The Evidence Is Piling Up That Higher Minimum Wages Kill Jobs

That is David Neumark in the WSJ, here is one excerpt:

Another recent study by Shanshan Liu and Thomas Hyclak of Lehigh University, and Krishna Regmi of Georgia College & State University most directly mimics the Dube et al. approach. But crucially it only uses as control areas parts of states that are classified by the Bureau of Economic Analysis as subject to the same economic shocks as the areas where minimum wages have increased. The resulting estimates point to job loss for the least-skilled workers studied, as do a number of other recent studies that address the Dube et al. criticisms.

The piece is a good brief survey of some of the developments since Card and Krueger.  Here are some alternate links to the piece.

Comments

I had heard that C&K revisited their prior debacle of a paper and found a similar result. I have not yet seen an updated copy of the latter paper. Does anyone have a link?

I thought Wascher et al did a great job of highlighting C&Ks egregious errors, not the least of which was relying on survey data collected by a grad student about what a sample of employers from a single industry stated they intended to do.

As wascher points out, the dependent variable is labor hours, not the unemployment rate or even payroll employment. Actions also speak louder than words.

The latest round of minimum wage increases should provide good natural experiments.

You can't just look at labor hours. If, for instance, a minimum wage law boosts wages by 10% and labor hours decline by 5% with no evidence of a drop in overall employment, that means workers are earning more money and working fewer hours. The elasticity is very important.

I hate to ask... But will... Why does anyone car about the employment aspects of a higher minimum wage? Doesn't the U.S. have a dire labor shortage so severe that we need huge numbers of immigrants to fill?

If a higher wage really destroys jobs, isn't that actually a win-win practical solution for America? Higher wages for poor workers and a fix for the labor shortage problem.

The unstated truth here is that the forces of greed and evil are aligned here. The cheap labor right wants to resurrect slavery with a cloak of political correctness (so they can get away with it). The forces of evil want to maximize the number of jobs for immigrants irrespective of the dangers to American society. See "How to Unemploy Immigrants" by Alex Tabarrok for a very explicit claim that we need low wages to maintain Open Borders.

Raise the minimum wage to $15/hour. We will have a better country for it.

Can you lay out your logic? Why would low wage bidders benefit from an increase in the minimum wage? Intuitively, the minimum wage exists to suppress that type of worker, hopefully triggering a set of responses that improves some welfare intuition in the long run.

A,

"Why would low wage bidders benefit from an increase in the minimum wage?"

Employers would be worse off, minimum wage workers would be better off. However, the real point is that America would be better off as a whole. Low wage immigrants have a (large) negative marginal product. Keeping them out is an economic plus for America. A higher minimum wage will work to this end.

Thought experiment: would permitting slavery lead to more or fewer "jobs"?. Evidence indeed. Jackals.

Oops, no offense intended to neumark who is named above. Wascher was the name I always remember.

Can you imagine paying a McDonalds employee $30K a year plus payroll taxes and other employee related costs? This is crazy and it will not end well. By the way those machines that the customer uses to place an automated order instead of giving it to an employee are made in China. So not only are we eliminating low/minimum wage jobs but we are replacing them with more offshore workers. We are sooooooo screwed.

If you had a $15 hr/min wage and you had someone who worked 40 hours a week for a full 52 weeks a year he'd have $31,200. Even at that level of min. wage, it would be a minority of McDonald's workers who touch $30K a year.

But in terms of imagination, sure I suppose I could. Would it make things better or worse, marginal either way I suppose. I would be more afraid if the only opportunity for future economic growth was increased low-skilled employment at sub-min wages.

Marginal...key word here being...marginal.

You know, as in Marginal Revolution :)

We're not screwed. The people working at McDonald's are screwed.

Personally, I think the greatest invention of the 21st century so far has been the self-checkout lanes at supermarkets. Avoid having to talk to sub-literate people, having to repeat things 6 times for them to understand, or having to decipher their peculiar dialects and pronunciations.

I haven't used a human teller at the supermarket in years. And I don't go to supermarkets which don't have self-checkout lanes. So much more convenient.

I welcome the elimination of these workers from the fast food industry too now (even though I haven't actually ordered or eaten at a fast food place in over 6 years)

'sub literate people'

You're the smartest guy @ the Piggly-Wiggly!

http://www.dictionary.com/browse/subliterate

“It is much better to enact a minimum-wage law even if it deprives these unfortunates of work. Better that the state should support the inefficient wholly and prevent the multiplication of the breed than subsidize incompetence and unthrift, enabling them to bring forth more of their kind.”

