The Robot Employment Act?

In light of LA’s vote to increase the minimum age to $15 an hour by 2020 here is one of my favorite pictures and caption from Modern Principles of Economics.

From Cowen-Tabarrok, Modern Principles of Economics

Should the Minimum Wage be called the “Robot Employment Act?”

Cowen-Tabarrok, Modern Principles of Economics, 3rd ed

 

Comments

This is the culmination of an effort that began a little over a year ago when Ron Unz called for California to adopt a $12 minimum wage as a means to price out immigrant labor. I guess that makes LA city a case of 'second best' xenophobia, given its size and massive hispanic population. Where are the liberals screaming white privledge on this issue?

The left, first and foremost, is anti-corporate (unless that corporation is a donor or makes all the right liberal noises) and would rather punish corporations even if it hurts people they purportedly care about. That or they are just completely ignorant; I'm not sure which prospect is worse.

Or they just genuinely (but probably incorrectly) think that such measures will benefit low-income workers.

I swear, this blog's comment section is so dramatic sometimes. You would think that everybody even remotely on the left is part of a thinly-veiled old-school communist conspiracy from the way "the left" is discussed here.

Hence the "ignorant" part.

I overdid it on the snark, I'm sorry. I directed the cumulative feeling of lots of blog posts at you.

The theory that I've seen offered to explain why something like this would be beneficial is that by paying low-income workers more, low income workers have more disposable income, which then allows them to spend more, which creates a virtuous circle that helps the economy.

I swear, the biggest problem many on the Left have in this country stems from when Democrats villainized supply side economics during the Reagan Administration, which leaves almost half this country blind to half of the supply-demand curve, and unwilling to talk about any form of stimulus which makes it easier for producers to produce.

A sort of "folk Keynesianism" (Arnold Kling's term) that doesn't really resemble actual Keynesian economics seems pretty rampant among the left. No doubt there's some sort of similar analogue on the right.

The problem is that is the theory offered anytime any sort of redistribution is brought up. Why is the fixation on raising the cost to the employer rather than alternatives such as the EITC which would have the same benefit the theory offers.

That's why it seems to me that support for the minimum wage is either motivated by ignorance (probably in most cases) or anti-corporate sentiment (in some cases). The empirical evidence on the benefits and disemployment effects of the minimum wage is mixed (and that's being generous). In contrast, we know that the EITC works. So why so much support for the minimum wage but not other measures?

A "folk Marxism" is at least as common. Clearly the workers are not being paid the value of their labor as long as the owner is still making a profit.

To William Woody,

Yes, that's the theory. Send more dollars into the "economy", and the dollars will run around creating wealth until they get tired and finally go into savings. I don't assume you believe that theory.

The theory is well proven by the Children's Allowance Effect. Raise your children's allowance by $50/week (from $0 if needed). Then, make or buy gifts which the children can buy from you. Your family will soon become rich, because their monetary demand gives you the opportunity to produce more for them. Wealth springs into being.

Well, that doesn't make much sense, but that cycle is too uncomplicated. Instead, have the kids spend in the neighborhood, and the resulting prosperity is sure to come back to you. Wealth will be created by the money being spent and respent in the neighborhood, in a way which is not apparent when the money goes around too short a loop. No one has actually seen the extra wealth created (above the original $50), but that is because the extra wealth is shy and doesn't want to appear in public. Keynesian macroeconomics is mysterious and wonderful.

The Keynesian spend and re-spend theory is bunk, but it is the type of bunk which fuels government projects and political careers. "These distributions (not handouts) will pay for themselves, so don't be stingy with your taxes."

Just 'cause you're paranoid doesn't mean they aren't out to get you.

You're making cartoonishly ridiculous claims about the political beliefs of a group of people, and then finding satisfaction in thoroughly refuting the claims that you just made up. I hope you realize that.

Pricing out legal immigration, but makes illegal immigration and the black market of labor that much more likely.

