The article is a bit misleading. The minimum wage is $11/hr. in Seattle and will reach $15 for large businesses by next year, and by 2021 for small businesses.
Amazon by itself is bringing in thousands of people per year, none at the minimum wage. To attribute a good economy in Seattle to a minimum wage is a non-sequitur.
I find it curious though how some can think raising pay by fiat will help the poor. If this were really so why would there be a schedule to phase it in slowly over 7 instead of immediately? I think part of the reason is that it is expected for natural monetary inflation to cancel out the effect of the min wage increase. If we assume 2% target inflation from the FED then that would be a 15% reduction in buying power of the dollar, reducing the burden on businesses for the increase in wage price.
With phased-in increases we tend to see effects that are within the error of margin. Naturally if there was an overnight price increase on anything there would be immediate measurable ramifications, which is probably why the phase-ins are always slow. If people truly thought the effects were positive then they would push for the changes to be as immediate as possible to leave no room for doubt about the effect of the policy.
Meanwhile the homeless situation in Seattle is getting progressively worse. With the increase in minimum wage, some people are paid more, but at the expense of some poor people not being able to acquire a job at all. Certainly we could find a better way of handling things.
> If this were really so why would there be a schedule to phase it in slowly over 7 years until full implementation instead of immediately?
The article's premise is that the benefit to the economy from increasing the income of the lowest-earners outweighs the higher costs to businesses. If this is the case, raising the wages overnight would be disastrous, because businesses would have to pay the surprise higher costs before the economy had a chance to strengthen as a result of the greater spending.
Implementing the policy faster doesn't just get the same results faster, it gets different results.
I was shocked to learn that there are more people that earn below minimum wage than there are that earn minimum wage [0]. I don't know if these people are exempt from minimum wage (report doesn't say) or are just being paid under the table. Either way, I fear that these employees may lack legitimacy and legal right afforded to other employees. A higher minimum wage, especially significantly higher, will increase the number of these shadow employees.
> I find it curious though how some can think raising pay by fiat will help the poor.
Er, I don't know how much time you spend around "the poor", but I can guarantee giving them piles of cash money will help, regardless of how much ivory tower logic the average HN reader can spin on it from their $3000/month condo with a Tesla in the garage.
I will admit I stopped reading your comment after that sentence.
There are people whose labor is worth $8/hr but not $11/hr. Raising the minimum wage will not result in "giving them a pile of cash", it will result in them no longer having a job.
There are people whose labor is worth $8/hr but not $11/hr.
You seem to think value and price are the same thing and both can be absolutely determined. Also it sounds weird to talk about people's labor as if they were potatoes, while you assert that minimum wage will result in them not having a job as if it's a nature law.
I'd try to reason with you, but it seems we're not in the same world anyway.
> I'd try to reason with you, but it seems we're not in the same world anyway.
Claiming that I'm too unreasonable to debate with won't win you any points.
> Also it sounds weird to talk about people's labor as if they were potatoes
It's not weird since it's something that has a market value. People are not their labor. Someone's labor can be bought and sold, and the availability and price of labor is subject to the same economic laws as potatoes.
Some potatoes are worth $0.60 but not $0.80, and if the price of potatoes were dictated to be $0.80, the $0.60 would go in the trash.
I don't want potatoes or people's labor to go in the trash.
>> I'd try to reason with you, but it seems we're not in the same world anyway.
> Claiming that I'm too unreasonable to debate with won't win you any points.
It did with me... Seriously, I think you misconstrued this statement as a personal attack, whereas IMHO its simply used to highlight the flaw in your logic: If we have a complex system where A implies B and B implies C and C implies D and so on which possibly goes back to A in subtle ways, but you're just saying "A implies B, B implies no A, hence this won't work, QED" you are assuming a very simplistic view of reality.
You cannot just stop at one step and draw a definite conclusion from that. As pointed out, the wage increase can be rolled over to a price increase for instance, instead of now having to fire everyone. I'm not saying that no loss of labor could occur, but definitely it's only one of many possibilities and the economy is a highly complex system with all kind of direct and indirect effects that are at play here.
All that said, I would actually argue for basic income than a minimum wage as it will completely eliminate the possibility of the labor loss resulting in a wage loss, but in absence of this, minimum wage seems still better than having an increasing amount of working poor.
Some have argued that skilled labor actually benefits the most from a minimum wage increase (can't find a citation offhand). This is caused by wage inflation as employers must increase compensation to retain workers.
I'm trying to understand your potato metaphor. The US government has a long history of setting a price floor beneath agricultural products.
Let me try it: Saying that my labor isn't worth $11/hr surely doesn't sound nice to me. But the intentions of saying that to me are making a huge difference. If you're just being mean, begrudging, racist or otherwise inhumane - offense is duly taken. But there can be a compassionate intention too. Denying that this intention could exist, leaves me believing the world is against me instead of actively acquiring working skill.
Coming from the other side of $8/hr I can assure you that you'll had so much inhumanity coming at you, you will very likely recognize the true intentions.* Looking back, I cannot thank the moments of compassionate harshness enough and could almost get angry at those denying these moments exist. Instead I say to them: It's easy to wear those rose-colored glasses if you don't have to live with its repercussions.
