14 ms·

A ‘very credible’ new study on Seattle’s $15 minimum wage has bad news

103 points by dalfonso 9y ago

coldcode 9y ago
Looks like the "credible" report is an approximation of a series of guesses and omissions. Measuring economic impact of almost anything is difficult but this one seems more vague than usual. If you want to discuss overall impact, you can't simply leave out things that are hard to measure but still wind up with a solid conclusion.
- JumpCrisscross 9y ago
  > If you want to discuss overall impact, you can't simply leave out things that are hard to measure They're not leaving out things that are "hard to measure." They're being honest about the limitations of their data: "Employers are required to report actual hours worked for employees whose hours are tracked (i.e. hourly workers), and report either actual hours worked or total number of hours assuming a 40 hour work week for employees whose hours are not tracked (i.e. salaried workers)" [1]. These data allow these researchers to make incredibly accurate measurements about the price and quantity demanded of labour. Because "the data identify business entities as [unemployment insurance] account holders...firms with multiple locations have the option of establishing a separate account for each location, or a common account." This means the researchers could only "identify business location only for single-site firms and those multi-site firms opting for separate accounts by location." Excluding multi-site single-account businesses from the analysis avoided muddying the precision of the hourly and quarterly wage data with geographic uncertainty. In any case, the study only purports to measure employment effects amongst "single-site businesses," which "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2]. [1] http://www.nber.org/papers/w23532.pdf http://www.nber.org/papers/w23532.pdf page 13 [2] page 14
blacksqr 9y ago
"employment overall did not change" "The number of workers making over $19 an hour increased abruptly" This is the bad news.
- rayiner 9y ago
  No, this is the bad news: > The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city.
  - blacksqr 9y ago
    "Congratulations, you now have a much greater opportunity to increase your wages if you improve your skills!" "No thanks, I prefer to keep my skills low, so the politicians have screwed me."
  - WalterBright 9y ago
    > were commissioned by the city. We'll see if the city ever commissions them again!
- Shivetya 9y ago
  the number of hours worked is dropping, that is bad. plus the need for low wage skill sets is dropping, that is bad too. total payrolls have fallen to where some are impacted more than a hundred dollars a month, loss.
- kevinnk 9y ago
  "the average low-wage worker in the city lost $125 a month because of the hike in the minimum." This is the bad news.
  - soperj 9y ago
    But they worked significantly less hours. No telling if they were able to then get a second job and make significantly more, or if they were fine with the $125 a month less and just got to use their time not at work for what they wanted to do.
PKop 9y ago
"On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum."
runako 9y ago
>> to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. I read this to mean that the study therefore would exclude employers such as Seattle-based Starbucks, Seattle-based Amazon, Seattle-based Costco, Seattle-based Nordstrom, McDonald's, etc. Based on that reading, it seems like quite a leap to draw any conclusions from this data. Am I reading this incorrectly?
- rukittenme 9y ago
  I'm not intelligent enough to say either way. I do think that excluding them was a good idea. If the only businesses that can survive a law are massive multi-national corporations, we've got a problem...
  - runako 9y ago
    That's a separate issue, also worthy of study. But it does seem ridiculous to assume the validity of a study of low-wage workers in Seattle while omitting data from companies like Starbucks that presumably employ many people affected by the change.
    - surfmike 9y ago
      The reason they excluded it was because the data they were provided for those companies did not differentiate between workers in Seattle and workers outside. That said the economics of hiring an extra shouldn't be significantly different for a big company. Costco and Starbucks probably have some wiggle room to cut down on the number of staff at a certain time. Also, to quote from the study: "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2]."
    - deleted 9y ago
      [deleted]
  - Joe-Z 9y ago
enduser 9y ago
Jeff Bezos owns this newspaper and has a deeply vested interest in keeping wages low.
- rhino369 9y ago
  The study was commissioned by Seattle.
  - chroem- 9y ago
    Yes, and his newspaper is blowing a study with bad methodology out of proportion.
- strathmeyer 9y ago
  Seems better than a government that wants to keep people out of work.
- hsod 9y ago
  The article itself seems to be a pretty even-handed summary of some the underlying research (which was not carried out by Jeff Bezos).
- heurist 9y ago
  Wouldn't he want them higher across the board so Amazon can fill in the price gap?
- dragonwriter 9y ago
  [withdrawn]
  - tptacek 9y ago
    This is an unusually facile remark for you. Here's Max Ehrenfreund's publication history at WaPo. Take a glance across it, and then decide if you're convinced he's essentially a fraud, reporting in bad faith to promote the viewpoints of Jeff Bezos. I wonder if he's ever even met him. https://www.washingtonpost.com/people/max-ehrenfreund/?utm_term=.64c79d137d78 https://www.washingtonpost.com/people/max-ehrenfreund/?utm_t...
CiPHPerCoder 9y ago
.
- hirundo 9y ago
  > then the study is just measuring toxicity rather than bad policy. Don't you think that good policy should account for human toxicity? You seem to believe that policy should not account for "human folly."
- thehardsphere 9y ago
  Ok, your moralizing tone is condescending, it is rude to pretend to "ask questions" when you're really pushing a thesis, and the thesis you are presenting has no explanatory power. Thus addressing those "questions" is largely uninteresting.
  - deleted 9y ago
    [deleted]
- throwanem 9y ago
  I suspect you're getting downvoted, and not getting replied to, because > the jobs [being] cut because of the collective actions of spiteful business owners who don't wish to pay their employees that much per hour ...just doesn't make any kind of sense. You might find an occasional individual small business owner who's willing to cut off his nose to spite his face in this fashion. To imagine it happening on a collective basis, whether in organized or spontaneous fashion, is fantastically absurd, and seems necessarily rooted in so little experience of actual business proprietors that it's hard to imagine any kind of productive conversation proceeding from this point.
davidf18 9y ago
http://www.nber.org/papers/w23532 http://www.nber.org/papers/w23532 At my local grocer in Manhattan, some prices suddenly went up 25% or more on a number of items and I was told by a senior manager of the food store chain (I was calling to complain about something else and inquired) who said it was because of the first minimum wage increase for not only the stores but the distributors which are also located in NY State. NY State passed a minimum wage from $11 to $13 to $15 by 2018 or so. The current rate is $11. A lot of people receive food stamps and/or are on a fixed income (think retirees) and this puts a substantial increase in their cost of living. This is only the first hike. One can only imagine how much higher food prices will be when it finally goes up to $15. Meanwhile neither NY State nor NY City has dealt with the real problem which is the high cost of living which is very hard on low-wage people in particular because of zoning density restrictions and overuse of historic landmark status. These zoning density restrictions are a huge windfall for wealthy landlords as they make renters pay far, far higher rates for apartments than they would in an efficient market. It is a huge regressive "tax" that makes landlords like Donald Trump far wealthier than they otherwise would be in a efficient, functioning real estate market.
SomeStupidPoint 9y ago
> In particular, to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. Wait, so are places like corporate McDonalds, Starbucks, Subway, etc excluded from the study? ...What about grocery stores? ...Clothing stores, mall shops, etc? It seems like failing to include those would be a major bias in the effects of the study. Edit: "Indeed, while employment overall did not change, that was because employers replaced low-paying jobs with high-paying jobs. The number of workers making over $19 an hour increased abruptly, while the number making less than that amount declined, Vigdor and his colleagues found. Vigdor said that restaurateurs in Seattle -- along with other employers -- responded to the minimum wage by hiring more skilled and experienced workers, who might be able to produce more revenue for their firms in the same amount of time." Oh, so their "loss" to low-paying jobs can be explained by a rise in jobs paying above their cutoff for "low-paying"? I have a lot of questions about this study; particularly since it doesn't agree with the other study mentioned in the article (with this study using "new" methods and the other using more "traditional" methods).