I continue to shout in the wilderness for the need for more wage subsidy instead of minimum wage.

"I continue to shout in the wilderness for the need for more wage subsidy instead of minimum wage."

... so your rhetorical approach/solution does not work very well ??

Who precisely do you expect to pay for these wage subsidies ?

What direct percentage of your personal income would you eagerly contribute to your "wage subsidy" solution ?

What direct percentage of your personal income would you eagerly contribute to your “wage subsidy” solution ?

More than I'm paying now. I'd support my taxes going up by, say, $500 or $1000 a year to pay for a wage subsidy.

Wage subsidies are paid by the top 20% of income earners who pay the bulk of income taxes.

These people also tend to benefit most from low cost labor.

So it's basically a wash...

Unz stated he wasn't an economist because if he were, he would know that consumers have infinite cash to spend and workers suck the cash they are paid into a black hole.

His reasoning was that the only way to increase consumer spending was to pay workers more.

He obviously does not understand the innovation in the 80s when economists discarded the idea that consumers are workers and workers are consumers.

With free lunch economics, GDP growth increases the less workers are paid because consumers spend other people's money based on other people's profits.

Great picture!
Anyone done the math on how much it costs to automate cooking & dishwashing versus the cost of hiring a human?

Whatever it costs, next year it will cost even less.

I'm told many restauranteurs in cities where large minimum wage hikes have gone through are responding by abolishing tipping. So better name might be the Service Compris Act.

There is no "n" in restaurateur. A common mistake, but one that a French speaker shouldn't make...

This is exactly correct. Automation will continue to replace physical work (I would not called unskilled, because some like cooking and welding do require some skill).no matter what.

Pretty soon we will have a huge number of unemployable people, and they are not going to sit in the street and accept that they are screwed. What do we do? Guaranteed minimum income? Massive Make work programs? Go Diamond Age

Simple: creative destruction. Euthanasia and sale of body parts.

Or let them go back to hunter-gatherer or farming.

No one needs them as workers or CONSUMERS so they get removed from the economy.

Shrink GDP unless the wealthy start eating lots more cheeseburgers and buy hundreds of $250 shoes per month.

Question: when will the robots go fix the roads and bridges and water and sewer etc without anyone paying them?

"Question: when will the robots go fix the roads and bridges and water and sewer etc without anyone paying them?"

Whos to say they dont? Do you think people lay asphalt with shovels?

Become servants, prostitutes, and plumbers.

Doesn't work.

We need a basic income, but people who are on it should not be allowed to reproduce.

And no immigration. Solves overpopulation in the long run.

What overpopulation? The only countries I know of in which this (to 1630s):
http://delong.typepad.com/sdj/2006/01/20060111_clark_.html
model applies (even roughly) is Madagascar, Niger, and the oil states. One of my long-held beliefs is that in modern economies, population pretty much doesn't matter. Its composition does. Its sheer size does not.

the point of a basic income is that everyonr receives it. it's not a welfare program.

Why do you think that Cowen is decidedly more muted in the anti-law and order animus than laughably naive, pie in the sky Tarroback. Cowen knows that heavy policing will be inevitable in the coming decades. He knows who is going to be responsible for keeping his neck off the chopping block. Although honestly with porn and video games on tap I'm pretty sure the lumpenproles won't really pose more than a sporadic, anarchic threat to the elites.

Yeah, that's what it is.

Some cities and countries around the world have even higher minimum wages. Where are the Australian robots?

Good question, although not really applicable given the nature of Aussie laws. For 16-17 year olds the wages are as low as $8/hr (vs >$15/hr for an adult).

So McD in Australia has the teens doing the more "menial" work with adults supervising. Not sure if that increases teen work ethics or the drop out rate. Also not sure if Australian fast food consumption patterns are different than in the US, presumably it would be hard to fully staff with high school aged kids during the lunch rush?

