7 ms·

David Neumark (who is no stranger to minimum wage research - it's his area of expertise: http://www.nber.org/authors/david_neumark http://www.nber.org/authors/d

by cheald 9y ago

David Neumark (who is no stranger to minimum wage research - it's his area of expertise: http://www.nber.org/authors/david_neumark http://www.nber.org/authors/david_neumark) astutely observed that Card-Kreuger has been widely deployed to exactly that effect (https://twitter.com/NeumarkDN/status/888134129945952256 https://twitter.com/NeumarkDN/status/888134129945952256), effectively being used to say "MW is settled, now stop arguing about it". I'm of the opinion that far too many people on both sides of the issue argue their positions from ideology rather than empiricism, to our collective detriment. The headline is right - one alarming study isn't the final word, nor should it be. But we seem to be rather quick to let one study confirming our biases to be "the final word" when it confirms our priors, and rather quick to dismiss it as "just one study" when it contradicts them. Neither position is intellectually honest, and if we truly want to help the most vulnerable, we have to do it in ways that are backed by the evidence.

noobermin 9y ago
But, I mean, it isn't really an open question is it? My impression is that MW actually has little effect if any on jobs is the scientific consensus. After a 1 minute google, bam, figure 1, a cluster at 0.[0] [0] http://cepr.net/documents/publications/min-wage-2013-02.pdf http://cepr.net/documents/publications/min-wage-2013-02.pdf
- conanbatt 9y ago
  The paper is very interesting! Really want to take the time to read it. Bear in mind there is a matter of degree. > The weight of that evidence points to little or no employment response to modest increases in the minimum wage. What will define "modest"? In argentina, minimum wage is almost median real income. 40% of workers work under the table. Id be extremely surprised that lower minimum wage wouldn't increase formal employment tremendously.
downandout 9y ago
The problem with older studies (such as Card-Kreuger) is that technology has advanced to the point where it is possible to replace at least some minimum wage workers, either through outright automation or increased productivity of other workers. Smart business owners will calculate the costs of replacing an employee with technology, and recalculate them whenever the variables change significantly (such as when the minimum wage is increased). If the numbers check out, minimum wage workers can and will lose their jobs. So, minimum wage increases, worker's comp changes, tax increases, etc. today may indeed spur job losses where that may not have been true before. We are in a brave new world.
- boomboomsubban 9y ago
  This isn't new. The Card-Kreuger study was performed at a point when many of these companies were first introducing computers for various logistics tasks, increasing productivity and replacing some jobs. Further, if you say that old studies aren't reliable because it's a brave new world, the predictions you make due to some numbers are also unreliable.
  - downandout 9y ago
    Are you honestly saying that commonly available technology in the early 90's was capable of replacing as many jobs as it is today? My only "prediction" is that, as has been the case since the beginning of recorded history, business owners will always try to reduce their expenses as much as possible, and that capabilities of technology will continue to increase as time goes on. I'd say those are fairly safe assumptions. With those basic and reasonable assumptions in place, minimum wage increases today will cost minimum wage jobs.
    - boomboomsubban 9y ago
      >Are you honestly saying that commonly available technology in the early 90's was capable of replacing as many jobs as it is today? I don't need to say that, fewer jobs being lost should have still have had an impact and those studies didn't find one. There are other periods in history where the leaps forward did have something like this level of impact, and jobs didn't disappear then either. >With those basic and reasonable assumptions in place, minimum wage increases today will cost minimum wage jobs. Your reasonable assumptions include this same process happening throughout history. It has had the same result throughout history, yet you're predicting that this result will somehow change.
frgtpsswrdlame 9y ago
