middle class jobs.) And if spare time is giffen good, it is quite natural that increase in minimum wages does not increase unemployment.
deleted 9y ago
[deleted]
- deleted 9y ago
  [deleted]
Analemma_ 9y ago
> No matter the methodology in this report, common sense tells otherwise. And it's common sense that the mercury in vaccines is neurotoxic, no matter what those studies say. We don't need any fancy book-learnins here! > It's a basic economic tenant that as the price of a good or service rises, less is consumed. We're all familiar with Econ 101, thanks. But there is in fact a great deal of empirical evidence that the real world in general, and labor markets in particular, do not adhere to these extremely simplistic models.

deleted 9y ago

[deleted]

arkis22 9y ago

>In the 22 instances when the federal minimum wage went up, the change in total private employment after one year was positive 15 out of 22 times >What’s more, looking more closely at the relative handful of instances in which employment decreased—whether total employment, or employment in our key indicator sectors—it is also clear that those declines were likely driven by factors other than the higher minimum wage. The factor they mention that drove those declines is recession. Good for them for looking at that, but it doesn't look like they checked the flip side of this: those increases in employment they're using as evidence were driven by factors OTHER than the increase of minimum wage. What was the economy growing at during those years where employment went up? If the falls accompany recession, maybe the increases coincide with crests in growth rates. Was employment starting off a low base? Was the growth rate high enough for employers to easily eat the cost increase? How much was the increase and what was the wage increased from? How does it compare to inflation in the area? >Significantly, the study finds that, unlike small wage increases, a $15 minimum wage generates billions in new consumer spending that offsets most of the higher costs to businesses. So they're admitting it doesn't offset all of the higher costs? Why would that then lead to increased employment? I understand that people making minimum wage find it almost impossible to save money, but this doesn't solve that problem. Even if you have more people making $15 an hour, businesses are offsetting that cost by raising prices. It seems like all you've done is create arbitrary inflation. So who's better off after the wage increase? Looks to me like the only winner is the government. They just sneakily mandated nominal tax increase. But even then that's just the short term.

matt4077 9y ago
The consequences are hard to predict because it involves multiple antagonistic feedback loops, and even whatever you define as "value" at the beginning might end up shifting over time. Here's one way of looking at it that I think cuts a bit through all that. It starts with the following assumption: - People earning minimum wage now, as well as people earning the higher minimum wage in the future spend a larger fraction of their income than average. I believe this is almost axiomatically true: Minimum-wage earners by definition have below average income, and the fraction of income that goes into savings and investments rises with income. Now answer the following less-obvious question: What (rough) % of jobs currently paying less than 15$ actually produce value exceeding those 15$? Example: someone at McDonalds get 7.25$/h. Their work serves 16 customers in that hour (in reality they may prepare the food for 30 customers, but split those with a cashier etc, but that doesn't matteR). That means each customer currently pays $7.25/15 = 50c for that labor. Raising the minimum wage would double those costs to $1. Let's say the meal comes out at $12.50 instead of $12. If people still feel they're getting more value out of that meal they will continue to buy. That will result in a net transfer of wealth to below-average earners, who are more likely to spend it, leading to the projected increase in employment. If people balk at the price and start cooking their own food, people working at McDonalds will lose their jobs. In reality it's almost certain to be a combination of both

ctw 9y ago

Ontario recently announced raising minimum wage from $11.40 to $15 by 2019. I've seen a negative response to this by everyone I know, as many of them say there will be less jobs available and consumer prices will go up. I thought the change would be great though, so I found it interesting that the first source in the further reading section of this report has this in its conclusion: > "Businesses will absorb the additional 3.3 percent in payroll costs partly through savings on employee turnover costs, higher worker productivity gains, and some automation (the substitution effect). Most of the increase in costs will likely be passed on to consumers via increased prices. Since labor costs make up only about one-fourth of operating costs, consumer prices will increase only slightly—about 0.14 percent per year over the phase-in period." [0] So yes, there will be automation, and yes, there will be increased prices, but neither of those negative points come close to negating the huge benefit of increased pay. > "Based on our analysis, we conclude that the proposed minimum wage will have its intended effects in improving incomes for low-wage workers. Any effects on employment and overall economic growth are likely to be small. The net impact of the policy will therefore be very positive." [0] [0] http://irle.berkeley.edu/files/2016/The-Effects-of-a-15-Minimum-Wage-in-New-York-State.pdf http://irle.berkeley.edu/files/2016/The-Effects-of-a-15-Mini...

gregw2 9y ago

My concern with minimum wage increases is that landlords then suck up much of the gains. They stand the most to gain moreso than workers. Is there any truth to that?

wonder_er 9y ago

Related to raising minimum wages - why is the purchasing power of our current wages always falling? If the purchasing power of $10 was constant over ten years, minimum wage would not need to go up. If the purchasing power of $10 went UP over ten years, that would be good for the poorest among us, yes?

walshemj 9y ago
Deflation is not good for an economy or poor people either

wordsarewind 9y ago

In addition to the lack of a control and the sole focus on the federal minimum wage which in many cases is simply irrelevant, the basic failure in this study is the use of nominal instead of real wages. The inflation-adjusted federal minimum wage has not changed significantly in decades, falling below, only to be corrected up to, the 1990 level.[1] Honestly, any empirical evidence that challenges the classic economic models by including the potential effects of increased purchasing power on job growth, among other things, must use inflation-adjusted wages. Furthermore, littering a report with quotes from conservatives, as if to show their inexplicable obsessions with an obviously absurd position is pathetic. This is not some crackpot theory bandied around to keep the boot on the poor beggar's neck, it follows from a logically sound, although perhaps overly simplistic, model which is the basis of our understanding of price controls, including minimum wage. [1] https://fredblog.stlouisfed.org/2015/07/the-real-minimum-wage/ https://fredblog.stlouisfed.org/2015/07/the-real-minimum-wag... (Edited wage level analysis and cited source.)

timbuckley 9y ago

There must be SOME minimum wage level at which jobs would be lost. (If you doubt this, consider how a $100 minimum wage would work.) The question is, what is the maximum minimum-wage before jobs are lost?

sbuttgereit 9y ago

I see something like this and first look at the source. My first question is why would I trust a study from any interest group any more than I would trust a study from our favorite boogeyman on biased studies, the Tobacco industry? Without reading the study I can already guess the conclusion. Naturally, their being an interest group doesn't mean the conclusion is wrong, but it does seem unlikely they would push a study that had mixed conclusions or found something contradictory to their study. I wonder how many times, for example, they rebut nameless "critics" of their position and set out uncited positions of those critics rather than specific examples and studies.

edoceo 9y ago

Recently Seattle did a min-wage increase. Many small businesses complained loudly but they are still open, they simply raised their prices. My fav pizza joint had their price increase rolled out before the pay rise went into effect. Which gave the owners a nice little spread for a few months, to invest in tools to reduce labor requirement. At $12/hr I earn enough to buy 2 lunch specials (at $6/ea). Now at $15/hr I earn enough to buy 1.875 specials at $8/ea! And that one manager I didn't like got fired. Yay economy! /s

neuland 9y ago
This may be me suffering from Poe's law, but it seems to me that you are demonstrably worse off, even if the restaurant stayed open and you kept your job. Before the min-wage increase you could afford 2 lunch specials and now only 1.875, despite your income going up. Inflation gobbled up all of the gains.