Min Wage Hikes

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Min Wage Hikes

Postby KeithE » Sat Feb 08, 2014 1:50 pm

As you know Obama has increased the min wage 39% (from $7.25 to $10.10) but only for a few people - namely min wage earners of new federally funded contracts (read * below). Obama also challenged industry to do the same for privately-funded production workers bringing out the predictable conservative reaction with generalities of how this will kill the economy:
Forbes
NewsMax
WatchDog
CATO

These and others in recent years have said min wages increases will just hurt poor people since it will reduce employment opportunity as their price increases.

Truth is most studies show little effect of min wage laws on employment rates of low wage earners. In fact, the most comprehensive study by the Center for Economic and Policy Research (CEPR) shows a small increase in employment opportunities of low wage earners with each of seven min wage increases since 1990. Look at Table I on page 16 of their report:
Why Does the Minimum Wage Have No Discernible Effect on Employment?.

Executive Summary of the CEPR study:

The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. 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.

Given the relatively small cost to employers of modest increases in the minimum wage, these adjustment mechanisms appear to be more than sufficient to avoid employment losses, even for employers with a large share of low-wage workers

underlines are mine.

This is the most complete survey of studies I’ve seen (and I’ve looked) and an interesting/accessible read. It shows that nationally each of 7 min wage increases since 1989 have actually resulted in increased employment opportunities for low wage earners (0.11% in 1990 ,0.13%,0.08%,0.08%,0.02%,0.03% and 0.03% in 2009 our most recent increase). Those increases are all small (less than 1%) but all positive and it is normalized by the general increase in min wage jobs since 1989.

The study moves on beyond this debate to explain why employment levels for low wage earners has not been affected much namely thorough consideration of 10 secondary adjustments corporation have made (other than the feared higher product prices) in response to actual min wage hikes (e.g. reduction in turnover rate, reorganized workflows improving efficiencies, wage compression [all levels except apparently the CEOs], reduction in profits [which have soared since 2000], better morale & harder work thru more motivated employees, stimulus effect, etc.).
As a result of these various alternative channels of adjustment, the institutional model suggests that the minimum wage "may have, particularly in the short-run, an approximately zero or small positive employment effect.


The conclusion:
Economists have conducted hundreds of studies of the employment impact of the minimum wage. Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.

The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms' overall costs and only modest relative to the wages paid to low-wage workers. In the traditional discussion of the minimum wage, economists have focused on how these costs affect employment outcomes, but employers have many other channels of adjustment. Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.


And here is another study (not quite as comprehensive) from UCB (that’s Berkeley for you southerners) focusing on adjacent areas where one state has had a min wage increase while the other has not.
Image.
It limits discussion to close local areas and is therefore not as national in scope as the CEPR study but they claim it’s better.

Abstract:
We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county pairs in the U.S. that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. Our findings are robust to allowing for long term effects of minimum wage changes.


Conclusion:
These caveats notwithstanding, our results explain the sometimes conflicting results in the existing minimum wage literature. For the range of minimum wage increases over the past several decades, methodologies using local com- parisons provide more reliable estimates by controlling for heterogeneity in employment growth. These estimates suggest no detectable employment losses from the kind of min- imum wage increases we have seen in the United States. Our analysis highlights the importance of accounting for such heterogeneity in future work on this topic.


OTOH, conservatives often point to 2008 book Minimum Wages by Neumark and Wascher (which I own) or a 2012 paper "Are the Effects of Minimum Wage Increases Always Small? New Evidence from a Case Study of New York State.”]2012 paper by Sabia, Burkhauser, Hansen.

The CEPR considered over 300 studies since 2000, including Neumark’s work/book, and the Sabia/Burkhasuer/Hansen paper (which they said was far too limited due to only one case being studied).

It is interesting to me that these conservatives latched on to the first sentence of the conclusion to Chapter 3 of Neumark/Wascher book which said:
In sum, we view the literature - when read broadly and critically - as largely solidifying the view that minimum wages reduce employment of low-skilled workers, and as suggesting that the low-wage labor market can be reasonably approximated by the neoclassical competitive model.

and ignore the rest of the paragraph which says other approaches to “improving the economic condition of those at the bottom of the income dsitribution” need to be considered as an intro to the rest of the book which calls for federally-funded job training programs which is decried by most of the RW in this country.