>The headline is right - one alarming study isn't the final word, nor should it be. But we seem to be rather quick to let one study confirming our biases to be "the final word" when it confirms our priors, and rather quick to dismiss it as "just one study" when it contradicts them. Neither position is intellectually honest, and if we truly want to help the most vulnerable, we have to do it in ways that are backed by the evidence. I disagree with this conception of the problem. As the other downvoted comment links the general consensus is that minimum wage hikes of small/medium magnitude are going to have zero/small effect on employment numbers. People like Card/Krueger because there's a lot of good reasoning in it and it's one of the earliest really good studies that showed the effect it did. But they quote it because the effect that it shows agrees with our scientific consensus. This UW study not only goes against consensus but also to an extreme degree: The UW report nonetheless finds an unprecedented impact of wage increases on jobs, ten times higher than the average in 942 published minimum wage and non-minimum wage estimates, and triple that of minimum wage critic David Neumark. [0] The UW study also tries to sell it itself (or has been accepted by laymen) as a more definitive study because it doesn't limit itself to one industry. And while it's true that it's pursuing a larger scope the sampling problems in their methodology have made it almost useless. If you refer back to the pdf in the previous citation and you can read about them. So I think people's skepticism about this study is actually pretty well placed. [0] http://irle.berkeley.edu/files/2017/Reich-letter-to-Robert-Feldstein.pdf http://irle.berkeley.edu/files/2017/Reich-letter-to-Robert-F...
- cheald 9y ago
  That's just the problem, there isn't a "general consensus" on minimum wage among economists. There is a broad and varied body of research with a variety of contradictory conclusions. A brief overview of the state of the literature is handily summed up here: https://www.reddit.com/r/Economics/wiki/faq_minwage#wiki_empirical_studies https://www.reddit.com/r/Economics/wiki/faq_minwage#wiki_emp... The tl;dr from that section is nicely concise: > The most comprehensive summary that can be made about the minimum wage literature is that while the evidence is sometimes contradictory, small minimum wage increases seem to either have no employment effects or at least quite small employment effects in the short run. Estimates of long-run impacts, or the impact of large minimum wage increases are presently unknown. Seattle is notable because it was (I believe) the largest MW increase in US history. The research has broadly agreed that with large changes, we don't have evidence predicting what'll happen, which is why this study is of such critical political importance to both sides - if it shows that the MW is a net gain, then the MW proponents get to say "see? no large changes, $15 MW nationwide now!". If it shows a net loss, the MW opponents get to say "see? You can't go past the inflection point without moving backwards, put the brakes on this push". Card/Kreuger was notable because it was the first robust result that contradicted the consensus at the time. The paper contributed substantially to our understanding of labor economics, and it would have been a major mistake to discount it because it conflicted with the widely-held beliefs at the time. To dismiss the UW study because it contradicts some contemporary research would be just as much a mistake.
moultano 9y ago
Much more interesting than the question, "is minimum wage good or bad?" is the question, "what policies accomplish the goals of minimum wage more effectively?" I wish half of the ink spent debating the sign of the impact of minimum wage were spent on that instead.
- Pyxl101 9y ago
  Yes. Much of the political rhetoric about the minimum wage seems to ignore obvious questions like, "What happens to the people whose labor is only worth (e.g.) $12 per hour, when the minimum rises to $15?" What problem are we really trying to solve by making it unlawful for people to hold a job, people whose labor is worth less than the minimum wage? Making it illegal to work (for a certain wage) is certainly a roundabout way to help poor people, if that's the goal. There are certainly people in any economy whose labor is not worth the total cost to an employer, for any given price. For an obvious extreme, consider a minimum wage of $1000/hour: this would not magically make everyone rich; instead, it would create a giant black market for labor. Intuition says that $1000/hr is obviously the wrong number. But what really is the justification for saying that $5 or $10 or $15 per hour is the right number? If the goal of such a policy is to help the lower class earn more, then minimum wage seems like a very indirect and blunt instrument by which to effect it.
  - seanmcdirmid 9y ago
    The idea is that people should be pushed up the value chain of productivity as well as just being paid more. Yes, we don't allow for $1/hour productivity like other countries (even when allowing for PPP) because that is just not acceptable use of human labor in a developed country. So minimum wages do create pressure to stay productive enough to keep employed, which is entirely intensional.
