How out of bounds is the $15 California minimum wage?

By 2022, when fully phased in (small firms with fewer than 25 workers would have until 2023 to comply), the California minimum wage would represent 69 percent of the median hourly wage in the state, assuming 2.2 percent annual growth from the current median of roughly $19 per hour.

That 69 percent ratio would be all but unprecedented, in U.S. terms and internationally. The current California minimum wage represents about half the state’s median hourly wage, just as the federal minimum wage averaged 48 percent of the national median between 1960 and 1979, according to a 2014 Brookings Institution paper by economist Arindrajit Dube. (It is currently 38 percent of the national median.)

Other industrial democracies with statutory minimum wages typically set theirs at half the national median wage, too.

That is from Charles Lane.  This is also worth noting:

Dube, generally a supporter of minimum wages, recommended that states use 50 percent of the median as their benchmark in the United States. (He told me by email that California’s experiment is worth running and monitoring.)

Yet Alan Krueger, among many others, is against it.  On what grounds is it worth running?

Comments

Upper middle class social engineers using low-skilled workers as their lab rats is standard operating procedure. Only a cad could possibly object.

"California’s experiment is worth running": you have just answered the 'to whom is it worth running?' question.

I gather you believe the upper class social engineers, just like everyone else earning over the median income, will suddenly restrict their calorie count, suddenly become slobs and forego clean toilets, and let garbage accumulate attracting rats, and they will let their children run wild without child care, demand their kids walk to school, and let infirm parents and children spend entire days in feces, because they will never increase their spending on goods and services performed by those earning minimum wage plus 20%?

After all, if the upper half do not reduce their quantity of goods and services that are small fractions of their incomes, the bottom half will see their incomes increase from the much higher spending by the upper half, and their increased income will exceed the price increases of low wage production.

Oh, wait, these days two handed economists are not politically correct!

My "on the one hand prices of production will rise" is not allowed to be balanced by "but on the other hand, low income workers producing necessities will see their incomes rise faster than prices, delivering a transfer of incomes from the high income people to the low income workers."

Seattle is running this experiment now. Why don't we wait and see how it goes, then judge?

http://www.latimes.com/business/hiltzik/la-fi-mh-seattle-s-minimum-wage-kills-jobs-but-data-20160222-column.html

UW analysis from January: https://drive.google.com/file/d/0B-KBLMLLa7X9U0lsMXNsaWlkZms/view

And then we can apply a urban $15 minimum wage to rural areas because you "Fucking Love Science", right?

It would be better information than we have now.

Or, because you love your political ideology, we could just keep finding reasons that there is no possible way to estimate the impact of this to weigh the benefits and costs and oh well let's not even consider it ever again it's just so damn hard. Right?

As if there's no political ideology required to make it acceptable and desirable to run these experiments.

I am admitting we don't know exactly what the impact would be. Others are saying no, no absolutely can't be considered because...bad.

I agree with Jan on this. This will act as a great experiment. I applaud California's willingness to undertake this potentially very costly science and use it's own poor as test subjects.

If they really thought it was a great idea they'd make it go into effect this year. Now *that* would be an experiment. But they're not, and I think it's so the Gov. can claim credit for a $15 minimum wage without having to actually deal with the consequences. Of course if it works out he'll take credit, but if it goes wrong than it's because his successor mucked it up along the way.

"it’s because his successor mucked it up along the way. "

More likely they'll try and blame it on Republicans/Business owners/foreign trade/recession or some other scapegoat.

A Trump presidency + this law = the biggest domestic migration to CA in decades

Only if there actually are enough jobs at $15/hr to go around. Nobody is going to move to CA if employers aren't hiring.

I seem to recall a time when many people moved to California for jobs, only to find there were no jobs available.

The minimum wage is only somewhat likely to induce a move, but I doubt that the information and rationality of the lower classes have improved since the dust bowl. How many people remain in blighted cities when there are other prospering states?

New migrants means new customers which means new jobs.

Ohh so the people coming for the low-end jobs are fueling the economy with all their money from the jobs they don't have yet? I get it now.

This seems more like the backdoor anti-legal-immigrant and kids of immigrants policy. Look at the education levels in LA County, nobody is going to be hiring a lot of those kids for $15/hour, they are going to migrate elsewhere or ?. We might be setting ourselves up for a bit of Euro style assimilation problem when they can't even get service jobs.

Its a huge subsidy to illegal labor as well. It will increase the gap between under the table wages and legal wages.

Finally if you have a binding minimum wage, won't the incidence of the payroll taxes be on the employer? I think this will increase the employer cost by more than people are thinking.

Total disaster.

If so, and they do not ease the building restriction in the parts of CA where people want to live, won't the land lords capture much of the raise?

BTW it looks like companies that are effected by the minimum wage, most being in competitive industries, raise their prices enough to cover almost the entire difference on labor costs. That means that the disemployment effects are due to people a little buying less from those businesses. That means the disemployment effects are very small. Never the less I am against minimum wage because I believe that even a very small increase in unemployment is very bad easily outweighing the benefit to those whose wages increase.

Also many people already work for less that minimum wage so a rise in the minimum wage would push more workers and employers in that direction.

Krueger won't be able to run a study on this one since the effects are already foreseen to be so bad, there's no exogenous shock. By 2022, there'll be no businesses left alive in California for him to study.

Then again, he only has himself to blame since he provided the main source of academic credibility to the minimum wage advocates. He himself may know better, but he surely didn't try to explain it to those who would use his research to advocate such nonsense.

Yes, literally all the businesses will be gone by 2022.

Good grief. I have a list of complaints a mile long about this bill, but it's not going to put everyone out of business.

The areas of California that are already high-cost will likely notice little difference.

Surely Facebook, Google, Hollywood et al. will all shut down and start the exodus away from one of the most highly storied coastlines on the planet, in part because they will all refuse to pay 18 cents more for their big mac meal.

You could show Wal-Marts razor thin per-employee margins to a leftist and they would still claim that Wal-Mart could double wages. They would claim things like increased demand. In reality, you could increase demand in a similar fashion by simply declaring that each dollar was now worth ten dollars. Minimum wage is garbage policy. If you want to increase income redistribution, direct redistribution is more efficient. But, 1. Most leftists couldn't pass an Intro to Microeconomics course (and don't believe in Micro anyway), and 2. Minimum wage is about punishing businesses and EITC just doesn't inflict delicious pain in the capitalist pigs running businesses.

"2. Minimum wage is about punishing businesses and EITC just doesn’t inflict delicious pain in the capitalist pigs running businesses."

The government has to pay for EITC, and it's far easier to pass a massive tax hike onto businesses in this manner. It's "free money" from the Left's point of view.

If every other store also had to raise wages, would Wal-Mart suddenly lose so much market share that it would go out of business? It is profitable precisely because can ruthlessly exploit efficiency. Why would it lose that competitive advantage if all other firms had the same wage requirements?