* granted, this works well on a personal level, maybe not so well if it comes out as a political press release
It seems that you misunderstood me, probably my fault. It's not a question of humanity. Treating labor just like any other good is terribly naive. How economy works is much more complex since good salaries feed the demand while a huge mass of poor people near the level of societal exclusion will cause unrest and problems for everybody. See Venezuela, not so long ago one of the richest countries of the subcontinent. It's in the best interest of middle classes to have a decent social net, specially considering you never know what the future holds for yourself.
Funny how moralistic value enters into the discussion when it comes to pricing wages. When it comes to any other commodity, the standard is supposedly "whatever the market will bear".
It's not moralistic. It's "worth" in the sense that how much marginal revenue that person produces. If you have to pay someone to sell $9 worth of coffee an hour, they're not "worth" more than $9 an hour, regardless of morals.
Then the store should change their prices, or perhaps close. If everybody is paying the same overhead (like staffing all day when they make money only during peak hours) then competition will operate as normal, prices may change to reflect costs etc.
Staffing is more complicated than "how much they sold during their shift"?
Sure, they'll try and pass off the costs to their customers. But with a higher price, there will likely be less coffee sold and less employment regardless.
Yes, staffing is more complicated, but min-wage labor cost for a restaurant are a significant portion of the costs and profit margins are very thin [0]. Many won't be able to absorb a ~50% increase in labor cost.
All will have the same labor costs. Minimum wage has gone up before; there are still coffee shops.
Its easy to play 'dot-to-dot' with these things - higher cost means lower sales means people fired. OR more money in the working class pocket means more coffee purchases means more hiring. You can connect-the-dots lots of ways.
The truth is, some of everything happens, and then it settles down into something workable. Yes we'll pay more for our coffee, but we'll also have more money in our pockets. And so on.
Morality is always there, or should be. Picketty has shown that our understandings of the Market as anything conducive to a stable society were a fiction caused by recent history.
It will stimulate the economy to promote more jobs. "There are people whose labor is worth $8/hr but not $11/hr" is a non-sequitur because this fuzzy concept of "worth" varies in time & space. (For example, demand-push inflation will change the numbers.)
The money doesn't just vanish when you raise the minimum wage. People who make less than about $20/hour are going to be spending pretty close to 100% of any additional income they get. It's fair to suggest it might raise the price of goods and services. All real-world examples of minimum wage hikes I've seen show real wages going up even though inflation does eat some of the gain.
But as far as reducing the amount of goods and services available, that isn't really backed up by anything. It's crazy that we're still relearning the lesson that we learned in the first half of the twentieth century, which is that when you raise the wage floor, consumer spending rises, which drives economic growth.
To have been in a country where there are "high" minimum wages, the low value added jobs are the first going away because they're too expensive for what they are.
The opportunity cost of a service is the limit for which one would be expected to pay for it. If forced to pay $1,000,000 to have someone clean your bathroom, you'd end up cleaning it yourself.
Grocery stores have something like a 1-2% margin, and people are often price-sensitive when shopping for food. So they'd have trouble raising prices. Probably they'd try to depend on self-checkout machines more. I imagine fast food companies like Taco Bell would lose sales.
High-margin software companies wouldn't care about the cost of their janitors, like you suggest.
> High-margin software companies wouldn't care about the cost of their janitors, like you suggest.
The CEO might not, but an enterprising facilities manager would certainly try to cut expenses by replacing the pleb who vacuums the hallway with a plus-size Roomba.
However you are both making different points. @kardashev is making a the classic argument against a minimum wage. You're arguing that giving low income people more money will help them.
It's not hard to think of other ways to top up incomes that don't involve setting a minimum wage. The simplest would be to pay low income people money directly instead of through an employer. A direct transfer system like this would probably satisfy economists more than a minimum wage would, since a direct payment has less of a negative effect on economic behaviour than a price mandate.
The economics of minimum wage among 'respectable' economists is debated in a similar way that the global warming "controversy" is debated by big oil. It's good for business to make people believe that there's a strong link between job losses and raising the minimum wage.
Meta-analyses of studies find an embarrassingly low level of statistical significance between job losses and raising the minimum wage:
"Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage. In 1995, Card and Krueger analyzed 14 earlier time-series studies on minimum wages and concluded that there was clear evidence of publication bias (in favor of studies that found a statistically significant negative employment effect). They point out that later studies, which had more data and lower standard errors, did not show the expected increase in t-statistic (almost all the studies had a t-statistic of about two, just above the level of statistical significance at the .05 level).[87] Though a serious methodological indictment, opponents of the minimum wage largely ignored this issue; as Thomas Leonard noted, "The silence is fairly deafening."[88]"
Profits, on the other hand - the elephant in the room when it comes to studying minimum wages - almost always take the brunt of the rise in wages:
> The economics of minimum wage among 'respectable' economists is debated in a similar way that the global warming "controversy" is debated by big oil.
I know climate scientists are pretty much agreed on global warming. I thought economists disagreed about minimum wage still. That Wikipedia page seems to suggest that more and more economists are supporting a minimum wage over time, but there is still not a consensus. Does that sound right to you?
> Right, if you particularly wanted to avoid cutting into the profits of companies like Walmart, there are other ways you could top up incomes.
I was just trying to make a technical point about the existence of alternatives to the minimum wage. Many of the people who advocate these alternatives have good intentions about helping people in need.
>I know climate scientists are pretty much agreed on global warming. I thought economists disagreed about minimum wage still. That Wikipedia page seems to suggest that more and more economists are supporting a minimum wage over time, but there is still not a consensus. Does that sound right to you?
