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What Minimum-Wage Foes Got Wrong About Seattle

90 points by herrkanin 8y ago

deleted 8y ago
[deleted]
ggm 8y ago
Needs to get more coverage, weighted by the impact the first claim had. Would a wayback machine for citations help find who is in duty bound to say "that thing we said, cited? they retracted.." or not?
ChrisLomont 8y ago
Left out of the boingboing praise, but in the abstract: "On net, the minimum wage increase from $9.47 to as much as $13 per hour raised earnings by an average of $8-$12 per week. The entirety of these gains accrued to workers with above-median experience at baseline; less-experienced workers saw no significant change to weekly pay. Approximately one-quarter of the earnings gains can be attributed to experienced workers making up for lost hours in Seattle with work outside the city limits." That seems opposite to the summary in Boingboing. It's also in agreement with many studies and theory which should price the lowest performing out of jobs as they cannot add enough value to make it worth an employer hiring them. Increased wages by fiat long enough merely increase inflation.
- Retric 8y ago
  Wages are not a uniform entity. Increasing the minimum wage has very minimal economic impact becase it makes up a tiny fraction of the US economy. Consider increasing pay 7$ per hour for all 542,000 US workers workers making minimum wage * 40 hours a week * 48 weeks a year = 7.2 Billion per year that’s chump change at under 0.04% US GDP. (That’s right not under 4% but under 0.04%.) Yes, many people make more than minimum wage, but not 7$ more than minimum wage. However, for them it’s a smaller increase so again it does not add up to much.
  - ChrisLomont 8y ago
    I don't see how it addresses the issues in the research. Care to explain? If min wage is set to X, anyone incapable of adding more then X to an employer is priced out of the job market. In this research the rise in wages resulted in reduced hours which were made up in neighboring markets which did not have this min wage.
    - Retric 8y ago
      I was addressing your inflation statement which is really not supported by evidence. In terms of pricing people out of the workforce, that’s not nessisarily a bad thing on net assuming a strong safty net. But again separate argument.
      - ChrisLomont 8y ago
        Two things: raising the min wage puts upward pressure on wages above the min also, so your estimate is not correct. Someone making min+1 will still expect to make min+~1 after the hike. Also, inflation need not be national to be inflation. This is why places with higher min wages tend to have higher overall wages and higher overall prices. These things do not operate in a vacuum. Look at prices where wages are low compared to process where wages are high, e.g., SF versus smalltown Alabama. So there is ample evidence that these things are related. By taking national averages you necessarily miss the local variation which clearly shows a price/wage correlation.
- TheSpiceIsLife 8y ago
  > Increased wages by fiat long enough merely increase inflation. If this is true then places with low minimum wage should also exhibit lower inflation than places with high minimum wage. Can this be demonstrated?
  - AnthonyMouse 8y ago
    > If this is true then places with low minimum wage should also exhibit lower inflation than places with high minimum wage. The analog to minimum wage isn't rate of inflation, it's prices. Places with a lower minimum wage do have lower prices. (The analog to rate of inflation would be rate of change in the minimum wage.)
    - TheSpiceIsLife 8y ago
      True, thank you, that's a good point.
- boomboomsubban 8y ago
  Did you look at what the study considered "experienced?" It was "greater than 700 hours worked for the past two quarters," which is about 18 hours a week for the previous six months. All of these jobs can be considered the "lowest performing," and I'm not sure what part if the summary you think this contradicts.
josephh 8y ago
WSJ's take on the same study: https://www.wsj.com/articles/seattles-fake-free-lunch-1541026906 https://www.wsj.com/articles/seattles-fake-free-lunch-154102...
- fiblye 8y ago
  The Wall Street Journal also likes to frame $260,000 and $650,000 incomes as typical Americans struggling to get by (originally posted on WSJ regarding Obama-era tax increases): http://i.imgur.com/bdgZa.jpg http://i.imgur.com/bdgZa.jpg It's hard to regard this Rupert Murdoch publication's opinions on money as grounded in any sort of reality.
  - umanwizard 8y ago
    Where on that image does it claim the family are “typical Americans struggling to get by” ?
  - refurb 8y ago
    That doesn’t seem like they are portrait of them as middle class struggling to get by. It just looks like examples of people impacted.
  - phd514 8y ago
    The article (https://www.wsj.com/articles/SB10001424127887323689604578220132665726040 https://www.wsj.com/articles/SB10001424127887323689604578220...) said nothing of the sort. It said that while the bulk of the tax increases were at the high end of the income spectrum, many individuals and couples with incomes in the 180k-500k range could see significant tax increases, too. That was contrary to the general portrayal of the "American Taxpayer Relief Act" as retaining the Bush-era tax cuts on everyone with less than 400k in income.
    - fiblye 8y ago