Hence the multiplying dollars. What effect does universal, proportional nominal wage increases have on income distribution? None. What effect does it have on production? None. The goal is income redistribution and EITC effectively targets low wage workers without decreasing the competitiveness of labor-intensive firms. Unfortunately the new meme is that EITC, medicare, SNAP, et al. are welfare for businesses, nor recipients - as if in their absence people would be less inclined to work.

Thomas - " What effect does universal, proportional nominal wage increases have on income distribution?"

If you think about it for a minute, that's a pretty dumb thing to say. Look up an image of an income distribution on Google. And then imagine that the bottom 20-30% of that distribution were now raised to a flat line equivalent to the new minimum wage. It unambiguously affects the income distribution.

I don't understand how you could make the massive mistake of pulling up the wages of the bottom 20-30% as being the same as a "universal proportional nominal wage increase". That's not even remotely what anyone is discussing. No one is suggesting that CEOs and software developers must also get a 30% or 50% raise over the next five years (although, indeed, many will).

"What effect does it have on production?"

Ugh. And here a moment ago you were lecturing us about how "the left" doesn't know anything about introductory economics.

So my t-shirt will cost $5.99 instead of $5.75. Walmart has famously good logistics and accounting systems. They will not lose any business - if anything, it will be mom and pop outlets who will struggle to adjust.

In fact, Walmart might even do rather well with a higher minimum wage, because the increase in wages will primarily accrue to people who don't have loads of money to spend, and they will spend a lot of their money at Walmart.

On who could pass intro to economics - well, it's pretty obvious that this applies to most on the right as well. But, to be fair, most people cannot pass courses that they have not already studied.

Surely, the power of hyperbole is wasted on you.

The general figure that originally circulated was 68 cents to double wages, and that was a gross underestimate for a number of reasons mostly because it included royalties from franchisees, but didn't include the wages paid by them.

The study will be on what can be completely automated (restaurant quality vending machines), what doesn't need to be done at all (like car washes), and how society will react (will people steal from completely unmanned stores, facing only taser drones). It will be epic. There will be businesses, just no employees.

How enforceable are high minimum wage laws, especially in contemporary California, a state where a huge fraction of small business employers aren't from cultures where the concept of Rule of Law is highly valued?

I could see a high minimum wage doing some good, but I could also see it turning into a fiasco.

California is an interesting example of corruption because the government isn't all that corrupt relative to, say, Illinois, where the government tends to shake down honest businesses. California still has 1910 Progressive government structures that are more resistant to governmental corruption than in Chicago.

But California now seems to have a high level of private enterprise corruption, with businesses cheating the government over taxes and Medicare and each other via insurance fraud and the like:

http://www.vdare.com/articles/diversity-is-strength-its-also-extended-crime-families-tax-fraud-and-hung-juries

So, it's hard to say what will happen with a very high minimum wage. Big companies like McDonald's will have to follow the law, but a huge fraction of small businessmen in California these days think following the law is for chumps.

Predictions:

1. Black market labor will expand in rural areas and among latinos
2. Enforcement in rural areas will be cheered by the left.
3. Enforcement in latino areas will be labelled racist.

+1 to #3 on that list.

The combination of #2 and #3 should make for some fireworks.

McDonald's itself has virtually no minimum wage employees.

Most McDonalds are franchises and they are the ones with minimum wage employees.

I'm pretty sure most people include McDonald's franchises under the umbrella of "McDonald's"

California, by the way, is a low standard of living state when you compare the median income to the high cost of living due to the expensive real estate. Back in 2005, I calculated that the standard of living for the median family of four in California was the 49th highest in America, above only Hawaii and D.C.

On the other hand, the weather is nice.

Yeah, all those silly people wouldn't live there if there weren't other factors that make it a very attractive place to live. Just like there are reasons you would have a very hard time convincing me to live in San Antonio.

@ jan,

TEXAS EMERGES AS TOP DESTINATION FOR CALIFORNIANS FLEEING STATE
"About 5 million Californians departed the Golden State between 2004 and 2013, while 3.9 million arrived from other states for a net population loss of roughly 1.1 million, The Sacramento Bee reported Monday, using tax return data from the Internal Revenue Service."

http://www.washingtontimes.com/news/2015/aug/31/texas-emerges-top-destination-californians-fleeing/

You do realize that CA's population continues to grow, right? Anyway, is a net loss of people moving between states for CA, the country's most populous state, which suffering from strained natural resources, absolutely bad thing? I suspect that many Californians thought "good riddance" when they left.

The argument is that people moving away is evidence of bad policies. Whether the migration itself is bad for the state depends on who is leaving.

It is one way to evaluate policies--but that trend could also be indicative of many things not related to or targeted by CA public policy (e.g drought, other parts of the country catching up to CA in terms of the number of jobs in tech, etc.). Is people moving to/away from the state the specific outcome this particular policy is supposed to target?

People moving out of California is a primary goal of many of their NIMBY policies. Environmentalism, labor restrictions, and heavy business regulation are a lot like gates on your community: They keep out the undesirables.

"I suspect that many Californians thought “good riddance” when they left."

I agree.

You're saying that this policy is specifically designed to drive people out (while raising the incomes of others.) It seems unlikely to me, because conspiracies are not as common as people believe and we have no idea just how effective this approach would be, so would seem a poor choice.

I tend to think it would be more of a side effect than explicit goal of the policy, which some or perhaps many people (not necessarily the policymakers) in CA would welcome.

Strained natural resources?

Jan you seem to not understand how this works, so I will explain. The environmentalist decide to put the brakes on new building for the sake of the environment. If that hurt existing middle class and rich white home owners they would change the laws but since their hoe values rise and if the own rental properties their rents rise they are happy and so do not change the policy. The community actually gets a little nicer do to the poorer folks being slowly driven out. The poorer folks tend to vote at lower rates and those who leave do not vote at all and so the policies are popular. Only the builders and those with undeveloped land that they would like to develop, go to bat for the poor folks and so they get bowled over, so you see it is sins of omission but sins just the same.
Nobody says let's drive the poor out out of here, but they median voter does not go to bat for them though they are the victims of and injustice.

"Nobody says let’s drive the poor out out of here,"

Jan already had a direct response to that. "I suspect that many Californians thought “good riddance” when they left."

People come and go for a lot of reasons. if less than 10% of the population has relocated to another state within a 10-year period, and the population continues to grow, we hardly have evidence that policy is driving people out of California in any sort of generalized sense.

I could similarly ignore all the people leaving California, focus exclusively on those the incoming numbers, and claim that everything was amazing.

Somewhere in the middle, of course, since we count both inflows and outflows.

It's bad to evaluate something like this on local outcomes. Low-skill workers will not move to a place where it is illegal to hire them in large numbers, and they will leave when they come of age there. So California might actually turn out looking great: normal unemployment, everyone gets paid well. Also, low-skill workers may be more likely to offend, to have children who take more resources to educate and need subsidized health insurance etc. This goes especially for policies like LA's minimum wage: they are just making it illegal to do things with unskilled labor there, but not nearby. Real estate is expensive in LA, so when the first most-profitable use of something is banned, it will be taken up by something else (probably a business whose profits are highest using higher-skilled labor); you won't see blight. Activists in Oakland now want a $20 minimum wage, against a plummeting African American population.