JumpCrisscross 9y ago
"Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies." http://nber.org/papers/w23532 http://nber.org/papers/w23532
- Stanish 9y ago
  First, just from skimming I see that this hasn't been peer reviewed yet. Second, it is coming from WaPo which is a very neoliberal, anti-worker paper (see the 900 anti Bernie Sanders stories it put out right as he was gaining momentum vs the neoliberal, anti-minimum-wage Clinton). Third, the fact that people are "earning less" could also be interpreted as meaning that the people are earning enough to take some time off for leisure, which has many benefits both monetary and otherwise. Fourth, it appears there were exclusions of large-scale corporations with facilities inside and outside of the city, which seems to miss the main target of a raised minimum: the corporations which can objectively easily afford it, and who employ the lion's share of workers in major cities. Finally, this non-pier-reviewed, dubiously filtered study goes against the vast majority of research on the subject performed to date. Not to mention it violates common sense, which says that our incredible increase in worker productivity should have seen corollary rises in worker pay over the last 40 years. In fact, we have seen the opposite.
Apreche 9y ago
Uh, businesses. You are supposed to raise prices, effectively taxing those rich customers. Did you forget that part?
- thehardsphere 9y ago
  You say that like that’s a choice they can make without any consequences.
- AnimalMuppet 9y ago
  Effectively taxing all customers. The poor buy stuff too...
- nkoren 9y ago
  Businesses that serve the poor can't do that.
- CompanionCuuube 9y ago
  Uh, if they raise prices, you're effectively taxing ALL customers. That's why consumption based taxes are worse for the mid to low wealth consumer, a greater share of their income is spent on consumption. You'd have to find out which products the rich customers are buying exclusively and increase the prices on those.
startupdiscuss 9y ago
"In particular, to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. Skeptics argued that omission could explain the unusual results."
- surfmike 9y ago
  Quote from study: "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2].
davidw 9y ago
I find this to be credible - at some level, it'll certainly hurt. The problem as I see it is that some people say "aha, see, that doesn't work", but then stop there. There is a real problem in that some people (not all who make minimum wage, and not only those who make minimum wage) have real problems making ends meet. What's the best way to help them?
- ithinkinstereo 9y ago
  Increase social services funding by taxing the rich and closing tax-dodging loopholes (like capital gains, etc.).
  - Stanleyc23 9y ago
    can you elaborate on this capital gains tax loophole?
    - dragonwriter 9y ago
      Long-term capital gains are taxed lower than normal generic income (at rates lower than the same person would pay in income tax) which in turn taxed lower than labor income (which is, in addition to regular income tax, subject to payroll tax.) Closing the capital gains tax loophole is, presumably, a reference to stopping some or all of this favorable treatment.
      - thehardsphere 9y ago
        1. That's not a "loophole", it's a deliberate feature of tax law. 2. Changing that would not do anything to solve this problem (even if you think it should be solved through more government spending, it wouldn't raise much money)
      - WalterBright 9y ago
        It's less of a loophole than one might think, because much of long term capital gains is illusory due to inflation.
accountyaccount 9y ago
Probably an unpopular opinion, but: Isn't raising the minimum essentially trying to save a sinking ship by adding more water to the ocean? Seems like time would be better spent ensuring that everyone has food, housing, and healthcare no matter what they do (easier said than done, of course).
- mullingitover 9y ago
  The minimum wage isn't pegged to inflation, so in a sense the minimum wage workers' ship is always taking on water. The hike to $15 was a bailout operation, but if the wage isn't pegged to inflation then it's still slowly sinking.
- djohnston 9y ago
  i agree. i can't help but think this sort of legislation just increases the rate at which companies like mcdonalds pursue fully automated franchises.
- thehardsphere 9y ago
  It's more like trying to save a sinking ship by telling the crew on the ship they can only use high-quality licensed ship repair equipment, instead patching the holes with whatever they can improvise. Yes, it would be better if they used high quality hull repair equipment, but sometimes it's not available and insisting that's the only thing you're allowed to use while the ship is sinking and people are struggling to survive is not helpful at all.
  - accountyaccount 9y ago
    Yeah, fair. People need help now. But how long can we continue kicking this problem down the road. We need to tie this thing to inflation or just admit that it's not the solution.
    - thehardsphere 9y ago
      It was never the solution. It's actively making things worse for most of the people it was claimed to be intended to help. Tying it to inflation is just going to make displacement of low skilled workers increase automatically every year.
noodle 9y ago
So low wage workers are getting cut but unemployment is still at 3.2%? Which is ~1.5% lower than the national average? Kind of sounds like this study might be looking at only half the story.
- thehardsphere 9y ago
  The unemployment rate only counts people looking for work. If they quit the labor force completely, they're no longer counted as unemployed. Minimum wage workers are usually the lowest skilled workers in the economy. When they're displaced they have the fewest alternative jobs available to them, so they tend to drop out of the labor force. Either temporarily, while they go and learn new skills, or permanently.
  - noodle 9y ago
    But that's really flexible, though, right? If a lot of people lost their jobs from minimum wage increases, wouldn't you expect the unemployment rate to increase at least temporarily around the same time while they initially look for new work before falling out of the market?
Kiro 9y ago
The successful Scandinavian model doesn't have any minimum wages for a reason.
- gaius 9y ago
  Nor does Germany with some of the best working conditions in the world...
  - jtedward 9y ago
    Germany recently got one.
  - falcolas 9y ago
    What Germany does have is a better social safety net so such minimums are not required to pay for basic needs. A minimum wage worker in the US is likely working 2-3 such jobs to cover food, rent, and other such necessities.
    - thehardsphere 9y ago
      Minimums weren't imposed help people to meet basic needs. They were imposed to keep Chinese immigrants from participating in the labor market.
      - falcolas 9y ago
        I would be super curious to look at the source on that. And, for whatever reason they were imposed, they are currently used to help people meet those basic needs. Should there be another mechanism to help people meet those needs? I think so, but that's another discussion topic entirely.
  - germanier 9y ago
    Germany introduced a general minimum wage of 8.50€ in 2015 (since raised to 8.84€). Before that there were (and still are) many union-negotiated sector-specific minimum wage rules (same as in the Nordic countries) but they haven't covered all low-wage sectors.
austincheney 9y ago
tldr; * The study uses more precise data than similar prior studies and comes to a sharply different conclusion. * Economists generally want to disbelieve this study, because the results aren't promising, but the method used is largely credible and the data is more precise. * The impact, according to the study, is that to compensate for the higher wages employers are continuing to hire but only highly skilled candidates thereby displacing the lowest wage earners or "removing the bottom rung".
- tptacek 9y ago
  "Economists" want to disbelieve the study? Can you support that with evidence? There are definitely liberal economists and conservative economists, but I don't think it's at all clear that the mainstream of economists broadly support a sharply increased minimum wage.
  - austincheney 9y ago
    Nope. It is the sensation I (myself) got from reading the article.
itsdrewmiller 9y ago
Whatever the underlying paper says, this article is terrible. It never explains why a bunch of low paying jobs being replaced with the same number of high paying ones is bad, other than some hand-waving about low skilled workers being left out. Where did all these new high skilled workers come from?
lend000 9y ago