"starter" wages are very low in most States for teens. And farm labor wages are even lower, with kids working with their family able to be paid by piece.

However, kids are smarter about economics than you are.

I know you will agree when someone tells you that you should enthusiastically work 80 hours a week for $4 per hour and immediately begin your 80 hour week.

Teens respond, "my free time is worth 5 times $4 per hour to do that crummy job".

Link to one of these oh-so-common 80 hour a week, $4 an hour jobs?

Urso, re-read what mulp said. I think you totally misinterpreted their point.

Is his point that minimum wage laws are unnecessary? Because, if so, that's quite a departure for mulp. But I'd be curious as to what *you* think his point is.

Axa,

They're right here:
http://www.bbc.com/news/technology-30098772
http://www.mineweb.com/uncategorized/australian-union-slams-rio-tinto-over-robot-threat/
http://www.theaustralian.com.au/news/features/rise-of-the-machines/story-e6frg6z6-1226291014017

The current hourly minimum wage in Australia is A$16.87, which is US$13.29 at current exchange rates. Bear in mind also that the cost of living in Australia is much higher than the US (as anyone who has actually been in the US and Australia would know); according to the World Bank, the PPP for Australia is 1.6 (i.e. you need the equivalent of US$160 to buy goods/services that would cost you US$100 in America). So the real purchasing power of the Australian minimum wage is about $8.30 -- not much higher than the US federal minimum, and lower than a lot of state minimums (including California's). The idea that a minimum wage job in Australia is enough to give you a cushy lifestyle is a myth.

@adam, thank for the links.

@dave, you are thinking in the shoes of a salaried worker. Try the shoes of one accountant from a multinational company. Are salaries higher in the US or Australia?

Axa: of course your right; I was just responding to the by-now rote invocation of the Australian minimum wage in the context of US minimum wage discussions; the meme that Australia is an example of another countries where a minimum wage worker is able say, to comfortably support a family, is widespread and just wrong.

Kiwi Dave, the World Bank PPP conversion factor for Australia is 1.52. With nominal GDP per capita roughly equal this makes Australian minimum wage around $11 US dollars, or higher than the $10 Californian minimum wage that now applies. I see California is richer than the average American state, so maybe they'd need a minimum wage of about $12 to be on par with Australia. In five years time when the $15 minimum wage is to be introduced they might need a minimum wage of maybe $14 to be rougly equal with Australia, so they might end up ahead of Australian for a while there.

Now just what is a cushy lifestyle is a matter of opinion, so I certainly won't say you're wrong about that, but you might be giving American readers the wrong impression. While income growth been highest for the top quintile in Australia, the real income of the bottom quintile increased by more than 40% from 1996 to 2007 while the United States is in the bizarre situation of the bottom quintile going nowhere in that time. Inequality in Australia has increased since the 80s but not by a great deal while it has, in comparison, soared in the United States. So Australia's poorest workers are considerably better off than the poorest workers in the United States.

Sorry, it's LA that is raising the minimum wage to $15 an hour in 2020, not the whole of California. So California as a whole will probably still be lagging Australia at that point. But we'll see.

Ronald,

So Australia’s poorest workers are considerably better off than the poorest workers in the United States.

I'm not sure that's true overall. One of the problems with inequality measures in the US is that regional cost of living variations are so vastly different that, say, a nationwide Gini coefficient is almost useless. A lot of the people with the lowest cash incomes live in places with costs of living that are simply not comparable to anywhere else in the first world (see e.g. David Brooks's amusing account of trying to spend $20 at a restaurant in rural Pennsylvania, which he could only accomplish in the end by basically ordering everything off the menu). The result being, in consumption terms, a lot of Americans who make relatively tiny incomes actually do pretty well (if you look at comparative stats for things like air conditioning, car ownership, square footage, most poor Americans live like middle class Europeans). The real poverty that exists in America -- which tends not to be well captured in the statistics -- is largely urban and largely immigrant (as described by the laundry workers in the blog you cite, as well as the recent scandal over nail salons).

