Are jobs really getting worse?

[FIPurpose]

@maizeman I think we're like 80-90% on the same page. I think you're right, we were talking past each other just a bit.

I'm sure there are plenty of construction workers, doctors, postmen and others who couldn't accomplish a 40 hour week in 30 hours. Right now I get paid by the hour and I couldn't do it in 30 hours without ripping off my clients.

And they destroy their minds and bodies because of the hours they work.

Doctors are currently some of the highest risk jobs for both burnout and suicide.
Construction workers wear out their bodies like football players. Many don't make it past 50 working in construction.
Postmen... is actually a well liked job, we can just hire more. This is actually one job that is expected to become rarer due to better centralization and routing automation. So it might be close to evening out.

But you're right, there probably are jobs out there that are actually needed and demand those full 40 hours. Instead of wasting a large number of people in unnecessary admin roles or easily automated roles, these positions can be spread out and the work week can be reduced. People with meaningless jobs can be reassigned to more meaningful ones, and everyone can go home earlier. I imagine that we could easily eliminate 20% of "work" and maintain a similar level of GDP.

[Bloop Bloop]

You're assuming that the work is capable of being spread out in the first place. Not everyone can be trained to do a given job X, Y or Z. For example, you're not going to be able to get every office worker who's currently underemployed to retrain as, say, a doctor. Or a banker. How would you even enforce that?

You would have to tell everyone who now has a legitimate 40+ hour per week job that they can't work the hours they like. Tell that to a fly-in fly-out mining engineer who's stoked that he's earning a shitload. On a more modest scale, I wouldn't like that either. I would much prefer to do my 40-hour a week job because it lets me retire 33% faster than if I was limited to only 30 hours a week.

So it's not as simple as saying everyone can spread out their role. Some of us don't want to and not every role is easy to spread.

[maizefolk]

@maizeman I think we're like 80-90% on the same page. I think you're right, we were talking past each other just a bit.

Happy to hear it!

FWIW, it's really a lot more fun having the remaining 10-20% disagreement you and I were having than some of the discussions I've had on the other side of this same debate.

I can understand where you're coming from. We seem to be disagreeing on economics and logistics, not ethics.

In contrast, I really cannot understand, for example, a poster who sees the working poor fearing being unable to put food on the table for themselves or their children as jobs go away as a good thing because it'll mean it is easier and cheaper for that poster to hire other human beings to do menial and demeaning jobs for them. And people like that do exist on this forum.

I don't know if they were imagining the job of "personal jester" but I like your label for this kind of thinking and may use it in the future.

[FIPurpose]

@maizeman I think we're like 80-90% on the same page. I think you're right, we were talking past each other just a bit.

Happy to hear it!

FWIW, it's really a lot more fun having the remaining 10-20% disagreement you and I were having than some of the discussions I've had on the other side of this same debate.

I can understand where you're coming from. We seem to be disagreeing on economics and logistics, not ethics.

In contrast, I really cannot understand, for example, a poster who sees the working poor fearing being unable to put food on the table for themselves or their children as jobs go away as a good thing because it'll mean it is easier and cheaper for that poster to hire other human beings to do menial and demeaning jobs for them. And people like that do exist on this forum.

I don't know if they were imagining the job of "personal jester" but I like your label for this kind of thinking and may use it in the future.

I probably don't mention what I do agree with you enough. That might help show where my thinking is at. You laid out some interesting statistics, and I would also be concerned with the ability for small businesses to afford 15/hr labor. (Though there are some pretty lucrative small businesses.) I think though we'd all recognize that low-pay related labor would just rise in cost. Ie, if labor at restaurants went up across the board, the costs would go up (though maybe that would cause 20% tipping to also end). What kind of price increase at Walmart would be necessary to pay employees 15/hr without disrupting profits?

Walmart currently has starting pay at $11/hr. Let's say 2MM of their employees are at that rate. That would require about an additional 21B. Walmart has an annual revenue of 515B. That's equivalent to about a 4% rise in cost. (Though this would be matched across the industry so Walmart wouldn't become less competitive.) That's not even considering the amount the government would be saving from reduced welfare use. Minimum wage in DC is $14/hr ($15 next year) and most Canadian provinces are right around 14CAD/hr. Walmart still has 3 stores in DC and I know I've seen them in Ontario. They made threats of closing their shops back in 2013 if DC raised minimum wage, and yet, there still there.

We could come up with alternatives for small businesses. Small businesses could pay a lower wage, but in return are eligible for 2-5% of profits. Employment at a startup/small business isn't just risky to the investor, it's risky for the employee as well. Doubly so for low wage work where they aren't easily able to save for a period of unemployment.

As with any policy, there's always going to be losers. But we currently have a large pool of people who are currently "losing" in our economy. So while we shouldn't destroy the economy, I also don't think policy should be required to make 100% of current businesses viable. Maybe some businesses just shouldn't be.

[maizefolk]

We could come up with alternatives for small businesses. Small businesses could pay a lower wage, but in return are eligible for 2-5% of profits. Employment at a startup/small business isn't just risky to the investor, it's risky for the employee as well. Doubly so for low wage work where they aren't easily able to save for a period of unemployment.

As with any policy, there's always going to be losers. But we currently have a large pool of people who are currently "losing" in our economy. So while we shouldn't destroy the economy, I also don't think policy should be required to make 100% of current businesses viable. Maybe some businesses just shouldn't be.

Actually I think we are continuing to talk past each other a little. My concern is that an increase in the minimum wage doesn't help people working jobs that don't make big profits for their employers. And this isn't some weird edge case. A LOT of people working for minimum wage or between minimum wage and $15/hour are in jobs that might either stop being economically viable or be automated if their labor because more expensive. A UBI or negative income tax helps all of those people.

Proposing that businesses be allowed to pay employees lower wages than all other businesses as long as the business doesn't make make more than 2-5% profit doesn't change the the fact that a big minimum wage increase helps a subset of workers, is neutral for many others, and hurts a lot of people. It's just shifting people back and forth between the "not helped" and "hurt" categories while creating the potential for additional weird economic distortions as businesses try to manipulate their profit margins.

I guess what I'm having trouble grasping is this. If a worker is making $18,000/year ($9/hour working full time) working at a restaurant that barely breaks even, we can either:

1) Raise the minimum wage to $30,000 ($15/hour), in which case the restaurant either goes under, automates away some of its jobs, or raises prices, which increases profit per worker but reduces the number of customers. In any of the three cases, the worker has a significant risk of losing their job. <-- the worker is harmed, and so is the restaurant owner.

2) Carve out an exception where, because the restaurant isn't turning much of a profit, the restaurant is allowed to keep paying the worker $18,000/year. <-- the worker isn't harmed but also isn't helped.

3) Use tax revenue collected across the economy, including from much more profitable businesses that don't employ minimum wage workers and may even be manufacturing the robots that will ultimately replace the worker to pay the worker $1,000/month ($12,000/year), which, combined with the $18,000 they're already earning, puts them at $30,000/year of total income. <-- the worker is helped, but the restaurant owner isn't harmed.

To me the choice seems obvious if we what to have the biggest impact on reducing the pool of people who are "losing" in our current economy.

[FIPurpose]

Proposing that businesses be allowed to pay employees lower wages than all other businesses as long as the business doesn't make make more than 2-5% profit doesn't change the the fact that a big minimum wage increase helps a subset of workers, is neutral for many others, and hurts a lot of people. It's just shifting people back and forth between the "not helped" and "hurt" categories while creating the potential for additional weird economic distortions as businesses try to manipulate their profit margins.

I may not have been clear in my suggestion. No not limiting businesses to some arbitrary profit %. I was saying that businesses could optionally instead keep a lower wage, but have employees vest into a portion of the business over the period of a few years. Meaning that small businesses could set themselves up to be run more like a co-op. Incentivizing the worker to work at a lower pay meaning that the risk they take and value that they create can be measurably recompensed.