-Royal Meeker, Woodrow Wilson’s commissioner of labor.

Well, there's something to be said about that. Unfortunately, it seems the support of the state only encourages the multiplication of their breed, rather then prevent it.

Always, always confront the left with the racist and elitist roots of their SWPL policies. If D. Trump proposed a minimum bank balance of $100,000 in order for an illegal to receive amnesty, he would be branded as racist by the left, yet this is just half of Mexico's own immigration policy. The left doesn't call Mexico racist because Mexicans are brown and the left always expects less from brown people.

I think it is true. The evidence is that minimum wage increases will be almost fully passed on to the customers. At $15 the prices at fast food restaurants will go up about 15-20% see link below. That will mean fewer people eating in restaurants and so the worst employees will be fired improving service which will be good for us with sufficient income. Some employees will get a nice raise but the burden will fall on the worst employee or employees in the least productive restaurants.

http://smallbusiness.chron.com/common-food-labor-cost-percentages-14700.html
Certain fast food restaurants can achieve labor cost as low as 25 percent, while table service restaurants are more likely to see labor in the 30 percent to 35 percent range. Food costs (including beverages) for the restaurant industry run typically from the 25 percent to 38 percent range, depending upon the style of restaurant and the mix of sales.

Milton Friedman nailed it. If the people are racist, as the left believes, effective minimum wage laws reduce the cost of racism to 0.

Don't forget the poor frequent these fast food restaurants more than the non poor. The costs are still borne by the poor.

You are overestimating the price effect – even in take-out restaurants, the minimum wage (MW) is typically much less than the mean wage and somewhat less than the median. In Idaho, for example, where the MW is $7.50, increasing it to $15, should increase prices less than 7%, even if the whole increase were shifted forward to consumers; in OR where the MW >$9, less than 5%. You are correct, however, that the the price effect would probably be higher for sit-down eating and drinking establishments. There is some evidence that one effect of OR's premium MW is a shift away from sit-down to take-out restaurants.

TMC wrote: Don’t forget the poor frequent these fast food restaurants more than the non poor. The costs are still borne by the poor.

Some of the cost is borne by the poor but most by the non-poor.

@Fred

I may have the magnitudes wrong but we my point is that the reduction in jobs will come through people using the types of business less that currently pay employees paid lower that the new minimum.

"Certain fast food restaurants can achieve labor cost as low as 25 percent"

Given the data I saw at my local Taco Bell a decade ago that labor costs there were 13%, this makes me want to see everyone's calculations.

Excellent thinking. By the way, what's your plan for when you can no longer wipe yourself?

Here outside Chicago, there were two major supermarket chains that installed self checkout about 10 years ago. One chain went out of business, and the other is removing its self checkout lanes. The stores that replaced the closed stores have no self checkout.

AIG, you are so smug and arrogant! And the Big Corporate Groceries love you, because you're performing free labor for them--labor they used to have pay employees to do.

Can you imagine paying $9 for your McMeal instead of $8?

It will be the end of everything.

You keep demonstrating why I need to remind you just how thick you are.

You can't afford $9 for your McMeal? (If so, you should probably ask for a raise.)

Or ... it won't be the end of everything?

What's your point?

My point is that you keep demonstrating the need for me to insult you.

Perhaps you could refer us to the last time you said anything that offered a) additional useful information, b) a useful presentation of a dissenting perspective, or c) anything that did not contain an implicit insult against someone.

I conclude that your actual level of confidence must be extremely low. Confident people don't feel the need to run around calling people names.

Your typical comment can be summed up as "I'm right I'm right, I sooo so right I don't even have to explain why. Oh, and in case I didn't say it twice already, you other twats are really dumbo dumb." Wouldn't you do better to spend your time dreaming up ways to abuse your students who refuse to take your word as defined truth? (By the way, student feedback on TAs is a thing.)

Just note how Troll Moe's pejorative 'McMeal' is elitist and insulting to anyone who has a low enough income to find McDonald's to be a special occadion, or lacking sufficient coastal, lefty, white person skphistication to recognize their own unwashed body. Truly disgusting.

McMeal is the term used by McDonalds itself. Of course you and you arrogantly ignorant, condescending ilk would need to take a field trip to the real world to be informed on the subject at issue, and that won't be happening. Maybe you can get someone to do it for you-at minimum wage.

Please point me to some evidence of McDonald's using "McMeal" in their own marketing?

Am I the only person in these comments that actually eats at McDonalds on occasion?

You've got Happy Meals, and McPick 2, and Extra Value Meals. There is no McDeal to my knowledge. You'd think you'd double check that before writing a post about how out of touch someone else is. I guess not though.