The problem I have with the minimum wage is that it transfers wealth from the very poorest to the mid-working class/lower middle class. Who am I to tell a homeless person that she is legally forbidden to engage in a voluntary, hourly employment contract for less than $15/hr? I would effectively be guaranteeing that she stays unemployed/homeless. Regardless of practical effects (which are ambiguous at best), it's wrong on moral grounds. On the other hand, the minimum wage definitely benefits middle class teenagers on their first jobs (if they can get a job), and has questionable benefit for millennial humanities college grads who have yet to start a career. For them, the higher wage comes with fewer hours, according to this study. In the long run though, the more we raise the minimum wage, the sooner the local price inflation catches up. Getting a casual meal in Seattle is NOT cheap right now. EDIT: I'll throw in that I think a very basic income with no minimum wage/unemployment/other welfare is much smarter fiscally and economically, and is the only way to largely eliminate extreme poverty. And it's sad that HN readers flagged this article because it challenges a conventional liberal talking point.
- taeric 9y ago
  You aren't telling the homeless person that they are legally forbidden from working in cheap labor. You are telling businesses that they are not solvent if they rely on ultra cheap labor.
  - Aron 9y ago
    both?
  - lend000 9y ago
    Perhaps minimum wage proponents need to frame it like that to justify it, but in reality, it goes both ways. You ARE legally forbidding a homeless person from working at a price of their choosing, just as much as you are forbidding a business from purchasing labor below a certain price.
    - taeric 9y ago
      This line of thinking leads to allowing people to sell themselves into slavery. Do we need to solve homelessness? Absolutely. We do not do this by propping up businesses and properties that rely on below livable wages. I can buy some level of slippery slope at play here. But, by and large, this frames it in a way that allows sub-livable wages. So, you can think my "side" is framing this in a way to justify it. This does little more than convince me your "side" is just trying to justify keeping ill earned wealth.
tptacek 9y ago
I really dislike this framing. By any contemporary definition I'm a "liberal": * I support higher taxes, particularly on higher income people, almost for its own sake. * I oppose almost all military intervention abroad. * I believe the federal government needs to intervene with local governments to prevent police abuses. * I strongly support public schools and oppose public-funded charters. ... and I could go on and on this way. On the other hand, I do not believe in a high national minimum wage, or in a small number of other "liberal" orthodoxies^h^h^h^h^hidees fixes (like universal college tuition, or single-payer health care). Why am I meant to feel like my "team" lost something when a study confirms something that most economists have been saying for decades?
- jeffdavis 9y ago
  For reasons not clear to me, the following statement is political suicide: "We tried something we believed would help low-income workers based on the best information we had at the time. The results have not met our expectations, so we will reassess whether it's a net benefit in our unique city or if we should suspend it and look at other proposals to help low-income workers instead."
- SomeStupidPoint 9y ago
  Can I get you to briefly outline why you don't believe in raising the minimum wage? I can't say that I agree with you, but you're generally a thoughtful guy and I would appreciate getting another perspective on the issue. (Also, curious: is the word "national" operative there -- eg, do your beliefs differ between a national minimum wage and a local one like the Seattle measure?)
  - tptacek 9y ago
    I'd just say that it's not settled whether sharp or nationwide increases in the minimum wage accomplish any clear public policy objectives. I could be convinced either way, but my perception is that it's not at all clear in the data that "$15 nationwide minimum wage" is a fight worth fighting. I definitely don't oppose the minimum wage! There's no libertarianism creeping into my perspective here. :)
c0nducktr 9y ago
If your business cannot pay employees a livable wage, it does not deserve to exist.
- bpicolo 9y ago
  Thanks largely to the internet, fewer and fewer can.
hirundo 9y ago
Opponents of a minimum wage need only believe that increasing the price of a thing tends to proportionally decrease the demand for that thing. This is simply a statement of the law of supply and demand, which is (though weaker) the economic equivalent of physics' F=MA. Proponents of a minimum wage need to believe that in this particular case, raising a price does not proportionally decrease demand. While this may be true (economics ain't physics), the burden of proof lies with the proponents, since it would be a contradiction of probably the most well established "law" of economics. If you feel that the data in this and similar studies are inconclusive, to the extent that you respect the discipline of economics, you should oppose a minimum wage.
- SomeStupidPoint 9y ago
  Except that there are numerous cases where raising price doesn't proportionally drop demand (it can even raise demand), and very well understood reasons for that. Pretending that it's a "law" of economics we can blindly apply to any situation is absurd.
  - hirundo 9y ago
    I used scare quotes to indicate that it isn't an actual law, which is also why I said that it's weaker than something like F=MA and that economics ain't physics. Then you chose to ignore all of that to accuse me of pretending otherwise. I don't deny that there are exceptions, I just claim that they _are_ exceptions, and that therefore the burden of proof is on the one arguing that a particular case is exceptional.
- PatentTroll 9y ago
  Your conclusion lies on the assumption that rational economists must oppose any measure which decreases demand.
  - hirundo 9y ago
    This particular decrease of demand is of work hour and jobs, and thus an increase in misery of particularly vulnerable people. If an economist is both rational and compassionate, they would need to believe that such price fixing has benefits that outweigh the increased misery. I'm not familiar with those offsetting benefits. If they exist, please enlighten me.
atemerev 9y ago
There is an excellent free (and very short) book, "Economics in one lesson" by Henry Hazlitt, which explains very logically why minimum wage, rent controls and other "band-aid" economical measures always end badly: https://mises.org/system/tdf/Henry%20Hazlitt%20Economics%20in%20One%20Lesson.pdf?file=1&type=document https://mises.org/system/tdf/Henry%20Hazlitt%20Economics%20i... It is like 2-hour reading, but very enlightening.
- taw55 9y ago
  And very ideologically biased...
  - greggyb 9y ago
    And yet presents a framework of analysis that is objective and a case study in the application of bias to an objective technique. The lesson of the book is more than the ideology of its author. It is hubris or naivete in the extreme to assume that someone you disagree with has nothing valuable to say.
    - taw55 9y ago
      Austrian economics is not "objective".
      - atemerev 9y ago
        What subjectivity is in it?
      - greggyb 9y ago
        > > It is hubris or naivete in the extreme to assume that someone you disagree with has nothing valuable to say. You think you disagree with me, and you clearly disagree with Austrian economics. Yet, with less than one page's worth of reading, you can identify the core lesson of the book, excerpted below. That the author then applies this lesson in ways you find objectionable is no judgment on the lesson itself. Chapter 1, Paragraph 1: While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. Chapter 1, Paragraph 2: there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences. In case you feel any desire to actually engage with the ideas of the book, it can be read for free, in full, here: https://www.mises.org/library/economics-one-lesson https://www.mises.org/library/economics-one-lesson
douche 9y ago
Granted, I'm a redneck from the back woods, but there are lots of people I know that don't make $15/hour in skilled trades, let alone minimum wage jobs. If you're going to pay minimum wage of $15, then all other wagesshould correspondingly increase
wnevets 9y ago
All of the economists said Ford was nuts for offering higher wages and less hours. I would argue it worked well.
lukeschlather 9y ago