Does having a co-op situation create negative incentives?

1. While the capital investment would necessarily make up a smaller share, but the lower paid employees would put the restaurant at an advantage over larger chains.
2. Employees would be more motivated to work as they'd be in a "eat what they kill" situation.

In our restaurant example we could have a small shop where the chef/owner has to incentivize 5% ownership vested over 3 years, to 5 employees.
A restaurant that averages 2000 a night (so let's estimate 5% profit margin) so $100/night. That would come out to about an additional ~.88/hr for each of the full-time employees. While the owner is able to maintain 75% control of the shares. There would have to be some carefully crafted guidelines around what minimums an employer has to offer in terms of employee ownership. Maybe something like total employee(ex majority owner) ownership must total x% in years 1-3, and x% after year 5. Businesses that take off can then convert and buy out to current employees or offer investor class shares conversion.

This would require low wage employees to learn to ask new questions. Maybe more people start to ask about how solid the business is, what their expected revenue is. It would be a learning curve for many, but I think it could become common knowledge pretty quickly.

Businesses may require a bit more overhead to manage these situations, but my guess is that it really wouldn't be too much more complicated than running a business already is. I would hope most small businesses are already being run as a corporation with likely multiple investors.

[maizefolk]

In our restaurant example we could have a small shop where the chef/owner has to incentivize 5% ownership vested over 3 years, to 5 employees.
A restaurant that averages 2000 a night (so let's estimate 5% profit margin) so $100/night. That would come out to about an additional ~.88/hr for each of the full-time employees. While the owner is able to maintain 75% control of the shares.

A restaurant that makes 5% profit margin on $2,000/night in revenue makes 2000 revenue/day*.05 profit margin * 365 days a year = $36,500 in profit per year which is the income of the owner who, in a restaurant like that, is definitely working a lot more than 40 hours a week in the same restaurant, unpaid.* From my limited experience, that's a pretty fair estimate, although my guess is that a restaurant that's open seven days a night and clearing 2,000/night in total revenue would need more than five full time employees.

But let's say by instituting mandatory profit sharing for employees that work at businesses with razor thin profit margins, we're able to raise the salaries of the seven million people working at restaurants** and making less that $15/hour by $1/hour. The median wage in that sector is currently $9/hour,** so this would increase it to $10/hour, or an extra $2,000/year.

Now they're making $20,000/year full time, which is definitely better than $18,000. Which I completely agree with you is "certainly barely enough to save for retirement, or college tuition, or even a rainy day."

Why not instead help those seven million people -- and the millions more working at nail saloons, cleaning hotel rooms, manually harvesting fruits and vegetables, and all sorts of other hard low wage work done for marginally profitable businesses -- more by making cash transfers that wouldn't penalize them relative to their peers for working at businesses that have much lower profit margins than Apple or Microsoft?

*A good introduction to what it's like to start/own a restaurant.

** Numbers taken from this report. Sorry that it is a PDF: https://www.nelp.org/wp-content/uploads/Growing-Movement-for-15-Dollars.pdf

I would hope most small businesses are already being run as a corporation with likely multiple investors.

Why do you hope that? To me it would be a better sign for both the economy and economic mobility if most small businesses could be founded by a single individual without having to take on outside investment.

FWIW, 70% of small businesses in the US are sole proprietorships and I would imagine a large chunk of the remainder are single member LLCs.

[2sk22]

@maizeman Your proposal does sound a lot like Earned Income Tax Credits https://en.wikipedia.org/wiki/Earned_income_tax_credit and seems to have broad support among economists

[TempusFugit]

I haven't read the full report, but the conclusion is interesting re: impact on small businesses of raising the minimum wage

"we find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states"

https://www.nber.org/papers/w26523

[maizefolk]

@maizeman Your proposal does sound a lot like Earned Income Tax Credits https://en.wikipedia.org/wiki/Earned_income_tax_credit and seems to have broad support among economists

Yes I agree. The EITC is a modest form of a negative income tax* in that the government gives you addition money above and beyond your income if your income is low enough instead of making you give some of your money to the government as income tax.

The downsides, or maybe downsides is too strong a word "limitations" might be better, of the EITC is 1) it is contingent on being able to find work (so it doesn't help the unemployed) 2) your credit actually declines if your income is too low (which seems backwards) and 3) it is primarily targeted at families with children.

The maximum credit for a household without children is ~$500 while for a household with children it is ~$3,500-$6,500 depending on the number of children. It definitely makes sense to support families with children, but excluding single people and couples without children (57% of total households) means the current EITC is an effective tool at fighting childhood poverty but not as efficient a tool for fighting poverty as a whole. I think the support among economists for maintaining or expanding the EITC would apply equally to one targeted to all households, but it's also true that, at least until recently, pitching a policy based at fighting childhood poverty was a lot more politically palatable than one fighting poverty among americans as a whole.

Recently it seems like more and more people are noticing that there are a lot of jobs going away, the new jobs that are being created are of lower quality, and that the continued growth in productivity of the American economy is starting to decouple of a lot of the types of work still done by many of us. So I think a broader EITC/negative income tax would have broader political support today than it would have had in the past.

[Just Joe]

They must hire more people to cover the extra hours and pay them benefits as well which also causes the cost of goods to rise.  Something has to give in that situation.  There are a few different possibilities for a business:
1)  Add automation and do away with low paid workers (think self checkout at Walmart or touchscreen ordering for fast food)
2)  Raise prices
3)  Go out of business (or don't start a business)

I'm not saying you're wrong, I only point this out because I see it a lot and it's very interesting to me.

When projecting out the possibilities for how business will react to a policy proposal, people tend to hold one item constant. Here's a basic equation:

Profit = Unit Sales * Price Per Unit - Cost of Goods Sold - Administrative Expense

So a policy proposal will raise administrative expenses.

Option #1 will lower administrative expenses by cutting jobs or investing in automation
#2 raises the Price Per Unit
#3 says to hell with the whole equation

But there's always #4, ownership could accept lower profits. So many of these discussions start with the assumption that profits should be fixed, or that they should only ever go up as a result of a policy.

So how much of a $4 burger is the hourly wages of the folks who work at the store? Do they represent 15% or 5%? Give them a $5 raise and the cost of the burger goes up how much? A quarter?

I'd spend an extra quarter for the folks that work there to make a livable wage.

[mathlete]

So how much of a $4 burger is the hourly wages of the folks who work at the store? Do they represent 15% or 5%? Give them a $5 raise and the cost of the burger goes up how much? A quarter?

I'd spend an extra quarter for the folks that work there to make a livable wage.

Or maybe shareholders could just lose out on a quarter of earnings per burger sold. McDonalds has a $2.11 EPS, but it's not shareholders are entitled to that amount.

[maizefolk]

But there's always #4, ownership could accept lower profits. So many of these discussions start with the assumption that profits should be fixed, or that they should only ever go up as a result of a policy.

So how much of a $4 burger is the hourly wages of the folks who work at the store? Do they represent 15% or 5%? Give them a $5 raise and the cost of the burger goes up how much? A quarter?

I'd spend an extra quarter for the folks that work there to make a livable wage.

Interesting question.

Based on this breakdown of costs for a McDonald's franchise, ~26% of total revenue goes to payroll and payroll taxes, ~5.5% to owner profits.

So workers get just over a buck from a $4 hamburger sale, and owners about 20 cents.

If salaries went up 67% (from a current average of $9/hour to a flat $15/hour) and everything else stayed constant one would need to pay an extra 70 cents for a $4 hamburger. If that a big enough change that people would eat fewer McDonalds hamburgers and the franchise would need fewer employees? I honestly don't know as I'm both not a regular customer and probably a lot less price sensitive than the average McDonalds customer.

But the money for a big raise like that would have to come from either automation of jobs, or increases prices. There just isn't enough profit in the system to absorb that big a pay increase without either higher prices or fewer hours of human labor.