Let's just say that I'm very impressed with the incorruptibility and dedication to the scientific method that ~95% of climate scientists hold. Especially since it's not like the oil companies haven't tried to tempt them to stray.
Not every profession is as upstanding as theirs when money and power enters the mix.
> Right, if you particularly wanted to avoid cutting into the profits of companies like Walmart, there are other ways you could top up incomes.
I don't know enough about the literature to comment on that part, but this is an uncharitable summary that sounds like its criticizing the motives of the other side.
Obviously if we were raising taxes to pay for schools or NASA or something, we wouldn't want a tax that targets Walmart more than Google. That would be weirdly political and probably inefficient too. You can make the same argument about paying for transfers, even if you don't have any particular love of Walmart.
What do you think motivated the people behind this to throw money at it?
>Obviously if we were raising taxes to pay for schools or NASA or something, we wouldn't want a tax that targets Walmart more than Google. That would be weirdly political and probably inefficient
Walmart in fact already receives indirect "weird political assistance" to the tune of $6.2 billion dollars via your taxes:
I'm fairly certain that they wouldn't mind at all if their workers got a $8 billion subsidy paid for by your taxes, and if they could cut their wages by $1 billion at the same time. Alice Walton would be overjoyed at the extra $800 million going towards her staff's incomes.
>I've seen the opposite in recent respectable economics textbooks.
I bet it wasn't Greg "the rich can do no wrong" Mankiw's textbook ;)
>In any case, a thought experiment: the 99% should get a $99/hour minimum, don't you think?
What's the thought experiment designed to achieve?
Hiking to $99 / hour immediately would likely trigger a bout of extremely high inflation - likely to a level which would hamper growth (as people would be more scrambling to protect their wealth rather than spending their money on useful products and services).
Personally, I'd hike to $20 and then put the wage up by $1 / hr every three months until inflation hit ~10% (~12-15% is the point at which inflation starts hampering growth) and from then on target that level of inflation via the minimum wage and welfare payments.
That would drive a huge amount of economic growth (spending would jump) and bring down inequality to more manageable levels.
What I'd really like to argue for is twofold: 1) meeting people where they're at and making no demands of them, 2) lessening the day to day misery of anyone by any amount using practical means that can be implemented immediately.
I strongly feel that large amounts of no-strings cash to people who need social-service type help is one of the best things you can do for them.
No strings housing is a good start too, and I am proud to have voted for the woman currently running the 1811 Eastlake building (Nicole Marci -- Google her or that address, if interested) in a local election this year.
I have been volunteering with various harm reduction type organizations off and on for almost 20 years.
> If this were really so why would there be a schedule to phase it in slowly over 7 instead of immediately? I think part of the reason is that it is expected for natural monetary inflation to cancel out the effect of the min wage increase. If we assume 2% target inflation from the FED then that would be a 15% reduction in buying power of the dollar, reducing the burden on businesses for the increase in wage price.
All things being equal? Come on...I doubt it. The inflation will certainly be a bit of help to the businesses, but don't forget that the status quo has been raising the minimum wage piecemeal, and the Washington minimum wage is at quite a differential from Seattle. Also, don't forget that once Seattle's minimum wage is in full effect it's chained to the CPI, so it's not just a raise on the minimum wage it's a permanent minimum wage.
Seattle doesn't have a job shortage, Seattle has a housing shortage. Not to say it's easy for poor people to acquire a job, but it's a lot easier to find a job in Seattle than it is to find a place to live.
> Meanwhile the homeless situation in Seattle is getting progressively worse. With the increase in minimum wage, some people are paid more, but at the expense of some poor people not being able to acquire a job at all.
Without an increase in minimum wage, people with a minimum wage job will still be homeless.
With an increase to minimum wages, the housing price will increase and they'll still be homeless.
We could argue that the increase may also impact people who earned more, the one at the limit won't be able to afford their places anymore and will become homeless.
>With the increase in minimum wage, some people are paid more, but at the expense of some poor people
No, at the expense of profit margins.
>Certainly we could find a better way of handling things.
The only other more direct way to move money from profit margins to the minimum waged would be to raise taxes on profits and effect a direct money transfer. Something tells me that you're not a fan of that either.
and has been on a hiring binge lately. Seattle's population is 652,000. Amazon clearly has quite an outsize influence on the city's employment makeup.
(Microsoft's campus is in neighboring Redmond, not Seattle. Some years back I read an article claiming that Microsoft had generated some 10,000 millionaires in the Seattle area.)
Yea these articles with zero evidence are basically pointless. The unemployment rate being low in most places that are desirable to live such as Seattle generally are short term problems. So give it a couple of years and there will be enough workers. Many people are moving to Seattle now from many other places. The high minimum wage generally won't end up being a huge deal except it just becomes a higher tax on everybody. Basically $7 sandwiches become $8 sandwiches and so on. Also most places that have 2 workers like an espresso stand the manager will see if he can get away with only 1 worker. So you waste more time buying a latte. So the more useful article would be something like, "restaurant owner sees 10% business increase and after surveying his customers finds that nearly all of the new people at the restaurant make minimum wage of $15, also his costs are now higher so his net result in profits is about 5% improvement year over year.. This situation has been anecdotally confirmed by about 15 other restaurants in the area.. All the while the population in that particular area only increased by 2%." I guess journalists are not economists or engineers.. :-/
The purpose of high minimal wage is to decrease inequality. It cannot become equal tax on everybody, unless you inject money into the system. The ones who are at very bottom would gain a lot, a lot more than increase in the cost of a latte. For example, for an apartment to become less affordable for a software developer, it has to become more affordable to a janitor. I am not even talking about the goods from Targets and Walmarts, which cost exactly same across the country.