It sounds like the study doesn't take into account cost of living. Even for a minimum wage employee, time is money. Assume for the sake of argument that this study accurately describes wage losses. [1] Assume that the average minimum wage worker was working 2 different jobs for a total of 40 hours a week with no benefits. That's a total of 160 hours a month, or $1440. A loss of $125/month equates to $1315, or 102 hours a month at $13/hour. [1] So the worker loses $125/month and gains 58 hours. To translate that into one dollars example, childcare in Seattle costs around $10/hour. There are of course lots of ways to save money with that free time. More sleep means fewer minor accidents leading to injury and sickness around the house. Childcare costs around $10/hour in this city, so by that metric there was basically no point in going to work before this wage increase if you had children to take care of. Saving 50 hours of work equates to saving $500 dollars. Obviously, it's not going to be 1:1, but even assuming you were spending just 15 hours in childcare would make our hypothetical worker better off, with an extra 35 hours to go to school, or just relax and keep their health. [1] It sounds like this study is looking only at small businesses, for whom the rate is $13/hour. Since it ignores most businesses that actually must pay $15/hour, the headline seems wrong by definition.
- thehardsphere 9y ago
  Oh, I see, so, the poor people who work to live should be thankful that they can do their own childcare now that they've been comdemned to never be employed again because nobody wants to pay them $15/hour. Do you realize how privileged you sound saying this? Do you really think these people made enough money to pay for child care to "enjoy" the cost savings now that they're sitting around at home? What does America look like from inside your limousine? Do you have any Grey Poupon?
dixie_land 9y ago
A local bar I favor added a 5%! "minimum wage surcharge". It's just an excuse for business to raise prices without actually improving the income of the servers. (Let's be realistic the 5% is not gonna go all to the servers and people will tip less out of spite)
kccqzy 9y ago
I sometimes really like the approach in Singapore better. Instead of mandating a minimum wage, which essentially tells businesses that they have pay their workers a minimum, the businesses can pay their workers at the market rate and the government gives the workers extra income-based subsidy. This strikes me as better than minimum wage: operating costs for businesses remain the same, yet workers have the equivalent of a minimum wage.
harimau777 9y ago
This seems like an interesting study, but I'm not sure its conclusion makes sense to me. Am I understanding the facts correctly: 1. Employment stayed about the same. 2. Employees overall were payed a lot more. 3. The number of low wage employees (which I assume means those making the new minimum wage) dropped. However employees overall were payed more. My understanding is that this means that employers switched to paying more of their employers above the minimum wage. 4. They say that the average low payed employee made $125 less. However, its not clear to me what that means in light of the other points. 5. The study did not include larger corporations that have employees in multiple cities. Several different interpretations were suggested: 1. Companies are hiring more skilled employees for higher wages and pushing less skilled employees out of the market. 2. Small businesses are being hurt and large businesses are taking their place. 3. Companies are paying employees more. 4. The results are due to some aspect of the economy that wasn't controlled for. It seems to me that the conclusion that this is bad for those who advocate for higher minimum wages isn't very strong unless they could show that it was actually pushing low skilled employees out of the market.
- surfmike 9y ago
  I think your assumption (1) is incorrect. Quote from article: "They've cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found."
  - thehardsphere 9y ago
    Also, the unemployment rate does not count individuals who have dropped out of the labor force completely, which displaced low skill workers are especially likely to do. If there are labor participation rate statistics available (probably not yet), you'd see the drop there.
  - deleted 9y ago
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deleted 9y ago
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zeteo 9y ago
> raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. > we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs [...] while hourly wages in such jobs increased by around 3 percent. Sounds like some pretty intense statistical manipulation. The second wage increase was ~18% ($2/$11) not 3%. So they've fished for a larger pool that only had a 3% increase in wage and arbitrarily designated these as "low-wage jobs". Also very conveniently they've chosen to highlight only the second wage increase; it sounds like no data massaging could make the first one look bad. If they were honestly aiming at statistical significance the best approach was of course to bundle the two increases together. An overall 37% change in minimum wage should have much clearer effects than its individual halves.
- deleted 9y ago
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- tptacek 9y ago
  That's the point of the study: the real increase in wages to workers isn't the nominal statutory increase. For example, many people in the low-wage labor market in Seattle were already making more than the minimum wage.
  - zeteo 9y ago
    Sure, but when the nominal increase is 18% and the selected group only shows 3% there's a big question about group selection. If you can cherry pick groups and variables then you can use phenomena like Simpson's paradox to prove pretty much anything with statistics.
vcdimension 9y ago
Its interesting that none of the "welfare state" economies of Scandinavia have minimum wage laws. Instead they allow collective bargaining by unions.
- thehardsphere 9y ago
  How is it that collective bargaining by unions relevant? I mean, we have collective bargaining in the US, so I'm trying to understand how exactly that is different from Scandinavia.
  - vcdimension 9y ago
    I think you have more anti-union laws in some US states, such as Michigan and Wisconsin.
    - thehardsphere 9y ago
      Well, OK, but I think Washington is not one of those states. So, again, how is it relevant?
      - vcdimension 9y ago
        Because if other states which do have anti-union laws are thinking about imposing minimum wage laws to improve the lives of low wage workers they might want to think again. Scandinavia is often upheld as a model for low levels of inequality and high standards of living. I'm sure there are plenty of other things to take into account, but it was just a simple observation.
        dragonwriter 9y ago
        Seattle is not a state; there are reasons to think that local minimum wage increases have different effects than statewide increases, which have different effects than national increases. Each time you increase the size of the jurisdiction, the opportunity for business to simply reroute to a lower cost jurisdiction (or entities not impacted by the smallwr-jurisdiction rule even if located in the jurisdiction) is reduced.
miguelrochefort 9y ago
> Who am I to tell a homeless person that she is legally forbidden to engage in a voluntary, hourly employment contract for less than $15/hr? Very eloquent.
adamsea 9y ago
Article says the stdy is not peer reviewed yet
dahart 9y ago
> On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum. This study seems interesting, and I'm open to the idea that this wage hike and it's effects could be an example of unintended consequences. But more than anything else in the article, the above quote rubs me the wrong way. Based only on what is reported in the article, this appears to be an abuse of statistics. They intentionally left out large employers, and are focusing on a narrowing wage range, so you can't say anything about the effect on the average low-wage worker. Not only that, it's a purely bimodal distribution. If what this study says is true, then there were no people who lost $125, there were people who gained some money, and people who lost jobs, and nothing in between. It's so misleading to cite an average.
petraeus 9y ago
The truth is those jobs will just go to automation resulting in negative benefits for those making under $15 currently.
alexandercrohde 9y ago
I think people are missing the forest for a single tree. Minimum wage is just a small token in the larger discussion of distribution of wealth. Minimum wage is a means to solve the fact that incompetent people monopolize wealth through political connections and spent it on yachts while other people just as smart and motivated try to pay off their college debt. Let's not make this an "us" and "them" issue. A study can cast doubt on a means, but not on an ends. The fact is that those low-skill jobs will disappear, McDonalds is already replacing its employees with self-order kiosks, Uber isn't trying to hide its plans. Minimum wage is not the answer, because it doesn't go far enough. Minimum wage doesn't work? Great, let's do universal basic income then.
gbacon 9y ago
Why is this post flagged?
em3rgent0rdr 9y ago
also what is not being talked about is these lost jobs are going to automation anyway. Increasing the minimum wage simply hastens the transition.