[mathlete]

Anyway though, I'm just making that argument in the abstract. I don't really support aggressive Federal MW legislation. Maybe bump it up a little, but as TempusFugit's NBER link highlights, going too big could hurt small businesses.

Who do we want to help when raising the MW? People working full time who are unable to make ends meet. If they're in a high COL area, let the city/state mandate minimum wages. If they're a single parent or something, then fund a more aggressive safety net, or provide universal childcare.

We don't want to strain a small business to give an Iowan teenager double the pocket money just because a single mom in Seattle can't make ends meet. Help the single mom.

[mathlete]

Interesting question.

Based on this breakdown of costs for a McDonald's franchise, ~26% of total revenue goes to payroll and payroll taxes, ~5.5% to owner profits.

So workers get just over a buck from a $4 hamburger sale, and owners about 20 cents.

If salaries went up 67% (from a current average of $9/hour to a flat $15/hour) and everything else stayed constant one would need to pay an extra 70 cents for a $4 hamburger. If that a big enough change that people would eat fewer McDonalds hamburgers and the franchise would need fewer employees? I honestly don't know as I'm both not a regular customer and probably a lot less price sensitive than the average McDonalds customer.

But the money for a big raise like that would have to come from either automation of jobs, or increases prices. There just isn't enough profit in the system to absorb that big a pay increase without either higher prices or fewer hours of human labor.

Cool info! I'm just picking nits, but you could probably exclude the $108K in management salaries from the raise.

Second, if higher wages makes owning a McDonalds Franchise less attractive, there are things that McDonalds Corporate could do ($6 billion in profit on $21 billion in sales). McDonalds famously makes money by leasing locations to franchisees. They could lower rents. They could lower or waive the franchisee fee to make the equity multipliers more attractive.

Again, I'm just advocating for the Devil here. I'm not really a fan of big MW increases. Just saying that if franchisees make $150K of each store, and MCD shareholders make $6 billion in revenue, there is money to raise wages.

[FIPurpose]

The Federal MW hasn't changed in like 10 years. In that time, inflation has eaten up 20% of that. To simply match 2009 MW, the feds would need to raise to ~$9/hr. Or $10.20 to match the 1968 MW. Which honestly is a bit insane. We're talking about a very much needed ~50% increase just to keep up with inflation. I think if the GOP had any sense in them, they'd capitulate to a modest increase to claim some popular support. But they're really just hold steady in that department. Instead Dems. are going to end up attaching MW to CPI and that would be much harder to reverse.

[mathlete]

The Federal MW hasn't changed in like 10 years. In that time, inflation has eaten up 20% of that. To simply match 2009 MW, the feds would need to raise to ~$9/hr. Or $10.20 to match the 1968 MW. Which honestly is a bit insane. We're talking about a very much needed ~50% increase just to keep up with inflation. I think if the GOP had any sense in them, they'd capitulate to a modest increase to claim some popular support. But they're really just hold steady in that department. Instead Dems. are going to end up attaching MW to CPI and that would be much harder to reverse.

This is compelling. But in 2009, 4.9% of the workforce was paid at or below the MW. Now it's 2.1%. Some combination of state/local action + the recovering job market + inflation is already raising wages without government intervention. There's still probably no reason not to link it to CPI, but I wouldn't put this high up on the agenda if I were Supreme Chancellor.

https://www.bls.gov/cps/minwage2009tbls.htm#1
https://www.bls.gov/opub/reports/minimum-wage/2018/home.htm#table10

[maizefolk]

Hmm, that's a good question about the manager salaries. It looks like a lot of employee positions that'd fall into the category of "management" but still make less than $15/hour (more in the $10-12/hour range) ([https://www.indeed.com/cmp/McDonald%27s/salaries?job_category=management]source[/url]). Even people with the job title of "general manager" report an average hourly salary of only $11.76/hour. So I think a $15/minimum wage increase would also increase the cost of manager salaries. I don't know if their average pay is factored into the overall average of $9/hour or not though. If not that might decrease the final percentage somewhat. 

If we assume manage pay goes up (15/12) 25% ($15/hour / $12/hour)  and general crew pay goes up 67% ($15/hour / $9/hour) and divide payroll proportionately between the two sets of employees, that drops the percent increase in payroll costs to 60% (rather than 68%) and the increase in the price of a $4 hamburger to 62 cents rather than 70 cents. (Plus or minus a lot because these are all back the the envelope numbers. Clearly a lot more than $0.25.)

Also agreed that McDonalds corporate could do some things to increase franchisee profits if they wanted to. The flip side though is that my understanding is that right now they often charge rent that is a percent of total sales. So if corporate didn't take action, individual franchisees would likely have to raise the price of a $4 hamburger more than 62-70 cents because part of that extra 62-70 cents would automatically get paid to McDonalds corporate and not be available for higher worker pay.

Definitely appreciate you picking the nit! Either way, hopefully people will take away the message that individual businesses with lots of hourly employees tend to spend more of their total revenue on salaries, and turn a lot less profit as a percent of sales, than is often assumed.

[FIPurpose]

The Federal MW hasn't changed in like 10 years. In that time, inflation has eaten up 20% of that. To simply match 2009 MW, the feds would need to raise to ~$9/hr. Or $10.20 to match the 1968 MW. Which honestly is a bit insane. We're talking about a very much needed ~50% increase just to keep up with inflation. I think if the GOP had any sense in them, they'd capitulate to a modest increase to claim some popular support. But they're really just hold steady in that department. Instead Dems. are going to end up attaching MW to CPI and that would be much harder to reverse.

This is compelling. But in 2009, 4.9% of the workforce was paid at or below the MW. Now it's 2.1%. Some combination of state/local action + the recovering job market + inflation is already raising wages without government intervention. There's still probably no reason not to link it to CPI, but I wouldn't put this high up on the agenda if I were Supreme Chancellor.

https://www.bls.gov/cps/minwage2009tbls.htm#1
https://www.bls.gov/opub/reports/minimum-wage/2018/home.htm#table10

Right how much of that is because states are pushing higher minimums? It is the federal government's job to make sure that people in states that refuse to raise the minimum are not being taken advantage of. Beyond that, these states would also be taking advantage of welfare in order to subsidize their own businesses.

in 2009 about ~14 states had higher minimums than the fed, today it's 30 (mostly in the 9-11 range). That also includes pretty much all large states except Texas and Penn. So yes, when a few states are refusing to fix their own wage laws, it is up to the federal government to fix those civil rights issues. Continuing to pay people 7.25/hr is taking advantage of a person no matter where they live in this country. If businesses in poor areas didn't go under in 2009 from the wage increase, they won't now either.

[Boofinator]

In contrast, I really cannot understand, for example, a poster who sees the working poor fearing being unable to put food on the table for themselves or their children as jobs go away as a good thing because it'll mean it is easier and cheaper for that poster to hire other human beings to do menial and demeaning jobs for them. And people like that do exist on this forum.

I don't know if they were imagining the job of "personal jester" but I like your label for this kind of thinking and may use it in the future.

In contrast, I really cannot understand how some people fail to grasp that the fundamental basis of all microeconomic transactions (with the exception of theft or charity) is the exchange of services between two parties where both parties receive an increase in value by that exchange. This exchange of value is only "demeaning" to people who do not value that the rewards of this world are payment for services performed to others (with the exception perhaps of those rare few living off the land). Apparently, these people feel the natural rules of society don't really apply to them, and they should be justly compensated for the pleasure of their existence.

Your complete mischaracterization of others' points and your associated insults are unnecessary and frustrating. If you leave those out, I'll refrain from replying so that you can thoroughly enjoy the echo chamber you so value.

[mathlete]

Continuing to pay people 7.25/hr is taking advantage of a person no matter where they live in this country. If businesses in poor areas didn't go under in 2009 from the wage increase, they won't now either.