It should be noted that the CEPR and UCB papers are not of a “bleeding heart liberal” nature but focus on economic realities in recent years.

When you add the “bleeding heart liberal” factor (as I do), there is really no reason not to raise the min wage to $10.10 across the board (for non-dependent adults) which enables, for instance, a 2 min wage earner family with 2 children to attain a the “living wage” in Shelby County TN which is $19.33/hour.


--------------------------
* Aside about federally funded contracts: I looked into this a good bit but could not find adequate data (isolated to federally funded contracts). So I’ll give my impressions as one working inside the world of defense contracting with a fair amount of “lingo” thrown in. I suspect true min wage earners are limited to well under 5% of total employees on defense contracts. Typical contracted period-of-performances (“PoP”) are 1-3 years basic with up to 10 years of options and extensions to those options are frequently granted. Contracted rates are allowed to increase for cost of living (typically 0-1.2%/year) for direct wages throughout the contract (making replacement of older more expensive workers necessary). But the bigger allowable increases are in indirect “Overhead” rates (nominally for office supplies, employment spaces, specialized facilities, computers, fringe benefits) and “General and Administrative (G&A)” rates (marketeers, certain R&D, bid and proposal costs, and non-direct personnel - janitors/admin personnel/chief executive officers). They are also allowed to be adjusted each year but with less scrutiny (usually the last matter discussed in a negotiation at a proverbial 4:59pm on Friday). I’ve seen a sustained increases in G&A of 8%/year on a large (>1000 people) 3+6 year “option” contract (but that is clearly anecdotal). Also because requirements changes occur frequently on long contracts, "equitable adjustments” are frequently made allowing much cost growth (some warranted, some unwarranted).

The point is that although a 39% increase in min wage sounds like a big raise, its effects on overall contracted rates will be minimum (and slowly phased in) and dwarfed by the increases in allowable G&A, overhead rates and equitable adjustments. This both makes a mockery of both Obama’s grandstanding and on conservatives outcrying of “min wage increases will kill the economy".
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Re: Min Wage Hikes

Postby ET » Sun Feb 09, 2014 2:23 am

Well, as I've learned about things here in this forum, some topics are cyclical in nature. Thus, another bout of minimum wagism virus.

I knew if I waited long enough, I'd find use of this George Will on the matter. No, it's not a data-and-chart laden affair such as Keith's starting post, but it ads a good bit of common sense to the idea for those what wish to think about the matter and not just let their ears be tickled by this topic: Raise Minimum Wage? If's Iffy
(some excerpts)
Liberals' love of recycling extends to their ideas, one of which illustrates the miniaturization of Barack Obama's presidency. He fervently favors a minor measure that would have mostly small, mostly injurious effects on a small number of people. Nevertheless, raising the minimum hourly wage for the 23rd time since 1938, from today's $7.25 to $10.10, is a nifty idea, if:

If government is good at setting prices. Government – subsidizer of Solyndra, operator of the ethanol program, creator of HealthCare.gov – uses minimum wage laws to set the price for the labor of workers who are apt to add only small value to the economy.

If you think government should prevent two consenting parties – an employer and a worker – from agreeing to an hourly wage that government disapproves.

If you think today's 7 percent unemployment rate is too low. (It would be 10.9 percent if the workforce participation rate were as high as it was when Obama was first inaugurated; since then, millions of discouraged workers have stopped searching for jobs.) Because less than 3 percent of the workforce earns the minimum wage, increasing it will not greatly increase unemployment. Still, raising the price of low-productivity workers will somewhat reduce demand for them.

If you reject that last sentence. If you do, name other goods or services for which you think demand is inelastic when their prices increase.

If you think teenage (16-19) unemployment (20.8 percent), and especially African-American teenage unemployment (35.8 percent), is too low. Approximately 24 percent of minimum wage workers are teenagers.

If you think government policy should encourage automation of the ordering and preparation of food to replace workers in the restaurant industry, which employs 43.8 percent of minimum wage workers.

If you think forcing employers to spend X dollars more than necessary to employ labor for entry-level jobs will stimulate the economy. If you believe this, you must think the workers receiving the extra dollars will put the money to more stimulative uses than their employers would have. If so, why not a minimum wage of $50.50 rather than the $10.10? Because this might discourage hiring? What makes you sure you know the threshold where job destruction begins?