Kiwi Dave, regional variation may mean some people in the US earning minimum wage are doing very well, but overall the poorest (or rather lowest paid) Australian workers are considerably better off than the poorest US workers. People who get the PPP adjusted equivalent of about $11 an hour are better off than people getting $7.25. Throw in Australia's free health care on top of that and minimum wage earners are very clearly doing better in Australia than the US. (And the weather is better too. Spiders are slightly larger though.)

Also, see this graph from inequality expert Branko Milanovic (http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-the-have-nots/?_r=0). Taking into account cost of living, the bottom ventile (i.e. 5%) of the American income distribution are in the top third of global income; and the fifth ventile (i.e. 25th percentile) are almost in the top 10%. Which is I think a bit of a corrective to the slightly overblown Dickensian take on the issue.

Axa, robots are not very noticeable in our day to day life in Australia, but our hedge fund managers do iron their own shirts: http://brontecapital.blogspot.com.au/2010/12/lessons-in-my-laundry-part-1.html

Thanks Ronald. This may lead to something. Perhaps there's a reason why car factories are automated and not burger joints. Capital is scarce and developing automation devours it. Thus, capital is aimed at automating exportable and high productivity technologies: car factories, electronics.......not at peculiar situations of the organization of society in an specific country. Perhaps salaries is not the whole story behind automation.

Classic free lunch economics on Alex's part.

Let's say all workers are replaced by robots.

That means all workers will be forced to become subsistence farmers or hunter-gatherers, or pillage and plunderers.

But in any case, the robots serve only the robot owners and no one else. The economy is composed entirely of money exchanged between capitalists exchanging capital assets. No one other than capitalists participate in the economy.

The former workers will fall into the farm labor sector, probably producing some non-cultivated mushrooms and game and handcrafts to the capitalists in barter.

But more likely, most former workers will become pillage and plunderers, maybe organizing themselves like the Greece to vote on which set of capitalists to declare war on, or perhaps being more like biker gangs or ISIS and just going in to take towns by force to gain control of assets that they use up and discard.

Economies are zero sum. Pay workers nothing. Workers will then pay nothing. And if no one pays, GDP is zero.

Unless capitalists are taxed to redistribute their cash to former workers so the workers can spend the cash buying what the robots make.

Just like how all those other workers displaced technology became subsistence farmers.

True story!. Farm labor used to be more than %50 of all labor, now farm labor is 3% of all labor. What happened to all those workers? Pillagers and plunderers like the road warrior.

"That means all workers will be forced to become subsistence farmers or hunter-gatherers, or pillage and plunderers."
-I think you have confused the stone age with utopia. Wake up. Utopia and the stone age are not compatible.

"Economies are zero sum."

-First law of economics: they're not.

Makes me wonder: if child labor had remained legal in the Western World up to the present day, where would we be innovation-and-automation-wise? Can short-run inefficient policies like minimum wage laws produce long-term net gains to humanity through innovation that wouldn't otherwise occur?

This depends on whether child labor laws were a leading or a lagging indicator. I honestly don't know the answer to that.

It certainly is an excellent question.

Good point. A plausible story can be made for either, I think.

But ultimately I wouldn't expect it to be wholly one or the other. As long as some portion of children were still working in various industries when legislation was passed making it illegal for them to do so, there should be the same effect of favoring capital/automation as we'd expect to see from minimum wage laws.

Great question.

How will we know if this "works," I.e., actually improves things for low income works without a big drop in employment? And how long will it take to find out?

"A report underwritten by the Los Angeles County Federation of Labor found that raising the minimum hourly wage to $15.25 … would create an additional 46,400 new jobs across the region by 2019, including nearly 25,000 in Los Angeles."

It would be interesting to see the methodology behind this data. Perhaps $30/hr would create even more. Was $15.25 an arbitary number or did they tune the number for the highest job growth? Or, maybe it's all a sham and the job impact will in reality be negative...