I'm not sure I agree. I don't think $7.25/hour is a good wage, and it's certainly not a "living wage" by most metrics that academics offer up. But I think I could definitely make an argument that mandating small businesses to pay a living wage (as defined by supporting an adult when working full time or something) is taking advantage of small business when something like 20% of workers at or below the minimum are teenagers.

At this point, we're talking about 1.7 million people who haven't been helped yet either by rising economic tides, or by their state or local government taking action. By doing a Federal mandate, you're going to help some people that need help of course, but you're also going to help people who don't need help. And it's going to come entirely at the cost of squeezed margins for low wage employers.

Is it taking advantage of a 16 year old to pay her $7.25/hour in beer money to flip burgers? Maybe. I don't know. But I'm willing to bet that people have a stronger reaction if you replace her with a 25 y/o single mom working for $7.25/hour. I'm cool with chaining the MW to the CPI, but I'm very wary of plans to raise the MW to $15/hour (even though my two favorite candidates both have this as a policy platform).

If we want to help single moms and people who can't make rent, then lets do that. I don't see why that has to be with Federal MW legislation though.

[FIPurpose]

Continuing to pay people 7.25/hr is taking advantage of a person no matter where they live in this country. If businesses in poor areas didn't go under in 2009 from the wage increase, they won't now either.

I'm not sure I agree. I don't think $7.25/hour is a good wage, and it's certainly not a "living wage" by most metrics that academics offer up. But I think I could definitely make an argument that mandating small businesses to pay a living wage (as defined by supporting an adult when working full time or something) is taking advantage of small business when something like 20% of workers at or below the minimum are teenagers.

At this point, we're talking about 1.7 million people who haven't been helped yet either by rising economic tides, or by their state or local government taking action. By doing a Federal mandate, you're going to help some people that need help of course, but you're also going to help people who don't need help. And it's going to come entirely at the cost of squeezed margins for low wage employers.

Is it taking advantage of a 16 year old to pay her $7.25/hour in beer money to flip burgers? Maybe. I don't know. But I'm willing to bet that people have a stronger reaction if you replace her with a 25 y/o single mom working for $7.25/hour. I'm cool with chaining the MW to the CPI, but I'm very wary of plans to raise the MW to $15/hour (even though my two favorite candidates both have this as a policy platform).

If we want to help single moms and people who can't make rent, then lets do that. I don't see why that has to be with Federal MW legislation though.

I'm not sure why 16 year old pay is less of a concern. Or like that's a whole class of people who don't deserve a living wage. How many teenagers are a major breadwinner for their family? How many teenagers are trying to save up so that they have some money for college textbooks and proper living arrangements away from their parents. How many are in foster care that have no long-term financial fallback apart from themselves?

And even if not. We're saying that there are businesses that will be destroyed because they won't be able to depend on cheap child labor? Also, you're saying that despite these workers only accounting for <2% of the work force, this would end up destroying large amounts of jobs? Unless there's something I'm missing, you can only pick one. In fact this study estimates that raising the MW to 10.10 (2016) would actually create a net 85k jobs: https://www.epi.org/publication/raising-federal-minimum-wage-to-1010/

I get it. I came from a family where I never worried about food. My money working at a fast food joint (I was gifted a $2k car by my parents to get to work in the first place) went to 1. A computer that I ended up using all through college, 2. A supply of money that I could use so that I didn't have to work my first 2 years of college. And even then, I went to an extremely affordable college in one of the cheapest towns to live in in the US. And on top of that I was heavily subsidized by my parents who paid for 1 year of rent and took out Parent loans for my school. Teenagers have a huge need to be paid well to just come close to making it through college without huge amounts of debt.

23MM people earn between 7.25 and 11. 42% earn less than 15/hr.

[mathlete]

I'm not sure why 16 year old pay is less of a concern. Or like that's a whole class of people who don't deserve a living wage. How many teenagers are a major breadwinner for their family? How many teenagers are trying to save up so that they have some money for college textbooks and proper living arrangements away from their parents. How many are in foster care that have no long-term financial fallback apart from themselves?

I have no idea, but I'm going to guess, probably not many.

And even if not. We're saying that there are businesses that will be destroyed because they won't be able to depend on cheap child labor? Also, you're saying that despite these workers only accounting for <2% of the work force, this would end up destroying large amounts of jobs? Unless there's something I'm missing, you can only pick one. In fact this study estimates that raising the MW to 10.10 (2016) would actually create a net 85k jobs: https://www.epi.org/publication/raising-federal-minimum-wage-to-1010/

I think there is this tendency to believe that companies that pay low wages are greedy and exploitative. That may or may not be true, but I don't think there's much correlation with wages. Most companies will pay the lowest wages they think they can get away with. Businesses that employ low wage workers tend to be companies with low margins and low skill jobs. A software company like Microsoft employs high skilled workers making lots of money and routinely posts margins in  the 30s. A grocery store on the other hand; low skill, low wages, 1%-3% margins.

What I'm saying is that I don't think your local grocery store should be more "on the hook" for floor raising for the benefit of low wage workers than Microsoft. But that's what Federal MW legislation does.

I never quantified how many businesses would go under or how many jobs would be lost or gained. Just that the problems that are ostensibly caused by low wages have better and more targeted solutions.

I get it. I came from a family where I never worried about food. My money working at a fast food joint (I was gifted a $2k car by my parents to get to work in the first place) went to 1. A computer that I ended up using all through college, 2. A supply of money that I could use so that I didn't have to work my first 2 years of college. And even then, I went to an extremely affordable college in one of the cheapest towns to live in in the US. And on top of that I was heavily subsidized by my parents who paid for 1 year of rent and took out Parent loans for my school. Teenagers have a huge need to be paid well to just come close to making it through college without huge amounts of debt.

So you were a college-bound kid in a financially stable household with parents who supported you into adulthood. And you think the Federal Government should legislate even more help for people like you? This is exactly my point.

If there is a 16 year old out there who is the breadwinner for her family, the Federal government should be kicking down the door to throw money at her, I agree with that. But it's inefficient to look at her and decide that everyone making what she is making should also get a raise.

23MM people earn between 7.25 and 11. 42% earn less than 15/hr.

These are good numbers to have in my pocket. Thank you.

Please recognize what an uncomfortable argument this is for me to make. One of my biggest positions on here is that more money in the hands of people with a high marginal propensity to consume (poor people) is much better for the economy than the rich sitting on money. So yes, I definitely see the benefit in someone making $11 and hour or $15 an hour instead of $8 and hour. Both for that person, and for the economy at large.

I just think there are much better ways to get from point A to point B. Raise taxes. Tax capital at a higher rate than labor. Use the proceeds to guarantee healthcare, childcare, and 2+ years of public university. Raise the Earned Income Tax Credit to help the working poor. Technology and globalization are exacerbating inequality in the United States. I don't think it's fair or even a good idea to make small businesses carry the burden for that.

[Davnasty]

In contrast, I really cannot understand, for example, a poster who sees the working poor fearing being unable to put food on the table for themselves or their children as jobs go away as a good thing because it'll mean it is easier and cheaper for that poster to hire other human beings to do menial and demeaning jobs for them. And people like that do exist on this forum.

I don't know if they were imagining the job of "personal jester" but I like your label for this kind of thinking and may use it in the future.

In contrast, I really cannot understand how some people fail to grasp that the fundamental basis of all microeconomic transactions (with the exception of theft or charity) is the exchange of services between two parties where both parties receive an increase in value by that exchange. This exchange of value is only "demeaning" to people who do not value that the rewards of this world are payment for services performed to others (with the exception perhaps of those rare few living off the land). Apparently, these people feel the natural rules of society don't really apply to them, and they should be justly compensated for the pleasure of their existence.

Your complete mischaracterization of others' points and your associated insults are unnecessary and frustrating. If you leave those out, I'll refrain from replying so that you can thoroughly enjoy the echo chamber you so value.