      > It said that while the bulk of the tax increases were at the high end of the income spectrum, many individuals and couples with incomes in the 180k-500k range could see significant tax increases, too. It's amazing that a non-insignificant number of people on HN don't think that's on the high end of the income spectrum. In most places in America, you'd be considered quite handsomely rich if you're making $200,000 a year. It puts you very, very solidly in the top 5% of earners. $300,000 puts you in the top 1%. That people think that's "contrary to the general portrayal of the American Taxpayer Relief Act" is bizarre. A comic with objectively high income earners making sad puppy dog faces because 1% of their massive income is gone is a sign that the publisher is out of touch with the reality that typical Americans face.
AnthonyMouse 8y ago
Policy-based evidence making. Reasonable economists find an inconvenient result, so pressure them to recant. Then they print something that doesn't contradict the original result, but it's less adversarial to the policy, so call it a reversal in the headline. > As was demonstrated back in 1994 by economists Alan Krueger and David Card, modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way. In other words, small changes have small effects. But also small benefits. What's the point of something that at best only breaks even?
- CPLX 8y ago
  A policy that is generally break even from an efficiency standpoint but reduces unwanted negative outcomes like poverty and income inequality is a clear win.
  - AnthonyMouse 8y ago
    > A policy that is generally break even from an efficiency standpoint but reduces unwanted negative outcomes like poverty and income inequality is a clear win. But the break even is on poverty and income inequality, even before you consider the inefficiencies. Then the money has to come from somewhere -- either the employer (in many cases a local small business) has to eat it, or they pass it onto the customer in the form of higher prices. It also makes local businesses less competitive against the likes of Walmart and Amazon.
    - RangerScience 8y ago
      That would only happen if the employees with cut hours then didn't spend their now-free hours on other stuff. If they just end up twiddling their thumbs, sure, maybe it's break even. Maybe the people whose hours get cut are those who need the extra time more than the extra cash. Maybe they take that extra time and use it making money elsewhere, outside of the scope of what the study could measure. Do you know what those people did with that now-free time?
      - 8y ago
DINKDINK 8y ago
So an economic free lunch, cool. /s "Ce qu'on voit et ce qu'on ne voit pas"
- CPLX 8y ago
  There are certainly conceivable changes to economic policy that result in net gains to all parties. There’s nothing theoretically impossible about arguing that such a thing has happened.
manfredo 8y ago
> But a new paper by the same authors (Sci-Hub mirror) shows that the rising minimum wage generated major increases for the workers who had the most hours, whose hours were only cut a little, but still came out ahead thanks to the wage increase; workers with fewer hours saw no financial harm from the rising minimum wage, working fewer hours and bringing home the same sum; and they found some harm to people who had the smallest number of hours) (which may actually reflect stronger demand for workers and fewer workers in this category of very-low-hour work). Is this actually reversing the claim? Or just making a narrower claim that the minimum wage hike increased some workers. Most claims around the negative effects of minimum wage say that workers will lose employment - not that those workers who remain employed will suffer. By restricting the conclusion to "the workers who had the most hours, whose hours were only cut a little" essentially dodges the question of whether the change benefited workers as a whole. Ultimately, though, this is a subjective questions. If you have 10 workers, making $12.50 an hour and if you had the option of making 9 of them get $15.00/hr but one of them gets fired is it a good outcome? The pool of workers are making a greater amount of money (it "breaks even" as other commenters have put it), but does that $2.50 an hour increase for 9 workers offset the negative of one of them getting fired? Maybe getting fired has less tangible effects that make the net increase not worth it. That fired worker may end up on the streets. Is instability of income is a greater problem than low income? I'm not saying there is any right answer here, my whole point is that it's subjective to determine what outcome is better.
- ctdonath 8y ago
  And your 9 remaining just saw their work demands go up 11% (with no additional hours), to cover the departed's work which still needs doing. Sure, 20% more pay for 11% more work is a deal, but it's still more work than originally signed on for.
  - Fjolsvith 8y ago
    Exactly. Still an Employer's market. With less jobs, employees have to compete harder to keep theirs.
    - 8y ago
ctdonath 8y ago
Still makes it practically illegal to produce less than $15/hr value. Can't produce that much? no work for you. This ensures that, even in the article's revised view, those who do suffer are those most needy.
- olliej 8y ago
  I’d love to know how you get to that conclusion.
  - qwerty777666555 8y ago
    Looks like you’re not running your business but rather a 9 to 5 office slave
  - bognition 8y ago
    Its basic accounting. If you have to pay someone $15/hr, they better be providing at least that much value back to you, otherwise you're running a charity
    - RangerScience 8y ago