If you think the high school dropout rate is too low. In 1994, Congress decreed that by 2000 the graduation rate would be “at least” 90 percent. In 2010 it was 78.2 percent. Increasing the minimum wage would increase the incentive to leave school early. One scholarly study concluded that in states where students may leave school before 18, increases in the minimum wage caused teenage school enrollment to decline.

If the milk of human kindness flows by the quart in your veins, so you should also want to raise the minimum street charity: Take moral grandstanding oblivious of consequences to a new level by requiring anyone who gives money to panhandlers to give a minimum of $10. Beggars may not benefit, but you will admire yourself.

Here's a REAL WORLD example of how increases in the minimum wage can possibly play out. Increase it enough, and it makes more sense to invest in machinery than to deal with humans. This was confirmed in a similar story I posted regarding the minimum wage and Europe. I believe it was McDonald's in Europe that paid their workers $10 or $12 an hour....and they employed fewer people in their operations because that added cost mandate higher efficiency. Higher pay, but fewer jobs available.

Addressing another issue to which William and I have previously objected in Keith's proposal, how does one explain to the "dependent adult" working next to the "non dependent adult" doing the SAME WORK that the dependent's work is worth less when doing the same task than the non-dependent's? What of the adult seeking a second job to earn some extra pay to put his/her kids through college or to make hobby money or whatever use to which they want to put it...does that non-dependent adult just seeking out "fun money" get paid the "dependent rate" or the "non-dependent" rate?

Not to mention what do you think is going to happen when an employer is going through a stack of applications and has before him or her a choice between paying a dependent worker $7.25/hr and a non-dependent worker $10.10/hr for the same work?
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Re: Min Wage Hikes

Postby Sandy » Sun Feb 09, 2014 4:28 pm

I find it interesting that conservatives are opposed to increasing the minimum wage because of what it will do to small business, while some of their business icons pay salaries above the minimum wage because they've discovered, by their own admission, they get more out of their employees. Interesting, too, is the fact that these are all hugely profitable businesses, and they are competitive in their respective fields in terms of prices for goods and services.
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Re: Min Wage Hikes

Postby KeithE » Sun Feb 09, 2014 11:07 pm

ET wrote:Not to mention what do you think is going to happen when an employer is going through a stack of applications and has before him or her a choice between paying a dependent worker $7.25/hr and a non-dependent worker $10.10/hr for the same work?


To answer you question, I would certainly not just base decisions on pay rate. I’d make judgment on their work history (dependent-youth would not fair that well here), their likely length of employment (dependent-youth not high on this ground either), their need (dependent-youth would not rank high here either), their enthusiasm (dependent-youth might be better here), and their appearance (dependent-youth may tend to rank higher here), as well as their pay rate (presumed lower for dependent youth).

3 of 5 criteria would likely go to an adult.

And I say right now (Feb 2014) with unemployment (6.6%) + discouraged job drop-outs (est 5%) = ~12%, I think the min wage ought to be the same for dependent youth and adults (at something like the President suggested $10.10/hour) until the unemployment+discouraged gets down to say 6%. Then we can begin offering jobs to youth for less than min wage to introduce youth to work. But in the mean time, fix our employment problems first and our economy will recover more fully.

Prices need not increase given the efficiencies of lower turnover, more morale, corporations giving up some of their record profits, and some wage compression at high ($100K/year) - to very high (>$500K) and especially gargantuan levels (>$2M/year) pay scales. And so what if prices do increase for some products; smart industry will lower their prices and/or improve their products to be competitive.

I can hear William complaining about "soaking the rich" (not realizing that the rich has been soaking the poor/middle class for decades) and I can hear ET saying “that’s social engineering” again not realizing the free market manipulators have been grabbing all they can get for decades simply because they can.
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Re: Min Wage Hikes

Postby Sandy » Sun Feb 09, 2014 11:54 pm

Keith wrote:I can hear William complaining about "soaking the rich" (not realizing that the rich has been soaking the poor/middle class for decades) and I can hear ET saying “that’s social engineering” again not realizing the free market manipulators have been grabbing all they can get for decades simply because they can.