I think you've misunderstood the intent of this post. If the first bolded statement doesn't apply to you then... well it doesn't apply to you. What is being mischaracterized?

If you haven't already, I recommend reading the rest of the exchange following that comment. It's a good conversation and I certainly wouldn't call it an echo chamber. In fact, I think maizeman's position is very much in line with the portion of your comment I've bolded.

[maizefolk]

Please recognize what an uncomfortable argument this is for me to make. One of my biggest positions on here is that more money in the hands of people with a high marginal propensity to consume (poor people) is much better for the economy than the rich sitting on money. So yes, I definitely see the benefit in someone making $11 and hour or $15 an hour instead of $8 and hour. Both for that person, and for the economy at large.

I just think there are much better ways to get from point A to point B. Raise taxes. Tax capital at a higher rate than labor. Use the proceeds to guarantee healthcare, childcare, and 2+ years of public university. Raise the Earned Income Tax Credit to help the working poor. Technology and globalization are exacerbating inequality in the United States. I don't think it's fair or even a good idea to make small businesses carry the burden for that.

I just want to echo my agreement, particularly with the bolded bits, although mathlete said it more compellingly and coherently than I have managed to.

My argument is not that the poor and disadvantaged have enough money and don't need any help. It's that raising the minimum wage is an inefficient and sometimes counterproductive way to get help to the people who really need it, since it misses out on helping those who are unable to work and those currently without jobs, while actually harming those whose jobs would not exist at $15/hour.

[mathlete]

I just want to echo my agreement, particularly with the bolded bits, although mathlete said it more compellingly and coherently than I have managed to.

My argument is not that the poor and disadvantaged have enough money and don't need any help. It's that raising the minimum wage is an inefficient and sometimes counterproductive way to get help to the people who really need it, since it misses out on helping those who are unable to work and those currently without jobs, while actually harming those whose jobs would not exist at $15/hour.

tsk tsk. Classic maizeman...

[FIPurpose]

Please recognize what an uncomfortable argument this is for me to make. One of my biggest positions on here is that more money in the hands of people with a high marginal propensity to consume (poor people) is much better for the economy than the rich sitting on money. So yes, I definitely see the benefit in someone making $11 and hour or $15 an hour instead of $8 and hour. Both for that person, and for the economy at large.

I just think there are much better ways to get from point A to point B. Raise taxes. Tax capital at a higher rate than labor. Use the proceeds to guarantee healthcare, childcare, and 2+ years of public university. Raise the Earned Income Tax Credit to help the working poor. Technology and globalization are exacerbating inequality in the United States. I don't think it's fair or even a good idea to make small businesses carry the burden for that.

I think this fails to recognize the changes in an economy that raises the minimum wage. That floor is raised across the whole economy. Meaning that the employees of Microsoft et al. would be paying higher prices (ostensibly they already are since they work in Seattle with a 15/hr minimum (12/hr with benefits)). The burden wouldn't be on small businesses, they would end up raising prices more or less in unison to match the increased costs.

We've already discussed that a hamburger would likely increase in cost .75. A cost that most of us can easily afford. Now a McD's employee can also afford that price increase: their wage doubled.

Raising taxes on the other hand:

1. Does not encourage workforce participation
2. Encourages the culture we currently have of combatting tax payers and takers (insert Mitt Romney quote here)
3. Is easily attacked and eaten away by politics

Raising MW on the other hand:

1. Reduces use of government welfare
2. Improves employee morale
3. Would reduce employee turnover
4. Provides minimum wage standards for a fair market playing ground (a big reason why Walmart is calling for a MW increase)
5. Creates a better more robust economy where there is a larger amount of leisure money flowing through the economy.

When Standard Oil was broken up, Rockefeller actually continued to make even more money. Sometimes economies reach a point where everyone has their fist in the proverbial pickle jar. We are currently at that point. No one wants to be the one to release their hand, so the government has to be the one that negotiates that even playing field.

The point to my own story was that it was difficult for me despite my own advantages. However, I at least have the self awareness to recognize that I'm easily in the top 10% of society and that my family was and is as well. I am more than willing to pay more in taxes to make that future possible to many more in our society. Is that selfish? I guess in a sense. I do know that if our society is truly as dependent on technological innovation as you say it is, then we better well start educating waaay more people than we are now. US tech is forced to open global offices not because they want to, but because they have to in order to find the talent.

[Just Joe]

What keeps all those people who profit off of the marginally employed (paid) from raising their prices to soak up any new found income of the MW folks?

Drive through low income neighborhoods and there are typical a variety of businesses that thrive no where else. Some rely on consumer ignorance, consumer impulse control, or a consumer's ability to plan/save for the future leading to financial calamities.

[FIPurpose]

What keeps all those people who profit off of the marginally employed (paid) from raising their prices to soak up any new found income of the MW folks?

Drive through low income neighborhoods and there are typical a variety of businesses that thrive no where else. Some rely on consumer ignorance, consumer impulse control, or a consumer's ability to plan/save for the future leading to financial calamities.

Are you talking about pay day loan companies? Those should be outlawed. There's also whole industries based around soaking the rich based on inflating their own egos. But short answer would be that increased pay means that poor people have more options available to them to make different purchasing decisions.

For example a quickie-mart may end up being replaced by a grocery store like a 'Save-a-lot' if those neighborhoods see an influx of cash, solving a multitude of problems around poor-health outcomes, food availability, and education outcomes. Some businesses may go out of business but they would be replaced by new ones that can provide for the needs of the community where it couldn't before.

[mathlete]

I think this fails to recognize the changes in an economy that raises the minimum wage. That floor is raised across the whole economy. Meaning that the employees of Microsoft et al. would be paying higher prices (ostensibly they already are since they work in Seattle with a 15/hr minimum (12/hr with benefits)). The burden wouldn't be on small businesses, they would end up raising prices more or less in unison to match the increased costs.

We've already discussed that a hamburger would likely increase in cost .75. A cost that most of us can easily afford. Now a McD's employee can also afford that price increase: their wage doubled.

This assumes that consumers aren't price-sensitive. Which they are.

Raising taxes on the other hand:

1. Does not encourage workforce participation
2. Encourages the culture we currently have of combatting tax payers and takers (insert Mitt Romney quote here)
3. Is easily attacked and eaten away by politics

I don't see workforce participation as an unambiguous good. And raising the MW is highly politicized too.

Raising MW on the other hand:

1. Reduces use of government welfare
2. Improves employee morale
3. Would reduce employee turnover
4. Provides minimum wage standards for a fair market playing ground (a big reason why Walmart is calling for a MW increase)
5. Creates a better more robust economy where there is a larger amount of leisure money flowing through the economy.

I don't see government welfare as an unambiguous bad. e.g., paying for everyone's healthcare is better/more efficient than raising everyone's wages so they have money to pay for healthcare. It's more welfare and lower wages, but a net positive IMO.

If the motivation is more leisure money flowing through the economy, then I'd rather see a universal basic income. You can tax it away from people making more money, and it would't unduly burden low margin/low skill industries.

When Standard Oil was broken up, Rockefeller actually continued to make even more money. Sometimes economies reach a point where everyone has their fist in the proverbial pickle jar. We are currently at that point. No one wants to be the one to release their hand, so the government has to be the one that negotiates that even playing field.

I agree. I'm a big proponent of government regulation. And even price-setting in some circumstances. Price-setting of labor at a national level just isn't one of those circumstances.

The point to my own story was that it was difficult for me despite my own advantages. However, I at least have the self awareness to recognize that I'm easily in the top 10% of society and that my family was and is as well. I am more than willing to pay more in taxes to make that future possible to many more in our society. Is that selfish? I guess in a sense. I do know that if our society is truly as dependent on technological innovation as you say it is, then we better well start educating waaay more people than we are now. US tech is forced to open global offices not because they want to, but because they have to in order to find the talent.