      Flip it. If you're gong to pay someone $15/hr, you better have something that needs doing that's worth that much to you. One way to look at employment is that it's your responsibility, as the employer, to know how much a job is worth to you; it's their responsibility to perform that job. If you're having people do something that's not worth what you're paying them? I would say that sounds like you're not running your business very well.
      - qwerty777666555 8y ago
        But there is no “I’m going” but rather “I’m forced to”. So if I don’t have something worth 15/h in my shop should I shut out?
      - acpetrov 8y ago
        And what if you need floors mopped? Now the small business is just getting gouged for that service
wnevets 8y ago
of course it doesn't. It also didn't bring ford down a ~100 years ago like all of the economists predicted then either.
- Theodores 8y ago
  It is not clear cut with the Ford story, Ford treated his workers nicely and then he got that chap in to treat them nastily. Ford wanted to produce just the Model T and keep it at that, his competitors wanted to go with the built in obsolescence model, get the customers buying new cars every year. Ford also wasn't into creating profit for the sake of investors, he wanted to keep all the money in the company. He didn't 'get' American capitalism, but he did want to enable people to be mobile and to build a wider economy based on that. Despite the contradictions of Ford he did prove that 'trickle down economics' was a load of rubbish and that it was far better to pay a decent wage, for the workers, for wider society and his own self-interest.
- randyrand 8y ago
  is there an upper limit to minimum wage ? what would it be and why?
paulpauper 8y ago
yeah but does that take into account reduced benefits. Amazon raised minimum wage to $15/hour, which got a ton of press, but simultaneously eliminated stock compensation for those same employees, which got much less press.
- icelancer 8y ago
  This was still a major net positive for the employees of the warehouse, because the stock compensation was nearly worthless given vesting time and so forth.
  - AnthonyMouse 8y ago
    > Several Amazon warehouse employees have criticized the move, stating they would actually be losing thousands in incentive pay. https://www.theverge.com/2018/10/3/17934194/amazon-minimum-wage-raise-stock-options-bonus-warehouse https://www.theverge.com/2018/10/3/17934194/amazon-minimum-w...
    - deleted 8y ago
      [deleted]
xae342 8y ago
This issue isn’t about economics of course, but what I don’t quite understand is why the right feels like it’s an injustice to change the playing field, like it’s cutting in line, or will put the laws of nature into chaos if someone gets more than their fair share for the work they did. I really don’t follow...
- AnthonyMouse 8y ago
  > This issue isn’t about economics of course, but what I don’t quite understand is why the right feels like it’s an injustice to change the playing field, like it’s cutting in line, or will put the laws of nature into chaos if someone gets more than their fair share for the work they did. I really don’t follow... But it is about economics. The theory of the minimum wage is that you take money from some hypothetical fat cat capitalist who would otherwise have stored it in a mattress to no avail and instead give it to a hard working stiff who can benefit their lives with it. The problem is that there are also a multitude of other things that can happen instead, pretty much all of which are bad and do actually happen in practice. The money may come from someone other than a fat cat, like a local small business owner or a working class customer. If prices rise, local businesses may be less competitive, resulting in higher unemployment and a smaller tax base (resulting in lower tax revenues or higher tax rates or both). The working stiff may lose their job. In the worst case, the entire business may close down. It's quite a bit worse than cutting in line. If you really want to understand the problem, list every consequence can think of for a minimum wage of $1000/hour. Most of the problems still apply at $15, just at a smaller scale.
  - iciac 8y ago
    The theory of the minimum wage is just the theory of a price floor. The effect on employment is dependent on the market composition and the cross-price elasticity of labour. Comparing a price floor of $15/h (highly substitutable unskilled labour) with $1000/h (unsubstitutable specialist labour) isn't really tenable. For most minimum wage positions you'll find the bulk is employment by large firms (potentially under a franchise arrangement), labour is substitutable, and wage-bargaining power is weak. Total production is more likely to be driven by demand, and a (relatively) small unit cost increase is likely to be absorbed (if anything, we'd expect it to affect firm profit more than purchased labour). You're correct that less competitive SMEs may be affected more here, operating as a price taker for both their product and labour. These firms however will be disproportionately affected by any external market movement - there's nothing particularly magical about a minimum wage increase.
elicash 8y ago
All the top-level comments are making excuses for inconvenient facts. I'm guessing a lot of folks on Hacker News believe themselves to be objective analysts and yet are blind to how their bias against the minimum wage is causing them to look foolish in ignoring any new information that might possibly conflict with their world view. The ONLY proper response if you're a critic of this study (if not with the methodology, which nobody here has found ANY problems with) is to say, "well there's a wide variety of findings on minimum wage." Instead, you have people intentionally misreading the study, making ideological claims about the "value" of the work minimum wage workers do, or a conspiratorial claim they reversed because of "pressure" without any evidence whatsoever. It's quite sad to see people so willing to reject inconvenient facts.