The corporate sector of the US economy has accumulated a level of wealth unprecedented in history, and has enriched a social class of wealthy elites unknown prior to the last three decades. It has done so because it hasn't been "soaked" to cover the cost of the infrastructure it uses, military protection that allows it to operate, and tax breaks it gets, and it has found ways to manipulate politicians, starting with Ronald Reagan, into helping them lower the cost of the labor that makes it possible for them to earn its money. Raising the minimum wage 50% wouldn't come close to being a "soaking," and it would likely increase the ability of corporations to earn more profit. If there's any concern about companies running to the third world to exploit the cheap labor of the underdeveloped countries, slap a tax on any company that lays off US workers and hires foreigners.

The rich in this country stopped being soaked long ago. The percentage of their spendable income that goes to taxes has a fractional impact on their riches, compared to the middle class.
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Re: Min Wage Hikes

Postby Mrs Haruo » Mon Feb 10, 2014 6:18 am

:-x You said it, Sandy. I don't appreciate one bit the squalor imposed on my neighborhood by absentee landlords and banks who foreclose on properties who don't give a rat's patootie that property they own and don't do a thing to improve becomes an eyesore and a health hazard when it gets broken into and used as a drug house and or a private dump site when there are honest hard working people forced to live in their cars if they are lucky enough to own one. I ride up I-5 through one of the more vibrant, beautiful and prosperous cities in the nation and at the same time see hundreds of tents erected in the wooded areas and under overpasses along the freeway by folks who have run out of options. There is something horribly wrong with this picture.
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Re: Min Wage Hikes

Postby KeithE » Tue Jun 03, 2014 7:35 am

Seattle passes a $15/Hr Min Wage.

We will see if Seattle's economy falls apart and whether or not their unemployment increases. Give it 3 months so as to remove the political reactionaries. Keep us informed Mrs. and Mr. Haruo.

Update: I guess it will not be implemented very quickly - 3 years before "many large businesses" must comply and 7 years before "all businesses" must comply according to:
CNN Money

I suspect much debate and behind the scenes wrangling over this.
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Re: Min Wage Hikes

Postby Haruo » Tue Jun 03, 2014 2:18 pm

Since I am currently making ten-something an hour (except when I work a paid holiday, which more than doubles my rate per hour), this new ordinance will undoubtedly have an effect on my income as it comes into full effect. It will probably have a net positive effect for me, but how it will play out countywide I have no idea. I say countywide because although it only affects employers in the city of Seattle, it will affect employees and job-seekers throughout the county (and, to a smaller extent, beyond).
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Re: Min Wage Hikes

Postby ET » Tue Jun 03, 2014 3:33 pm

Not directed at you Haruo...just a general statement - an industrious teenager or other worker could offer to work for $10 or $12/hr for cash after this takes effect and make a nice bit of money for the next Xbox or iPhone. :)
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Re: Min Wage Hikes

Postby Mrs Haruo » Wed Jun 04, 2014 3:38 am

Most teenagers that I know of that are able to find a job are helping to support their families. Buying school clothes their parents cant afford, and saving for college.
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Re: Min Wage Hikes

Postby ET » Wed Jun 04, 2014 4:30 pm

The majority of teenage min wage workers are suburban middle class per U.S. Labor Dept stats.
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Re: Min Wage Hikes

Postby Dave Roberts » Wed Jun 04, 2014 7:50 pm

ET, out of curiosity, what percentage of minimum wage workers are adults?
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Re: Min Wage Hikes

Postby ET » Wed Jun 04, 2014 9:49 pm

Dave, I posted that info in another thread on this topic. I'll see if I can find it and link or repost.
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Re: Min Wage Hikes

Postby Ed Pettibone » Thu Jun 05, 2014 5:03 am

Dave Roberts wrote:ET, out of curiosity, what percentage of minimum wage workers are adults?


Ed; Dave see http://www.pewresearch.org/fact-tank/20 ... imum-wage/

Part of what you wil find is
People at or below the federal minimum are:

Disproportionately young: 50.6% are ages 16 to 24; 24% are teenagers (ages 16 to 19).
Mostly (78%) white; fully half are white women.
Largely part-time workers (64% of the total).
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Re: Min Wage Hikes

Postby Sandy » Thu Jun 05, 2014 6:10 am

I don't think Seattle's economy will fall apart because of a $15 minimum wage. An established business with a strong customer base isn't going to move away over a few thousand dollars in expenses. More money will enter the economy, and that will boost business, not kill it. In Canada, where the provinces set their own minimum wage, the highest levels of economic prosperity, and business profit, is in the provinces with the highest minimum wages.
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Re: Min Wage Hikes

Postby KeithE » Thu Jun 05, 2014 9:01 am

Sandy wrote:I don't think Seattle's economy will fall apart because of a $15 minimum wage. An established business with a strong customer base isn't going to move away over a few thousand dollars in expenses. More money will enter the economy, and that will boost business, not kill it. In Canada, where the provinces set their own minimum wage, the highest levels of economic prosperity, and business profit, is in the provinces with the highest minimum wages.