This is only one of many out-of-sight/out-of-mind policies California has. Look at the tax system tilted against new arrivals (super high taxes on income, sales and new property; no tax on old property). Or the impossibility of building. Eventually, poor people in California will only live in the central valley and farthest, hottest exurbs. There will bunch of hand-wringing about the geographic inequality. To combat the inequality, they will make it illegal to build any more housing in the exurbs or central valley, mandate an even higher minimum wage and institute rent control everywhere. Eventually, all but a few of the poor who are lucky enough to get government jobs or grab a rent-controlled apartment when the policy goes into effect will have to leave to live with their relatives in Houston and Atlanta. Consequently, Californians will have the evidence they need to congratulate themselves on their caring policies (we cut poverty in half!) and look down at Texas and Georgia.

As a Californian, the idea of using the minimum wage law to drive out of the state the low productivity workers who don't earn enough to pay for their own health care ($12 per hour worked according to Peter Schaffer's calculations) sounds pretty good to me. If Dov Charney has to relocate American Apparel to Texas, well, don't let the doorknob hit you on the way out, Dov.

I'm more worried that Dov will figure out a way to pretend to pay his workers $15 while actually paying them $10.

It is incorrect to think that someone's labor is not worth $22 per hour simply because their take home pay is $10/hr. If a worker is willfully employed, his productivity must be higher than the total cost of employment. How much is health care and how much is pay does not especially matter to whether the worker is pulling his own weight. However, if the total cost of employment rises over productivity, the worker will be laid off, and the state will have to pick up the tab.

I propose a statewide minimum wage for professional internet commenters and middle-aged men who are fixated on Dov Charney: $1000/hr. So you'll be up to $3k/hr. If you have to relocate to Texas, don't let the door hit you on the way out.

Who is Peter Schaffer? Is that supposed to be like a name thrown around at Davos or something? I don't think it is. I think it is some guy you met on the internet.

You don't seem to be familiar with the practice of "Privatizing Profits, Socializing Costs."

This is actually not a bad point, except that California tends to have a more generous safety net than other places.
Are poor people actually leaving the state, or are they just settling down in places like Oakland? Or are just the *really* poor people staying and living off disability while anyone with a work ethic flees to Texas and Georgia?

Yes, this law won't make the poor leave, as much as it will make the "working" poor leave.

Nope they will just have to be limited to three hours per week. Their ability to produce a higher number of garments per hour is on them.

How many more people does California even need/want? I love the constant threats of everything and everyone relocating to Texas. I doubt CA lawmakers or citizens are scared. Google will still continue to hire its engineers and the farms aren't going anywhere, so long as they get that little water issue sorted.

We get it. You love California and won't be swayed by any rational argument that the state may be making poor policy choices that could result in negative consequences. Because "Cali is awesome and always will be" or something. Many businesses have left and more are likely to. Yes Silicon Valley isn't going anywhere, but if you're paying attention you'll notice that the vast majority of those firms' expansion is taking place outside of your beloved state. Farms admittedly don't have the luxury to move, but that water issue you referenced isn't so little.

I don't even live in California, nor am I from there.

I can be swayed by rational arguments, and I am not even saying that CA should definitely raise the minimum wage. I am saying the endless drone of "they'll move to Texas" is not resonating with many. The "we must beat Texas in the business climate rating" mindset is not something that should be blindly adopted. And is getting more people to move to CA--or preventing people from leaving--undoubtedly a good thing in the countries most populous state with extremely strained resources?

Boulder, CO

"Extremely strained resources"

WTF are you talking about?

Yes, your .com billionaires will still be billionaires. The effect of this will be largely felt by the poor and lower middle class.

This starts, and can only work, if the dot com billionaires + mere millionaires consume enough $15/hr labor to drive the whole thing.

I think we might have enough affluent consumers (school kids with debit cards) to make it work .. but that is very cautious optimism. It is an experiment, with odds maybe 5/4.

I love that I do not say 5/4 for or against.

I'm glad the progressives here are admitting that the true goal here is not to help the poor, but to run them out of town so you don't have to look at them. Thanks for letting the mask slip.

No, I am simply asking whether goal should be to increase population and keep from leaving, no matter what? Or if perhaps the goal should be to improve the lives of the majority of working poor through higher wages.

If 5% of minumum wage jobs were eliminated and those workers left for Texas (where life is GREAT FOR THEM--we need more labor market mobility, btw), but 95% of minimum wage workers got a significant pay bump, you say it is absolutely bad policy. I say maybe it is good policy.

Should read "increase the population and keep all workers from leaving, no matter what".

And what if the low-skilled folks driven out by the new high minimum wage turned out to be predominantly minorities? And the overall effect was to turn California whiter (sort of like San Francisco on a state-wide scale)? Would you be OK with that result?

>increase the population and keep all workers from leaving, no matter what

So why all the ruckus about gentrification?

If progressive politics are about raising standards and pushing out people who can't afford the new standard, why do we care if Oakland's poor get pushed out of the state?

Cooper, I don't know what "progressive politics" is about, but I want what is best for the low-income person. If, for a minority of those folks, that means getting to live in Texas so they can have a higher standard of living, while the rest of the poor people in CA get a pay boost, that is a good outcome.

Slocum, I don't believe in policies to target people based on their skin color. California is a majority-minority state with great diversity that is only increasing. The chances of this policy significantly changing that are nil.

Slocum, I don’t believe in policies to target people based on their skin color. California is a majority-minority state with great diversity that is only increasing. The chances of this policy significantly changing that are nil.

I'm not sure why you think that -- it has clearly happened in San Francisco. If lower-income, lower-skilled workers are forced out of California, it seems almost impossible that Hispanics won't be hit much harder than Whites and Asians:

"From 2006 to 2010 Latinos age 25 and older were much more likely to report they
had not completed high school or college compared to the state’s general
population in that age group. Nearly half of Latinos (43 percent) had less than a
high school education compared to 19 percent of the general population. "

"Nearly one-third of California’s population age 25 and older (30 percent) had a
bachelor’s degree or higher, but only one in 10 Latinos in that age group
(10 percent) had at least a bachelor’s degree. "

http://latinocaucus.legislature.ca.gov/sites/latinocaucus.legislature.ca.gov/files/LatinosInCA.pdf

You're acting as if those stats are news. They're not. This is a policy targeted to help the large majority of low-income workers (not because they are minorities, whites, or any particular race). What it would do is raise incomes of low-wage workers, who may be disproportionately non-white.

Is the fact that most of the benefit of those increased wages does not accrue to whites a reason to oppose it? I say no. It should be a race-blind policy.

"What it would do is raise incomes of low-wage workers."

