Go Back   This Blue Marble, a Global Current Events Discussion Forum > Main Floor > Economy

Economy Economy discussion forum. Discuss the politics and effects of the general economy and global economic collapse here. Please keep all politics out of the Finance and Investment subforum.

Reply
 
Thread Tools Search this Thread Display Modes
Old 01-11-2017, 10:06 AM   #1
Potemkin
Omne ignotum pro magnifico
 
Potemkin's Avatar
 
Join Date: Aug 2008
Posts: 28,131
Blog Entries: 3
Thanks: 110
Thanked 5,895 Times in 2,914 Posts
Default Higher Minimum Wage May Have Losers

Like a lot of other things that Liberals and Progressives decide businesses should have to do (without ever run one themselves) they think to simplistically.

The research paper is here: http://john-joseph-horton.com/papers/minimum_wage.pdf

https://www.nytimes.com/2017/01/10/b...age-.html?_r=0

When forced to pay more, many employers hired more productive workers, a researcher concluded.

Studies Find Higher Minimum Wage May Have Losers

By NOAM SCHEIBER*
MSN
CHICAGO — A growing number of economists have found that many cities and states have considerable room to raise the minimum wage before employers meaningfully cut back on hiring.

But that conclusion may gloss over some significant responses to minimum-wage increases by individual employers, according to two new studies. And those reactions may, in turn, raise questions about the effectiveness of the minimum wage in helping certain workers.

The findings, presented over the weekend at the annual meeting of the American Economic Association, the nation’s premier gathering of academic economists, come as many cities and states are raising their minimum wages. California and New York last year approved gradual increases to $15 per hour. Proponents argue that raising the minimum is one of the most practical ways of improving living standards for the working poor and reducing inequality.

To test that proposition, John Horton of New York University conducted an experiment on an online platform where employers post discrete jobs — including customer service support, data entry, and graphic design — and workers submit a proposed hourly wage for completing them.

Mr. Horton, working with the platform, was able to impose a minimum wage at random on one-quarter of about 160,000 jobs posted over roughly a month and a half in 2013. If a worker proposed an hourly wage that was below the minimum, the platform’s software asked him or her to raise the bid until it cleared the threshold. In some cases the minimum wage was $2 per hour, in some cases $3, and in some cases $4.

At first glance, the findings were consistent with the growing body of work on the minimum wage: While the workers saw their wages rise, there was little decline in hiring. But other results suggested that the minimum wage was having large effects. Most important, the hours a given worker spent on a given job fell substantially for jobs that typically pay a low wage — say, answering customer emails.

Mr. Horton concluded that when forced to pay more in wages, many employers were hiring more productive workers, so that the overall amount they spent on each job changed far less than the minimum-wage increase would have suggested. The more productive workers appeared to finish similar work more quickly.

The traditional way most studies determine if employees are hiring a different kind of worker after the minimum wage rises is to consider certain characteristics, like race, age and education level.

The problem is that one worker can be much more productive than another with the same demographic profile, potentially masking the productivity upgrade that Mr. Horton documents. He was able to overcome this problem because the platform gave him access to precise data reflecting productivity, like past wages.

When the minimum wage increased, employers tended to hire workers who had earned higher wages in the past, suggesting that they were looking for a more productive work force.

If the pattern Mr. Horton identified were to apply across the economy, it would raise questions about whether increasing the minimum wage is as helpful to those near the bottom of the income spectrum as some proponents assume. The higher minimum wage could cost low-skilled workers their jobs, as employers rush to replace them with somewhat more skilled workers.

“There’s nothing about my paper that says raising the minimum wage is a bad idea — it may be that the trade-off is worth making,” Mr. Horton said. But there is “this consideration we probably haven’t considered.”

Some economists are skeptical that employers would respond the way Mr. Horton describes if an entire city or state increased its minimum wage, as opposed to just a single employer or subset of employers.

“I think the way to relate this result to the real world labor market is to consider what would happen if Walmart had to raise wages,” said Arindrajit Dube, an economist at the University of Massachusetts at Amherst, who has studied minimum wage laws.

Walmart has said that after it increased wages in 2015, it was able to attract more productive workers.

“This experiment is probably telling us much the same thing,” Mr. Dube added in an email. “But if we want to know what would happen if N.Y. or C.A. raised its minimum wage to 15/hr, I doubt that this online experiment — neat as it is — will shed much light.”

When the minimum wage goes up for everyone, it is not so easy for employers to substitute better-skilled workers because the new minimum would not offer a more attractive wage. In many cases, more highly skilled workers see their wages rise after minimum-wage increases to keep them above the new minimum, making it all the more difficult to lure them away.

Zane Tankel, chief executive and equity partner in a group that owns and operates several dozen Applebee’s restaurants in the New York City area, said replacing low-skilled workers with higher-skilled ones after the state’s recent minimum-wage increases is “not something that we try to do.”