So what I'm not clear on, and I wish people would provide some real example would be this issue of how businesses that currently employ people working at minimum wage actually are affected -- do they pass on the cost increase to their customers, hire less people, accept less profits, or are the increases in cost offset by more sales. I personally don't like the idea of a minimum wage being set by random politicians. So if $15 is good and it helps the economy, then why now $25/hour? I mean sure let's raise it or whatever so their is some base level of the ability for people to live, but where is the point of diminishing returns, I would actually like to know rather than just be like, $15/hr, yay!! Then 3 years later, "based upon the great success of $15/hr, lets go to $18/hr!!" its like uh ok what is the background reason for stating that the economy can absorb it other than saying "I dunno, I want my boss to pay me $18/hr, so lets vote yes!" Of course if he hires less people because of that (and I'm not fearmongering, I'm just saying lets say that actually happens), then that's not good right?
Oakland passed a new minimum wage ordinance last year (the year before maybe?) and a lot of the small local businesses around me raised their prices. They also put cards on their menus explaining the increases. It's possible they stopped hiring. It's possible the let go of staff. But most of them definitely raised their prices a bit.
But the thing is, these places aren't the places that people living on minimum wage frequent. They are yuppie/hipster magnets with overpriced lattes and fancy salads and fancy burgers, etc.
The corner store didn't raise prices. The grocery store didn't raise prices. The gas station didn't raise prices. Landlords didn't raise prices.
My impression is that the direct financial impact of raising the minimum wage in the form of increased prices only impacts people who have more disposable income.
Now, there are other impacts (like lost jobs, lower hiring, etc) but the consensus from economic studies seems to be that those effects aren't statistically significant.
So, minimum wage earners have more to spend on necessities and those of us fortunate enough to have more disposable income have to spend $2-$3 more for a meal or $0.50 more for a coffee.
There's actually a great way to track that - look at the cost of a Chipotle burrito in different cities. The price for a burrito in San Francisco went up with perfect correlation when the wage increased in San Francisco. The reason it's particularly useful for Chipotle is because they are entirely corporate owned, which means there are no franchise owners distorting the data (or rather, franchises are independently owned and many are not well run, and restaurants with lower prices would be used as data points to justify the wage increase when that restaurant may in fact be failing).
Not too long ago it was part of my job to analyze the minimum wage hike and how it will effect fast food restaurants. Like most things in the real world, the nitty gritty details are complicated. The gist of it is that fast food restaurants in the United States are going to become even less profitable as the minimum wage increases. And in an industry where it's considered great if your margins are 5%, that can be pretty bad.
Don't minimum wage people purchase slot of fast food? Wouldn't a minimum wage hike lead to increased sales to offset the hike?
I repair alot of I. T. At many major chains so I visit them regulary. They seem pretty efficient and an extra $20 an hour of labor costs doesn't seem like a game changer. Especially if it reduces turn over or improves employee moral. Would definitely hurt something like a stake n shake.. 24/7 operation and tons of kids.
Actually maybe it didn't come across clearly, but I was saying it would be ideal if the article actually gave some kind of useful information such as the fake example that I provided. You are actually asking me the exact question I wish to ask of the person who wrote the original article.. basically can they please provide a real example versus the whole "the unemployment rate is low and the minimum wage is high!" and no mention of the obvious correlation vs. causation argument.
Correlation is not causation (fighting urge to post XKCD comic). "Unemployment fell, most recently to less than 4 percent, more than a full percentage point lower than the national rate." The fall can be explained by an improving economy. Unemployment was 4.2% on Dec. 31, 2013 https://ycharts.com/indicators/seattle_wa_unemployment_rate National rate was 6.7% at that time. So the difference between Seattle and national has been reduced, they are relatively worse off after introducing a higher minimum wage. EDIT Can't resist anymore https://xkcd.com/552/
Sigh. I have a dream when one day people learn to use that quote correctly. Correlation does not imply causation, but a lack of correlation does suggest (not prove, but suggest) a lack of causation.
In this case, the relevant claim is the claim by minimum wage opponents that the unemployment rate and the minimum wage are positively correlated. Seattle's situation does NOT imply that a $15/hr minimum wage decreases unemployment (if someone were to make that claim, then your quip would apply), but it DOES suggest that a $15/hr minimum wage does not increase unemployment; this distinction is subtle but vital.
"Correlation does not imply causation, but a lack of correlation does suggest (not prove, but suggest) a lack of causation."
I don't think it's any stronger one way or the other. Correlation does not imply causation; it may suggest it, but there may be confounders. And lack of correlation does not imply lack of causation, because there may be confounders that mask results that would suggest causation.
Showing causation is hard and usually takes careful design of experiment with very good controls to eliminate any potential confounders, something that is not present in retrospective studies.
In the meantime, many Texas cities: http://time.com/80005/why-texas-is-our-future are building tons of affordable housing, even as superficially liberal cities like Seattle legislate it out of existence.
I moved to Seattle a year ago and this is 100% true. Everyone talks about how liberal the city is, but they sure as hell won't do anything about housing or rising rents. Could they build more? Sure. But they don't want to spoil their view of the Space Needle and the mountains.
