Do these studies take into account second order effects? For example, I would imagine with poor people having more money from a minimum wage, there would also be more spending on consumption, potentially mitigating employment effects.
I can’t help but feel the sole reason why a minimum wage lacks noticeable disemployment effects is because employers are still able to adjust by increasing intensity, reducing hours, and cutting perks. What this would suggest though, is that while nominal pay increases, the value of what they’re receiving from their job will stay precisely the same, up until the point (probably substantially above $15 - really, haven’t a clue where) where employers cannot cut back perks or increase intensity further. It’s not for nothing that Amazon can pay a $15 minimum - they also have quite possibly the strictest, most micromanaged workplace in the US. This is, interestingly, a case for raising the minimum wage - we are squeezing the orange harder now, and getting more production at the same actual cost - and indeed, it is highly possible that humans are biased against explicit costs and overlook non cash wages, and businesses might need a kick in the pants in this. (We see this in government jobs - lower pay is traded for high job security) However, if our goal is to increase the living standards of the poor, then our most direct, and I should think, more efficient way, would be a negative income tax or a wage subsidy program such as eitc. (Not going to go into the perverse incentives of welfare too much - though, perhaps people would be better off if we just scrapped all welfare - no incentive not to produce then!)
"For example, a 2019 paper by Arindrajit Dube finds that doubling the minimum wage would result in somewhere between a 2.2% and a 4.5% drop in poverty."
Sorry if I'm misunderstanding but wouldn't a "minimum wage elasticity of the non-elderly poverty rate with respect to the minimum wage ranges between −0.220 and −0.459" mean that a 100% increase in the minimum wage would result in a proportionate decrease in the poverty rate of 22-45% not 2.5% to 4.5%?
- I'm admittedly a noob here, so I really appreciated your summary of the debate!
- Maybe you did this and I missed this, but shouldn't we distinguish between short-term elasticity and long-term elasticity? Depending on secondary measures taken by regional governments, I can imagine different scenarios where long-term elasticity is smaller than short-term elasticity.
- If people believe raising minimum wage will kill jobs (i.e. we shouldn't raise it) shouldn't they also believe we should get rid of it altogether as it would, in theory, create more job opportunities? I know this is an oversimplification, but it seems like that's what you would conclude based on their model. Like, do they have an example of where lowering the minimum wage would be more beneficial? Or, do they have an example of expanding the minimum wage past a certain point would have more cost then benefits? It seems like specificity would be important.
I own a small sandwich shop. I say abolish federal minimum wage, in my area the wage market has adjusted its self. We lack a workforce here every business is on a skeleton crew, hence wages are higher to attract workers. High school kids are making $10 per hour and up. Business are offering hiring bonuses. On the other hand we have a welfare and disability problem. It's so easy to get the government hand outs than work. That's why our wages are up and the staffing is low.
A free market in wages will fix it's self just like supply and demand, we already see it here we don't need the government sticking their fingers in it. Most of these people in government and economic analysis don't know what a gallon of milk cost or a delivery driver gets paid. There is millions of job positions out there waiting to be filled. Stop feeding the bears (welfare) and nature will fix itself!
I know a lot of small business owners and they are all watching this closely. Most people don't realize small business run on very low margins. Doubling the wages will put alot of them in the red, especially when we are struggling to keep doors open during a pandemic. They are not the government and can't magically print more money. Most say they will have to raise prices 30 or 40%, and cut staffing by similar numbers.
Then you have to take cost increases into account too. If I make 21 an hour now, ill make 21 an hour after the 15 dollar minimum goes into effect. So instead of 3 times minimum wage, ill make 140% of it. Pushing me out of middle class and closer to poverty. I'll also be paying 5 for gas and milk, rent will go up utilities will go up.
So we get 30% of people who were making minimum wage making nothing and the middle class not making enough to stay out of poverty. An increase is due, but needs to be inclined with inflation. More 9 to 10 per hour, or were going to have one hell of a recession.
None of this takes on account of the price of everything going up. Do you really think employers are just going to eat this cost out of their own pockets? They will pass it down in higher prices which will still mean minimum wage will not be enough! It's a starting point not a staying point, learn skills and some yourself and make more money or find another job that pays more.
Small business here... 39% tax on corporations...$15 minimum wage.. Mandated health insurance... I can make a prediction you're going to lose 50% of your small businesses. Most small businesses pay more than minimum wage to begin with. We couldn't afford Obama care and it reduced our full time workers to 30 hours or less. All these politicians should be required to take business and economic classes. This is planned to eliminate all small businesses so all the large corporations can take over. Large corporation should not be allowed to donate money to political preferences.