Yes, that's the stated intention, but not the likely effect. There is simply no possibility of millions of high-school dropouts suddenly all becoming worth $30,000/yr (or of employers of low-wage workers -- which typically target the low end of the market and operate on thin margins -- eating the difference between the new high wage and their employees low productivity). A married couple of minimum wage earners would have a household income of $60,000, which is about 15% above the current US household median. It's not possible to make all families above average by legislative fiat -- this cannot end well.

@Jon
How many more people does California even need/want?

People need a place to live unless you are ok with the sleeping on the street.

How many more people does California even need/want?

Depends on if California wants to keep the hippies and artists around, I guess.

When I get my next property tax bill(currently $7000) I won't pay it cause.
no tax on old property.
You must be referring to Prop 13, but Prop 13 says 1% of purchase price(plus bonded indebtedness, about one quarter % more) and 2% increase per year, not exactly
no tax on old property

I think you get his point. The NIMBY liberals of California demand an entrance fee of increased (relative) property taxes to people who move in. I wonder if this violates the interstate commerce clause?

I cannot find any challenges to Prop 13. Prop 13 has been around since 1978, so if Prop 13 violates the interstate commerce clause, its opponents have had plenty of time to make their case. Who would challenge it? Would the Institute for Justice want to take it on as unfairly protecting incumbents?

I want to correct my previous post. While I still have not found any cases that challenged Prop 13 on the interstate commerce clause, there was a case that challenged it in the United State Supreme Court.

"The most notable, Nordlinger v. Hahn, argued that acquisition-value assessments are unconstitutional under the federal constitution as a violation of the Equal Protection Clause of the Fourteenth Amendment. Nordlinger reached the Supreme Court of the United States. The nation's highest court in 1992 upheld Prop 13 against the Nordlinger challenge by a vote of 8-1" https://ballotpedia.org/California_Proposition_13_(1978)

US mobility has declined substantially in the last decade. It's one reason that such a high fraction of counties have still not shaken off the crash, in terms of employment. Of course, net migration is already negative for Ca. This should increase it somewhat, both in terms of jobs and low skill workers. That way the winners can gentrify even more neighborhoods!

For example, Turkey's Gulen cult, which is run out of Saylorsburg in the Poconos ever since the Imam Gulen fled to exile in the U.S. in the late 1990s, is the largest operator of charter schools in the United States, taking in over a half billion dollars of American taxpayer money annually. They import a lot of Turkish men to teach in their charter schools here and force these teachers to kick back a sizable percentage of their teacher's salary, such as 40%, to the cult:

http://takimag.com/article/the_shadowy_imam_of_the_poconos_steve_sailer/print#axzz44Ss6asNY

After all, 60% of an American teacher's salary is still a lot of money to a Third Worlder.

I could imagine such practices becoming fairly widespread in California with a $15 minimum wage: immigrants would get officially paid $15 per hour, but would have to kick back $5 per hour (or whatever) under the table to their employers.

By the way, a couple of years ago, the FBI was aggressively investigating the Gulen cult charter school fraud, but I haven't heard much about it lately. (I kind of suspect the CIA had a sit down with the FBI and explained that the Gulen Cult was the U.S.A.'s government-in-waiting for Turkey and, as Napoleon said, "As always, the central question is Constantinople.")

Steve, growing up in Southern Cal, most of the illegals I knew of were paid cash. Wouldn't a higher minimum wage make it more attractive to hire illegals in cash at lower rates?

I once had a delivery job with a company that hired a lot of Hispanics that required us to pay the firm a daily $4 radio rental fee for a Nextel phone about 10 years ago (they wouldn't call your personal cell). Combined with the low wage, and the cost of driving my car, I made less than minimum wage (I quit after about 4-6 weeks).

That is actually a good idea, they can be sold equity in their employer at a high valuation. Since they will have to pay tax on the income, they may end up taking home less. If anyone is stupid enough to be there and if for some reason I didn't hate them, I would suggest it. It should be possible to take someone public on the pink sheets for only a few thousand, and CA can really up its IPO numbers to pad its stats.

The Min wage is already 15$. By 2022 when it actually happens, it will be irrelevant. California is the cash king of america. Was in 1965 as well. I remember when my cousin moved out there from Ohio, we thought WOW, he earns that much!!!!!

Price controls on labor. Can the same for food, clothing, rent, property, gasoline and whiskey be far behind?

We're not oh so far off the 100-year mark on price floors on labour. The descent into a fully planned economy hasn't happened yet, nor is it likely to happen.

I ran the numbers for Oregon. In 2015, the Oregon median wage was just over $18 per hour. Between 2001 and 2015, it increased by an average of 2.4%. That puts the expected median income at just under $21 per hour when the minimum wage reaches $14.75 in Oregon. That means Oregon's minimum wage would be at an even riskier 70% of the expected median wage.

Well, Oregon's minimum wage is a stranger animal than California, as it will vary in different parts of the state based on population density. $14.75 will only apply to Portland.

It should be interesting. I figure I'll just grab the popcorn and watch what happens in CA and OR. As long as the populists in Congress don't push through a $15 national minimum wage, I'm willing to let the states ('laboratories of democracy' per Justice Brandeis) show us what works.

If the minimum wage starts looking bad for CA, there will be a renewed push for a $15 per hour national minimum wage.

I'd expect price controls to reduce labor demand, but every time a minimum wage is introduced or increased, I'm surprised how little effect it seems to have on employment. Is that correct, and if so has anyone got a good explanation?

There are a few plausible explanations. An important one is that employers may have stronger negotiating power over wages, and, for example, may pay below the wage that they would pay if both employers and employees had equal ability to negotiate. Another one is that, while some marginal workers/businesses may see job losses, it may attract additional labour supply from people who were previously not actively searching for work (or working just part time).

Some opponents of minimum wage suggest that the job losses are just hidden in the statistics due to minimum wage hikes tending to occur during growth periods.

I'm not sure I follow this. What does it mean to have 'equal ability to negotiate'? Employer and employee are inherently in different structural positions. Potential employees can choose to withhold their labor (stay out of market or work elsewhere) if they don't like the wages offered. If employers are forced to offer more, they must either charge more to their customers or accept lower profits. If they're still making nice profits without raising prices, it suggests imperfect competition (or rents that are being taxed by minimum wage legislation).

If that additional labor supply tempted by higher minimum wages is profitable to employ, it begs the question of why businesses aren't already taking the Henry Ford approach and jacking up wages without requiring legislation.

Maybe I'm being too glib, though. After all, the limited impact of minimum wages on employment remains to be explained!

"After all, the limited impact of minimum wages on employment remains to be explained!"

Generally the minimum wage increases are at levels well below the median wage level. So, the effects are small.

"Equal ability to negotiate" is supremely difficult to pinpoint. I will highlight the fact that shareholders can collude via management in the negotiation process, but workers struggle to negotiate in a similar collective fashion.

Who faces which costs in job dislocation, risk aversion to changes jobs/employees, and a number of issues significantly muddies the water.