Mr. Tankel argued that differences in the productivity of low-level workers in his industry are not very big. “It’s just a lot more money for the exact same job description,” he said. He is accelerating automation in his restaurants, including tablet devices for ordering certain items and payment, to offset the costs of the higher minimum.

(The next paragraph he adds in a little spin because he knows he will get emails and protests from the "$15 crowd" for saying, and showing evidence of, what people who own businesses already know what they would do. -Pote)

Mr. Horton is quick to acknowledge that there are many reasons his experiment might not capture employer behavior in the wider economy. But he says a higher minimum wage could attract more highly skilled workers who were not previously in the labor market — say, college students. At the same time, less-skilled workers might lose their jobs and drop out of the labor force.

More broadly, he said, the contribution of his paper is to show that one impulse of many employers in the face of a minimum-wage increase will be to find more productive workers, even if there are limits on how much they can follow through on this desire.

“There are lots of reasons to think this is probably happening and we haven’t detected it because we don’t have the data,” he said. “I know in my career, people have fine-grained opinions about who’s better than who, and we talk about them endlessly. We’re constantly ranking. But when we talk about other labor markets, we pretend the same distinctions don’t exist.”
A second study presented at the conference suggests another way that employers may respond to a rising minimum wage: simply going out of business.

The husband-and-wife research team of Michael Luca of Harvard Business School and Dara Lee Luca of Mathematica Policy Research identified the ratings of tens of thousands of restaurants in the San Francisco area on the website Yelp and found that many poorly rated restaurants tend to go out of business after a minimum-wage increase takes effect.

By contrast, highly rated restaurants appear to be largely unaffected by minimum-wage increases, and over all, there is no substantial rise in restaurant closings after a minimum-wage increase.

Though the couple’s study is still being refined and they have yet to explore the reason, one possibility is that workers at poorly rated restaurants tend to be less productive than workers at highly rated restaurants, making it difficult for those restaurants to survive when paying workers more. (It’s also possible that highly rated restaurants are better able to pass rising costs on to their customers.)

The results are broadly consistent with a 2013 study by the economists Daniel Aaronson, Eric French and Isaac Sorkin, showing that a sizable minimum-wage increase in New Jersey resulted in many lost jobs as numerous businesses closed, but an almost offsetting number of new jobs as other businesses opened, which the authors argue were more productive.
__________________
“The price of freedom is the willingness to do sudden battle anywhere, any time and with utter recklessness.”
― Robert A. Heinlein, The Puppet Masters

Last edited by Potemkin; 01-11-2017 at 10:16 AM.
Potemkin is offline   Reply With Quote
Old 01-11-2017, 12:24 PM   #2
Sonny
Star Witness
 
Sonny's Avatar
 
Join Date: Aug 2008
Location: the safe house
Posts: 5,769
Blog Entries: 1
Thanks: 2,012
Thanked 766 Times in 497 Posts
You know Turkey raised their minimum wage five times in 2016. and While the name of that book could be "Strongman Dictator touches gold turns it to shit" there probable is a chapter on "Higher Minimum Wage May Have Losers"..


`

Last edited by Sonny; 01-11-2017 at 12:29 PM.
Sonny is offline   Reply With Quote
The Following User Says Thank You to Sonny For This Useful Post:
leistb (01-11-2017)
Old 01-11-2017, 02:19 PM   #3
Sysiphus
Senior Level 6
 
Sysiphus's Avatar
 
Join Date: Aug 2008
Location: Seattle
Posts: 8,585
Thanks: 717
Thanked 1,903 Times in 1,088 Posts
In coastal cities, $15/hour is scarcely a living wage. In some of them, it is not even so. I realize that some of the workers are part-time and supplementing other sources of income, such as kids living with their parents or persons with a significant other who earns and adequate income. But we have to set a wage that is reasonable for everyone. A 1-bedroom apartment in Seattle is approaching $2000. Even in some of the less desirable suburbs it is usually over $1000/month. Even if you have a couple earning $30/hour combined, it is still barely enough to live here, particularly if they don't have healthcare insurance and other benefits.

To me, this is not about "social justice" or anything like it. It is about stopping employers from shifting costs onto the taxpayer. Why? Because if they don't pay a wage that is sufficient for their workers to afford the basics, then the taxpayers are going to have to kick in with benefits like healthcare coverage (Medicaid), housing subsidies, food stamps, etc. I would much prefer that employers (and customers) shoulder such burdens.

If government handouts did not exist, then the employers would not be able to attract workers without paying higher wages. So, the solution is to either eliminate public benefits or force employers to pay a living wage. If folks go out of business because their business model does not permit them to pay a wage that a person can afford to live on, so be it. If they have to raise prices, so be it.