103 points by dalfonso 9y ago

Looks like the "credible" report is an approximation of a series of guesses and omissions. Measuring economic impact of almost anything is difficult but this one seems more vague than usual. If you want to discuss overall impact, you can't simply leave out things that are hard to measure but still wind up with a solid conclusion.

JumpCrisscross 9y ago
> If you want to discuss overall impact, you can't simply leave out things that are hard to measure They're not leaving out things that are "hard to measure." They're being honest about the limitations of their data: "Employers are required to report actual hours worked for employees whose hours are tracked (i.e. hourly workers), and report either actual hours worked or total number of hours assuming a 40 hour work week for employees whose hours are not tracked (i.e. salaried workers)" [1]. These data allow these researchers to make incredibly accurate measurements about the price and quantity demanded of labour. Because "the data identify business entities as [unemployment insurance] account holders...firms with multiple locations have the option of establishing a separate account for each location, or a common account." This means the researchers could only "identify business location only for single-site firms and those multi-site firms opting for separate accounts by location." Excluding multi-site single-account businesses from the analysis avoided muddying the precision of the hourly and quarterly wage data with geographic uncertainty. In any case, the study only purports to measure employment effects amongst "single-site businesses," which "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2]. [1] http://www.nber.org/papers/w23532.pdf http://www.nber.org/papers/w23532.pdf page 13 [2] page 14

blacksqr 9y ago

"employment overall did not change" "The number of workers making over $19 an hour increased abruptly" This is the bad news.

rayiner 9y ago
No, this is the bad news: > The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city.
- blacksqr 9y ago
  "Congratulations, you now have a much greater opportunity to increase your wages if you improve your skills!" "No thanks, I prefer to keep my skills low, so the politicians have screwed me."
- WalterBright 9y ago
  > were commissioned by the city. We'll see if the city ever commissions them again!
Shivetya 9y ago
the number of hours worked is dropping, that is bad. plus the need for low wage skill sets is dropping, that is bad too. total payrolls have fallen to where some are impacted more than a hundred dollars a month, loss.
kevinnk 9y ago
"the average low-wage worker in the city lost $125 a month because of the hike in the minimum." This is the bad news.
- soperj 9y ago
  But they worked significantly less hours. No telling if they were able to then get a second job and make significantly more, or if they were fine with the $125 a month less and just got to use their time not at work for what they wanted to do.

PKop 9y ago

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

runako 9y ago

>> to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. I read this to mean that the study therefore would exclude employers such as Seattle-based Starbucks, Seattle-based Amazon, Seattle-based Costco, Seattle-based Nordstrom, McDonald's, etc. Based on that reading, it seems like quite a leap to draw any conclusions from this data. Am I reading this incorrectly?

rukittenme 9y ago
I'm not intelligent enough to say either way. I do think that excluding them was a good idea. If the only businesses that can survive a law are massive multi-national corporations, we've got a problem...
- runako 9y ago
  That's a separate issue, also worthy of study. But it does seem ridiculous to assume the validity of a study of low-wage workers in Seattle while omitting data from companies like Starbucks that presumably employ many people affected by the change.
  - surfmike 9y ago
    The reason they excluded it was because the data they were provided for those companies did not differentiate between workers in Seattle and workers outside. That said the economics of hiring an extra shouldn't be significantly different for a big company. Costco and Starbucks probably have some wiggle room to cut down on the number of staff at a certain time. Also, to quote from the study: "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2]."
  - deleted 9y ago
    [deleted]
- Joe-Z 9y ago

enduser 9y ago

Jeff Bezos owns this newspaper and has a deeply vested interest in keeping wages low.

rhino369 9y ago
The study was commissioned by Seattle.
- chroem- 9y ago
  Yes, and his newspaper is blowing a study with bad methodology out of proportion.
strathmeyer 9y ago
Seems better than a government that wants to keep people out of work.
hsod 9y ago
The article itself seems to be a pretty even-handed summary of some the underlying research (which was not carried out by Jeff Bezos).
heurist 9y ago
Wouldn't he want them higher across the board so Amazon can fill in the price gap?
dragonwriter 9y ago
[withdrawn]
- tptacek 9y ago
  This is an unusually facile remark for you. Here's Max Ehrenfreund's publication history at WaPo. Take a glance across it, and then decide if you're convinced he's essentially a fraud, reporting in bad faith to promote the viewpoints of Jeff Bezos. I wonder if he's ever even met him. https://www.washingtonpost.com/people/max-ehrenfreund/?utm_term=.64c79d137d78 https://www.washingtonpost.com/people/max-ehrenfreund/?utm_t...

CiPHPerCoder 9y ago

hirundo 9y ago
> then the study is just measuring toxicity rather than bad policy. Don't you think that good policy should account for human toxicity? You seem to believe that policy should not account for "human folly."
thehardsphere 9y ago
Ok, your moralizing tone is condescending, it is rude to pretend to "ask questions" when you're really pushing a thesis, and the thesis you are presenting has no explanatory power. Thus addressing those "questions" is largely uninteresting.
- deleted 9y ago
  [deleted]
throwanem 9y ago
I suspect you're getting downvoted, and not getting replied to, because > the jobs [being] cut because of the collective actions of spiteful business owners who don't wish to pay their employees that much per hour ...just doesn't make any kind of sense. You might find an occasional individual small business owner who's willing to cut off his nose to spite his face in this fashion. To imagine it happening on a collective basis, whether in organized or spontaneous fashion, is fantastically absurd, and seems necessarily rooted in so little experience of actual business proprietors that it's hard to imagine any kind of productive conversation proceeding from this point.

davidf18 9y ago

http://www.nber.org/papers/w23532 http://www.nber.org/papers/w23532 At my local grocer in Manhattan, some prices suddenly went up 25% or more on a number of items and I was told by a senior manager of the food store chain (I was calling to complain about something else and inquired) who said it was because of the first minimum wage increase for not only the stores but the distributors which are also located in NY State. NY State passed a minimum wage from $11 to $13 to $15 by 2018 or so. The current rate is $11. A lot of people receive food stamps and/or are on a fixed income (think retirees) and this puts a substantial increase in their cost of living. This is only the first hike. One can only imagine how much higher food prices will be when it finally goes up to $15. Meanwhile neither NY State nor NY City has dealt with the real problem which is the high cost of living which is very hard on low-wage people in particular because of zoning density restrictions and overuse of historic landmark status. These zoning density restrictions are a huge windfall for wealthy landlords as they make renters pay far, far higher rates for apartments than they would in an efficient market. It is a huge regressive "tax" that makes landlords like Donald Trump far wealthier than they otherwise would be in a efficient, functioning real estate market.

SomeStupidPoint 9y ago

> In particular, to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. Wait, so are places like corporate McDonalds, Starbucks, Subway, etc excluded from the study? ...What about grocery stores? ...Clothing stores, mall shops, etc? It seems like failing to include those would be a major bias in the effects of the study. Edit: "Indeed, while employment overall did not change, that was because employers replaced low-paying jobs with high-paying jobs. The number of workers making over $19 an hour increased abruptly, while the number making less than that amount declined, Vigdor and his colleagues found. Vigdor said that restaurateurs in Seattle -- along with other employers -- responded to the minimum wage by hiring more skilled and experienced workers, who might be able to produce more revenue for their firms in the same amount of time." Oh, so their "loss" to low-paying jobs can be explained by a rise in jobs paying above their cutoff for "low-paying"? I have a lot of questions about this study; particularly since it doesn't agree with the other study mentioned in the article (with this study using "new" methods and the other using more "traditional" methods).