Consider that it is very difficult for a low income worker to hold out for the better wage, because they have rent to pay and do not have a union pool of money to help make it through the negotiation - you take whatever money you need. Employers, however, tend to have access to cash/liquidity, and can more easily wait it out to ensure lower wages even if this implies some costs in not filling a position in the shorter-term. I assume that you have no experience in low wage jobs at a time when you do not have qualifications/experience to access higher paid opportunities. it is extremely difficult to negotiate for a raise even when you know your output is double that of other staff who are necessarily earning at least as much as they are paid.

A more realistic explanation is that labor demand is fairly inelastic in the short run. It takes time to invest in capital to replace labor. I believe Tyler posted a paper once which demonstrated a large labor effect of minimum wages which was delayed by 2-3 years - a realistic time in which to alter business plans.

I dont know if its a good explanation, but for some, anyway, if they cant find a job they might leave the state. They wouldn't show up as unemployed then.

Those people will largely move to states with lower costs of living, even assuming their wages don't increase, so isn't that good for them?

That's a very interesting argument and I suspect that you would be less than fond of that argument if it came from the right instead: "If people can't afford to live on the minimum wage, they will move to lower cost of living areas, which will be a net improvement for them" or "if people can't afford the rent in NYC, they should move to the midwest" or "If Flint can't afford to pay its own keep, it should be dissolved and the people should move somewhere else" or "the Syrian civil war is a net good becauase the refugees moved to Europe" or "slavery was a net good because African Americans have far better quality of life than Africans".

I mean, c'mon, do you really believe that effectively forcing poor people to move away from their revealed preference in geographic location is a net good?

The liberal activists fighting gentrification seem to believe that it is not a net good.

A good argument is a good argument. I don't discriminate. The point is that the majority of low-wage workers will stay in CA, and get a decent boost in income. The point is NOT that anything that causes people to move is a good thing, which is what you seem to be saying, but is not an argument I've heard anyone on the right or left make. With a minimum wage hike, there may be some jobs lost--not a guarantee, but let's play it out. CA is in a good position here, because just about anywhere else these folks move to will have a higher standard of living adjusted for pay. So, if a small share of people do move, they actually end up someplace better in terms of pay for cost of living.

Finally, are you familiar withe analyses which have found that a lot (most?) of the people who moved after Katrina and never went back to NOLA are actually doing much better in their new environs than they were before the storm?

@Jan The weather in Texas is very bad OTOH in California it is very nice, they could be happier employed in CA at a lower wage than in Texas at even a higher wage but happier in Texas at a lower wage than in California unemployed.

Also if they move out of state won't that further reduce demand?

1. Min wages are not very far from what the natural min wage is anyway, so it's not too disruptive.

2. The effects are in the longer run, so they are not too obviously related directly back to the hike. Look at teen unemployment now vs 20 years ago though.

3. Wages is only part of the comp plan. Employers cut other perks to even out the wage hike.

Wages are.....

Thanks. These make a lot of sense, but too subtle for most political debates today.

First of all, price controls dont reduce labor demand, they reduce the quantity of labor demanded. This is a fundamental distinction between shifting a demand curve and moving along it.

The labor market model predicts that equilibrium labor HOURS will decline, not necessarily employment. This is a common mistake repeated often by economists who should know better.

The establishment survey (payroll employment) does not distinguish between part time and full time employment. The household survey does, but its standard error is high and it doesnt account for cuts in overtime.

Card and Kruegers paper relied on survey responses about what employers claimed they intende to do, not what they actually did. There is also evidence that employment may be sticky in the short run. It takes time to replace people with machines.

The best evidence of an adverse effect is the Super Size meals. As the wage rate goes up, the relative price of capital goes down. Profit maximization then implies that each worker must deliver more food. Another piece of evidence is the black teen unemployment rate that spikes after every increase in minimum wage.

Raises in the minimum wage might not be binding if equilibrium wage is above it for many people. Wages also take the form of benefits, and studies dont always look at total compensation. Worker productivity isnt usually at a maximum, and employers are willing and able to crack the whip more when wages are forced up.

Finally, the left Achilles Heel of analysis is holding all else constant. Its questionable whether studies did that. The right Achilles Heel is lack of good data.

Minimum wage killed the labor demand for gas station attendants, except in the two states that prohibit self service. McDonalds and Red Robin are already experimenting with electronic point of sale. More will follow.

Illegal aliens have practically taken all of the restaurant kitchen, landscaping, maid service, office cleaning and construction jobs. Probably many others too.

Excellent points, thank you. I can't see minimum wage as being a big factor in electronic point of sale, though. I think the differential between automation and free market labor cost is already overwhelming, even without minimum wage. But I take your general point, and you're right that I formulated point on demand curve carelessly.

Automation costs money and doesn't work really well. More than likely decrease sales marginally. It is only considered if the costs of labor are higher.

What this increase will do is put more people at minimum wage. For some workers it will mean the same work needs to get done in fewer hours, and they will have three jobs to get enough hours. This is already very common, it will become more widespread. Expect business strategies to smoothe out the demand over the day.

The political economy aspect is quite obvious. The proportion of workers getting minimum wage gets larger, and come election time they all get a raise by decree. It creates a voting bloc even more effective than a union. If the policy is unsuccessful in getting rid of jobs and workers, not creating a voting bloc, the experiment will be seen as failing.

"I think the differential between automation and free market labor cost is already overwhelming, even without minimum wage."

That's not really accurate. (I'm a controls engineer.) Generally speaking automation has a fairly large capital costs and increases maintenance costs. And humans are, relatively speaking, very dexterous, mentally flexible, self programming machines with built in trouble shooting, repair and alarming capabilities. Of course, as the price of labor goes up, more tasks become economical to automate. However, if currently, it were cheaper to automate a fast food restaurant, then the industry would be spending billions (trillions?) to do so.

All that being said the cost of automation is continuously dropping.

So, in the long run, raising minimum wage is a very poor policy. The Federal government should be spending more of it's revenue on the EITC and reducing FICA taxes.

"First of all, price controls dont reduce labor demand, they reduce the quantity of labor demanded. This is a fundamental distinction between shifting a demand curve and moving along it."

Economists understand this, but let's be clear: the average Bernie supporter does not believe microeconomics.

Imagine a Macdonald's where you sit down at your table, order the meal on a small computer, and 2 minutes later the meal is delivered to your table.

Would that be a worse world to live in? No more waiting in long lines, among other things.

The BLS data shows that the only time minimum wage employment increases is after an increase in the minimum wage. Every other year minimum wage employment falls.

"The BLS data shows that the only time minimum wage employment increases is after an increase in the minimum wage. Every other year minimum wage employment falls."

LOL, and did you think of why that might be? Hint, it's not because of additional hiring.

Raise the minimum wage to $10, and now everyone who was already making $10/hr just joined the minimum wage population, as did every worker who was making more than the old minimum wage but not as much as the new one - if they don't get laid off.