Why stop at $30? Why not $1000? If $15.25 can create jobs, why can't more?

Maybe it converts 200000 full time jobs into 246400 part time jobs. Job creation!

Diminishing returns?

The California minimum wage will be $10 in a month; the LA minimum will be $15 by 2020.
The average of the Labor input costs on fast food is about 1/4 of the price. Since some of that increase will actually be whittled down in real terms due to inflation, I'd say it will cause fast food prices to go up about 10%. Frankly, not that significant.

Speaking of inflation, why don't we just index the minimum wage to inflation? Then we don't have to keep having these discontinuous jumps. It's not like we will never raise it again, why go through this every 10 years?

I would assume it's because the parties can't agree on how to measure inflation. Even a half percent change either way makes a huge difference compounded over the decades.

Of course the Prez's current plan is to both jack up the minimum wage and index it to inflation. In effect he'd be raising it significantly more than the "sticker" reveals, because previous increases have always assumed some inflation erosion, which would no longer exist.

To Nemo,

The "new jobs" computation usually works like this, and it is bogus.

Almost no one thinks that requiring a larger wage is going to create more jobs in the legislated industry, say fast food. They are imagining the new jobs springing from the extra demand created by the extra pay.

Workers X extra-pay = extra-cash. Extra cash / $30,000 = new jobs. Roughly, for every 3 people getting $5 more/hour, one additional job is supposed to be created.

This is bogus because this ignores that the extra cash (resources) comes from somewhere. So, for each extra $30,000 in fast-food revenue, a job disappears somewhere. If you spend more for X you must spend less for Y. The demand for higher minimum wages is a demand to reallocate resources, not increase them.

The minimum wage is a socialist/communist demand to take money from filthy business owners and redistribute it to deserving workers. But, businesses organize work and production, they don't make a profit equal to their sales. When their costs (wages paid) increase, they must collect more from their customers or go out of business. The business owners do lose profits as well as sales, which is part of the overall loss.

Yes, $15.25 is arbitrary. I have never seen a principled argument for the level of the minimum wage. It seems to me that it is always enough to excite the crowd without obviously crushing the targeted industry. It is the definition of gut-feeling and political.

There are several effects of the LA minimum wage hike that I think will be stronger than a shift to robots:

1. More businesses with no W2 employees (family businesses, partnerships, sole-proprietorships).

2. More informal-sector businesses (combined with #1)

3. Uber approach applied to more domains where workers are independent contractors (Uber for house-cleaners?)

4. Order & pay by app in restaurants. More use of self-service

6. More prepared foods and ingredients in restaurants. Food delivery services (food prepared outside the city) taking market-share from bricks-and-mortar restaurants.

7. Hotels and motels start dropping daily maid service (or upcharge for it)

Agreed, although 4 is really an example of the kind of automation Alex is talking about, just without humanoid robots. You did miss an obvious one, though, and that is new businesses (particularly service-sector) opening outside the city limits, and to a lesser extent, existing businesses relocating outside the city limits. This is particularly true in the LA metro area, which is a patchwork of municipalities, some of which are enclaves surrounded by LA. I think the only place where a municipal living wage law can work is one where the metro area is overwhelmingly dominated by a single municipality (San Antonio; other examples?)

Agreed, although 4 is really an example of the kind of automation Alex is talking about

Well, from that point of view, so is 6 -- it's much easier to automate industrial food production than craft food production (contra the photo, we won't see robotic line cooks). But industrial food automation is not new at all. What will be new, though, is changing the competitive balance between industrially produced foods and hand-crafted foods. How long before we see the Seattle/LA version of this controversy:

http://www.theguardian.com/lifeandstyle/wordofmouth/2014/jul/15/france-fait-maison-homemade-law-save-reputation

(although the problems there seem more driven by high VAT rates rather than minimum wages)

Just wanted to briefly comment- one point to consider is that one welfare-improving aspect of minimum wage hikes is increasing the bargaining power of those who work above the minimum wage. So, a minimum wage hike can be welfare improving, since the high end of the wage distribution (those hurt as employers) have low marginal utilities of income, and the low end of the distribution (those moving from marginal jobs to unemployment) may be compensated through transfers, whereas the middle of the distribution gains from increased bargaining power.