Not a whole lot of difference between provinces on the min wage to base this generalization on.

Minimum Wage in Canada
lowest Alberta $9.95; highest Ontario & Nunavut $11.00
and
Province economic grades

Image

In the US I do not see any correlation between min wage (highest is Washington at $9.32/hour they increases in Jan 2014, lowest is Minnesota at $6.15)
Image

and Gross State Product per capita (both Washington and Minnesota doing well).

Image.

------------------

But I agree Seattle will not fall apart because of this (state of Washington has not suffered despite having an above the federal min wage since 1997).

Nor will employment levels of low wage earners drop as is often claimed. Read why at Why Does the Minimum Wage Have No Discernible Effect on Employment?
Conclusion
Economists have conducted hundreds of studies of the employment impact of the minimum wage. Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.
The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms' overall costs and only modest relative to the wages paid to low-wage workers. In the traditional discussion of the minimum wage, economists have focused on how these costs affect employment outcomes, but employers have many other channels of adjustment. Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.



-------------------
The far greater rise in pay at the upper end of wage earners is what is making for an unstable and inequitable economy.
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Re: Min Wage Hikes

Postby Sandy » Thu Jun 05, 2014 11:12 am

Pew Research 2012 wrote:People at or below the federal minimum are:
◾Disproportionately young: 50.6% are ages 16 to 24; 24% are teenagers (ages 16 to 19).
◾Mostly (78%) white; fully half are white women.
◾Largely part-time workers (64% of the total).


So if their figures, which come from the labor department and their own research, are correct, then the adult percentage of minimum wage workers is 76%.

Pew Research 2012 wrote:. According to the Bureau of Labor Statistics, last year 1.566 million hourly workers earned the federal minimum of $7.25 an hour; nearly two million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.55 million hourly workers at or below the federal minimum.That group represents 4.7% of the nation’s 75.3 million hourly-paid workers and 2.8% of all workers.


Ultimately, it is pretty easy to figure out that raising the federal minimum would not have a major detrimental effect on either business or the economy, nor would it kill jobs.
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Re: Min Wage Hikes

Postby KeithE » Thu Jun 05, 2014 12:08 pm

Sandy wrote:
Pew Research 2012 wrote:People at or below the federal minimum are:
◾Disproportionately young: 50.6% are ages 16 to 24; 24% are teenagers (ages 16 to 19).
◾Mostly (78%) white; fully half are white women.
◾Largely part-time workers (64% of the total).


So if their figures, which come from the labor department and their own research, are correct, then the adult percentage of minimum wage workers is 76%.

Pew Research 2012 wrote:. According to the Bureau of Labor Statistics, last year 1.566 million hourly workers earned the federal minimum of $7.25 an hour; nearly two million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.55 million hourly workers at or below the federal minimum.That group represents 4.7% of the nation’s 75.3 million hourly-paid workers and 2.8% of all workers.


Ultimately, it is pretty easy to figure out that raising the federal minimum would not have a major detrimental effect on either business or the economy, nor would it kill jobs.


And it will take several millions (who make less than $15/hr) off the public dole which will reduce the deficit a little bit further*.

And it will put money in the hands of people who both need it and will spend it creating a growth in demand for products.

And, most importantly, their lives will be improved probably leading to less crime. The Kingdom will be enhanced.

* BTW mid year, the FY2014 deficit is projected to fall again to $492B (2.8% of GDP) mainly on the basis of increased revenues. The stimulus has worked at least for reducing the deficit - it was $1.4T (10.1% of GDP) in FY2009 and $680B in FY2013. Now let's correct who has benefitted from this economic recovery. To date the wealthy have and the poor continue to suffer. Top one percent took in 95 percent of income gains during Obama’s recovery.
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Re: Min Wage Hikes

Postby ET » Thu Jun 05, 2014 10:39 pm

One of the first articles I've seen about Seattle and this issue. Seattle Times: $15 wage floor slowly takes hold in SeaTac: Six weeks after SeaTac’s minimum wage jumped to $15, the impact varies from business to business.
Some relevant excerpts:
Six weeks after the new hourly minimum standard took effect at some hotels and parking lots in SeaTac, proponents and opponents alike say any evidence to gauge its impact is still anecdotal.
***
Other businesses have adjusted in ways that run the gamut from putting more work in the hands of managers, to instituting a small “living-wage surcharge” for a daily parking space near the airport.
***
To be sure, SeaTac’s $15 minimum wage has claimed some casualties.