Why are you all so married to a NATIONAL minimum wage. You concede that is doesn't make sense, but then insist that we should have one anyway because we'll eventually adjust to a % of median wage. 1. I've never seen an actual bill in Congress set the minimum wage regionally. 2. Why not start with a bill with a % of median wage from the beginning?
In 2019, the median wage for hourly workers in KS was...$15. So Dube's estimate suggests that a minimum wage above $8.85 per hour would start to have significant employment effects in Kansas. Dube, the economist who thinks minimum wage cuts impact employment the way Laffer thinks tax rate cuts impact tax revenue.
As for monopsony power. Sure frictions exist in the market because current employers know productivity better than potential employers, but the labor market is much farther from single buyer than competition. It is not as if every MSA outside of the East and West Coasts are one traffic light downtowns. Wichita, KS MSA has 640 thousand people. According to QCEW there are 1,824 retail trade establishments and 1,319 establishments in accommodations and food. How much monopsony power could they have in labor markets. Their residual supply and MC of Labor curves might not overlap, but they are probably pretty close. Wichita's RPP is only 87.9. A fraction of NYC's 125.7, whose $15 minimum wage is perfectly fine for everybody.
I don't even object to a modest increase in the minimum wage, but this all feels like a noble lie. Convince people there are no costs, because they don't understand that the loss in jobs is worth the increase in wages of those still employed. Yet, the expert analysis is very myopic. Let the states figure out the minimum wage. They may not make optimal decisions, but at least they are actually considering the markets that are being impacted.
The real empirical question should simply be "What is the Elasticity of Demand for low-skilled Labor?" The answer shouldn't be "It depends, are we estimating the impact of immigration, minimum wage, or tax incidence?"
Complete garbage. Making a minimum wage 15 an hour will cause a severe spike in price for consumers as business owners will have to pass the cost on to maintain any profit. What you only account for is big corporations that have been proven to actually not be the driving force.behind economics. They are the anchors for economic boost while small to midsized companies drive the economy up and they will cease to exist or be forced to cut hours or spike prices which in turn would push people to buy from big corps that buy cheap knockoffs from foreign entities that have half the life span of the original product. In essence you would destroy small to mid size businesses to reap a temporary boost of lowering poverty levels until said businesses closed and laid off millions with no job prospects. Instead of using unskilled high minimum wage, you leave it lower and give options for people to learn a trade or skill and find a better job. Instead your wanting to reward the lazy, unambitious people that don't want to strive for anything better.
"The whole point of minimum wage is to reduce poverty. Many papers find that it does do this. For example, a 2019 paper by Arindrajit Dube finds that doubling the minimum wage would result in somewhere between a 2.2% and a 4.5% drop in poverty. That’s not a knockout blow, but it would be substantial, since the overall poverty rate is around 12%."
Please be careful!
Dube (2019) writes in footnote 2: "Most results in this paper are for the non-elderly population; so, when I refer to “the poverty rate,” I am referring to the poverty rate among those under 65 years of age."
In fact, the increase in prices due to the $15 MW policy will mostly hurt the non-working poor (elderly on pension, people on disability insurance, etc.).
It is not obvious to me there is empirical evidence that MW reduces poverty!
Independently, after identifying the winners and losers, the next question is how to value the gains and looses of winners and losers. Is it straightforward? I do not think so... so how can we safely conclude MW is a good policy?
How about the the government go after all the executive's that payouts at the end over of every year that goes way into the millions of dollars. They all act like if it was not for them the companies would go under, plus paying some kid $15 to flip burgers is just stupid
What about the racial impact of minimum wage laws? Its odd that it isn't discussed much here, given that the left is obsessed with racial impact in many other policy realms. My biggest beef with the minimum wage is what it does to minorities in inner cities. UC Irvines David Neumark is especially poignant on this and how it disproportionally harms the most marginal in society - especially Blacks from inner cities. Everyone intuitively understands why say the teenage unemployment is so high given minimum wage laws, but the Black urban youth is suffering from the same impact of the minimum wage, and will have much more long term negatives because of it. I'd be for a minimum wage if it was somehow pegged to the Black/White unemployment gap, for example. But when it comes to issues that greatly benefit unions (public schools, public services, and the minimum wage) the left suddenly doesn't care about racial impacts.