Apparently not in use anymore, but: http://www1.mcdonalds.com/bagamcmeal/

It won't be the end of everything. But it will mean I have $1 less to spend on something else. Which means that someone else won't be getting that $1.

However, the installation of self-serve machines is happening with the current minimum wage so it is not at all clear to me that they correlate with a particular wage level. If they make good economic sense for McDonald's, if customers are willing to use them, then those machines will be installed even if the minimum wage is lowered slightly as opposed to raised.

This is one reason why I have never been particularly worried about that latest round of efforts to increase the minimum wage to stupidly high levels. Obviously, the evidence will become apparent that the minimum wage kills jobs the more you raise it. So the whole movement is bound to kill itself off eventually. The results are going to start pouring in from all these experiments soon.

+$15

I'm not sure how much the affect will be in CA, since they are spreading it over the next 6 years. Still, there should be a discernable effect assuming the Labor Supply Demand Curve is basically correct. I'm doubtful it will be as bad as some people seem to think, but still I would expect CA's unemployment trend to be worse than the national average.

But how do you suss the effect (if any) out from the noise? Especially over such a long time period. My working theory is to treat with suspicion any governmental policy that doesn't go into effect until the current group of leges are out of office.

This minimum wage is large enough to be well above the noise level, which historically is rare. I'm not sure the US has ever had a 50% rise over 5 years in just one large state. Now granted if we have a national minimum wage hike next year, then we probably won't learn much.

+100 If minimum wage increases have an insignificant effect on unemployment and the money comes from the pockets of the rich owners and upper management, what is the reason to stretch it out the implementation. Give employers a couple of months to change payrolls and put it in place so we can easily see if they are right or wrong.

Obviously the reason to stretch out the implementation is to avoid shocks. On some level, most of these people realize that the effect of a step change in the minimum wage woould obviously lead to lay-offs. Where their delusion lies is in the idea that if marginal increases in labor costs don't result in marginal changes in employment (which is what they believe based on Card/Kreuger), that you can stack lots of marginal changes on top of each other and still see zero effect.

It's spread out intentionally to make it hard to discern the effect. Over 6 years, by the time the studies are done it will be 10 years in the future, and then there will always be the occasional outlier study which find no effect or positive effect, and that's the one they will latch onto.

And in 10 years, the $15/hour wage will not have much of an effect anymore since it's unlikely to be as...binding...as $15/hour is today...so they'll declare victory, without actually understanding what's going on.

You can say the same thing about socialism but Bernie Sanders has won 20 states. People are fucking retarded.

+1000,000,000,000

People are f**king stupid. it's not as if evidence that minimum wages kill jobs didn't exist prior to now. It's existed for decades. And it's made not a bit of difference to the people who advocate for them.

Having spoken to some of them, they actually are not at all concerned that it kills jobs. They get that part. They just think that the ones who will keep their jobs will be paid more, and hence, their feel-good exercise will be successful.

See, they are not interested in the people who get laid off or fired or never hired. They only care about minimum wages because it makes them...FEEL GOOD...about themselves, that they helped "someone" get a higher job, even if at the expense of 3 other people not getting a job.

You have to look at the incentives of the Bernietards.

What I have observed is that the Card and Kreuger study serves as some sort of shred of validation for the more sensible progressives who want to believe in the minimum wage, but are too smart not to understand the economics. So along comes Card and Kreuger who tells them that the "empirical" data shows no effect, so not to worry, theory can be safely ignored. When the empirical data starts coming in proving that the theory is in fact correct those people are going to start feeling very uncomfortable. And that's only talking about people who aren't even directly economically affected. When you throw on all the unemployed poor people and the effect of that on state budgets, they will start getting very, very, very, uncomfortable. Of course, there will always be a cadre of fucking stupid people who will insist that all the studies showing the minimum wage is killing jobs are a giant plot by evil capitalist corporations, but it's the semi-sensible middle that counts. The fact that Card and Kreuger is touted by many of those people means that evidence does indeed matter to them, on some level.

Those people have no idea what economic research there is on this topic. It's not as if they read the dozens of papers and came to an education conclusion that C+K was better then the rest. They get their info from the NYT and The Daily Show, so if the NYT only talks about C+K, then that's the only study they will ever hear about.

They don't care about the empirical evidence, because if they did, they would also be paying attention to the studies which show the opposite

And they certainly don't understand the argument C+K were making in the first place.

So no, I think this demonstrate the utter uselessness of economists in dictating policy or informing public opinion.