    - deleted 9y ago
      [deleted]
    - seanmcdirmid 9y ago
      > comment replied deleted Think about it: it's not just the work, it's the quality of the housing and the food, and everything else. Sure, someone could "work" for $1/hour but they could never live on that in a rich country. There is a bottom on labor productivity below which labor is not viable for the minimum standard of living for the country. Pushing up the min wage forces productivity improvements as well as standard of living increases. Otherwise, we would have something like India, supporting a wider variety of living standards; I.e. We wouldn't be a developed country anymore. Below that level of employability, social services are supposed to take over, but this being America....
tuna-piano 9y ago
Posted in a previous thread, but I still don't understand this whole "Minimum wage is good/bad" conversation, and it's really bothering me (especially from economists). ------ Every minimum wage increase is different! Even the staunchest free market economist wouldn't claim that a hypothetical minimum wage increase from $.10/hr to $.50/hr in Seattle would increase unemployment. And even the staunchest socialist economist would not claim that a minimum wage increase from $8/hr to $800/hr wouldn't increase unemployment. Similarly, how can you compare an increase from $5-6 in New jersey in 2005 to one from $11 to $13 in Seattle in 2017? You can't just make blanket statements about this stuff. The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?"
- cheald 9y ago
  I'm not aware of any academic economists who say "the MW is good/bad". They talk about it terms of positive and negative effects, and frequently qualified to a particular location or industry (read both UW studies, for example; the researchers generally tend to present their findings without editorialization). When it hits the media, it gets blown out into sensationalist headlines that apply broad-stroke good/bad filters to the concept as a whole without any of the subtlety or nuance of the original research.
- AnthonyMouse 9y ago
  > The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?" That still isn't the right question because it's a false dichotomy. At any interesting wage, a minimum wage increase will increase unemployment. An increase from $.10/hr to $.50/hr does nothing because approximately zero people make less than $.50/hr to begin with. Once you get into wages that people are actually paid, with high probability there will be some jobs that can't be justified at a higher wage. Imposing a minimum wage is taking from the people at the very bottom (who become unemployed) in order to give to the people at the almost-but-not-quite bottom. Which is why the whole exercise is folly. It doesn't matter whether the higher wages outweigh the increase in unemployment in any particular scenario because there is a third option -- increase income without imposing the entire cost on employers who hire people at the bottom. The simplest way to do that is a UBI. The UBI supplements everyone's wages, which brings up the lowest paid workers to the minimum, and is paid for from general taxes, which minimizes the economic damage by spreading out the burden (and having the rich pay their proportionate share).
esaym 9y ago
>I'm of the opinion that far too many people on both sides of the issue argue their positions from ideology rather than empiricism, to our collective detriment. And some of us just use math. If a company is barely profitable already, being required to pay more for labor probably won't work too well.
- CalChris 9y ago
  You aren't using math. You're just cherry picking hypothetical data. McDonalds and Walmart are not barely profitable; they're extremely profitable.
  - AnthonyMouse 9y ago
    It's not about whether the company as a whole is profitable, it's about whether the value the company derives from employing a particular person is more than what they have to be paid. This is especially true of manual jobs that could be outsourced or automated for only slightly more than employees are currently paid.
    - michaelmrose 9y ago
      Then the cost of automation will be less than the employee is paid very soon anyway
      - AnthonyMouse 9y ago
        That's little consolation to the person who loses their job today instead of years from now.
    - chongli 9y ago
      It's not about whether the company as a whole is profitable This is a great point. McDonald's and Walmart could paradoxically become more profitable after a minimum wage increase. How? By closing their least profitable stores. Perhaps those stores were just barely making a profit and the increase pushed them into the red. By closing these stores they increase their profitability despite recording a decrease in profit.