I was skeptical about whether a $15 minimum wage would really pass, but it’s been the cool thing to talk about lately...so maybe the winds are changing
So will start with the personal antidote.
My brother-in-law, owns a small business/fast food restaurant. He is a Greek immigrant, and he is completely against the minimum wage increase of course. Then again, he is a cheap bastard on everything. He has already said that he will just raise prices. Of course if it’s phased in over a period of time, she raise his prices occasionally anyway.
I guess my concern is, actually it’s not a concern, what about wage compression. Obviously supervisors who were making say $12 an hour, are now going to be paid more. But instead of being paid four dollars more than their workers, now the employer might only pay them one or two dollars over the workers. Is this good? Is this bad? How long does this affect last?
I also wonder about another possible effect. If you’re an employer that has to pay these higher wages, do you get more selective about who you hire? Do you say, well let me hire this community college graduate instead of this GED guy.
Speaking again about the wage compression issue. I can see that at companies with a decent amount of minimum wage earners, it’s forcing the salaries up of everybody. Worker makes 15, supervisor makes 16, manager makes 18, etc.
How much of a knock on effect will that have on employers that don’t have a lot of sub $15 an hour employers? Obviously, or maybe not obviously, they have to compete for labor, so be somewhat competitive. I just don’t know.
And since I don’t wanna get out of bed, could this shock create a recession?
Having said all this, I am completely with Noah here. Life is boring, sometimes you need to just take a fucking chance. Let’s raise the minimum-wage and see what happens. I am 100% in favor.
Crap, one more thing occurred to me. We will call this fantasy land. I would love to see them come by in the minimum wage increase, with new overtime rules. The work week is basically set by the federal government’s employer laws for nonexempt employees. I think they need to slowly start reducing the standard work week in the United States. Make overtime start kicking in at 38 hours, then 36, and then down to 32.
It seems to me that this might the gate the if there are any negative effects of and increase the minimum wage. Americans work too much, automation means that there’s no reason for us to work 40 hours a week. I think we would all be better off if we got three day weekends. Let employers hire a greater number of employees to make up the difference.
Do these studies take into account second order effects? For example, I would imagine with poor people having more money from a minimum wage, there would also be more spending on consumption, potentially mitigating employment effects.
I can’t help but feel the sole reason why a minimum wage lacks noticeable disemployment effects is because employers are still able to adjust by increasing intensity, reducing hours, and cutting perks. What this would suggest though, is that while nominal pay increases, the value of what they’re receiving from their job will stay precisely the same, up until the point (probably substantially above $15 - really, haven’t a clue where) where employers cannot cut back perks or increase intensity further. It’s not for nothing that Amazon can pay a $15 minimum - they also have quite possibly the strictest, most micromanaged workplace in the US. This is, interestingly, a case for raising the minimum wage - we are squeezing the orange harder now, and getting more production at the same actual cost - and indeed, it is highly possible that humans are biased against explicit costs and overlook non cash wages, and businesses might need a kick in the pants in this. (We see this in government jobs - lower pay is traded for high job security) However, if our goal is to increase the living standards of the poor, then our most direct, and I should think, more efficient way, would be a negative income tax or a wage subsidy program such as eitc. (Not going to go into the perverse incentives of welfare too much - though, perhaps people would be better off if we just scrapped all welfare - no incentive not to produce then!)
Don't raise the minimum wage to fifteen dollars an hour, instead, raise your children to be worth more than fifteen dollars an hour.
"For example, a 2019 paper by Arindrajit Dube finds that doubling the minimum wage would result in somewhere between a 2.2% and a 4.5% drop in poverty."
Sorry if I'm misunderstanding but wouldn't a "minimum wage elasticity of the non-elderly poverty rate with respect to the minimum wage ranges between −0.220 and −0.459" mean that a 100% increase in the minimum wage would result in a proportionate decrease in the poverty rate of 22-45% not 2.5% to 4.5%?
Three Things:
- I'm admittedly a noob here, so I really appreciated your summary of the debate!
- Maybe you did this and I missed this, but shouldn't we distinguish between short-term elasticity and long-term elasticity? Depending on secondary measures taken by regional governments, I can imagine different scenarios where long-term elasticity is smaller than short-term elasticity.