I'm excited to hear that you're willing to pay more in taxes! Can I interest you in some floor-raising welfare measures :)

Whoever said that this thread is an echo chamber is wrong. This thread is awesome. FIPurpose and I are both people who fundamentally believe that richer people should be willing to shell out more money to better the lives of low wage workers. But we still find a way to disagree on the finer details. These are the best kind of disagreements.

[mathlete]

Are you talking about pay day loan companies? Those should be outlawed.

Hooray! Another opportunity for productive disagreement.

Payday loans exist to serve a market. If you outlaw them, that won't necessarily stop people from needing cash in between paychecks. Better to pay a scummy lender an insane interest rate than to borrow from the guy who takes a baseball bat to your kneecaps when you can't pay the money back.

I'm definitely in favor of more legislation that requires these places to tell their customers what a terrible deal they're offering.

[maizefolk]

But short answer would be that increased pay means that poor people have more options available to them to make different purchasing decisions.

For example a quickie-mart may end up being replaced by a grocery store like a 'Save-a-lot' if those neighborhoods see an influx of cash, solving a multitude of problems around poor-health outcomes, food availability, and education outcomes.

I agree that increased disposable income for poor people (regardless of where that incomes comes from) means that poor people have more options available to them to make different purchasing decisions.

I suspect you'd see the same, if not more, of the same positive changes in your second paragraph by implementing a stronger safety net/income floor (capitalism where income does not start at zero) than from a minimum wage increase, since you'd be putting money in the hands of all of the people currently living in food deserts (which tend to have much higher rates of unemployment/underemployment and lower rates of workforce participation) and not just the subset of residents in those neighborhoods who are employed, currently making less than $15/hour, and working jobs where their employers can afford to raise their pay to $15/hour without reducing hours or employee numbers.

Some businesses may go out of business but they would be replaced by new ones that can provide for the needs of the community where it couldn't before.

This is probably one a couple of cruxes where we disagree. I don't think increasing the minimum wage all the way to $15 would create nearly enough new jobs to compensate for the folks put out of work.

Could you tell me a bit more about why you seem so confident that it would? Because I think we're definitely trying to accomplish the same end goals we're just coming down on completely different means to achieve those ends.

[TempusFugit]

Are you talking about pay day loan companies? Those should be outlawed.

Hooray! Another opportunity for productive disagreement.

Payday loans exist to serve a market. If you outlaw them, that won't necessarily stop people from needing cash in between paychecks. Better to pay a scummy lender an insane interest rate than to borrow from the guy who takes a baseball bat to your kneecaps when you can't pay the money back.

I'm definitely in favor of more legislation that requires these places to tell their customers what a terrible deal they're offering.

Exactly.  Removing the lender doesn't remove the need.  If you think these folks deserve better rates then feel free to open a storefront and loan out money at lower rates.  I agree with the idea of mandating better disclosure, but we’re talking about people here.

[maizefolk]

A couple of pieces of information on payday lenders that I found fascinating.

Post on the blog of the New York Federal Reserve Bank: https://libertystreeteconomics.newyorkfed.org/2015/10/reframing-the-debate-about-payday-lending.html
Freakonomics Podcast (or text transcript, which is faster to read) which includes an interview with the people who wrote the NY Fed article: http://freakonomics.com/podcast/payday-loans/

The very short version is that people tend to be rational actors, and if they're taking out loans at extremely high interest rates, knowing that there is a significant risk of being trapped in a cycle of not being able to pay off the loan and having to roll it over, it is frequently because it is the best of the very bad options available to them.

For example someone might take out a payday loan to avoid being sent to jail for an unpaid ticket or to avoid an escalating series of overdraft fees when their bank account is empty and they know several checks are going to post to it before their next payday.

To me is seems like problem isn't that people have the option of payday loans, it is that they don't have other better options. Seems like the solution would be work on getting people for financial buffer/resiliency rather than to take away one of their bad options so they'll be forced into whatever the next-least-bad option is (jail/even more expensive overdraft fees/etc).

[FIPurpose]

I think a big part of where we are maybe talking past each other is that the number of studies done on MW are very limited. And the few studies that have been done will have several confounding factors that make isolating the effect of MW a rather difficult task. So instead of being able to reference specific data (like I stated earlier, the last national MW raise was 10 years ago, so there hasn't been any ability to measure the effects of minimum wage hikes in recent years), we have to rely on city or state wide MW hike studies and make assumptions about how that would play out on a national level. We both end up citing macroeconomic principles, but they end up drawing somewhat conflicting viewpoints. So here are some studies that I'll present for debate:

A simulation of the effects of a $15 MW in Mississippi: https://irle.berkeley.edu/files/2019/02/The-Employment-Effects-of-a-15-Minimum-Wage-in-the-US-and-in-Mississippi.pdf

A $15 nationwide minimum wage by 2024 would generate a significant increase in living
standards for about 41.5 million workers and their families in the U.S. while creating a
minimal effect on employment and a small price increase borne by all consumers. The effects
in Mississippi would be roughly similar.

Three industries account for more than 40 percent of the U.S. private sector workers who
would get increases: retail trade (18.2 percent), restaurants (15.6 percent), and health
services (10.5 percent). The remaining low-wage workers are scattered among a broad variety
of industries. Total wage costs would increase 1.9 percent across all employers.

We estimate a very small increase in employment growth, relative to what would occur
without the minimum wage increase: 90,000 more jobs by 2024, which corresponds to 0.1
percent of projected 2024 employment. By comparison, census benchmark revisions of
annual employment have averaged 0.3 percent over the past decade and the Congressional
Budget Office projects that employment in the U.S. will grow 3.15 percent in the same time
period.

One based on Seattle's experience of raising their MW: https://irle.berkeley.edu/files/2017/Seattles-Minimum-Wage-Experiences-2015-16.pdf

The evidence collected here suggests that minimum wages in Seattle up to $13 per hour raised wages
for low-paid workers without causing disemployment. Each ten percent minimum wage increase in
Seattle raised pay by nearly one percent in food services overall and by 2.3 percent in limited-service
restaurants. The pay increase in full-serve restaurants was much smaller and not statistically
significant, consistent in part with higher pay in full-service restaurants and the establishment of a tip
credit policy. Employment effects in food services, in restaurants, in limited-service restaurants and in
full-service restaurants were not statistically distinguishable from zero. These results are all consistent
with previous studies that credibly examine the causal effects of minimum wages.
These findings of no significant disemployment effect of minimum wages up to $13 significantly
extend the minimum wage range studied in the previous literature. Of course, unobserved factors,
such as Seattle’s hot labor market compared to that in Synthetic Seattle (Tu, Lerman and Gates 2017),
may have positively affected Seattle’s low-wage employment during this period. We will monitor this
possibility as the city’s $15 policy continues to phase in. And Seattle makes up just one case study;
examination of a wider set of cities may lead to different conclusions. Our future reports will throw
further light on this possibility

And here's one that is tracking California's MW increase to 15 by 2023: https://irle.berkeley.edu/files/2017/Effects-of-a-15-Minimum-Wage-in-California-and-Fresno.pdf

Using past trends on population and employment, we project that state employment without
the minimum wage increases will grow 1.40 percent annually between 2016 and 2023.

Our estimate projects a very small increase in employment growth relative to what would
occur without the minimum wage increase. This slightly higher job growth would add 13,980
more jobs by 2023, raising employment by 0.1 percent by 2023..

How can such a major improvement in living standards occur without adverse employment
effects? The answer is that minimum wage increases generate both negative and positive
employment effects. A higher minimum wage induces some automation, as well as increased
worker productivity and slightly higher prices; these are the negative effects. A minimum wage
increase simultaneously reduces employee turnover, which reduces employers’ costs, and it
increases worker purchasing power, which stimulates consumer demand. These are the
positive effects. As it turns out, these negative and positive effects on employment largely
offset each other, in both California and in Fresno County.