I realize there is no "one size fits all" solution to this (urban vs rural, coastal vs inland, etc.). Ideally, it would be left up to localities to decide whether to impose a minimum wage, and what the right amount is. If some of them want to "race to the bottom" and turn their towns into wage-slavery shitholes, they are free to do so. However, if they do that, there need to be some limits on cities and counties abilities' to dig into the state's (or federal) coffers to, effectively, subsidize their lower-wage employers. I have always believed the more local things are kept, the better. But there are two-sides to that coin. Localizing regulation also means no free lunches.
__________________
Quis custodiet ipsos custodes?

Last edited by Sysiphus; 01-11-2017 at 02:31 PM.
Sysiphus is offline   Reply With Quote
Old 01-11-2017, 11:26 PM   #4
leistb
There's no justice - it's just us
 
leistb's Avatar
 
Join Date: Sep 2008
Posts: 10,459
Thanks: 1,461
Thanked 2,982 Times in 1,339 Posts
Quote:
Originally Posted by Sysiphus View Post
In coastal cities, $15/hour is scarcely a living wage. In some of them, it is not even so. I realize that some of the workers are part-time and supplementing other sources of income, such as kids living with their parents or persons with a significant other who earns and adequate income. But we have to set a wage that is reasonable for everyone. A 1-bedroom apartment in Seattle is approaching $2000. Even in some of the less desirable suburbs it is usually over $1000/month. Even if you have a couple earning $30/hour combined, it is still barely enough to live here, particularly if they don't have healthcare insurance and other benefits.

To me, this is not about "social justice" or anything like it. It is about stopping employers from shifting costs onto the taxpayer. Why? Because if they don't pay a wage that is sufficient for their workers to afford the basics, then the taxpayers are going to have to kick in with benefits like healthcare coverage (Medicaid), housing subsidies, food stamps, etc. I would much prefer that employers (and customers) shoulder such burdens.

If government handouts did not exist, then the employers would not be able to attract workers without paying higher wages. So, the solution is to either eliminate public benefits or force employers to pay a living wage. If folks go out of business because their business model does not permit them to pay a wage that a person can afford to live on, so be it. If they have to raise prices, so be it.

I realize there is no "one size fits all" solution to this (urban vs rural, coastal vs inland, etc.). Ideally, it would be left up to localities to decide whether to impose a minimum wage, and what the right amount is. If some of them want to "race to the bottom" and turn their towns into wage-slavery shitholes, they are free to do so. However, if they do that, there need to be some limits on cities and counties abilities' to dig into the state's (or federal) coffers to, effectively, subsidize their lower-wage employers. I have always believed the more local things are kept, the better. But there are two-sides to that coin. Localizing regulation also means no free lunches.
You, along with economists who support raising the minimum wage seem to forget that on the other side of the economic equation is the consumer. With the exception of the Affordable Care Act, you can't force someone to buy something. Without your consumer your theory is dead. This has nothing to do with business models supporting a living wage and everything to do with selling a product at a price that someone will pay.
leistb is online now   Reply With Quote
Old 01-12-2017, 12:23 AM   #5
Sysiphus
Senior Level 6
 
Sysiphus's Avatar
 
Join Date: Aug 2008
Location: Seattle
Posts: 8,585
Thanks: 717
Thanked 1,903 Times in 1,088 Posts
I don't care about the almighty "consumer". Overconsumption, in particular buying a bunch of worthless crap from China and overspending in general, is part of why we are in the predicament we are in now. Restaurant is too expensive? Tough shit. Eat at home or take a bag lunch. We have become addicted to cheap crap, cheap services and cheap food. Yes, they give Americans one of the highest living standards in the world, but they come with a price.

To use the restaurant example, if someone wants to dine out for every meal, they can be my guest. But, I shouldn't be subsidizing their lifestyle choice by covering a big chunk of Bruno the busboy's emergency room visit bill, which I currently am. If I want to do that, I can go to the restaurant and pay $5 more for a meal than I would otherwise because the owner now has to pay Bruno enough that he can afford his own insurance (or provide it for him).

Will there be pain? Yes, of course. Farm owners pay wages too, and the cost of produce and groceries will go up too. But at least the costs of goods and services will reflect ALL costs that go into making them.

Services sector employers in particular have been doing this so long that everyone thinks it is OK. It is not OK that business owners are able to pay their employees significantly less than they should because some of the employees' necessities are covered by taxpayer-funded handouts. That means I am bearing some of the business owner's expenses regardless of whether I do business with him. That is not capitalism, it is something else entirely.
__________________
Quis custodiet ipsos custodes?