- If people believe raising minimum wage will kill jobs (i.e. we shouldn't raise it) shouldn't they also believe we should get rid of it altogether as it would, in theory, create more job opportunities? I know this is an oversimplification, but it seems like that's what you would conclude based on their model. Like, do they have an example of where lowering the minimum wage would be more beneficial? Or, do they have an example of expanding the minimum wage past a certain point would have more cost then benefits? It seems like specificity would be important.
I own a small sandwich shop. I say abolish federal minimum wage, in my area the wage market has adjusted its self. We lack a workforce here every business is on a skeleton crew, hence wages are higher to attract workers. High school kids are making $10 per hour and up. Business are offering hiring bonuses. On the other hand we have a welfare and disability problem. It's so easy to get the government hand outs than work. That's why our wages are up and the staffing is low.
A free market in wages will fix it's self just like supply and demand, we already see it here we don't need the government sticking their fingers in it. Most of these people in government and economic analysis don't know what a gallon of milk cost or a delivery driver gets paid. There is millions of job positions out there waiting to be filled. Stop feeding the bears (welfare) and nature will fix itself!
I know a lot of small business owners and they are all watching this closely. Most people don't realize small business run on very low margins. Doubling the wages will put alot of them in the red, especially when we are struggling to keep doors open during a pandemic. They are not the government and can't magically print more money. Most say they will have to raise prices 30 or 40%, and cut staffing by similar numbers.
Then you have to take cost increases into account too. If I make 21 an hour now, ill make 21 an hour after the 15 dollar minimum goes into effect. So instead of 3 times minimum wage, ill make 140% of it. Pushing me out of middle class and closer to poverty. I'll also be paying 5 for gas and milk, rent will go up utilities will go up.
So we get 30% of people who were making minimum wage making nothing and the middle class not making enough to stay out of poverty. An increase is due, but needs to be inclined with inflation. More 9 to 10 per hour, or were going to have one hell of a recession.
None of this takes on account of the price of everything going up. Do you really think employers are just going to eat this cost out of their own pockets? They will pass it down in higher prices which will still mean minimum wage will not be enough! It's a starting point not a staying point, learn skills and some yourself and make more money or find another job that pays more.
Small business here... 39% tax on corporations...$15 minimum wage.. Mandated health insurance... I can make a prediction you're going to lose 50% of your small businesses. Most small businesses pay more than minimum wage to begin with. We couldn't afford Obama care and it reduced our full time workers to 30 hours or less. All these politicians should be required to take business and economic classes. This is planned to eliminate all small businesses so all the large corporations can take over. Large corporation should not be allowed to donate money to political preferences.
Noah: A friend sent me the link because of the meme at the top. I love it. Thanks.
Why are you all so married to a NATIONAL minimum wage. You concede that is doesn't make sense, but then insist that we should have one anyway because we'll eventually adjust to a % of median wage. 1. I've never seen an actual bill in Congress set the minimum wage regionally. 2. Why not start with a bill with a % of median wage from the beginning?
In 2019, the median wage for hourly workers in KS was...$15. So Dube's estimate suggests that a minimum wage above $8.85 per hour would start to have significant employment effects in Kansas. Dube, the economist who thinks minimum wage cuts impact employment the way Laffer thinks tax rate cuts impact tax revenue.
As for monopsony power. Sure frictions exist in the market because current employers know productivity better than potential employers, but the labor market is much farther from single buyer than competition. It is not as if every MSA outside of the East and West Coasts are one traffic light downtowns. Wichita, KS MSA has 640 thousand people. According to QCEW there are 1,824 retail trade establishments and 1,319 establishments in accommodations and food. How much monopsony power could they have in labor markets. Their residual supply and MC of Labor curves might not overlap, but they are probably pretty close. Wichita's RPP is only 87.9. A fraction of NYC's 125.7, whose $15 minimum wage is perfectly fine for everybody.
I don't even object to a modest increase in the minimum wage, but this all feels like a noble lie. Convince people there are no costs, because they don't understand that the loss in jobs is worth the increase in wages of those still employed. Yet, the expert analysis is very myopic. Let the states figure out the minimum wage. They may not make optimal decisions, but at least they are actually considering the markets that are being impacted.
The real empirical question should simply be "What is the Elasticity of Demand for low-skilled Labor?" The answer shouldn't be "It depends, are we estimating the impact of immigration, minimum wage, or tax incidence?"