The 215-room Clarion Hotel closed its full-service restaurant in December, laying off 15 people, said general manager Perry Wall. The hotel also let go a night desk clerk and maintenance employee and is considering a 10 percent increase in room rates for the spring travel season, Wall said.

He estimates that without a reduction in head count, the hotel’s annual payroll costs would have increased $300,000.

Here's another article:
COMMENTARY: Ethnic business community says ‘no’ to $15 minimum wage hike proposal
Although Seattle’s proposed $15/hour minimum wage increase has been publicly debated since last fall, we local ethnic and immigrant small business owners have just begun to realize the negative impact the wage hike will have on our businesses and on our employees.

Or another article in the same paper:
BLOG: What SeaTac tells us about $15 minimum wage
One was a waitress and the other was cleaning the hallway.
“Are you happy with the $15 wage?” I asked the full-time cleaning lady.
“It sounds good, but it’s not good,” the woman said.
“Why?” I asked.
“I lost my 401k, health insurance, paid holiday, and vacation,” she responded. “No more free food,” she added.
The hotel used to feed her. Now, she has to bring her own food. Also, no overtime, she said. She used to work extra hours and received overtime pay.
What else? I asked.
“I have to pay for parking,” she said.
I then asked the part-time waitress, who was part of the catering staff.
“Yes, I’ve got $15 an hour, but all my tips are now much less,” she said. Before the new wage law was implemented, her hourly wage was $7. But her tips added to more than $15 an hour. Yes, she used to receive free food and parking. Now, she has to bring her own food and pay for parking.
Another staffer did not want to say anything, but he did say the $15 has a huge impact on the hotel.
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Re: Min Wage Hikes

Postby ET » Thu Jun 05, 2014 10:40 pm

KeithE wrote:And it will take several millions (who make less than $15/hr) off the public dole which will reduce the deficit a little bit further*.

And it will put money in the hands of people who both need it and will spend it creating a growth in demand for products.

What of those who end up on the public dole because they can't get a job? Or possibly those that have their hours cut?

But more importantly, if your premise that an increase in the min wage will create "growth in demand", then one would expect that unemployment would go down as demand for products goes up due to the higher wages. But based on the data you have referenced, the impact is almost non-existent, which would more logically imply that at best any increase in demand is offset by decreased demand from lost jobs and reduced hours or other factors.

Is there any data regarding a decrease of those on the public dole after an increase in the min wage? Based on your argument, that should happen.

Also, if raising the min wage really does result in "reductions in labor turnover, which yield significant cost savings to employers", why would the employer not raise the wage on his own instead of waiting for a government mandate? This argument would seem to imply that a raise in wages to the lowest paid almost pays for itself and is beneficial to the employer, so why do employer's resist it so much if it is beneficial to their business?

The problem with your argument is that it presumes to negate one of the basic laws of economics - that the higher the price, the lower the demand of a product. These studies go to great lengths to argue that labor is somehow immune to that law. I'm not buying it. Labor is not immune to the law of supply and demand.
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Re: Min wage stats

Postby ET » Thu Jun 05, 2014 11:05 pm

Dave Roberts wrote:ET, out of curiosity, what percentage of minimum wage workers are adults?

Here's the stats, Dave: Characteristics of Minimum Wage Workers: 2012 There's more info compiled in this report and even has graphs and charts for folks like Keith.

Sandy is wrong in his statement that 76% of min wage workers are adults. It's 50% give or take a bit. Half of the adults working for min wage are working part-time.

Overall, min wage workers only constitute 2.9% of workers. Half of those are 25 and younger, so we're down to 1.45% adult min wage workers and half of that percentage is working part time, so we've got 0.7% of U.S. workers for which we're tossing around these figures for a "living wage", attempting to create a non-poverty income for full-time min wage workers.