I don't mean to sound hostile but you're painting the Seattleites who came before you with a rather broad brush. I own a free-standing house in Seattle and I am very much a YIMBY (Yes In My Backyard). So are many of my friends. We are fighting an entrenched mentality of "this is how it has always been and this is how it will always be," but we are winning more than we are losing. HALA, while watered down, is doing things like Mandatory Inclusive Zoning and requiring upzones around areas of transit infrastructure.
Yes, it's very slow going. But this is also a case of every time we "win," another 5,000 people show up with mountains of cash who can outbid everyone else in the region. Seattle is very popular as a place to live so we're trying to outrun both normal demand and the demand for housing that doesn't cost multiple thousands of dollars. It is a tough slog.
(By the way, Seattle has some of the most far-reaching renter protections in the state. Rent control is barred by state law but Seattle requires landlords to do a lot of things, provide a lot of notice, and limit rent increases a lot more drastically than any of our surrounding suburbs. Oh, and those suburbs aren't exactly building their own capacity, either. Good luck getting a large multi-residence project approved on Mercer Island or in Bellevue outside of the downtown core. Redmond is right out. Shoreline and Renton are doing better than most; Shoreline even pushed back against its own citizens to say "look, light rail stations deserve density around them so we're doing it, sorry nearby single-family homeowners.")
Seattle also has a limited land area, because of the ocean and lakes. There is only one way to get more housing, build up, or build outside the city limits.
Seattle actually has some houseboats [1]. Not sure total numbers, but they are definitely a very small drop in the bucket compared to all other housing forms.
Probably more impactful in terms of population numbers is the similar "apartment block over water" which popped up in Seattle a few decades back and are still around. ~5 stories and over water is a lot more people than a row of houseboats.
You're right in pointing out that there might be unnacounted variables which might confound the impact of the minimum wage hike. But the majority of people running around saying that higher minimum wages cause unemployment do so on the basis of an overly simplified model (the standard partial equilibrium from Econ 101, where they're looking only at supply and demand curves for labor under complete information).
Once you start weaking some conditions (using a search and matching framework instead of contracting under complete information) and adding confounding variables (like economy wide-effects or consumer credit restritions), not only your conclusions might change, but you might actually get a better model. Academics have some grasp of this and are much more subdued in their conclusions, specially when coming from pure theory. Pundits, however, are paid to be clueless. And I think this is the true insight of this submission.
First, "unemployment rate" is extremely subjective, with the Bureau of Labor listing 6 different possible measures that all fit the definition for "unemployment rate" [http://www.bls.gov/lau/stalt.htm]. Not devaluing your results, but numbers reported online should be taken with a gain of salt.
Second, I don't think it's completely fair to use this as precedent for cases elsewhere in the country. Seattle's mean income ($75,331) is well above both Washington State's ($64,129) and the US's rate ($55,775) [http://www.deptofnumbers.com/income/washington/seattle/]. The impact of adjusting minimum wage might be extremely understated.
> First, "unemployment rate" is extremely subjective
No it isn't. At least not in this context or most contexts. While you are correct that there are multiple ways to measure unemployment, they are all objective measures. In addition to this, the colloquial usage of the "unemployment rate" refers to the U3 rate listed by the BLS.
True, but it pretty definitively refutes the hypothesis that raising the minimum wage to $15 would dramatically increase unemployment in any reasonable setting. That is an important result. Now can have a discussion about the costs and benefits without the fear mongering.
it pretty definitively refutes the hypothesis that raising the minimum wage to $15 would dramatically increase unemployment
How so, if Seattle doesn't have a $15/h minimum wage? It'll only take effect in 2017, and even then, only for large employers that don't pay medical benefits. Under this law, the $15 wage will only be universal in 2021: http://murray.seattle.gov/minimumwage/
Correlation is not always causation but it can be and it is usually very strong evidence against the presence of opposite forces of causation. If higher minimum wages actually cause unemployment (as minimum wage opponents often argue) then how do you explain Seattle.
> The fall can be explained by an improving economy.
The hypothesis of the article is that the economic benefit of increasing minimum wage is mediated by improvement of the economy due to increased spending. I'm not saying you're wrong, but that particular point doesn't seem to contradict the article's premise.
The economy (and jobs) improved in the whole of the US so I think people can't claim it was caused by Seattle adopting the minimum wage. I'm not saying you or the article made that claim, just that it doesn't follow from this case.
If you click on the link to Bloomberg you can read the conclusion:
"Some time ago, I suggested that we would eventually learn whether higher minimum wages were going to kill jobs. The early data is in, and so far it doesn’t look like they do."
This seems like an awfully broad conclusion to draw.
It is indisputable that minimum wage kills or exports some jobs (I know this is a fact because my company is planning to add fewer low wage employees and contractors in our local area based largely on minimum wage changes). The question is whether the people who benefit from the supply restriction (people in low, but not minimum wage jobs) benefit and then spend enough to cancel out the aggregate cost of the distortion. It may be possible that in Seattle's unique situation this was/is true, but even this conclusion seems like a "politically motivated economic analysis, this was what the [pr]opponents hoped would happen because it fit with way they think world should work."
One of the questions that these pieces skirt around is how inefficient is the "unregulated" labor market? Clearly some intervention in the labor market, like banning non-competes, makes is closer to efficient, but the question is what inefficiency is the minimum wage solving, and what is it creating?