Of course, changes in total welfare would depend on the extent of the constraints' bind and overall structure of the labor market.

This is a finding from more recent work on labor market search & frictions, absent from our econ 101.

Our life is better because human labor was replaced by machines . When did this become. A bad thing

When there are no jobs left that people can do for less than robots.

If that was the case why would anyone care? If i can have robots tend to my every need, why would i want to work?

@MOFO.

Because you still need to eat and the robot servants aren't free. Because we have yet to think through how to distribute limited resources* in an economy where human labor has zero value.

Total substitution of capital for labor =/= end of economic scarcity

*While remaining within the general boundaries of contemporary human rights norms. If, OTOH, you're a complete sociopath and have no problem with either mass murder or mass starvation, then never mind.

If there is economic scarcity that robots cant defeat, then clearly human labor has a value higher than 0. We can employ human labor to devise ways to deal with various scarcities. Last i checked, robots cant innovate or create, they can just dumbly labor. So long as there is a need for innovation, there is a need for human labor.

The world is increasingly looking exactly like this, fewer and fewer people laboring and more and more people creating and innovating. How is that bad? So what if no one is employed performing manual labor in a factory? No one is employed shoveling coal and the world is a better place for it.

In order for robots to supplant all human labor they'll have to be smarter than we are, otherwise they'd still need us to direct them (labor). At that point they'll have easily replaced us as the dominant form of life in the planet, and they'll resolve the problem of how to feed the humans however they decide to.

@MOFO:

"If there is economic scarcity that robots cant defeat, then clearly human labor has a value higher than 0."

Unjustified conclusion. Also, you're implying that the presence of human labor negates economic scarcity. By that yardstick, there shouldn't be any economic scarcity now.

"Last i checked, robots cant innovate or create, they can just dumbly labor."

Total substitution of capital for labor presupposes true artificial intelligence. That is, machines can do EVERYTHING of any economic value that humans can, including innovate and create.

You're operating from the implicit assumption that such artificial intelligence isn't possible and speaking as if that's an a priori, universally understood fact.

"The world is increasingly looking exactly like this, fewer and fewer people laboring and more and more people creating and innovating. How is that bad?"

Because it's occurring at the expense of the Western middle class. Breadwinner-level, mid-wage, previously stable and reliable jobs have been automated, and to a lesser extent, globalized away. Despite all the fairy tale bullshit being spewed by certain Silicon Valley libertarian software moguls, those jobs are being replaced predominantly by shitty, low-end, low-wage, unstable, dead end service and retail jobs. To put it another way, we're not transforming coal miners and industrial line workers into software engineers and entrepreneurs, but rather into burger-flippers and cashiers.

Just once, I want to see one of you delusional assholes have the integrity to acknowledge the downside of your economic ideology. For fuck's sake, own it.

When a smart ass economist blogger wanted to pretend he was clever

exactly. Tyler's argument is a position in favor of increasing the minimum wage.

Life is better when human labor is replaced by machines that are *more efficient*, i.e., when the machine is better than the human. When the replacement occurs because human labor is made *less efficient* due to minimum wage laws, then that is a bad thing because in this case the machine is second best.

Alex should talk to the poster of the previous MR article, and vice versa. Consciousness is probably beside the point as far as the threat of AI. If robots are cheaper than people at $15/hr today, they will be cheaper than people at $ 3/hr in a couple of years. And they are already replacing people who make $50-$200/hr - including economists.

Exactly, edmeasure.