- rukittenme 8y ago
  Mr. Ritholtz did three things. He found the most extreme over-reactions to the law, he criticized those over-reactions for being too extreme, and he provided one graph of one statistic that charts restaurant employment from 1990 to 2018. This is his only argument in the piece: > [Restaurants] were in fact opening; employment in food services and drinking establishments has soared. But does that data support his conclusion? Could Seattle's population growth explain the gains in restaurant employment? Why a chart starting from 1990 for a law passed in 2018? Has enough time elapsed to understand the impact of the law? Was the downturn in restaurant employment in 2018 related to the minimum wage law? Though I love it, let's skip the Socratic dialogue. The $15/hr minimum wage does not go into effect until January 1st 2019! Let's wait and see how customer's react to higher prices before declaring victory.
  - elicash 8y ago
    I think the more noteworthy article (since I agree the OP is lacking) is the NYT article that it links to: https://www.nytimes.com/2018/10/22/business/economy/seattle-minimum-wage-study.html https://www.nytimes.com/2018/10/22/business/economy/seattle-... Here's the new paper it describes: https://www.nber.org/papers/w25182?utm_campaign=ntw&utm_medium=email&utm_source=ntwg20 https://www.nber.org/papers/w25182?utm_campaign=ntw&utm_medi...
jillesvangurp 8y ago
Germany actually just introduced minimum wage a few years ago. They did not actually have this. Their unemployment rate is at an historic low. So the arguments used against that here did not quite pan out either. But of course Germany was a bit of an anomaly in Europe: this stuff is old news to most of the rest of Europe. Regardless of ideology, the debate seems to be about the cost of minimum wage (especially on the right side) and not really about the benefits. The benefits of not having abject poverty in your society are many. Minimum wage is an important tool for that. Regardless of your position on this, you'd have to consider both cost and benefits for any analysis worthy of that word. To name just one such benefit, people with disposable income tend spend that income on things. This is great for the local economy. So instead of funneling money up the corporate hierarchy towards off shore accounts, a second house for the CEO, or whatever, funneling money back into the economy where it actually gets used has an effect on that economy: it grows. Seattle seems to be doing fine demonstrating that this works as advertised. More people can afford to go to restaurants so the restaurant business is booming. That should not be that surprising to economists.
- minton 8y ago
  > So instead of funneling money up the corporate hierarchy towards off shore accounts, a second house for the CEO, or whatever, funneling money back into the economy I assume the CEO isn’t willing to generously give up their second house and will find a way to push this cost onto all consumers including those happily earning higher wages. Is there a mechanism in place to prevent this?
  - zachsnow 8y ago
    The same mechanism that ensures that the local coffee shop isn’t charging so much that the owner has a second house in Bermuda — if you raise prices that much you won’t be competitive. Obviously in an particular case, who knows? But in general I think the expectation is that the market will decide.
    - skidd0 8y ago
      A minimum wage isn't one coffee shop with expensive beans. It means Every shop has expensive beans.
stuaxo 8y ago
This implies that the critism was honest. (Disclaimer, haven't read the article)
bigfartchili 8y ago
As a small business owner in a state that recently passed minimum wage hikes up to 50% higher than 5 years early let me share my experience. We have raised wages pretty dramatically but realistically it has absolutely nothing to do with the minimum wage hike. Since unemployment is so low in our state we actively need to compete with other businesses to hire people and the strongest selling point is offering better wages. Now obviously the hike has forced us to pay more than we regularly would. The results of this is that we have raised the amount we charge customers. Those customers then complain that their having to pay more for the same service. At the same time every single apartment in this area has had its rent increased by a large margin. Cost of goods have gone up. Cost of services has gone up. House prices has gone up as labor cost has as well. The people making 15 per hour before are now getting paid the same as the entry level workers. Any employee that has been loyal to the company has not had the same wage increase as the other workers yet they are paying more for everything they purchase. In my opinion minimum wage hike is “working” simply because of the low unemployment rate and the booming economy. The statistics don’t really paint an accurate picture. Ask any of my employees if they are better off today than they were 5 years ago and most would say no. The employees we have had for 5+ years would say they are worse off today.
village-idiot 8y ago
Minimum wage is nothing more than a privatized social safety net.