JumpCrisscross 9y ago

"Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies." http://nber.org/papers/w23532 http://nber.org/papers/w23532

Stanish 9y ago
First, just from skimming I see that this hasn't been peer reviewed yet. Second, it is coming from WaPo which is a very neoliberal, anti-worker paper (see the 900 anti Bernie Sanders stories it put out right as he was gaining momentum vs the neoliberal, anti-minimum-wage Clinton). Third, the fact that people are "earning less" could also be interpreted as meaning that the people are earning enough to take some time off for leisure, which has many benefits both monetary and otherwise. Fourth, it appears there were exclusions of large-scale corporations with facilities inside and outside of the city, which seems to miss the main target of a raised minimum: the corporations which can objectively easily afford it, and who employ the lion's share of workers in major cities. Finally, this non-pier-reviewed, dubiously filtered study goes against the vast majority of research on the subject performed to date. Not to mention it violates common sense, which says that our incredible increase in worker productivity should have seen corollary rises in worker pay over the last 40 years. In fact, we have seen the opposite.

Apreche 9y ago

Uh, businesses. You are supposed to raise prices, effectively taxing those rich customers. Did you forget that part?

thehardsphere 9y ago
You say that like that’s a choice they can make without any consequences.
AnimalMuppet 9y ago
Effectively taxing all customers. The poor buy stuff too...
nkoren 9y ago
Businesses that serve the poor can't do that.
CompanionCuuube 9y ago
Uh, if they raise prices, you're effectively taxing ALL customers. That's why consumption based taxes are worse for the mid to low wealth consumer, a greater share of their income is spent on consumption. You'd have to find out which products the rich customers are buying exclusively and increase the prices on those.

startupdiscuss 9y ago

"In particular, to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. Skeptics argued that omission could explain the unusual results."

surfmike 9y ago
Quote from study: "as shown in Table 2, in Washington State as a whole, single-site businesses comprise 89% of firms and employ 62% of the entire workforce (which includes 2.7 million employees in an average quarter)" [2].

davidw 9y ago

I find this to be credible - at some level, it'll certainly hurt. The problem as I see it is that some people say "aha, see, that doesn't work", but then stop there. There is a real problem in that some people (not all who make minimum wage, and not only those who make minimum wage) have real problems making ends meet. What's the best way to help them?

ithinkinstereo 9y ago
Increase social services funding by taxing the rich and closing tax-dodging loopholes (like capital gains, etc.).
- Stanleyc23 9y ago
  can you elaborate on this capital gains tax loophole?
  - dragonwriter 9y ago
    Long-term capital gains are taxed lower than normal generic income (at rates lower than the same person would pay in income tax) which in turn taxed lower than labor income (which is, in addition to regular income tax, subject to payroll tax.) Closing the capital gains tax loophole is, presumably, a reference to stopping some or all of this favorable treatment.
    - thehardsphere 9y ago
      1. That's not a "loophole", it's a deliberate feature of tax law. 2. Changing that would not do anything to solve this problem (even if you think it should be solved through more government spending, it wouldn't raise much money)
    - WalterBright 9y ago
      It's less of a loophole than one might think, because much of long term capital gains is illusory due to inflation.

accountyaccount 9y ago

Probably an unpopular opinion, but: Isn't raising the minimum essentially trying to save a sinking ship by adding more water to the ocean? Seems like time would be better spent ensuring that everyone has food, housing, and healthcare no matter what they do (easier said than done, of course).

mullingitover 9y ago
The minimum wage isn't pegged to inflation, so in a sense the minimum wage workers' ship is always taking on water. The hike to $15 was a bailout operation, but if the wage isn't pegged to inflation then it's still slowly sinking.
djohnston 9y ago
i agree. i can't help but think this sort of legislation just increases the rate at which companies like mcdonalds pursue fully automated franchises.
thehardsphere 9y ago
It's more like trying to save a sinking ship by telling the crew on the ship they can only use high-quality licensed ship repair equipment, instead patching the holes with whatever they can improvise. Yes, it would be better if they used high quality hull repair equipment, but sometimes it's not available and insisting that's the only thing you're allowed to use while the ship is sinking and people are struggling to survive is not helpful at all.
- accountyaccount 9y ago
  Yeah, fair. People need help now. But how long can we continue kicking this problem down the road. We need to tie this thing to inflation or just admit that it's not the solution.
  - thehardsphere 9y ago
    It was never the solution. It's actively making things worse for most of the people it was claimed to be intended to help. Tying it to inflation is just going to make displacement of low skilled workers increase automatically every year.

noodle 9y ago

So low wage workers are getting cut but unemployment is still at 3.2%? Which is ~1.5% lower than the national average? Kind of sounds like this study might be looking at only half the story.

thehardsphere 9y ago
The unemployment rate only counts people looking for work. If they quit the labor force completely, they're no longer counted as unemployed. Minimum wage workers are usually the lowest skilled workers in the economy. When they're displaced they have the fewest alternative jobs available to them, so they tend to drop out of the labor force. Either temporarily, while they go and learn new skills, or permanently.
- noodle 9y ago
  But that's really flexible, though, right? If a lot of people lost their jobs from minimum wage increases, wouldn't you expect the unemployment rate to increase at least temporarily around the same time while they initially look for new work before falling out of the market?

Kiro 9y ago

The successful Scandinavian model doesn't have any minimum wages for a reason.

gaius 9y ago
Nor does Germany with some of the best working conditions in the world...
- jtedward 9y ago
  Germany recently got one.
- falcolas 9y ago
  What Germany does have is a better social safety net so such minimums are not required to pay for basic needs. A minimum wage worker in the US is likely working 2-3 such jobs to cover food, rent, and other such necessities.
  - thehardsphere 9y ago
    Minimums weren't imposed help people to meet basic needs. They were imposed to keep Chinese immigrants from participating in the labor market.
    - falcolas 9y ago
      I would be super curious to look at the source on that. And, for whatever reason they were imposed, they are currently used to help people meet those basic needs. Should there be another mechanism to help people meet those needs? I think so, but that's another discussion topic entirely.
- germanier 9y ago
  Germany introduced a general minimum wage of 8.50€ in 2015 (since raised to 8.84€). Before that there were (and still are) many union-negotiated sector-specific minimum wage rules (same as in the Nordic countries) but they haven't covered all low-wage sectors.

austincheney 9y ago

tldr; * The study uses more precise data than similar prior studies and comes to a sharply different conclusion. * Economists generally want to disbelieve this study, because the results aren't promising, but the method used is largely credible and the data is more precise. * The impact, according to the study, is that to compensate for the higher wages employers are continuing to hire but only highly skilled candidates thereby displacing the lowest wage earners or "removing the bottom rung".

tptacek 9y ago
"Economists" want to disbelieve the study? Can you support that with evidence? There are definitely liberal economists and conservative economists, but I don't think it's at all clear that the mainstream of economists broadly support a sharply increased minimum wage.
- austincheney 9y ago
  Nope. It is the sensation I (myself) got from reading the article.