> This seems like an awfully broad conclusion to draw.
and this anecdote
> It is indisputable that minimum wage kills or exports some jobs (I know this is a fact because my company is planning to add fewer low wage employees and contractors in our local area based largely on minimum wage changes)
is excellent. Admittedly early data about a major metropolitan economy? Pfft. A single anecdote? The basis for claiming that an empirical claim is indisputably true.
Sounds like your company runs a pretty marginal business. A worker that is making $10/hr ($20K / year ) now makes $15 / hr or $30K /year doesn't add the $10+K in extra value.
When I hear about companies that are not "adding jobs because of minimum wage", I go back later and look in the news reports.
Invariably:
1. the company was doing badly already and use the minimum wage, tax increases, etc. to excuse their internal business difficulties.
2. the companies competitors are some how immune to the minimum wage increase and those competitors are expanding and hiring,
3. OR the company in question quietly really did hire more people because surprise, surprise, higher pay resulted in more discretionary income to spend and business was up.
In a properly functioning free market, the company should be doing badly! They might like to earn a nice fat profit, but that isn't what the rest of us like. Competition should get rid of that. Having business difficulties is the expected norm.
So point #1 should normally be true, and any change that makes business more difficult should normally cause business failures and resulting job loss.
It is also indisputable that increasing the minimum wage puts more money into the economy, it's a clear stimulation. And our economy to a large extent is dependent on consumer spending. The increase in spending, vs the fewer jobs with higher minimum wags - that's the complicated question.
You dispute yourself what you call indisputable in your own comment! Fewer jobs means potentially less money in the economy (and theory says that in most cases, more money is lost from fewer jobs than gained from higher pay).
Employers at burgers Inc hire enough people to make and serve the quantity of burgers they expect to sell. If more people can afford to buy burgers they hire more people not less.
The idea that quantity of labor demanded decreases with increased labor costs is oversimplified and ignores reality.
Or the employers decide it now makes sense to invest in infrastructure or automation so that fewer or perhaps even no workers are required. Elevator attendants are the classic example.
Almost all evidence supports negative employment effects of minimum wage increases. A handful of studies do not. It takes a real head-in-the-sand approach to empiricism to claim that there is no evidence to support negative employment effects.
A more recent meta study (2013) seems to claim otherwise:
> The weight of that evidence points to little or no employment response to modest increases in the minimum wage.
> The report reviews evidence on eleven possible adjustments to minimum-wage increases that may help to explain why the measured employment effects are so consistently small. The strongest evidence suggests that the most important channels of adjustment are: reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners ("wage compression"); and small price increases.
Call me surprised that a tiny progressive policy think tank would publish something that conveniently ignores all contradicting evidence to find support for the minimum wage.
Things change. The current labor market is almost unrecognizably different from even 10 years ago. An explosion in automation has changed the landscape.
If you assume that (a) most manufacturing has moved to cheap-labor countries and (b) rent is a more important input than labor for restaurants / starbucks, then it's not surprising that raising the wage floor doesn't hurt employment.
The wage floor imposed by cost of living is already in effect in most major cities.
A bolder move would be to impose a tariff on goods and services that use sub minimum wage labor.
This doesn't affect the overall point, but the "lowest unemployment rate" part of the headline is annoyingly unsupported. Googling "lowest unemployment city in the usa" shows a Google featured snippet listing Sioux Falls as the city with the lowest unemployment rate at 2.1%, which is lower than Seattle's rate.
Edit: turns out the "highest minimum wage" part is also wrong. Seattle's minimum wage is currently $11/hour, and Washington DC's minimum wage is $11.50. (If this is confusing after reading the article, it's because the article didn't mention that the $15/hour rate doesn't start until 2021.)
Any adverse signal from changes to the minimum wage are going to be buried below the noise floor of a Seattle economy that is extremely hot right now. You have to account for the fact that (1) the drop in unemployment has nothing to do with minimum wage jobs and (2) there is a general labor shortage in Seattle that is driving up wages at all tiers regardless of the minimum wage.
If the Seattle economy was flat and they could demonstrate no impact on employment of minimum wage workers that would be one thing, but they aren't demonstrating that here. Given the economic conditions in Seattle, the article is arguing from a dubious correlation.
According to the Washington Post the results of raising the minimum wage from $9.96 to $11.14 per hour are mixed [1], [2]:
> Yet the actual benefits to workers might have been minimal, according to a group of economists whom the city commissioned to study the minimum wage and who presented their initial findings last week.
> The average hourly wage for workers affected by the increase jumped from $9.96 to $11.14, but wages likely would have increased some anyway due to Seattle's overall economy. Meanwhile, although workers were earning more, fewer of them had a job than would have without an increase. Those who did work had fewer hours than they would have without the wage hike.
> Accounting for these factors, the average increase in total earnings due to the minimum wage was small, the researchers concluded. Using their preferred method, they calculated that workers' earnings increased by $5.54 a week on average because of the minimum wage. Using other methods, the researchers found that the minimum wage hike actually caused total weekly earnings to drop -- by as much as $5.22 a week.
It seems to me that the results when the $15/hr minimum are reached are hard to predict.
[1] the minimum wage will eventually reach $15/hr however at this point it is only $11.14/hr
One thing that I did not see mentioned in the thread or in the article was the human side of things, we don't want to lose site of the fact that we are talking about human beings who need to get a living wage. I am not saying economic issues don't weigh in, but also there is just a moral factor that I think should always be included in these types of discussion. I live in Seattle and, at least most of the people I know, see that as a significant consideration.