Of course, an employer that doesn't pay a living wage is dumping the cost (the "externalities") on others. We wouldn't allow a steel company to dump its toxic waste in the river for the rest of us to pay the cost of cleaning it up, so why do we let some employers (freeloaders) do that with their employees? Another commenter makes the very good suggestion that, rather than a minimum wage, the public provides a subsidy to being the employees up to a living wage. I suspect those employers would object because it would bring into sharp focus that they are the freeloaders.

Why is it the employer's job to make sure the employee is able to live comfortably no matter what their productivity or value added is in the workplace? Is any employer not hiring someone "dumping them in the river"?

If you simply declare them to be freeloaders it all makes sense.

What in the heck is your definition of a "living wage"?

A wage high enough to provide a worker with: food, clothing, shelter, efficient transportation, and basic healthcare if he works 40 hours a week.

Even if ANY of those things could be quantified and agreed upon for a single person, do we scale it up for wage workers with 5 kids? If so why is that on the employer to provide rather than the worker scaling up his # of hours worked (multiple jobs if needed) and scaling down # of poor life choices?

You obviously don't understand what an externality is. Hint: it's not "a cost".

I completely reject the idea that paying a kid $20 to mow my lawn is doing something wrong because I'm not paying a living wage. In fact I would go so far as to say you would be insane to suggest otherwise.

Why is this a bad thing? The jobs that are easily replaced by robots should be. The ones that are not will be paid better.

That's what I've always said. So somebody tell me why we're importing over a million people a year to do to the jobs that are going to be automated out of existence.

Rumor has it those people are going to save us from ourselves by solving our problems and magically rescue Social Security and Medicare too.

So, because of the minimum wage, we get robots? Isn't that a positive in both the medium and long-terms? If outsourcing is viewed as a positive due to creative destruction, why isn't the minimum wage viewed as a similar form of creative destruction?

It is outsourcing from Homo Sapiens.

to capital owned by Homo sapiens?

Agreed, Just Saying. This post's argument appears to me very much a pro-minimum wage one. Robert C. Allen says that one of the main reasons for the beginning of steam technology in the textiles and apparel industry in England was that England was such a high-wage country that it was only profitable to use there. This led to increasing returns, which helped lead to the Great Divergence.

Isn't this going to happen one way or another? So if somebody can't make a living wage why are so worried that people getting married and having children? Why do we need immigrants to this nation?

These will be great times for Engineers. We'll happily introduce you to your new friend and helper while we're working on next year's model.

Love this!

And to get a sense of how big a jump this is, and how great the potential for major impacts on employment in L.A., consider that the median wage in the metro area is only $18.40, and vast number of skilled and semi-skilled occupations pay below this $15 threshold (see the link for my list); there will have to be knock-on effects here as no one who's worked to get trained in a trade wants to make the same as a burger-flipper.

http://www.patheos.com/blogs/janetheactuary/2015/05/minimum-wage-update.html

So, we're going to have an excellent test of whether the minimum wage has a negative effect on employment or not.

I predice a large increase in the number of people working "per piece" service contracts. Like, you give me $20 to mow your law, regardless of how long it takes me. You pay me $X per square foot to install flooring, however long it take me. If I'm really efficient and good, I make more thaqn min wage. If I'm inefficient I don't. These workers will be independent contractors rather than formal employees.

I think of this as generally a good development. I like the idea of a nation of independent contractors. Like the yeoman farmers of our lawns.

Except that it is precisely the opposite of a yeoman farmer. The whole idea of the yeoman farmer was that you controlled the product of your labor rather than bidding it out.

Isn't that the uber model? Or are we imagining that all these independent contractors have their own marketing system? Generally, I like the idea of greater agency in the workplace -- the issue, as always, is who controls access to that marketplace, whether its for flooring, taxi service or the sale of used books. That's the new nexus for the contest between capital and labor.