90 points by herrkanin 8y ago

deleted 8y ago

[deleted]

ggm 8y ago

Needs to get more coverage, weighted by the impact the first claim had. Would a wayback machine for citations help find who is in duty bound to say "that thing we said, cited? they retracted.." or not?

ChrisLomont 8y ago

Left out of the boingboing praise, but in the abstract: "On net, the minimum wage increase from $9.47 to as much as $13 per hour raised earnings by an average of $8-$12 per week. The entirety of these gains accrued to workers with above-median experience at baseline; less-experienced workers saw no significant change to weekly pay. Approximately one-quarter of the earnings gains can be attributed to experienced workers making up for lost hours in Seattle with work outside the city limits." That seems opposite to the summary in Boingboing. It's also in agreement with many studies and theory which should price the lowest performing out of jobs as they cannot add enough value to make it worth an employer hiring them. Increased wages by fiat long enough merely increase inflation.

Retric 8y ago
Wages are not a uniform entity. Increasing the minimum wage has very minimal economic impact becase it makes up a tiny fraction of the US economy. Consider increasing pay 7$ per hour for all 542,000 US workers workers making minimum wage * 40 hours a week * 48 weeks a year = 7.2 Billion per year that’s chump change at under 0.04% US GDP. (That’s right not under 4% but under 0.04%.) Yes, many people make more than minimum wage, but not 7$ more than minimum wage. However, for them it’s a smaller increase so again it does not add up to much.
- ChrisLomont 8y ago
  I don't see how it addresses the issues in the research. Care to explain? If min wage is set to X, anyone incapable of adding more then X to an employer is priced out of the job market. In this research the rise in wages resulted in reduced hours which were made up in neighboring markets which did not have this min wage.
  - Retric 8y ago
    I was addressing your inflation statement which is really not supported by evidence. In terms of pricing people out of the workforce, that’s not nessisarily a bad thing on net assuming a strong safty net. But again separate argument.
    - ChrisLomont 8y ago
      Two things: raising the min wage puts upward pressure on wages above the min also, so your estimate is not correct. Someone making min+1 will still expect to make min+~1 after the hike. Also, inflation need not be national to be inflation. This is why places with higher min wages tend to have higher overall wages and higher overall prices. These things do not operate in a vacuum. Look at prices where wages are low compared to process where wages are high, e.g., SF versus smalltown Alabama. So there is ample evidence that these things are related. By taking national averages you necessarily miss the local variation which clearly shows a price/wage correlation.
TheSpiceIsLife 8y ago
> Increased wages by fiat long enough merely increase inflation. If this is true then places with low minimum wage should also exhibit lower inflation than places with high minimum wage. Can this be demonstrated?
- AnthonyMouse 8y ago
  > If this is true then places with low minimum wage should also exhibit lower inflation than places with high minimum wage. The analog to minimum wage isn't rate of inflation, it's prices. Places with a lower minimum wage do have lower prices. (The analog to rate of inflation would be rate of change in the minimum wage.)
  - TheSpiceIsLife 8y ago
    True, thank you, that's a good point.
boomboomsubban 8y ago
Did you look at what the study considered "experienced?" It was "greater than 700 hours worked for the past two quarters," which is about 18 hours a week for the previous six months. All of these jobs can be considered the "lowest performing," and I'm not sure what part if the summary you think this contradicts.

josephh 8y ago

WSJ's take on the same study: https://www.wsj.com/articles/seattles-fake-free-lunch-1541026906 https://www.wsj.com/articles/seattles-fake-free-lunch-154102...

fiblye 8y ago
The Wall Street Journal also likes to frame $260,000 and $650,000 incomes as typical Americans struggling to get by (originally posted on WSJ regarding Obama-era tax increases): http://i.imgur.com/bdgZa.jpg http://i.imgur.com/bdgZa.jpg It's hard to regard this Rupert Murdoch publication's opinions on money as grounded in any sort of reality.
- umanwizard 8y ago
  Where on that image does it claim the family are “typical Americans struggling to get by” ?
- refurb 8y ago
  That doesn’t seem like they are portrait of them as middle class struggling to get by. It just looks like examples of people impacted.
- phd514 8y ago
  The article (https://www.wsj.com/articles/SB10001424127887323689604578220132665726040 https://www.wsj.com/articles/SB10001424127887323689604578220...) said nothing of the sort. It said that while the bulk of the tax increases were at the high end of the income spectrum, many individuals and couples with incomes in the 180k-500k range could see significant tax increases, too. That was contrary to the general portrayal of the "American Taxpayer Relief Act" as retaining the Bush-era tax cuts on everyone with less than 400k in income.
  - fiblye 8y ago
    > It said that while the bulk of the tax increases were at the high end of the income spectrum, many individuals and couples with incomes in the 180k-500k range could see significant tax increases, too. It's amazing that a non-insignificant number of people on HN don't think that's on the high end of the income spectrum. In most places in America, you'd be considered quite handsomely rich if you're making $200,000 a year. It puts you very, very solidly in the top 5% of earners. $300,000 puts you in the top 1%. That people think that's "contrary to the general portrayal of the American Taxpayer Relief Act" is bizarre. A comic with objectively high income earners making sad puppy dog faces because 1% of their massive income is gone is a sign that the publisher is out of touch with the reality that typical Americans face.