Seattle is also a very wealthy city already so the absorbsion of higher labor costs is a more elastic. However, you have to look at the greater trend, the U.S. unemployment rate has fallen quite lot since this law was ever enacted, and Seattle already had a lower than average unemployment rate.
The full effects of the law will not be felt until it is fully enacted anyhow, but it's important to remember that Seattle isn't some isolated economy, and it is experiencing big economic growth from two of the largest and most successful (and most valuable) companies in the world, Microsoft and Amazon; not to mention just the national aggregate of economic growth.
It would be a lot more interesting to see a sector by sector breakdown of labor slack. Restaurant closings after the law began to hike wages to the eventual $15 spiked well above the national average. I doubt that's a coincidence. I honestly don't think you will be able to see a significant effect until after a recession and we can see the effects of sticky wages with a much higher price floor.
My guess is that it will still be fairly muted, because....Microsoft and Amazon are both based in the Seattle area; but the effects could perhaps be better measured. Anyone doing a victory lap now is definitely jumping the gun.
The reporting on Seattle's minimum wage hike aligns suspiciously well with news outlets' ideological biases, almost to the point that the articles could have been written before the wage hike even happened.
Which suggests that maybe the data are inconclusive or muddled and so everyone is finding what they expected to find. It's a complicated situation, with many factors that aren't touched on in this article:
1. Seattle had relatively few minimum wage workers to begin with. The raise doesn't directly affect most of Seattle's workforce.
2. Seattle's booming economic numbers probably overlook the fact that the working poor and chronically unemployed can't afford to live within city limits. It's expensive here.
3. The tech boom continues to flood the market with high-paid jobs, and prices for everything are steadily raising across the board. This could be masking effects, positive or negative, of the minimum wage hike.
4. Meanwhile, there is a massive increase in homelessness and homeless tent encampments. A lot of people are being left behind by the boom.
In case others are inspired by the Seattle example: you should know that their $15 minimum wage experiment was not a result of technocratic liberalism.
It was a political fight by self-conscious socialists working in conjunction with SEIU fast food workers.
Winning that fight required a combination of "outside" activism, and "inside" political campaigning. The organization involved (Socialist Alternative) actually was able to get a member named Kshama Sawant onto city council. Like many cities, Seattle is Democrat dominated, who totally opposed $15 until they were forced to vote on it in public.
Like so many critical political issues, the institutional technocrats will not initiate working class reforms. They must be imposed from below, with working class people organizing themselves.
This article is quite biased without much proof. Clearly, doomsayers aren't exactly correct, but who is more correct?
https://www.dol.gov/featured/minimum-wage/mythbuster that government page is pretty biased, with proof in small samples. Some workers should be paid more than others, but why should the minimum wage be more than $7.00?
http://thesovereigninvestor.com/us-economy/why-raising-the-m... - that link is pretty biased, but it shows another side of thought that is lacking, with many wage increase proponents ignoring inflation completely.
I want everyone to be able to survive, but at what point does a high minimum wage lead to a bigger gap between the employers and workers?
You don't need advanced economics to understand that setting a price floor will reduce quantity supplied and increase quantity demanded. It's evident from logic. What other good does not respond to changes in price? Everyone earns some amount of marginal revenue, say X, and they are paid Y where X > Y. Is there absolutely no-one where the marginal revenue that they earn their employer is between the old minimum wage and the new, higher minimum wage?
If you throw a rock in a lake, you probably can't reasonably measure the impact it had on the height of the lake. But you're certain that it had an impact. Similarly, you must use logic and reason to deduce that putting a mandated price floor on labor will reduce the amount of labor demanded.
> Similarly, you must use logic and reason to deduce that putting a mandated price floor on labor will reduce the amount of labor demanded.
Ehhhhhh. First, according to a simple theory, yes, you are correct. This means that if the evidence points in another direction (and the article is suggesting it is pointing in another direction), then clearly your simple theory is missing something.
Second, the situation is definitely more complicated than that. It's not like the ONLY effect raising minimum wage has is on the cost of employing people; if you're only paying attention to that one effect, sure, I'd expect your conclusion. But - I say - apparently - I note - in this situation, your conclusion is not occurring, so -
How do you tell whether this is due to the other, unexamined effects of raising minimum wage, or whether it is due to other causes?
Finally:
> You don't need advanced economics to understand that setting a price floor will reduce quantity supplied and increase quantity demanded
...No, I wouldn't necessarily expect that. Let's say I mandate that corn costs $10 a cob. What are effects I might expect to see?
- Some farmers switch to making more corn, because it's now worth more (they may not be thinking about whether people will buy it at the new price, just that any sold is sold at $10)
- Corn moves to be seen as a more "luxury" resource, a la the "keeping up with the joneses" effect.
- Some farmers switch to making less corn, because they anticipate fewer people buying it at the higher price, since fewer people can get $10 worth of value out of one cob. (The nominal price of corn may then rise to $10, due to a reduction in supply moving to match demand at the new price).
Let's reverse the situation. Let's say I mandate that corn now costs $0.01 a cob. What effects might I expect to see?
- Only shitty corn gets made
- People find uses for cheap as shit corn, that weren't economical before. Demand for corn rises as there are more economical uses for it
I'm not saying that "price floor for employees" is the same as "price floor for corn", I am saying that clearly they are not the same, so you definitely can't apply the same model to both and expect to predict reality. Setting a price floor on a good is definitely different than setting a wage floor on people.