The California wide one is probably the best as it is the largest population and widest appeal. And they have a comparison with the relatively poor county of Fresno. But they show that based on all estimates and observed outcomes, employment has been steady, and that the positives and negatives of a MW increase on the economy as a whole cancel out. There's a reason that states that have been pushing 12-15/hr aren't seeing huge capital flight, nor are consumers seeing huge price increases. They continue to thrive.

[maizefolk]

Hey thanks for posting these FIPurpose! I'm going to read in more detail.

I want to clarify that, if I understand correctly, California study is like the Mississippi one in that it specifically reports on the projected impact of minimum wage increases using the Berkeley IRLE's structural economic model, rather than observations of real world effects. The law with a phased increase to $15/hour was passed in 2016 and this report came out in January of 2017, so I don't think there was time to observe any outcomes of the California law by the time they were writing this report.

But I'm still reading so may yet prove to have missed something. I did grumble a bit when I got to the part where they found two different elasticities for the substitution of capital for labor (e.g. buying self checkout/ordering machines to replace cashiers), took the midpoint of the two, and called that a conservative choice rather than taking the more favorable estimate (the one that would result in less job loss).

Want to thank everyone to a fascinating (and civil) discussion on this topic. Have been having to think a lot harder about that I know or predict, and why I believe it to be true than I normally do, which is always a good feeling.

[Systems101]

There is a fairly old study that I think may be relevant, and shows interesting differential effects from a 1992 increase in minimum wage in NJ (when the minimum wage didn't change in PA).

Contrary to the central prediction of a text book model of the minimum wage, but consistent with a growing number of studies based on cross-sectional-time series comparisons of affected and unaffected markets or employers, we find no evidence that the rise in New Jersey's minimum wage reduced employment at fastfood restaurants in the state.

It's worth adding to the reading list as @FIPurpose and @maizeman continue their discussion.

[FIPurpose]

There is a study that they did comparing 6 cities raising their minimum wage around the same time: https://irle.berkeley.edu/files/2018/09/The-New-Wave-of-Local-Minimum-Wage-Policies.pdf

The main conclusion from that paper:

Minimum wages in our six cities ranged from just above $10 to $13 at the end of 2016, the last period
for which our data are available. As in earlier case studies of individual cities and national minimum
wage studies, we focus on the food services industry, the largest and most intense user of low-wage labor.
We isolate the causal effects of the minimum wage changes using both event study and
synthetic control methods.

Compared to earlier local case studies, we draw from a wider variety of untreated comparison counties
to conduct our analysis. We examine the results for each city as well as pooled estimates that draw
from all six cities together. We use the Quarterly Census of Employment and Wages because it has
sufficiently finely-grained quarterly data at the local level, unlike other datasets, such as the Current
Population Survey or the American Community Survey.

We find that minimum wages in the $10 to $13 range have statistically significant positive effects on
earnings. At the individual city level, our estimated wage increases are proportional to the size of the
minimum wage increases. On average across the six cities, we find that a 10 percent increase in the
minimum wage increases earnings in the food services industry between 1.3 and 2.5 percent. This
result is very similar to the estimates in previous studies of minimum wage levels up to $10.

In addition to our findings of positive effects on earnings, we do not detect negative significant
employment effects in any of the individual cities, or when pooling them together. Our results from
the event study and synthetic control approaches are remarkably similar. They are also consistent with
the consensus of estimates in previous studies of restaurant workers and with studies of minimum
wage policies with similar minimum wage to median wage ratios. However, our pooled employment
confidence intervals are somewhat broader than in previous studies. This imprecision may result from
the limited number of events in our study compared to studies of state and federal increases.

[GodlessCommie]

Re: minimum wage, and in addition to studies cited above... Most other developed countries have minimum wage higher than the US, although not all have it, and not many are at $15 and above. There is no dearth of restaurants, including American fast food chains in them, or customers in said restaurants.

[mathlete]

UC Berkeley is a great institution and if they say that MW legislation has worked well for California and Seattle, then I have no reason to doubt that. Of course, that's compared to doing nothing at all, vs. my preferred method of taxing and expanding targeted welfare. But that's fine.

It doesn't surprise me that California continues to chug along as the state and localities raise the minimum wage. California is a diversified economic juggernaut, and the most beautiful place in the country. Silicon Valley is still Silicon Valley, even as quality of life there deteriorates. That's just how big the state's built in advantages are.

The simulation stuff with Mississippi is interesting. I'm not an economist or a professor like the people who did this research, so all I can say is that Mississippi is not California, and maybe that gets lost in the sauce somewhere. Median home prices in Sacramento, one of CA's more affordable metros, are still more than double what they are in Jackson Mississippi. Mississippi is dead last in per-capita GDP, and population growth is nearly flat. Mississippi is home to zero Fortune 500 companies.

I desperately want to floor-raise for Mississippi. But while California or Washington State have rich and vibrant economies that can certainly absorb a Federally mandated wage hike, I'm worried about states like Mississippi. Higher wages are good in the abstract, but this floor-raising is going to come mostly at the expense of Mississippi consumers and businesses, neither of which are particularly rich or price insensitive.

I'd rather we floor-raise Mississippi with Federal funding. Federal dollars for free childcare. Federal refundable tax rebates for the working poor. That kind of stuff.

Thanks for adding some University research to the conversation. Makes us all smarter.

[GodlessCommie]

How did places like Mississippi react when the Federal Minimum Wage was first introduced? Did it cause businesses to close and customers to reduce spending?

[Fish Sweet]

Just wanted to chime in with and say that for a lurker like me, this whole back and forth has been both fascinating and educational!

I'd also like to add a note that while it's easy to say that between two cashiers at McD's, a teenager living at home and a 32 yo single mother to 3, of COURSE the mother should be making more, wages really shouldn't be based on how much someone 'needs' the money.   For starters, there's really no way to determine someone's level of 'need' without a lot of intrusive and boundary-violating digging into their personal affairs.  It can also play into a lot of biased and discriminatory assumptions. For example, I know women who were denied raises and promotions because "Jimbob is the breadwinner of his household and has a wife, three kids, and a mortgage to take care of-- you're single, no kids, and he needs the money more."  Aside from the obvious gender and marriage based discrimination taking place, it also ignores the plethora of other reasons for why people might 'need' money--  repaying debt, supporting elderly family, caretaking duties, personal medical expenses, not to mention people who might not be 'out' in their workplaces or not willing to just plain disclose all that personal info.

For that matter, how many teenagers are the primary breadwinners of their home?  Working hard at second jobs after school to pay rent?  How many are supporting parents or siblings?  Probably quite a few.  I grew up in a thoroughly upper middle class community spilling over with privilege and wealth in an upper middle class family-- and yet, I still know/knew plenty.  Some of them I weren't aware of until many years later, because lack of money and relying on children can be a source of a lot of shame.  Disability, death, job loss, cancer, long term care for elderly or special needs family members-- those are issues that impact us all, rich and poor, young and old.

[mathlete]

Trying to mentally go through the fundamentals of doubling Mississippi's minimum wage.

We're not bringing in resources from anywhere else, so this is in effect, redistribution within Mississippi's borders. The idea being that there's a lot of potential transacting that Mississippians would be doing, but capital and income is too inefficiently distributed. I'm just not sure if the lack of transacting (i.e. bad economy) in the state is due to an inefficient allocation of wealth and income, or just that there isn't enough wealth and income to begin with. As I said before, no Fortune 500 companies. Subject to natural disasters. Slow to industrialize. 14th in Oil Production, but that's probably less vital in the 21st century than it was last century.

I don't want to dunk on Mississippi too hard. I'm sure it's a nice place. And it's got three tier one research universities, which is good. But the best bet to help someone in Mississippi is to have them leave for greener pastures. Not everyone wants to do that, which I understand. So we should make large Federal investments for those who want to stay. I understand this is a tough sell, since the state already ranks last in net receivables.