AnthonyMouse 8y ago

Policy-based evidence making. Reasonable economists find an inconvenient result, so pressure them to recant. Then they print something that doesn't contradict the original result, but it's less adversarial to the policy, so call it a reversal in the headline. > As was demonstrated back in 1994 by economists Alan Krueger and David Card, modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way. In other words, small changes have small effects. But also small benefits. What's the point of something that at best only breaks even?

CPLX 8y ago
A policy that is generally break even from an efficiency standpoint but reduces unwanted negative outcomes like poverty and income inequality is a clear win.
- AnthonyMouse 8y ago
  > A policy that is generally break even from an efficiency standpoint but reduces unwanted negative outcomes like poverty and income inequality is a clear win. But the break even is on poverty and income inequality, even before you consider the inefficiencies. Then the money has to come from somewhere -- either the employer (in many cases a local small business) has to eat it, or they pass it onto the customer in the form of higher prices. It also makes local businesses less competitive against the likes of Walmart and Amazon.
  - RangerScience 8y ago
    That would only happen if the employees with cut hours then didn't spend their now-free hours on other stuff. If they just end up twiddling their thumbs, sure, maybe it's break even. Maybe the people whose hours get cut are those who need the extra time more than the extra cash. Maybe they take that extra time and use it making money elsewhere, outside of the scope of what the study could measure. Do you know what those people did with that now-free time?
    - 8y ago

DINKDINK 8y ago

So an economic free lunch, cool. /s "Ce qu'on voit et ce qu'on ne voit pas"

CPLX 8y ago
There are certainly conceivable changes to economic policy that result in net gains to all parties. There’s nothing theoretically impossible about arguing that such a thing has happened.

manfredo 8y ago

> But a new paper by the same authors (Sci-Hub mirror) shows that the rising minimum wage generated major increases for the workers who had the most hours, whose hours were only cut a little, but still came out ahead thanks to the wage increase; workers with fewer hours saw no financial harm from the rising minimum wage, working fewer hours and bringing home the same sum; and they found some harm to people who had the smallest number of hours) (which may actually reflect stronger demand for workers and fewer workers in this category of very-low-hour work). Is this actually reversing the claim? Or just making a narrower claim that the minimum wage hike increased some workers. Most claims around the negative effects of minimum wage say that workers will lose employment - not that those workers who remain employed will suffer. By restricting the conclusion to "the workers who had the most hours, whose hours were only cut a little" essentially dodges the question of whether the change benefited workers as a whole. Ultimately, though, this is a subjective questions. If you have 10 workers, making $12.50 an hour and if you had the option of making 9 of them get $15.00/hr but one of them gets fired is it a good outcome? The pool of workers are making a greater amount of money (it "breaks even" as other commenters have put it), but does that $2.50 an hour increase for 9 workers offset the negative of one of them getting fired? Maybe getting fired has less tangible effects that make the net increase not worth it. That fired worker may end up on the streets. Is instability of income is a greater problem than low income? I'm not saying there is any right answer here, my whole point is that it's subjective to determine what outcome is better.

ctdonath 8y ago
And your 9 remaining just saw their work demands go up 11% (with no additional hours), to cover the departed's work which still needs doing. Sure, 20% more pay for 11% more work is a deal, but it's still more work than originally signed on for.
- Fjolsvith 8y ago
  Exactly. Still an Employer's market. With less jobs, employees have to compete harder to keep theirs.
  - 8y ago

ctdonath 8y ago

Still makes it practically illegal to produce less than $15/hr value. Can't produce that much? no work for you. This ensures that, even in the article's revised view, those who do suffer are those most needy.