And, I'm saying: this is more complicated than such a simple model can predict.
Here's a question: Why are you even trying to explain economic cause and effect through logic, rather than through statistical correlation? It's not like you're ever going to be able to understand enough of each situation to actually model everything* "clockwork-universe style", and that's if you can even derive solid laws with which to run the model. Statistical tendencies seems like a much more reasonable way to try to model everything.
I'm explaining it through logic because statistical correlation is especially complicated and difficult to tease out in social science. You can't take a snapshot of one city, pre and post minimum wage and definitely conclude that the change (or lack of change) in unemployment is due to the minimum wage. Here's a few things to consider:
There are more people being paid under minimum wage than there are being paid minimum wage [0]. The unemployment effect of a price floor could be partially offset by a larger number of people being pushed to below-minimum wage jobs (presumably under-the-table). The minimum wage isn't changed randomly, often hire minimum wages get imposed on higher income cities. There are other factors that happened between pre-min wage increase and post-min wage increase. Expectations of wage increases are often implied in current conditions. For instance, if you do that math that you can open a business and make 10% profit margin with 50% of your expenses coming from min wage labor, you would know that your profit margin is complete wiped out with a 20% increase in labor cost. You know that it is likely that min wage will go up rather soon, you will not bother opening the business. And so on...
In your corn example, sure, we don't know what would happen if a price floor of corn at $10 were mandated (assuming the market price is less than $10). But I think we can be pretty certain that the amount of corn demanded would drop. Similarly, at a price ceiling below the market price, the quantity demanded will rise, although the quantity supplied will drop, causing a shortage. Look at Venezuela where price ceilings exist for many products.
I'd think the logic is harder to tease out than the statistical correlation; isn't the latter more-or-less intended for situations where you can't determine (let alone measure) all the variables?
I've been unable to find a good citable ranking of major cities by percentage of white population. But I don't think this is right. Here's what Wikipedia has to say about the demography of Seattle in 2010 [1]:
According to the 2010 United States Census, Seattle had a population
of 608,660 with a racial and ethnic composition as follows:
White: 69.5% (Non-Hispanic Whites: 66.3%)
Asian: 13.8% (4.1% Chinese, 2.6% Filipino, 2.2% Vietnamese, 1.3% Japanese, 1.1% Korean, 0.8% Indian, 0.3% Cambodian, 0.3% Laotian, 0.2% Pakistanis, 0.2% Indonesian, 0.2% Thai)
Black or African American: 7.9%
Hispanic or Latino (of any race): 9.0% (4.0% Mexican, 2.3% Puerto Rican, 1.3% Colombian, 0.2% Guatemalan, 0.2% Salvadoran, 0.2% Cuban)
American Indian and Alaska Native: 0.8%
Native Hawaiian and Other Pacific Islander: 0.4%
Other race: 2.4%
Two or more races: 5.1%
I'm trying to understand what this statement is implying. It's it saying Seattle is booming because it is mostly white? Is it saying Seattle can absorb a higher minimum wage because it is mostly white?
I can I'm trying to understand what does the diversity (or lack of) have to do with the financial well being of the entire city?
You stated that Austin has horrible diversity, which is not true statistically.
Having read the article, it doesn't say anything about how Austin is "pushing out minorities".
I won’t dwell on Tang and Falola’s results, which the American-Statesman’s Dan Zehr covered last week, other than to note that a majority of African-Americans — 56 percent — said they left Austin because they no longer could afford to live in the city. Many said they would move back if they could.
Furthermore, from the Zehr piece mentioned there:
Despite those indications, fewer than half the residents surveyed said they felt “pushed out” of the city, according to the report.
The people being "pushed out" say they aren't being pushed out. You are claiming the exact opposite. Did you read the articles?
They can't afford it. If you are familiar with Austin this is a problem for all residents - housing prices have shot up because there is so much demand. It's not a minority issue. Yes, they are disproportionately affected, but the city is not targeting them. Ask any resident of Austin that's been there before 2005 and they'll tell you the same thing. The city is having trouble with massive growth - ironically much of it is from West coasters.
> If you are familiar with Austin this is a problem for all residents - housing prices have shot up because there is so much demand. It's not a minority issue.
If you're familiar with Austin, how much more demand for housing there is there compared to demand for housing in Dallas? How is that difference in demand, if any, reflected in pricing?
Austin is about as clear a case as you can get of pricing shooting up in response to extremely average levels of demand combined with severe supply restrictions.
Amazon by itself is bringing in thousands of people per year, none at the minimum wage. To attribute a good economy in Seattle to a minimum wage is a non-sequitur.
I find it curious though how some can think raising pay by fiat will help the poor. If this were really so why would there be a schedule to phase it in slowly over 7 instead of immediately? I think part of the reason is that it is expected for natural monetary inflation to cancel out the effect of the min wage increase. If we assume 2% target inflation from the FED then that would be a 15% reduction in buying power of the dollar, reducing the burden on businesses for the increase in wage price.
With phased-in increases we tend to see effects that are within the error of margin. Naturally if there was an overnight price increase on anything there would be immediate measurable ramifications, which is probably why the phase-ins are always slow. If people truly thought the effects were positive then they would push for the changes to be as immediate as possible to leave no room for doubt about the effect of the policy.
Meanwhile the homeless situation in Seattle is getting progressively worse. With the increase in minimum wage, some people are paid more, but at the expense of some poor people not being able to acquire a job at all. Certainly we could find a better way of handling things.