Last edited by Sysiphus; 01-12-2017 at 12:29 AM.
Sysiphus is offline   Reply With Quote
Old 01-12-2017, 07:42 AM   #6
leistb
There's no justice - it's just us
 
leistb's Avatar
 
Join Date: Sep 2008
Posts: 10,459
Thanks: 1,461
Thanked 2,982 Times in 1,339 Posts
Not caring about the consumer doesn't remove them from the equation -regardless of the product nor does increasing the price of a product to accommodate a policy simultaneously increase its perceived value resulting in a sale. Adding more government will not solve this.
leistb is online now   Reply With Quote
Old 01-12-2017, 01:29 PM   #7
Sysiphus
Senior Level 6
 
Sysiphus's Avatar
 
Join Date: Aug 2008
Location: Seattle
Posts: 8,585
Thanks: 717
Thanked 1,903 Times in 1,088 Posts
Quote:
Adding more government will not solve this.
As I said, you can have a free labor market where the wage is truly set by supply and demand, or you can have welfare benefits prop up workers who are not paid enough to sustain themselves and their families. But, you cannot have both. The labor market right now is not a free labor market because welfare benefits subsidize employees' AND regulations have distorting effects on hiring decisions. So, in that sense we are both right.

All I am saying is that unless we are willing to abandon the public welfare system we have, I would rather see the "tax" that results borne at the source as opposed to spread out generally among the population regardless of consumption patterns.

To use a stark example, if I don't consume anything at all, I still have to pay taxes that support welfare payments. Those welfare payments allow employers to pay their workers less than they would absent the welfare payments. So, why should I effectively subsidize other consumers' purchases when I don't get any benefit at all?

You say that the price is set by the consumer, but that is over-simplifying it. The clearing price in a market is set by demand AND supply. If it costs $1000/month for an employee to pay for the basics, then an employer will not be able to attract workers by paying them $500/month. If the "clearing price" in the market for the good or service the employer provides does not permit the employer to charge a price sufficient to pay $1000/month to employees, it will go out of business. Supply will then drop and the clearing price will rise. Eventually it will hit equilibrium at a level that is sufficient for employers to cover their costs, including labor.
__________________
Quis custodiet ipsos custodes?

Last edited by Sysiphus; 01-12-2017 at 01:39 PM.
Sysiphus is offline   Reply With Quote
Old 01-12-2017, 05:51 PM   #8
leistb
There's no justice - it's just us
 
leistb's Avatar
 
Join Date: Sep 2008
Posts: 10,459
Thanks: 1,461
Thanked 2,982 Times in 1,339 Posts
Quote:
Originally Posted by Sysiphus View Post
As I said, you can have a free labor market where the wage is truly set by supply and demand, or you can have welfare benefits prop up workers who are not paid enough to sustain themselves and their families. But, you cannot have both. The labor market right now is not a free labor market because welfare benefits subsidize employees' AND regulations have distorting effects on hiring decisions. So, in that sense we are both right.

All I am saying is that unless we are willing to abandon the public welfare system we have, I would rather see the "tax" that results borne at the source as opposed to spread out generally among the population regardless of consumption patterns.

To use a stark example, if I don't consume anything at all, I still have to pay taxes that support welfare payments. Those welfare payments allow employers to pay their workers less than they would absent the welfare payments. So, why should I effectively subsidize other consumers' purchases when I don't get any benefit at all?

You say that the price is set by the consumer, but that is over-simplifying it. The clearing price in a market is set by demand AND supply. If it costs $1000/month for an employee to pay for the basics, then an employer will not be able to attract workers by paying them $500/month. If the "clearing price" in the market for the good or service the employer provides does not permit the employer to charge a price sufficient to pay $1000/month to employees, it will go out of business. Supply will then drop and the clearing price will rise. Eventually it will hit equilibrium at a level that is sufficient for employers to cover their costs, including labor.
It is over-simplifying it and as you've begun to articulate, there's much more to it than that. Just as there are more consequences to your argument of "shifting costs onto the taxpayer" vis-à-vis increased prices for his goods or services.

Frankly, I can't formulate a solution to this self-inflicted gunshot wound given our current monetary system. To me, the construction of the Federal Reserve and as of 1971, moving completely away from any kind of backing of currency by a hard asset has put us on this course from which there is no solution. IMO, what you and I are to and fro-ing about simply amounts to rearranging deck chairs on a sinking ship.

The troubles we face are simply manifestations of a system working as it's designed to work -the end result, unfortunately, isn't a pleasant one for the little guy. And again it's by design but there are too few people who understand at a fundamental level how they're being screwed. Beginning at 18:53 and ending at 21:50 of this clip explains perfectly why we're in the pickle we're in.
leistb is online now   Reply With Quote
Reply

Tags
higher, losers, minimum, wage

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -4. The time now is 08:46 AM.


Powered by vBulletin®
Copyright © Jelsoft Enterprises Ltd.