Complete garbage. Making a minimum wage 15 an hour will cause a severe spike in price for consumers as business owners will have to pass the cost on to maintain any profit. What you only account for is big corporations that have been proven to actually not be the driving force.behind economics. They are the anchors for economic boost while small to midsized companies drive the economy up and they will cease to exist or be forced to cut hours or spike prices which in turn would push people to buy from big corps that buy cheap knockoffs from foreign entities that have half the life span of the original product. In essence you would destroy small to mid size businesses to reap a temporary boost of lowering poverty levels until said businesses closed and laid off millions with no job prospects. Instead of using unskilled high minimum wage, you leave it lower and give options for people to learn a trade or skill and find a better job. Instead your wanting to reward the lazy, unambitious people that don't want to strive for anything better.
You write:
"The whole point of minimum wage is to reduce poverty. Many papers find that it does do this. For example, a 2019 paper by Arindrajit Dube finds that doubling the minimum wage would result in somewhere between a 2.2% and a 4.5% drop in poverty. That’s not a knockout blow, but it would be substantial, since the overall poverty rate is around 12%."
Please be careful!
Dube (2019) writes in footnote 2: "Most results in this paper are for the non-elderly population; so, when I refer to “the poverty rate,” I am referring to the poverty rate among those under 65 years of age."
In fact, the increase in prices due to the $15 MW policy will mostly hurt the non-working poor (elderly on pension, people on disability insurance, etc.).
It is not obvious to me there is empirical evidence that MW reduces poverty!
Independently, after identifying the winners and losers, the next question is how to value the gains and looses of winners and losers. Is it straightforward? I do not think so... so how can we safely conclude MW is a good policy?
How about the the government go after all the executive's that payouts at the end over of every year that goes way into the millions of dollars. They all act like if it was not for them the companies would go under, plus paying some kid $15 to flip burgers is just stupid
What about the racial impact of minimum wage laws? Its odd that it isn't discussed much here, given that the left is obsessed with racial impact in many other policy realms. My biggest beef with the minimum wage is what it does to minorities in inner cities. UC Irvines David Neumark is especially poignant on this and how it disproportionally harms the most marginal in society - especially Blacks from inner cities. Everyone intuitively understands why say the teenage unemployment is so high given minimum wage laws, but the Black urban youth is suffering from the same impact of the minimum wage, and will have much more long term negatives because of it. I'd be for a minimum wage if it was somehow pegged to the Black/White unemployment gap, for example. But when it comes to issues that greatly benefit unions (public schools, public services, and the minimum wage) the left suddenly doesn't care about racial impacts.
I was skeptical about whether a $15 minimum wage would really pass, but it’s been the cool thing to talk about lately...so maybe the winds are changing
So will start with the personal antidote.
My brother-in-law, owns a small business/fast food restaurant. He is a Greek immigrant, and he is completely against the minimum wage increase of course. Then again, he is a cheap bastard on everything. He has already said that he will just raise prices. Of course if it’s phased in over a period of time, she raise his prices occasionally anyway.
I guess my concern is, actually it’s not a concern, what about wage compression. Obviously supervisors who were making say $12 an hour, are now going to be paid more. But instead of being paid four dollars more than their workers, now the employer might only pay them one or two dollars over the workers. Is this good? Is this bad? How long does this affect last?
I also wonder about another possible effect. If you’re an employer that has to pay these higher wages, do you get more selective about who you hire? Do you say, well let me hire this community college graduate instead of this GED guy.
Speaking again about the wage compression issue. I can see that at companies with a decent amount of minimum wage earners, it’s forcing the salaries up of everybody. Worker makes 15, supervisor makes 16, manager makes 18, etc.
How much of a knock on effect will that have on employers that don’t have a lot of sub $15 an hour employers? Obviously, or maybe not obviously, they have to compete for labor, so be somewhat competitive. I just don’t know.
And since I don’t wanna get out of bed, could this shock create a recession?
Having said all this, I am completely with Noah here. Life is boring, sometimes you need to just take a fucking chance. Let’s raise the minimum-wage and see what happens. I am 100% in favor.
Crap, one more thing occurred to me. We will call this fantasy land. I would love to see them come by in the minimum wage increase, with new overtime rules. The work week is basically set by the federal government’s employer laws for nonexempt employees. I think they need to slowly start reducing the standard work week in the United States. Make overtime start kicking in at 38 hours, then 36, and then down to 32.
It seems to me that this might the gate the if there are any negative effects of and increase the minimum wage. Americans work too much, automation means that there’s no reason for us to work 40 hours a week. I think we would all be better off if we got three day weekends. Let employers hire a greater number of employees to make up the difference.