Well wouldn't an employee be closer to the precise opposite of the yeoman than a contractor? Given the extent of specialization in the modern economy I think contractors are as far as we can go, at least until everyone just needs to perform basic maintenaince on their home 3D printer and robots.

I hope employers try to do that. FLSA law suits for everyone!

Welp, guess we'll just have to import more illegal coolie slave labor for the megacorps then

Tyler is obviously putting this forward as an argument against the minimum wage increase but it really is an argument in favor. If Tyler is correct their are technologies in existence now that could increase labor productivity but are going underutilized because of low labor costs. An increase in the minimum wage will force companies to invest in these technologies rather than getting by on the old cheap labor economy without productivity gains. That is a good thing.

We want productivity to increase. Indeed we want productivity to increase to the point that the cost for all labor is $0. Efficient economic redistribution can give us the best of both worlds: rapidly increasing productivity and rising living standards for the lower class. Tyler is arguing in favor of a minimum wage increase.

I should have said Tyler and Alex.

The first commentator basically nailed it. This is a backdoor way of solving the immigration problem, or at least in reducing immigration from Latin America (now mostly Central America) into the LA area. Since the main asset the immigrants have when they arrive is that they are able and willing to bid lower than the native-born workers for employment, you remove their ability to do this, and will get less immigration. And you will get much of the Left behind an anti-immigration initiative for once, or at least where they have to oppose a minimum wage increase.

Of course, if you are in favor of high immigration BECAUSE it lowers wages, you won't favor this.

And one of the commentators was also accurate that raising wages will trigger investment in labor-saving technology.

More sloppy reasoning by Tyler and Alex. Few people dispute demand and supply curves; the relevant question is whether the additional income earned by those who are employed and any macro-effects of low paid workers spending more outweighs dis-employment effect of the supply-demand curve.

So far the bulk of the evidence leans heavily towards indicating in the short run any the net result of a modest wage increase is a gain of dollars to low wage workers. e.g. (average wage increase) X (number of impacted workers )- (Number of workers losing jobs) X (average wage of workers disemployed) is much greater than zero.

Having neglected to perform this elementary analysis, perhaps Alex and Tyler should review Elements of Mathematical Problem Formulation or a similar source.

It also depends on if there are non monetary benefits to work a job in the taxed economy (as opposed to working for cash).

Of the 105 comments until now, not a single commenter has connected the raise-the-minimum-wage movement with the simple fact that it is intended to garner votes. Labor economics is surely secondary. Minimum wage voters know where their bread is buttered, but if economics PhD's can't agree how the production of bread and butter can be maximized, how do you expect short-sighted voters to?

So we have to wait to 2020 to see the results of this experiment. Will restaurants and hotels near the border prosper?

Everyone here wants productivity to increase : raising wages, especially low wages is to only way to create enough incentive for robotization, which is the key to productivity.

Unemployment is not the problem, it's the solution.

I wonder however who will pay for economists in such a world

The Walton family is one of the richest in the world, consistently near the top of the Forbes 500 list for many years. In practically every state where Walmart operates, their employees are the largest recipients of public assistance. This assistance (earned income tax credit, food stamps, health insurance, Pell grants, etc etc) was put in place by presidents and legislators of both parties. Your tax dollars are directly subsidizing the Walton family wealth because you are subsidizing the true cost of their workforce... and most probably, you (because of the lobbyists they can afford and you can't) are playing a much higher tax rate than they are.

Ex ante it would be nice if a program evaluation were designed for this increase. What is it supposed to do? How will we know if it has been accomplished? A lot of people seem to be calling this an "experiment," but it would probably be too much to expect for an economist, to you know, state a null hypothesis and the relevant variables. Science, I suppose is much more fun, sifting through data after the fact and finding facts to fit your story. Sic semper erat, et sic semper erit.

If a higher minimum wage leads to more automation...

and automatioon creates more and better jobs than it eliminates...

what exactly is the problem with increasing the minimum wage?

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