[Boofinator]

In contrast, I really cannot understand, for example, a poster who sees the working poor fearing being unable to put food on the table for themselves or their children as jobs go away as a good thing because it'll mean it is easier and cheaper for that poster to hire other human beings to do menial and demeaning jobs for them. And people like that do exist on this forum.

I don't know if they were imagining the job of "personal jester" but I like your label for this kind of thinking and may use it in the future.

In contrast, I really cannot understand how some people fail to grasp that the fundamental basis of all microeconomic transactions (with the exception of theft or charity) is the exchange of services between two parties where both parties receive an increase in value by that exchange. This exchange of value is only "demeaning" to people who do not value that the rewards of this world are payment for services performed to others (with the exception perhaps of those rare few living off the land). Apparently, these people feel the natural rules of society don't really apply to them, and they should be justly compensated for the pleasure of their existence.

Your complete mischaracterization of others' points and your associated insults are unnecessary and frustrating. If you leave those out, I'll refrain from replying so that you can thoroughly enjoy the echo chamber you so value.

I think you've misunderstood the intent of this post. If the first bolded statement doesn't apply to you then... well it doesn't apply to you. What is being mischaracterized?

If you haven't already, I recommend reading the rest of the exchange following that comment. It's a good conversation and I certainly wouldn't call it an echo chamber. In fact, I think maizeman's position is very much in line with the portion of your comment I've bolded.

I really don't want to be a part of the general discussion of this thread, but just to make my point clear: I don't think there exists anybody on this forum who thinks people should be working "menial and demeaning jobs"*, nor do they imagine the job of a "personal jester". Maizeman has the habit of misconstruing the talking points of others (aka straw-manning), and it completely discredits his otherwise informed arguments. And when I referenced the "echo chamber", I was referring to his habit of accusing those who disagree on a fundamental level with some topic at hand (rather than simply arguing the finer points that support his general conclusion) as "not acting in good faith".

*Some people, understandably, might have different definitions of "menial and demeaning". In my opinion, a job which provides value to society, is taken up with free will, and provides a living wage, cannot be menial and demeaning from a societal standpoint. However, from a personal standpoint, I'd imagine many if not most people throughout the history of time would have considered their jobs to be menial and demeaning at least some portion of the time.

MOD NOTE: Please stop personal attacks on other forum members. Thanks.

[Bloop Bloop]

In my opinion society should embrace some level of redistribution to:
(1) Prevent people from starving or freezing;
(2) Prevent children from being encumbered with the sins of their parents (in practice it is impossible to entirely prevent this, but having a robust education system, some form of estate tax, and a fair university entry system that attempts to control for socio-economic status are some ways to go about this).

But beyond that, I don't believe in any job market assistance. I believe in meritocracy. I believe you get what you're capable of getting. I don't like nepotism, and I'm happy for that to be discouraged, but otherwise it doesn't bother me if some people lack skills and are paid worse and some people have skills and are paid better.

To you a job may seem menial or demeaning - to me it's a non-sequitur. People have to try to earn a living first, if they're physically and mentally capable, before they turn to the government for support. The idea of redistribution that attempts to palliate the disparity in skills and intellect is not something I will ever support.

[mathlete]

We don't live in a meritocracy though. We live in a cheerocracy under capitalism. Compensation for labor pales in comparison for compensation that's driven by what you own. And the more you own, the more you get to change the rules for your own benefit. Capital gains are taxed at a lower rate than labor. The US just committed to going over a trillion dollars further in debt, mostly to fund share buybacks - i.e. to pay people who own equity more money.

So some low skill people end up laboring for nominal rates, and things like a reasonable commute or having children are cost-prohibitive for them. And meanwhile, other low skill people own equity and collect more money than they have utility for. Our allocation of capital is extremely inefficient IMO.

[GodlessCommie]

but otherwise it doesn't bother me if some people lack skills and are paid worse and some people have skills and are paid better.

I don't think anyone argues for unskill labor to be paid the same as skilled (despite what my screen name may suggest). The question is what the floor shoold be, and how big the acceptable gap.

No, we cannot rely solely on market forces here - market forces allowed for child labor and deadly working conditions just fine.

And what skills you have is heavily driven by factors beyond your control: where and to which parents you are born.

[Bloop Bloop]

We don't live in a meritocracy though. We live in a cheerocracy under capitalism. Compensation for labor pales in comparison for compensation that's driven by what you own. And the more you own, the more you get to change the rules for your own benefit. Capital gains are taxed at a lower rate than labor. The US just committed to going over a trillion dollars further in debt, mostly to fund share buybacks - i.e. to pay people who own equity more money.

So some low skill people end up laboring for nominal rates, and things like a reasonable commute or having children are cost-prohibitive for them. And meanwhile, other low skill people own equity and collect more money than they have utility for. Our allocation of capital is extremely inefficient IMO.

Maybe in the US capital gains are taxed more lightly than labour. Here in Australia they are mostly not, since most labourers do not pay a very high rate of tax at all. I am not saying I don't think the tax system can be twerked and possibly an estate tax would do well to divest low-skilled inheritors from some of their unearned gains. I don't have an issue with all that. But that's not central to the argument about jobs.

but otherwise it doesn't bother me if some people lack skills and are paid worse and some people have skills and are paid better.

I don't think anyone argues for unskill labor to be paid the same as skilled (despite what my screen name may suggest). The question is what the floor shoold be, and how big the acceptable gap.

No, we cannot rely solely on market forces here - market forces allowed for child labor and deadly working conditions just fine.

And what skills you have is heavily driven by factors beyond your control: where and to which parents you are born.

I accept that what skills you have are partly inherited or taught by parents. That's just life. I see it as an extension of the good or bad choices made by parents. Like I said I think a robust educational system and early intervention system would help provide equality of opportunity for children (and that should be encouraged) but at some stage you have to accept that parents' decisions will redound to the next generation.

[EscapedApe]

Want less poverty, move more money to the lower class. ... Public companies alone bought back $1T in stock this year, US companies can afford to pay more without losing any jobs.

I agree with you here, but this seems to be an argument for either a UBI or negative income tax (which is a topic already debated to death in other threads) funded by an increase in taxation of corporate profits rather than an argument for a raise in the minimum wage.

-Raising the minimum wage to $15/hour helps people who currently make less than $15/hour but generate more than $15/hour in profit for their employer.
-Raising the minimum wage to $15/hour hurts people who currently make less than $15/hour and generate less than $15/hour in profit for their employer.
-Raising the minimum wage to $15/hour doesn't do anything for people who cannot currently find work, or those trying to support a family while making $15 or more per hour.

Either a UBI or negative income tax would help all three groups.

There's something missing here.

In the past, minimum wage hikes have always resulted in increases in both unemployment and income inequality. And there's a specific reason for this.

As you pointed out, a person who is paid $15/hour but doesn't produce $15/hour worth of value is likely to be replaced by a robot.

But this outcome is far worse than simply a person being out of a job. It is also a person being deprived of the work experience that they would have gained if they had that job.

Work experience is critical to a person's ability to gain upward mobility.

There is this perception that economic "classes" are large, static entities. In reality,they are categories that people pass through (usually in the upwards direction) as they gain experience, education, skill, and knowledge. A person working a minimum wage job won't usually remain at that income level their entire life. They will develop these traits in their work and move upwards and onwards - but only if they have a job to begin with.

"Solutions" that disincentivize businesses from hiring people, or which incentivize people to not work, do far more harm than is readily apparent on the surface. I think letting the market determine wages is the best solution if it means more people have an opportunity to gain experience and move quickly out of low wage positions and into higher-earning ones.

[Davnasty]

In the past, minimum wage hikes have always resulted in increases in both unemployment and income inequality. And there's a specific reason for this.

Citation?