itsdrewmiller 9y ago

Whatever the underlying paper says, this article is terrible. It never explains why a bunch of low paying jobs being replaced with the same number of high paying ones is bad, other than some hand-waving about low skilled workers being left out. Where did all these new high skilled workers come from?

lend000 9y ago

The problem I have with the minimum wage is that it transfers wealth from the very poorest to the mid-working class/lower middle class. Who am I to tell a homeless person that she is legally forbidden to engage in a voluntary, hourly employment contract for less than $15/hr? I would effectively be guaranteeing that she stays unemployed/homeless. Regardless of practical effects (which are ambiguous at best), it's wrong on moral grounds. On the other hand, the minimum wage definitely benefits middle class teenagers on their first jobs (if they can get a job), and has questionable benefit for millennial humanities college grads who have yet to start a career. For them, the higher wage comes with fewer hours, according to this study. In the long run though, the more we raise the minimum wage, the sooner the local price inflation catches up. Getting a casual meal in Seattle is NOT cheap right now. EDIT: I'll throw in that I think a very basic income with no minimum wage/unemployment/other welfare is much smarter fiscally and economically, and is the only way to largely eliminate extreme poverty. And it's sad that HN readers flagged this article because it challenges a conventional liberal talking point.

taeric 9y ago
You aren't telling the homeless person that they are legally forbidden from working in cheap labor. You are telling businesses that they are not solvent if they rely on ultra cheap labor.
- Aron 9y ago
  both?
- lend000 9y ago
  Perhaps minimum wage proponents need to frame it like that to justify it, but in reality, it goes both ways. You ARE legally forbidding a homeless person from working at a price of their choosing, just as much as you are forbidding a business from purchasing labor below a certain price.
  - taeric 9y ago
    This line of thinking leads to allowing people to sell themselves into slavery. Do we need to solve homelessness? Absolutely. We do not do this by propping up businesses and properties that rely on below livable wages. I can buy some level of slippery slope at play here. But, by and large, this frames it in a way that allows sub-livable wages. So, you can think my "side" is framing this in a way to justify it. This does little more than convince me your "side" is just trying to justify keeping ill earned wealth.

tptacek 9y ago

I really dislike this framing. By any contemporary definition I'm a "liberal": * I support higher taxes, particularly on higher income people, almost for its own sake. * I oppose almost all military intervention abroad. * I believe the federal government needs to intervene with local governments to prevent police abuses. * I strongly support public schools and oppose public-funded charters. ... and I could go on and on this way. On the other hand, I do not believe in a high national minimum wage, or in a small number of other "liberal" orthodoxies^h^h^h^h^hidees fixes (like universal college tuition, or single-payer health care). Why am I meant to feel like my "team" lost something when a study confirms something that most economists have been saying for decades?

jeffdavis 9y ago
For reasons not clear to me, the following statement is political suicide: "We tried something we believed would help low-income workers based on the best information we had at the time. The results have not met our expectations, so we will reassess whether it's a net benefit in our unique city or if we should suspend it and look at other proposals to help low-income workers instead."
SomeStupidPoint 9y ago
Can I get you to briefly outline why you don't believe in raising the minimum wage? I can't say that I agree with you, but you're generally a thoughtful guy and I would appreciate getting another perspective on the issue. (Also, curious: is the word "national" operative there -- eg, do your beliefs differ between a national minimum wage and a local one like the Seattle measure?)
- tptacek 9y ago
  I'd just say that it's not settled whether sharp or nationwide increases in the minimum wage accomplish any clear public policy objectives. I could be convinced either way, but my perception is that it's not at all clear in the data that "$15 nationwide minimum wage" is a fight worth fighting. I definitely don't oppose the minimum wage! There's no libertarianism creeping into my perspective here. :)

c0nducktr 9y ago

If your business cannot pay employees a livable wage, it does not deserve to exist.

bpicolo 9y ago
Thanks largely to the internet, fewer and fewer can.

hirundo 9y ago

Opponents of a minimum wage need only believe that increasing the price of a thing tends to proportionally decrease the demand for that thing. This is simply a statement of the law of supply and demand, which is (though weaker) the economic equivalent of physics' F=MA. Proponents of a minimum wage need to believe that in this particular case, raising a price does not proportionally decrease demand. While this may be true (economics ain't physics), the burden of proof lies with the proponents, since it would be a contradiction of probably the most well established "law" of economics. If you feel that the data in this and similar studies are inconclusive, to the extent that you respect the discipline of economics, you should oppose a minimum wage.

SomeStupidPoint 9y ago
Except that there are numerous cases where raising price doesn't proportionally drop demand (it can even raise demand), and very well understood reasons for that. Pretending that it's a "law" of economics we can blindly apply to any situation is absurd.
- hirundo 9y ago
  I used scare quotes to indicate that it isn't an actual law, which is also why I said that it's weaker than something like F=MA and that economics ain't physics. Then you chose to ignore all of that to accuse me of pretending otherwise. I don't deny that there are exceptions, I just claim that they _are_ exceptions, and that therefore the burden of proof is on the one arguing that a particular case is exceptional.
PatentTroll 9y ago
Your conclusion lies on the assumption that rational economists must oppose any measure which decreases demand.
- hirundo 9y ago
  This particular decrease of demand is of work hour and jobs, and thus an increase in misery of particularly vulnerable people. If an economist is both rational and compassionate, they would need to believe that such price fixing has benefits that outweigh the increased misery. I'm not familiar with those offsetting benefits. If they exist, please enlighten me.

atemerev 9y ago

There is an excellent free (and very short) book, "Economics in one lesson" by Henry Hazlitt, which explains very logically why minimum wage, rent controls and other "band-aid" economical measures always end badly: https://mises.org/system/tdf/Henry%20Hazlitt%20Economics%20in%20One%20Lesson.pdf?file=1&type=document https://mises.org/system/tdf/Henry%20Hazlitt%20Economics%20i... It is like 2-hour reading, but very enlightening.

taw55 9y ago
And very ideologically biased...
- greggyb 9y ago
  And yet presents a framework of analysis that is objective and a case study in the application of bias to an objective technique. The lesson of the book is more than the ideology of its author. It is hubris or naivete in the extreme to assume that someone you disagree with has nothing valuable to say.
  - taw55 9y ago
    Austrian economics is not "objective".
    - atemerev 9y ago
      What subjectivity is in it?
    - greggyb 9y ago
      > > It is hubris or naivete in the extreme to assume that someone you disagree with has nothing valuable to say. You think you disagree with me, and you clearly disagree with Austrian economics. Yet, with less than one page's worth of reading, you can identify the core lesson of the book, excerpted below. That the author then applies this lesson in ways you find objectionable is no judgment on the lesson itself. Chapter 1, Paragraph 1: While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. Chapter 1, Paragraph 2: there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences. In case you feel any desire to actually engage with the ideas of the book, it can be read for free, in full, here: https://www.mises.org/library/economics-one-lesson https://www.mises.org/library/economics-one-lesson

douche 9y ago

Granted, I'm a redneck from the back woods, but there are lots of people I know that don't make $15/hour in skilled trades, let alone minimum wage jobs. If you're going to pay minimum wage of $15, then all other wagesshould correspondingly increase

wnevets 9y ago

All of the economists said Ford was nuts for offering higher wages and less hours. I would argue it worked well.