Because companies that are effected by the minimum wage, most being in competitive industries, raise their prices enough to cover almost the entire difference on labor costs. That means that the disemployment effects are due to people a little buying less from those businesses. Thus the disemployment effects are very small.

Never the less I am against minimum wage because I believe that even a very small increase in unemployment is very bad easily outweighing the benefit to those whose wages increase.

Would minimum wage proponents be okay with eliminating the minimum wage in exchange for a guaranteed minimum income for all citizens?

Why should they choose if they think they can have both?

Many labor union contracts as based on a premium to minimum wage. This raises wages for people well above any reasonable minimum income.

Willitts, can you show me an actual example of this.

It would be stupid of the union since minimum wages have grown less than average hourly earnings since the 1950s.

"Willitts, can you show me an actual example of this."

http://lmgtfy.com/?q=union+contracts+based+on+minimum+wage

From the very top link: "the United Food and Commercial Workers International Union says that pegging its wages to the federal minimum is commonplace. On its website, the UFCW notes that "oftentimes, union contracts are triggered to implement wage hikes in the case of minimum wage increases." Such increases, the UFCW says, are "one of the many advantages of being a union member.""

I think most would. But devil is in the details on that one.

I would strongly oppose giving everyone a check. I used to think this was neat, but I hadn't really thought it through.

I would strongly support a massive EITC boost. If someone's labor is only worth $10/hour, we shouldn't lock them out of the market.

It seems to be an article of faith behind the bill that everyone's labor is worth at least $15/hour and it's only nasty market forces that are stopping them from being paid that. This might be true. But if the reality is that their labor really is worth $10/hour, then this is a horrible thing to do to them.

The UBI is a political non-starter for the left. How can you deliver goods in exchange for political capital if everyone is entitled to the same thing? A less cynical argument is that the UBI is a non-starter because it will fail to deliver based on need and fail to control the expenditures of the poor- if you supply a UBI and get rid of food stamps, what do you do when children are starving because Mom's UBI was spent on drugs? What will you do when the UBI fails to cover the expenses of people with cancer or the residents of declining cities? The UBI is libertarianism applied to welfare and libertarianism is the antithesis of big-government.

Actually, I think the Left would get behind the UBI. It's essentially an attempt to buy more voters and the "rich" effectively pay for it. However, a more sensible policy like an expanded EITC is something they'll avoid.

If a $15 minimum wage reduces the number jobs as predicted by Econ 101 the median wage will increase, perhaps to $30 which would keep the ratio intact.

http://www.bls.gov/oes/current/oes_23420.htm#51-0000

The city of Fresno has a median hourly wage for production sector workers of $11.75/hour.

The meat packing industry would see its labor costs rise by nearly 40%. Farm labor costs would rise over 50%. Retail sales workers, 50% increase. Day care workers, up 40%.

How many of those jobs would survive?

Many retail sales jobs would be automated. Farmers operating in a globally competitive agriculture industry could be wiped out by foreign competition. Any kind of low skill, low wage industrial work could move.

It might be cheaper to ship cows to Nevada and slaughter them there rather than pay California's butchers $16/hour+ (I assume we couldn't pay them the bare minimum as they are already earning above min-wage in an unpleasant job).

you do know that their is a separate minimum wage for agricultural workers.

Moreover, only 3.6% of retail workers are paid the minimum wage.
http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf

@Spencer
you do know that their is a separate minimum wage for agricultural workers.

Of course there should not be, it is away for politicians to scam the voter who want the minimum wage.

That's why he referenced the median wage

"(I assume we couldn’t pay them the bare minimum as they are already earning above min-wage in an unpleasant job)."

Most jobs are unpleasant in one way or another, that's why people are paid to do them. For some reason, the most unpleasant jobs are compensated the least while jobs with little physical discomfort or even skills are highly rewarded. Most people are incapable of being packing house butcher. They become teachers and administrators.

It may not matter. More and more workers are being converted to independent contractors; indeed, in the past 10 years the number of independent contractors rose more than 9.4 million, which exceeds the rise in overall employment during the period. http://www.nytimes.com/2016/03/31/upshot/contractors-and-temps-accounted-for-all-of-the-growth-in-employment-in-the-last-decade.html?ref=business. For libertarian-leaning economists, this is likely viewed as a good development, as independent contractors are responsible for their own benefits, including health insurance, unemployment, and retirement, and because independent contractors can be deployed more efficiently (i.e., when needed). Be careful what you ask for. Shifting production to lower cost developing countries was viewed as a good thing too. But if workers can't depend on employers for job security and benefits, who will they come to rely on?

The DOL and IRS is cracking down very hard on the fake "independent contractors". It is a booming area of law for employment lawyers. Companies can try to keep doing it but they are getting burned hard. In fact, from where I sit it seems like bigger employers are moving away from classifying their workers as independent contractors because of the legal risks involved.

What is a "fake independent contractor"? If a company wants me to work for them on this basis, and I agree to it, it sounds real to me.

In my jurisdiction if you get a large proportion of your business income from one source you may be considered an employee. Say 80%. And if your expenses are essentially employment expenses; computer stuff, vehicle, office supplies. It is often honored more in the breach, but someone who subcontracts may find a friendly tax agent asking for 5 years worth of employee deductions.

An acquaintance had a small hair salon which typically rent out stalls for a percentage of take or something similar. She got stuck with a bill for unemployment premiums. If you structure your business to minimize tax costs, and you don't own a politician, expect the rules to change to get more of your money.

Yup. The IRS is going hard against these types of relationships in order to get the payroll taxes. State governments are being way more aggressive in moving against these fake contractors and the people who hire them to get the UI payments and workers comp contributions.

We have what are called "labor laws" in the US. These "laws" define and delineate the relationship between a worker and the person they work for. Some of these "laws" (you can think of them as guideline enforced by the government) describe when a person can work for as an independent contractor which effects the way the employer must treat the worker and the types of laws that apply to their relationship.

The "fake" independent contractors are workers who are treated like employees for the purpose of the employer's ability to control the time, place, and manner in which the work is performed but treated like a contractor for the purpose of employment laws (e.g. overtime, minimum wage, title vii, etc.) and required taxes/benefits.

You understand that you don't have the freedom to contract around certain laws even if you want to do so, right?

And you understand that the reason the Chamber of Commerce supports illegal immigration is because it allows their members (and their affiliates) to "contract around" certain laws by ignoring them completely.

Few things are more bizarre than progressive support of illegal immigration. It is, in effect, a deregulation of our immigration regime. Complete with all the attendant niceties that progressives would scream about and a few besides (hundreds of people dying in he desert, thousands being exploited attempting their crossing.) And yet, the progressives support this deregulation completely.

I wonder why?

I understand that it's against the law. However, I oppose those laws. I don't think there is anything inherently illegitimate or unjust about such an arrangement, and the government regulating it causes harm.

Does being a contractor let you escape minimum wage laws?