To think that 0.7% of U.S. workers - or even 2.9% - pulling down $15 or even $20 an hour is going to have any measurable impact on a $17,000,000,000,000 - 17 trillion - economy is quite ridiculous.
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Re: Min Wage Hikes

Postby Haruo » Thu Jun 05, 2014 11:46 pm

Overall, minimum wage workers may only constitute 2.9% of workers, but my guess is that in Seattle the percentage that earn less than $15/hr. is quite a bit higher than that.

BTW, if a particular worker works three part-time jobs, two of them for the minimum, 15 hours a week each, and one for 15¢ above the minimum, 12 hours a week, how many minimum-wage workers does she count as for the purposes of these statistics? And how do we tell which of the rates she should get the two hours of overtime on? (Assuming a slightly fairer world.)
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Re: Min wage stats

Postby Sandy » Fri Jun 06, 2014 6:02 am

ET wrote:
Dave Roberts wrote:ET, out of curiosity, what percentage of minimum wage workers are adults?

Here's the stats, Dave: Characteristics of Minimum Wage Workers: 2012 There's more info compiled in this report and even has graphs and charts for folks like Keith.

Sandy is wrong in his statement that 76% of min wage workers are adults. It's 50% give or take a bit. Half of the adults working for min wage are working part-time.

Overall, min wage workers only constitute 2.9% of workers. Half of those are 25 and younger, so we're down to 1.45% adult min wage workers and half of that percentage is working part time, so we've got 0.7% of U.S. workers for which we're tossing around these figures for a "living wage", attempting to create a non-poverty income for full-time min wage workers.

To think that 0.7% of U.S. workers - or even 2.9% - pulling down $15 or even $20 an hour is going to have any measurable impact on a $17,000,000,000,000 - 17 trillion - economy is quite ridiculous.


The statistics quote in the Pew Survey I cited come from the Labor Department. They should know. Go to Pew Survey and look it up--you have to register for a subscription.

Your figures, as usual, are not correct. However, your last statement is correct. To think that 3.6%, which is the true figure, will have any measurable inpact on a 17 trillion economy is quite ridiculous. Which is the exact reason why business should be forced to push the wage up. Their pockets are stuffed with cash, and raising their worker's wages won't hurt them one little bit. You're talking about a fractional percentage. Most business can afford that without even thinking about raising their already inflated prices. Of course, you and other conservatives buck and chafe at the mere suggestion that business should have to compete on a fair and level playing field, and you'd love to see the day when workers are reduced to serfdom.

If you want to remove government protections for workers, and having to force business to treat workers fairly, then let's remove all of the protections that allow businesses to exploit and cheat workers and customers, have a truly open market, and see exactly where that goes. Stop using tax dollars as corporate welfare, stop paying trillions for military protection for businesses who are exploiting cheap foreign labor, and let them pay for the protection privately, make businesses pay for the wear and tear they cause on the tax supported infrastructure that they consume in doing business. Let's give that a try, and see how long it takes greed to start a war.
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Re: Min wage stats

Postby KeithE » Fri Jun 06, 2014 3:08 pm

ET wrote:
Dave Roberts wrote:ET, out of curiosity, what percentage of minimum wage workers are adults?

Here's the stats, Dave: Characteristics of Minimum Wage Workers: 2012 There's more info compiled in this report and even has graphs and charts for folks like Keith.

Sandy is wrong in his statement that 76% of min wage workers are adults. It's 50% give or take a bit. Half of the adults working for min wage are working part-time.

Overall, min wage workers only constitute 2.9% of workers. Half of those are 25 and younger, so we're down to 1.45% adult min wage workers and half of that percentage is working part time, so we've got 0.7% of U.S. workers for which we're tossing around these figures for a "living wage", attempting to create a non-poverty income for full-time min wage workers.

To think that 0.7% of U.S. workers - or even 2.9% - pulling down $15 or even $20 an hour is going to have any measurable impact on a $17,000,000,000,000 - 17 trillion - economy is quite ridiculous.


I believe both Sandy and ET could be correct about the % of min wage workers that are adults- it depends on what you consider adult.
Image
Using this char from the Heritage Foundation, ET claimed 24 year was the adult demarcation line where it is seen that about 50% of the area under the curve is above that and 50% below that. However, if a more traditional definition of adult (21 years) is used, Sandy's estimate from Pew Research is much better ~70% (and 85% if 18 years and above are considered “adult”). I'll side with Sandy/Pew Research over ET/Heritage since most 21 year olds are on their own (many 18 year olds are on their own as well). One can nearly always count on RW organizations (like Heritage) to fudge the data when something they hold dear (corporate profits and excessive executive pay) is challenged in any way.