lukeschlather 9y ago

It sounds like the study doesn't take into account cost of living. Even for a minimum wage employee, time is money. Assume for the sake of argument that this study accurately describes wage losses. [1] Assume that the average minimum wage worker was working 2 different jobs for a total of 40 hours a week with no benefits. That's a total of 160 hours a month, or $1440. A loss of $125/month equates to $1315, or 102 hours a month at $13/hour. [1] So the worker loses $125/month and gains 58 hours. To translate that into one dollars example, childcare in Seattle costs around $10/hour. There are of course lots of ways to save money with that free time. More sleep means fewer minor accidents leading to injury and sickness around the house. Childcare costs around $10/hour in this city, so by that metric there was basically no point in going to work before this wage increase if you had children to take care of. Saving 50 hours of work equates to saving $500 dollars. Obviously, it's not going to be 1:1, but even assuming you were spending just 15 hours in childcare would make our hypothetical worker better off, with an extra 35 hours to go to school, or just relax and keep their health. [1] It sounds like this study is looking only at small businesses, for whom the rate is $13/hour. Since it ignores most businesses that actually must pay $15/hour, the headline seems wrong by definition.

thehardsphere 9y ago
Oh, I see, so, the poor people who work to live should be thankful that they can do their own childcare now that they've been comdemned to never be employed again because nobody wants to pay them $15/hour. Do you realize how privileged you sound saying this? Do you really think these people made enough money to pay for child care to "enjoy" the cost savings now that they're sitting around at home? What does America look like from inside your limousine? Do you have any Grey Poupon?

dixie_land 9y ago

A local bar I favor added a 5%! "minimum wage surcharge". It's just an excuse for business to raise prices without actually improving the income of the servers. (Let's be realistic the 5% is not gonna go all to the servers and people will tip less out of spite)

kccqzy 9y ago

I sometimes really like the approach in Singapore better. Instead of mandating a minimum wage, which essentially tells businesses that they have pay their workers a minimum, the businesses can pay their workers at the market rate and the government gives the workers extra income-based subsidy. This strikes me as better than minimum wage: operating costs for businesses remain the same, yet workers have the equivalent of a minimum wage.

harimau777 9y ago

This seems like an interesting study, but I'm not sure its conclusion makes sense to me. Am I understanding the facts correctly: 1. Employment stayed about the same. 2. Employees overall were payed a lot more. 3. The number of low wage employees (which I assume means those making the new minimum wage) dropped. However employees overall were payed more. My understanding is that this means that employers switched to paying more of their employers above the minimum wage. 4. They say that the average low payed employee made $125 less. However, its not clear to me what that means in light of the other points. 5. The study did not include larger corporations that have employees in multiple cities. Several different interpretations were suggested: 1. Companies are hiring more skilled employees for higher wages and pushing less skilled employees out of the market. 2. Small businesses are being hurt and large businesses are taking their place. 3. Companies are paying employees more. 4. The results are due to some aspect of the economy that wasn't controlled for. It seems to me that the conclusion that this is bad for those who advocate for higher minimum wages isn't very strong unless they could show that it was actually pushing low skilled employees out of the market.

surfmike 9y ago
I think your assumption (1) is incorrect. Quote from article: "They've cut their payrolls, putting off new hiring, reducing hours or letting their workers go, the study found."
- thehardsphere 9y ago
  Also, the unemployment rate does not count individuals who have dropped out of the labor force completely, which displaced low skill workers are especially likely to do. If there are labor participation rate statistics available (probably not yet), you'd see the drop there.
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zeteo 9y ago

> raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. > we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs [...] while hourly wages in such jobs increased by around 3 percent. Sounds like some pretty intense statistical manipulation. The second wage increase was ~18% ($2/$11) not 3%. So they've fished for a larger pool that only had a 3% increase in wage and arbitrarily designated these as "low-wage jobs". Also very conveniently they've chosen to highlight only the second wage increase; it sounds like no data massaging could make the first one look bad. If they were honestly aiming at statistical significance the best approach was of course to bundle the two increases together. An overall 37% change in minimum wage should have much clearer effects than its individual halves.

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tptacek 9y ago
That's the point of the study: the real increase in wages to workers isn't the nominal statutory increase. For example, many people in the low-wage labor market in Seattle were already making more than the minimum wage.
- zeteo 9y ago
  Sure, but when the nominal increase is 18% and the selected group only shows 3% there's a big question about group selection. If you can cherry pick groups and variables then you can use phenomena like Simpson's paradox to prove pretty much anything with statistics.

vcdimension 9y ago

Its interesting that none of the "welfare state" economies of Scandinavia have minimum wage laws. Instead they allow collective bargaining by unions.

thehardsphere 9y ago
How is it that collective bargaining by unions relevant? I mean, we have collective bargaining in the US, so I'm trying to understand how exactly that is different from Scandinavia.
- vcdimension 9y ago
  I think you have more anti-union laws in some US states, such as Michigan and Wisconsin.
  - thehardsphere 9y ago
    Well, OK, but I think Washington is not one of those states. So, again, how is it relevant?
    - vcdimension 9y ago
      Because if other states which do have anti-union laws are thinking about imposing minimum wage laws to improve the lives of low wage workers they might want to think again. Scandinavia is often upheld as a model for low levels of inequality and high standards of living. I'm sure there are plenty of other things to take into account, but it was just a simple observation.
      - dragonwriter 9y ago
        Seattle is not a state; there are reasons to think that local minimum wage increases have different effects than statewide increases, which have different effects than national increases. Each time you increase the size of the jurisdiction, the opportunity for business to simply reroute to a lower cost jurisdiction (or entities not impacted by the smallwr-jurisdiction rule even if located in the jurisdiction) is reduced.

miguelrochefort 9y ago

> Who am I to tell a homeless person that she is legally forbidden to engage in a voluntary, hourly employment contract for less than $15/hr? Very eloquent.

adamsea 9y ago

Article says the stdy is not peer reviewed yet

dahart 9y ago

> On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum. This study seems interesting, and I'm open to the idea that this wage hike and it's effects could be an example of unintended consequences. But more than anything else in the article, the above quote rubs me the wrong way. Based only on what is reported in the article, this appears to be an abuse of statistics. They intentionally left out large employers, and are focusing on a narrowing wage range, so you can't say anything about the effect on the average low-wage worker. Not only that, it's a purely bimodal distribution. If what this study says is true, then there were no people who lost $125, there were people who gained some money, and people who lost jobs, and nothing in between. It's so misleading to cite an average.

petraeus 9y ago

The truth is those jobs will just go to automation resulting in negative benefits for those making under $15 currently.

alexandercrohde 9y ago

I think people are missing the forest for a single tree. Minimum wage is just a small token in the larger discussion of distribution of wealth. Minimum wage is a means to solve the fact that incompetent people monopolize wealth through political connections and spent it on yachts while other people just as smart and motivated try to pay off their college debt. Let's not make this an "us" and "them" issue. A study can cast doubt on a means, but not on an ends. The fact is that those low-skill jobs will disappear, McDonalds is already replacing its employees with self-order kiosks, Uber isn't trying to hide its plans. Minimum wage is not the answer, because it doesn't go far enough. Minimum wage doesn't work? Great, let's do universal basic income then.

gbacon 9y ago

Why is this post flagged?

em3rgent0rdr 9y ago

also what is not being talked about is these lost jobs are going to automation anyway. Increasing the minimum wage simply hastens the transition.