Yes. The Fair Labor Standard Act only applies to employees, not "independent contractors". I have had a number of cases where an individual was classified as a "contractor" and paid a piece rate for their work. When the number of hours they worked was divided by what they made in a work week it was almost always less than minimum wage. I was able to get the employees the difference between what they were paid and the federal minimum wage and an equal amount in liquidated damages.

A business/contractor relationship is treated like a b2b contract rather than a master/servant relationship to which employment regulations apply.

In globally competitive online industries, this also allows contractors to get paid experience while getting around minimum wage requirements, where they may not actually be worth the minimum wage early in their career. I occasionally get offers for translations by Indian or Chinese firms which are effectively paying in the range of $5 an hour - well, you can guess what quality of translators they get - if you are good, there are absolutely loads of clients willing to pay a good rate.

I'm pretty sure that in most Western countries if your contractor status is structured in a way that means you earn less than the minimum wage, you can later fight for this difference to be paid, as mentioned by efcdons (but you need to keep a lot of really good records, which is rare for people in such situations).

Benefits are stupid, and truly independent people don't become unemployed for that reason. Last time I was fired I got another job the same day. I would take crowdsourced work and live on a few cents per day if I had to. People should save, but if they don't save they can work. I save a lot but will never retire.

If the government really wants to enforce the law, they should fine and jail the people who falsely claimed to be contractors on their returns rather than employers. In any case, the self-employment tax should offset any employer social security contribution. They should also just be more vigorous about requiring contractors to do more pro-forma independent work for other clients and keep written agreements. Maybe they should require contractors to have their own contracting firms and provide indemnification.

Failed background checks mean that more and more people will be taking under-the-table work because they won't be able to get any other kind. The IRS can do whatever they want but society's foul balls still need to food to eat, a place to sleep and clothing. Of course, crime is one other option.

Dube et al use the median wage for workers that are usually full time, but the OES includes part time workers. CPS ORG has it as $20.12 for 2015, so it'd be comparable to France. Using the right benchmark for comparison is important as this became relevant in the debate over raising min wage in Maine: groups opposed used median including seasonal and part time, it came to light and then using apples to apples median excluding those workers showed could get to proposed level and be under Dube's 50 percent ratio, really undercutting opposition http://m.timesrecord.com/news/2016-03-15/Front_Page/Minimum_wage_hike_campaign_says_opponents_misused_.html#.Vv0SsD73bCQ

Why would seasonal and part-time workers not count?

Will this mean a boost for small, owner/family operated businesses that have no W2 employees? A big opportunity for referral services like Uber or Taskrabbitt? Will firms like Molly Maid with W2 employees be pushed aside by services like Handy? And will there then be big, messy legal fights over trying to classify all these independent contractors as employees (as has already happened in CA with Uber)? Will food trucks poach market share from bricks-and-mortar fast food? Will AirBnB rentals take more business from hotels & motels? How badly will agriculture be hurt? Will labor-intensive crops simply no longer be grown in California? Or will somebody finally figure out how to automate apple-picking? Will the state try to enforce minimum wage laws for au pairs and nannies? For baby-sitters? How much low-wage work will move off the books entirely?

"Will this mean a boost for small, owner/family operated businesses that have no W2 employees?"

Those are pretty limited.

It will be a disaster for regular small businesses and especially their employees. If you own a local store and are paying $10 per hour, your direct cost will go up 50%, then you get to pay FICA on the increase. Workers comp and unemployment is also based on payroll so there is more increase.

Those are pretty limited...It will be a disaster for regular small businesses and especially their employees

You're providing an argument why family run businesses may become less limited in a $15/hr future.

Slocum, I think you are correct. This would be a boon to small family owned businesses, such as convenience stores. They can pay themselves less than minimum wage whereas the large companies can't. And effectively they can use the cost differential to grow market share.

"Yet Alan Krueger, among many others, is against it. On what grounds is it worth running?"

What? No he isn't. From the article you posted:
"Krueger has written that a “$15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences,” though he said it might be okay in certain high-wage cities and states. "

Sounds like CA would be somewhere raising the min wage to $15 "might be oaky".

I'm not an economist, but doesn't this analysis overlook the obvious -- i.e., that if the increased minimum wage exerts upward pressure on wages generally, then $15 will in time be less than 69% of the new median wage?

Median wages have been stagnant for 40+ years. Pegging the minimum wage to the media wage would seem to represent buy-in to that miserable status quo. We've been living with 40 years of Reaganomics, and the effect on wages has been disastrous. People are tired of the elites reaping all the benefits of increased productivity. This is one small step to rectify that situation -- rest assured that others are on the way.

lol. there's no part of minimum wage laws that say "you can't pay above this rate." so to tie the two is absurd. stagnating median wages are a result of immigration fueled labor market growth* combined with trade/automation related job losses.

*it's amazing how many economists teach about the law of supply and demand, then turn around and insist it can't apply to the labor market.

There is something to be said for this.
Labor isn't quite like other commodities because it can be retrained, but it can't be retrained instantaneously, or completely flexibly.
A high school graduate who barely passed algebra can't be retrained into an engineering job in a realistic way, so people laid off due to automation mostly aren't going back into the labor market as robot engineers. They are basically unskilled labor at that point.
Surplus labor may be absorbed by the economy in some way but not at the same wage.

I think the main problem for those competing with immigrants though is not that they will work for less but generally that they have a much better work ethic than the typical unskilled American worker. Many unskilled American workers are people who never finished high school or just barely squeaked by, even though a high school education is offered to everyone at public expense. The immigrants are people who are obviously motivated enough to move to another country on their own, and they are willing to bust their ass working 12-16 hour days. They may not be high school educated either, but that's not because they dropped out or were too lazy to do homework. Basically, my point is that immigrants are self-selected for high work ethic, and unskilled Americans are self-selected for low work ethic. Americans with a good work ethic tend to finish school and go to community college and move into some higher paying occupation.

Labor retraining is not easy, and most people cannot really do it.

In the past, we've been lucky because it's often taken a generation for one's job to become obsolete. Now it can go from looking rosey to completely dead in a decade.

I think most people can do it, but it takes a lot of hand holding and patience. Older people who have been pushed out of the job market are going to be insecure about their abilities and might not be the easiest pupils to deal with. But they might also be the ones who are most serious about actually learning a marketable skill (unlike a lot of 20 year old college kids). They might be more willing to learn something that is boring but steady employment.

There's probably a market opportunity in here somewhere for someone to take on the task in exchange for some percentage of the person's income for the next X years, if that was allowed. The way the student loan system works, the lender take a back seat, isn't directly involved in retraining, and the school has less of an interest in whether the student actually learns anything that makes them employable. If the person doing the retraining actually had a direct financial stake in the outcome this might be more effective.

"Older people who have been pushed out of the job market ..."

From my experience, older, low skilled people 55+, will either take a make work job and try to ride it out till they can take early retirement on SS (age 62) or find a doctor that will certify them as disabled.

"Labor retraining" may not be easy, but many people refuse to change to reasonably secure fields that pay a (lower) middle class wage like truck driver or plumber. In the case of truck/delivery driving, a good driving record and abstaining from hippy-lettuce & booze seem to be deal breakers for many.