olliej 8y ago
I’d love to know how you get to that conclusion.
- qwerty777666555 8y ago
  Looks like you’re not running your business but rather a 9 to 5 office slave
- bognition 8y ago
  Its basic accounting. If you have to pay someone $15/hr, they better be providing at least that much value back to you, otherwise you're running a charity
  - RangerScience 8y ago
    Flip it. If you're gong to pay someone $15/hr, you better have something that needs doing that's worth that much to you. One way to look at employment is that it's your responsibility, as the employer, to know how much a job is worth to you; it's their responsibility to perform that job. If you're having people do something that's not worth what you're paying them? I would say that sounds like you're not running your business very well.
    - qwerty777666555 8y ago
      But there is no “I’m going” but rather “I’m forced to”. So if I don’t have something worth 15/h in my shop should I shut out?
    - acpetrov 8y ago
      And what if you need floors mopped? Now the small business is just getting gouged for that service

wnevets 8y ago

of course it doesn't. It also didn't bring ford down a ~100 years ago like all of the economists predicted then either.

Theodores 8y ago
It is not clear cut with the Ford story, Ford treated his workers nicely and then he got that chap in to treat them nastily. Ford wanted to produce just the Model T and keep it at that, his competitors wanted to go with the built in obsolescence model, get the customers buying new cars every year. Ford also wasn't into creating profit for the sake of investors, he wanted to keep all the money in the company. He didn't 'get' American capitalism, but he did want to enable people to be mobile and to build a wider economy based on that. Despite the contradictions of Ford he did prove that 'trickle down economics' was a load of rubbish and that it was far better to pay a decent wage, for the workers, for wider society and his own self-interest.
randyrand 8y ago
is there an upper limit to minimum wage ? what would it be and why?

paulpauper 8y ago

yeah but does that take into account reduced benefits. Amazon raised minimum wage to $15/hour, which got a ton of press, but simultaneously eliminated stock compensation for those same employees, which got much less press.

icelancer 8y ago
This was still a major net positive for the employees of the warehouse, because the stock compensation was nearly worthless given vesting time and so forth.
- AnthonyMouse 8y ago
  > Several Amazon warehouse employees have criticized the move, stating they would actually be losing thousands in incentive pay. https://www.theverge.com/2018/10/3/17934194/amazon-minimum-wage-raise-stock-options-bonus-warehouse https://www.theverge.com/2018/10/3/17934194/amazon-minimum-w...
  - deleted 8y ago
    [deleted]

xae342 8y ago

This issue isn’t about economics of course, but what I don’t quite understand is why the right feels like it’s an injustice to change the playing field, like it’s cutting in line, or will put the laws of nature into chaos if someone gets more than their fair share for the work they did. I really don’t follow...

AnthonyMouse 8y ago
> This issue isn’t about economics of course, but what I don’t quite understand is why the right feels like it’s an injustice to change the playing field, like it’s cutting in line, or will put the laws of nature into chaos if someone gets more than their fair share for the work they did. I really don’t follow... But it is about economics. The theory of the minimum wage is that you take money from some hypothetical fat cat capitalist who would otherwise have stored it in a mattress to no avail and instead give it to a hard working stiff who can benefit their lives with it. The problem is that there are also a multitude of other things that can happen instead, pretty much all of which are bad and do actually happen in practice. The money may come from someone other than a fat cat, like a local small business owner or a working class customer. If prices rise, local businesses may be less competitive, resulting in higher unemployment and a smaller tax base (resulting in lower tax revenues or higher tax rates or both). The working stiff may lose their job. In the worst case, the entire business may close down. It's quite a bit worse than cutting in line. If you really want to understand the problem, list every consequence can think of for a minimum wage of $1000/hour. Most of the problems still apply at $15, just at a smaller scale.
- iciac 8y ago
  The theory of the minimum wage is just the theory of a price floor. The effect on employment is dependent on the market composition and the cross-price elasticity of labour. Comparing a price floor of $15/h (highly substitutable unskilled labour) with $1000/h (unsubstitutable specialist labour) isn't really tenable. For most minimum wage positions you'll find the bulk is employment by large firms (potentially under a franchise arrangement), labour is substitutable, and wage-bargaining power is weak. Total production is more likely to be driven by demand, and a (relatively) small unit cost increase is likely to be absorbed (if anything, we'd expect it to affect firm profit more than purchased labour). You're correct that less competitive SMEs may be affected more here, operating as a price taker for both their product and labour. These firms however will be disproportionately affected by any external market movement - there's nothing particularly magical about a minimum wage increase.