And, ET, you are certainly minimizing how many American workers would benefit by an increase in the min wage to $15/hr. The median wage in the US in 2012 was $32,196/yr = $15.47/hr meaning having a min wage of $15/hr would improve the living conditions of about 48% of workers - not just 2.9% or 1.45% (whether or not they choose to work full time).
Image

And truth be told, current day $15/hr workers would likely object to their lower paid co-workers being bumped higher and more would likely receive raises as well. So far more than 2.9% who are at or below min wage now would benefit. The entire wage scale would need to be adjusted (accordion style) perhaps keeping the total payroll the same or eating into profits or making other adjustments.

Corporations may very well be pushed to hike their product/services prices with such a large increase in the payroll. But they have several other means to control costs like reductions of wages at the high end, less profits, less benefits. They would also benefit greatly by having more people with enough money to buy products (increasing their volume and releasing more capita to increase production/employment), as well as more loyalty in the work force and thereby improved productivity. Hard to say how it would all turn out but the study I posted above (repeated here) claims a wash for min wage increases (at least smaller scale increases) with consideration of the many studies about actual effects of min wage increases since 1990. Not just theory.
Conclusion
Economists have conducted hundreds of studies of the employment impact of the minimum wage. Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.

The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms' overall costs and only modest relative to the wages paid to low-wage workers. In the traditional discussion of the minimum wage, economists have focused on how these costs affect employment outcomes, but employers have many other channels of adjustment. Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.


But the sort of increase they were talking about in the above study were smaller increases than what Seattle is doing ($9.28/hr to $15/hr. ~ 50% increase).

Read also the 11 “adjustments” that corporations can make in the link above - some have ill effects on workers (e.g. benefit reductions) and one has negative impacts on product purchasers (modest price increases). But most are just better business practices and have been the reason why min wage increases have seldom had disemployment effects (look at Figure 1 - “elasticity" = loss of jobs).

Personally I'm glad Seattle is trying such a large increase as a trial balloon. (ET's SEATAC city examples are RW-chosen anecdotes). A raise to $9/hr nationally seems more appropriate ($9/hr is 24% increase and Washington state has already showed that is not reckless). Maybe after successful implementation in Seattle (without economic demise) $15/hr can be tried elsewhere (or not depending on outcome).

Have a heart for the poor, brother (and that is far more than a few percent of lazy Americans that are cash-challenged). What is not acceptable is the status quo where child poverty is 21.8% and growing in the US (until recently).
Image

BTW, Social Security has gone a long way to improving the lot of the elderly (look above).

Also it is not acceptable in this supposed "land of opportunity" to have one of the lowest social mobility among developed countries in the world.
Image

What is your suggestion, ET? Cut regulations and everything will be good? We have been deregulating sporadically since 1980 especially the financial sector. The outcome has been great for the 1%, pretty good for the 5%, but disastrous for the bottom 60%. Try to make the case for further deregulation on a factual basis.

Some sort of wage pressures (up on the low end and down on the high end - accordion style) is required, imo.

Add-on Sunday morning(after I got my internet back):

Fixing wage distribution is not the only or even most important matter in accelerating the economic recovery. We also need more jobs:
Image

and re-regulation of the financial sector and some heads to role into prison among the corporate cheats.
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Re: Min wage stats

Postby ET » Mon Jun 09, 2014 1:42 pm

Sandy wrote:Your figures, as usual, are not correct.

I direct your attention to "Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing federal minimum wage by age and sex, 2012 annual averages" from the Dept of Labor report I previously referenced. Note that the percent of hourly workers at or below min wage is 50.4% for the age group of 16-24.

Keith might want to take note that it is the Dept of Labor that specifies the 16-24 age range, not the Heritage Foundation.

I'll repeat: The problem with your argument is that it presumes to negate one of the basic laws of economics - that the higher the price, the lower the demand of a product. These studies go to great lengths to argue that labor is somehow immune to that law. I'm not buying it. Labor is not immune to the law of supply and demand.

You request that I "have a heart"....what of those workers that can't get a job because of the $15/hr min wage? What have you done for them by pricing them out of the labor market?
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