Speaking for myself, I would never take a truck driving job because of the health impact. You're basically sitting on your ass all day, working nights and very long hours and are away from your family. I can imagine a lot of 55+ people feel the same way, since they may already have back problems.

Something I might consider would be light-duty landscaping or gardening though. Get outside and get some fresh air and exercise.

Present-day American society allows individuals that are non-productive losers the opportunity to not only survive but prosper to a degree. This was never the case just a short time ago. Perhaps that's the wonder of crony capitalism under the aegis of a supposedly all-seeing nation/state.

No it means more workers will be getting minimum wage.

40 Years of Reaganomics? Did Jimmy Carter implement Reaganomics?

When it comes to taxes, no. When it comes to regulations, yes. To cite 3 examples, Jimmy Carter signed the United States Airline Deregulation Act of 1978, Depository Institutions Deregulation and Monetary Control Act of 1980, & the Motor Carrier Act of 1980.

It's amazing how awesome Reagan's influence is. It goes backwards in time for a decade and into the future 30 years.

Or Reagan is the primary American given credit for the ground the Chicago School made in influencing public opinion about economic policy in that era, an influence that very much lingers.

And hopefully will forever

The question should be how far out of bounds is the minimum wage? Should we even have a minimum wage? It is being used no by politicians to get votes from low information voters. It does and will hurt both employers and employees.

Well, some high-information people support the minimum wage. Even lots of economists. It's not simply a question of ignorance.

I think we would be better off without it, however.

What's really insipid is the move to push the minimum salaried worker pay to over $50K. A year+ ago, I wanted to change fields and was quite willing to work for below that amount. That wasn't necessary, but statist paternalism in limiting my options (aka threatening me with jail for negotiating my way into a new field) was annoying.

Its economic impact is beside the point. It's actually an infringement on voluntary contractual relationships, a moral issue. Let's not forget that the people that write minimum wage laws have unpaid interns.

coyoteblog.com made an excellent point along those same lines regarding the Right to Privacy from Roe v. Wade.

The liberal majority opinion in Roe is quite contorted when discussing Privacy outside the bedroom or reproductive sphere. They made it quite clear that the state would still have full blowtorch & pliers enforcement ability for employment contracts and drug regulation.

Does anyone track the illegal day labor rate? I would guess that it is pretty high (between $5 and $10), and the higher it is, the more confidence I'd have in $15

You don't pay FICA or income taxes on the illegal day labor rate. An illegal asking for $15 per hour under the table, a) gets more money than a citizen by avoiding taxes and b) costs the employer significantly less, since no FICA taxes (and health insurance costs) must be paid.

Features, not bugs.

This is big city/coastal liberals virtue signaling on the backs of struggling areas. SF, Silicon Valley and LA (in general) with high income will probably absorb this. Ironically, it will be the large corporations who are in the better position to absorb and smaller businesses which will take it in the nuts.

The worst effect will be felt in the poorer interior areas away from the coast, already under severe economic pressure.

What Truman Capote said about California applies: "you lose one point off your IQ for every year you stay there".

Truman Capote, quoted by Art and champion of the right!

Yet Alan Krueger, among many others, is against it. On what grounds is it worth running?

Isn't Alan Kruegar one of those free-market fundamentalists? Full steam ahead into the glorious socialist future!

The long delays and steps will hide the impact. Do it now all at once, so the results are obvious and we can adjust, or do not do it!

Why set it up to fail? It takes time to adjust.

What takes time to adjust?

It is sold as a simple transfer from rich business owners and management to low income workers. If that is what it is there is no need for an adjustment period. Rather I think adjustment period is made by risk averse politicians to hide any negative outcomes.

Isn't that somewhat close to what Puerto Rico endures with having the federal minimum wage?

Cherry picking dates again? When was it instituted? 1934?

The democrats want to inflate the economy. They tried this under Carter in the 70s. This is SOP for them. This is how they try to buy votes with other peoples' money. Screw the consumers. Screw the taxpayers. Every generation has to learn how evil the democrats are.

I don't see why a $15 minimum wage should be a big problem. According to the International Monetary fund in 2015 the nominal US GDP per capita was $55,904 while in Australia it was $51,642. So the United States is clearly richer than Australia, but at today's exchange rate Australia's minimum wage is around $13.50 US and the minimum wage for a casual worker, which would be most waitresses and waiters, is around $16.80 US. And this has not resulted in disaster in Australia.

Now it might be a good idea to phase in the increase, but apparently that is exactly what's going to happen and so by the time it actually reaches $15 inflation and growth will have lessened its impact.

Of course some cultural change may result from the increase in minimum wage. For example, the American habit of frequently eating food in a restaurant strikes me as weird. Oh sure, those trendy people in Sydney and Melbourne do it all the time, but it's not something people scraping by on the median wage of $34,000 US can afford to do very often.

Sorry, the median income for a full time worker in Australia is around $48,000 US a year, not $34,000 US.

http://www.macrobusiness.com.au/2015/10/what-is-the-average-australian-wage-in-2015/

One thing we know for sure based on what are probably low estimates from the California budget estimators is it is going to cost the average family of 4 and additional $500 per year in additional taxes just to pay for the increased costs that the state is going to incur as a result of the increase in the minimum wage.

Are there a lot of people working near the minimum wage in California? Won't many of those families of 4 earn higher income? Are you accounting for additional taxes raised as a result of a) people paying taxes straight up and b) the fact that minimum wage earners tend to spend their money right away and funnel money back into the economy, where it will soon be taxed again?

Well, I guess I won't be buying all those California fruits and vegetables my local grocery store carries too much longer.

There are about to be plenty of experiments for economists to watch. Alberta has also announced a phased-in $15/hr minimum wage. And Ontario is about to 'experiment' with a guaranteed annual income for everyone.

Of course, these are one-way ratchets. Once you have a province full of people with a guaranteed income, good luck ever unwinding that policy if it turns out to be a disaster.

The hubris of left-wing economists and politicians is just breathtaking. There is no consensus on the value or risks of these policies, but they're just going to run with them anyway. What could possibly go wrong?

Someone like Tyler or Russ Roberts should make a project of collecting predictions from major economists regarding the effects of these policies. Commit them to an opinion NOW before the policies go into effect, before they have a chance to pour through the data after the fact to construct post-hoc rationales for why their policies didn't work.

Remember that there are at least 2 Californias. There is the coast, with high incomes and low unemployment. Just to the east is the central valley, where unemployment is still horrible and incomes are especially low, especially given the drought-driven disaster in agriculture. Ca has the highest poverty rate in the US. Even if the coasts can handle this law, the rest of the state is toast. But those folks don't vote much and a bunch of Republicans live there, so who cares, right?

I might be wrong about this, but I would think that raising the minimum wage would probably be an excellent way of raising the median wage. So there's probably not much need to worry about the minimum wage becoming too high compared to the median wage if it is only being raised to $15 an hour.

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