by cheald 9y ago

noobermin 9y ago

But, I mean, it isn't really an open question is it? My impression is that MW actually has little effect if any on jobs is the scientific consensus. After a 1 minute google, bam, figure 1, a cluster at 0.[0] [0] http://cepr.net/documents/publications/min-wage-2013-02.pdf http://cepr.net/documents/publications/min-wage-2013-02.pdf

conanbatt 9y ago
The paper is very interesting! Really want to take the time to read it. Bear in mind there is a matter of degree. > The weight of that evidence points to little or no employment response to modest increases in the minimum wage. What will define "modest"? In argentina, minimum wage is almost median real income. 40% of workers work under the table. Id be extremely surprised that lower minimum wage wouldn't increase formal employment tremendously.

downandout 9y ago

The problem with older studies (such as Card-Kreuger) is that technology has advanced to the point where it is possible to replace at least some minimum wage workers, either through outright automation or increased productivity of other workers. Smart business owners will calculate the costs of replacing an employee with technology, and recalculate them whenever the variables change significantly (such as when the minimum wage is increased). If the numbers check out, minimum wage workers can and will lose their jobs. So, minimum wage increases, worker's comp changes, tax increases, etc. today may indeed spur job losses where that may not have been true before. We are in a brave new world.

boomboomsubban 9y ago
This isn't new. The Card-Kreuger study was performed at a point when many of these companies were first introducing computers for various logistics tasks, increasing productivity and replacing some jobs. Further, if you say that old studies aren't reliable because it's a brave new world, the predictions you make due to some numbers are also unreliable.
- downandout 9y ago
  Are you honestly saying that commonly available technology in the early 90's was capable of replacing as many jobs as it is today? My only "prediction" is that, as has been the case since the beginning of recorded history, business owners will always try to reduce their expenses as much as possible, and that capabilities of technology will continue to increase as time goes on. I'd say those are fairly safe assumptions. With those basic and reasonable assumptions in place, minimum wage increases today will cost minimum wage jobs.
  - boomboomsubban 9y ago
    >Are you honestly saying that commonly available technology in the early 90's was capable of replacing as many jobs as it is today? I don't need to say that, fewer jobs being lost should have still have had an impact and those studies didn't find one. There are other periods in history where the leaps forward did have something like this level of impact, and jobs didn't disappear then either. >With those basic and reasonable assumptions in place, minimum wage increases today will cost minimum wage jobs. Your reasonable assumptions include this same process happening throughout history. It has had the same result throughout history, yet you're predicting that this result will somehow change.

frgtpsswrdlame 9y ago

>The headline is right - one alarming study isn't the final word, nor should it be. But we seem to be rather quick to let one study confirming our biases to be "the final word" when it confirms our priors, and rather quick to dismiss it as "just one study" when it contradicts them. Neither position is intellectually honest, and if we truly want to help the most vulnerable, we have to do it in ways that are backed by the evidence. I disagree with this conception of the problem. As the other downvoted comment links the general consensus is that minimum wage hikes of small/medium magnitude are going to have zero/small effect on employment numbers. People like Card/Krueger because there's a lot of good reasoning in it and it's one of the earliest really good studies that showed the effect it did. But they quote it because the effect that it shows agrees with our scientific consensus. This UW study not only goes against consensus but also to an extreme degree: The UW report nonetheless finds an unprecedented impact of wage increases on jobs, ten times higher than the average in 942 published minimum wage and non-minimum wage estimates, and triple that of minimum wage critic David Neumark. [0] The UW study also tries to sell it itself (or has been accepted by laymen) as a more definitive study because it doesn't limit itself to one industry. And while it's true that it's pursuing a larger scope the sampling problems in their methodology have made it almost useless. If you refer back to the pdf in the previous citation and you can read about them. So I think people's skepticism about this study is actually pretty well placed. [0] http://irle.berkeley.edu/files/2017/Reich-letter-to-Robert-Feldstein.pdf http://irle.berkeley.edu/files/2017/Reich-letter-to-Robert-F...

cheald 9y ago
That's just the problem, there isn't a "general consensus" on minimum wage among economists. There is a broad and varied body of research with a variety of contradictory conclusions. A brief overview of the state of the literature is handily summed up here: https://www.reddit.com/r/Economics/wiki/faq_minwage#wiki_empirical_studies https://www.reddit.com/r/Economics/wiki/faq_minwage#wiki_emp... The tl;dr from that section is nicely concise: > The most comprehensive summary that can be made about the minimum wage literature is that while the evidence is sometimes contradictory, small minimum wage increases seem to either have no employment effects or at least quite small employment effects in the short run. Estimates of long-run impacts, or the impact of large minimum wage increases are presently unknown. Seattle is notable because it was (I believe) the largest MW increase in US history. The research has broadly agreed that with large changes, we don't have evidence predicting what'll happen, which is why this study is of such critical political importance to both sides - if it shows that the MW is a net gain, then the MW proponents get to say "see? no large changes, $15 MW nationwide now!". If it shows a net loss, the MW opponents get to say "see? You can't go past the inflection point without moving backwards, put the brakes on this push". Card/Kreuger was notable because it was the first robust result that contradicted the consensus at the time. The paper contributed substantially to our understanding of labor economics, and it would have been a major mistake to discount it because it conflicted with the widely-held beliefs at the time. To dismiss the UW study because it contradicts some contemporary research would be just as much a mistake.

moultano 9y ago

Much more interesting than the question, "is minimum wage good or bad?" is the question, "what policies accomplish the goals of minimum wage more effectively?" I wish half of the ink spent debating the sign of the impact of minimum wage were spent on that instead.