elicash 8y ago

All the top-level comments are making excuses for inconvenient facts. I'm guessing a lot of folks on Hacker News believe themselves to be objective analysts and yet are blind to how their bias against the minimum wage is causing them to look foolish in ignoring any new information that might possibly conflict with their world view. The ONLY proper response if you're a critic of this study (if not with the methodology, which nobody here has found ANY problems with) is to say, "well there's a wide variety of findings on minimum wage." Instead, you have people intentionally misreading the study, making ideological claims about the "value" of the work minimum wage workers do, or a conspiratorial claim they reversed because of "pressure" without any evidence whatsoever. It's quite sad to see people so willing to reject inconvenient facts.

rukittenme 8y ago
Mr. Ritholtz did three things. He found the most extreme over-reactions to the law, he criticized those over-reactions for being too extreme, and he provided one graph of one statistic that charts restaurant employment from 1990 to 2018. This is his only argument in the piece: > [Restaurants] were in fact opening; employment in food services and drinking establishments has soared. But does that data support his conclusion? Could Seattle's population growth explain the gains in restaurant employment? Why a chart starting from 1990 for a law passed in 2018? Has enough time elapsed to understand the impact of the law? Was the downturn in restaurant employment in 2018 related to the minimum wage law? Though I love it, let's skip the Socratic dialogue. The $15/hr minimum wage does not go into effect until January 1st 2019! Let's wait and see how customer's react to higher prices before declaring victory.
- elicash 8y ago
  I think the more noteworthy article (since I agree the OP is lacking) is the NYT article that it links to: https://www.nytimes.com/2018/10/22/business/economy/seattle-minimum-wage-study.html https://www.nytimes.com/2018/10/22/business/economy/seattle-... Here's the new paper it describes: https://www.nber.org/papers/w25182?utm_campaign=ntw&utm_medium=email&utm_source=ntwg20 https://www.nber.org/papers/w25182?utm_campaign=ntw&utm_medi...

jillesvangurp 8y ago

Germany actually just introduced minimum wage a few years ago. They did not actually have this. Their unemployment rate is at an historic low. So the arguments used against that here did not quite pan out either. But of course Germany was a bit of an anomaly in Europe: this stuff is old news to most of the rest of Europe. Regardless of ideology, the debate seems to be about the cost of minimum wage (especially on the right side) and not really about the benefits. The benefits of not having abject poverty in your society are many. Minimum wage is an important tool for that. Regardless of your position on this, you'd have to consider both cost and benefits for any analysis worthy of that word. To name just one such benefit, people with disposable income tend spend that income on things. This is great for the local economy. So instead of funneling money up the corporate hierarchy towards off shore accounts, a second house for the CEO, or whatever, funneling money back into the economy where it actually gets used has an effect on that economy: it grows. Seattle seems to be doing fine demonstrating that this works as advertised. More people can afford to go to restaurants so the restaurant business is booming. That should not be that surprising to economists.

minton 8y ago
> So instead of funneling money up the corporate hierarchy towards off shore accounts, a second house for the CEO, or whatever, funneling money back into the economy I assume the CEO isn’t willing to generously give up their second house and will find a way to push this cost onto all consumers including those happily earning higher wages. Is there a mechanism in place to prevent this?
- zachsnow 8y ago
  The same mechanism that ensures that the local coffee shop isn’t charging so much that the owner has a second house in Bermuda — if you raise prices that much you won’t be competitive. Obviously in an particular case, who knows? But in general I think the expectation is that the market will decide.
  - skidd0 8y ago
    A minimum wage isn't one coffee shop with expensive beans. It means Every shop has expensive beans.

stuaxo 8y ago

This implies that the critism was honest. (Disclaimer, haven't read the article)

bigfartchili 8y ago

As a small business owner in a state that recently passed minimum wage hikes up to 50% higher than 5 years early let me share my experience. We have raised wages pretty dramatically but realistically it has absolutely nothing to do with the minimum wage hike. Since unemployment is so low in our state we actively need to compete with other businesses to hire people and the strongest selling point is offering better wages. Now obviously the hike has forced us to pay more than we regularly would. The results of this is that we have raised the amount we charge customers. Those customers then complain that their having to pay more for the same service. At the same time every single apartment in this area has had its rent increased by a large margin. Cost of goods have gone up. Cost of services has gone up. House prices has gone up as labor cost has as well. The people making 15 per hour before are now getting paid the same as the entry level workers. Any employee that has been loyal to the company has not had the same wage increase as the other workers yet they are paying more for everything they purchase. In my opinion minimum wage hike is “working” simply because of the low unemployment rate and the booming economy. The statistics don’t really paint an accurate picture. Ask any of my employees if they are better off today than they were 5 years ago and most would say no. The employees we have had for 5+ years would say they are worse off today.

village-idiot 8y ago

Minimum wage is nothing more than a privatized social safety net.