Pyxl101 9y ago
Yes. Much of the political rhetoric about the minimum wage seems to ignore obvious questions like, "What happens to the people whose labor is only worth (e.g.) $12 per hour, when the minimum rises to $15?" What problem are we really trying to solve by making it unlawful for people to hold a job, people whose labor is worth less than the minimum wage? Making it illegal to work (for a certain wage) is certainly a roundabout way to help poor people, if that's the goal. There are certainly people in any economy whose labor is not worth the total cost to an employer, for any given price. For an obvious extreme, consider a minimum wage of $1000/hour: this would not magically make everyone rich; instead, it would create a giant black market for labor. Intuition says that $1000/hr is obviously the wrong number. But what really is the justification for saying that $5 or $10 or $15 per hour is the right number? If the goal of such a policy is to help the lower class earn more, then minimum wage seems like a very indirect and blunt instrument by which to effect it.
- seanmcdirmid 9y ago
  The idea is that people should be pushed up the value chain of productivity as well as just being paid more. Yes, we don't allow for $1/hour productivity like other countries (even when allowing for PPP) because that is just not acceptable use of human labor in a developed country. So minimum wages do create pressure to stay productive enough to keep employed, which is entirely intensional.
  - deleted 9y ago
    [deleted]
  - seanmcdirmid 9y ago
    > comment replied deleted Think about it: it's not just the work, it's the quality of the housing and the food, and everything else. Sure, someone could "work" for $1/hour but they could never live on that in a rich country. There is a bottom on labor productivity below which labor is not viable for the minimum standard of living for the country. Pushing up the min wage forces productivity improvements as well as standard of living increases. Otherwise, we would have something like India, supporting a wider variety of living standards; I.e. We wouldn't be a developed country anymore. Below that level of employability, social services are supposed to take over, but this being America....

tuna-piano 9y ago

Posted in a previous thread, but I still don't understand this whole "Minimum wage is good/bad" conversation, and it's really bothering me (especially from economists). ------ Every minimum wage increase is different! Even the staunchest free market economist wouldn't claim that a hypothetical minimum wage increase from $.10/hr to $.50/hr in Seattle would increase unemployment. And even the staunchest socialist economist would not claim that a minimum wage increase from $8/hr to $800/hr wouldn't increase unemployment. Similarly, how can you compare an increase from $5-6 in New jersey in 2005 to one from $11 to $13 in Seattle in 2017? You can't just make blanket statements about this stuff. The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?"

cheald 9y ago
I'm not aware of any academic economists who say "the MW is good/bad". They talk about it terms of positive and negative effects, and frequently qualified to a particular location or industry (read both UW studies, for example; the researchers generally tend to present their findings without editorialization). When it hits the media, it gets blown out into sensationalist headlines that apply broad-stroke good/bad filters to the concept as a whole without any of the subtlety or nuance of the original research.
AnthonyMouse 9y ago
> The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?" That still isn't the right question because it's a false dichotomy. At any interesting wage, a minimum wage increase will increase unemployment. An increase from $.10/hr to $.50/hr does nothing because approximately zero people make less than $.50/hr to begin with. Once you get into wages that people are actually paid, with high probability there will be some jobs that can't be justified at a higher wage. Imposing a minimum wage is taking from the people at the very bottom (who become unemployed) in order to give to the people at the almost-but-not-quite bottom. Which is why the whole exercise is folly. It doesn't matter whether the higher wages outweigh the increase in unemployment in any particular scenario because there is a third option -- increase income without imposing the entire cost on employers who hire people at the bottom. The simplest way to do that is a UBI. The UBI supplements everyone's wages, which brings up the lowest paid workers to the minimum, and is paid for from general taxes, which minimizes the economic damage by spreading out the burden (and having the rich pay their proportionate share).

esaym 9y ago

>I'm of the opinion that far too many people on both sides of the issue argue their positions from ideology rather than empiricism, to our collective detriment. And some of us just use math. If a company is barely profitable already, being required to pay more for labor probably won't work too well.

CalChris 9y ago
You aren't using math. You're just cherry picking hypothetical data. McDonalds and Walmart are not barely profitable; they're extremely profitable.
- AnthonyMouse 9y ago
  It's not about whether the company as a whole is profitable, it's about whether the value the company derives from employing a particular person is more than what they have to be paid. This is especially true of manual jobs that could be outsourced or automated for only slightly more than employees are currently paid.
  - michaelmrose 9y ago
    Then the cost of automation will be less than the employee is paid very soon anyway
    - AnthonyMouse 9y ago
      That's little consolation to the person who loses their job today instead of years from now.
  - chongli 9y ago
    It's not about whether the company as a whole is profitable This is a great point. McDonald's and Walmart could paradoxically become more profitable after a minimum wage increase. How? By closing their least profitable stores. Perhaps those stores were just barely making a profit and the increase pushed them into the red. By closing these stores they increase their profitability despite recording a decrease in profit.