I don't understand why you are so smug about your superiority. You have completely neglected the impact that markedly higher wages at the bottom of the ladder will have on commerce. Millions more people now able to dine out, buy yard fixtures, dress better, get their teeth fixed. Since you seem to despise people with imperfections, I would think you would be all for personal improvements. Think of the all the more people in your dating pool. And those that do get left out because of increased automation will find jobs at new condom factories and STD pharmaceutical makers. I call that a win-win for you!

"I don’t understand why you are so smug about your superiority"

Because I, at least, understand how a supply and demand graph works. Granted, it's not much of an achievement. But it surely makes me superior to you.

You have completely neglected the impact that markedly higher wages at the bottom of the ladder will have on commerce. Millions more people now able to dine out, buy yard fixtures, dress better, get their teeth fixed.

This is utterly retarded. There will be some job losses, which will mean some people will be spending LESS on dining out, buying yard fixtures, and getting their teeth fixed. It also means some consumers will be spending more on food, which means THEY will be spending less on dining out, yard fixtures, and so forth. There is no free lunch. The money comes out of someone else's pocket, and that someone else will then have less money to spend on other stuff. There may be a net transfer of wealth, but there is no evidence it is from rich people to very poor people. There might be a slight transfer from the middle class to the working class, but lots of middle class kids have minimum wage jobs, and lots of working class people eat at McDonalds, so it's mostly canceled out.

What if we only raised it to the same level it was at in 1965?

What if...you're dumb?

What if you had something constructive to say?

That was my most constructive response to one your comments, yet.

Why aren't you advocating that the continent of Africa collectively raise their minimum wage to $15 per hour? Is it because you don't want black people to earn good incomes because you are racist? Or, is it because you understand supply and demand?

"not only are we eliminating low/minimum wage jobs but we are replacing them with more offshore workers"

You say that like it's a bad thing.

Right-wing newspaper cites study "prooving" right-wing point, is referenced by right-wing blogger as "evidence".

I say it once, and over, and over, and over: studies prove that studies are wrong. http://reason.com/blog/2015/08/28/study-finds-studies-are-wrong

Any controversial subject can be "proven" on both sides of the argument, as the oil, tobacco, and banking industry know so well.

So why stop at $15 JS? I say crank it up to a rate of $100k/yr. and solve the problem once and for all.

What if i pay you .50 cents an hour?

"What if i pay you .50 cents an hour?"

I'll find a better offer.

Could captain obvious explain to us what the higher value of x in a continuous, exponential function demonstrates about the lower value of X in that function?

I'll play captain obvious: if the $100 minimum sage has a negative effect on employment, so does the $15 minimum wage. The question of how much is empirical, but we don't throw out basic logic (supply and demand) unless we are Machiavellien liars.

That is, of course, the proper response. MW supporters know in the back of their mind that demand curves slop downward, they just don't believe it does below $X (which is always less than what they make at their white collar jobs) because the evil corporations take all that money for themselves. It's certainly not a possibility in their mind that someone could be so unskilled that their labor is worth less than $15 an hour. At best, if some company goes out of business due to labor costs, you'll just hear MW supporters snarking how the business should have had a better business model (remember: labor costs aren't part of business models in their world).

Actually that is a mischaracterization; the point is the job losses are small relative to the benefits, i.e. there is a net transfer of income to the lower paid employees, even after accounting for the job losses.

Whether that is true for a large increase, i.e. to $15/hour is in question.

You mean there is a net transfer of income to the lower paid employees at the expense of the lowest paid / lowest skilled employees. I guess if that's how you want to prefer to fight poverty, that's up to you, but it seems really weird to me.

@Urstoff Well, that is the union model, which is as integral to the DNC as inhaling their own farts.

I can afford to pay my barber enough to send his kids to college (maybe not an elite one unless they get scholarships).

And if you can't, then you need a wage hike.

Which comes from the magical wage fairies from magical money land.

No. It's pretty simple. Economy-wide, things get more efficient. So, things that we still want but aren't subject to much efficiency improvement, well, because people normally care about people, we can just pay those people an OK wage.

With economy-wide higher efficiency, my consumer surplus of that service is HUGE compared to what it used to be, in dollars, because I've got more dollars to go around. So we can afford it.

Where's the magic in that?

I pay my barber to cut my hair, not to send his kids to college.

But then again, I'm not as dumb as you.

"No. It’s pretty simple. Economy-wide, things get more efficient. So, things that we still want but aren’t subject to much efficiency improvement, well, because people normally care about people, we can just pay those people an OK wage.
With economy-wide higher efficiency, my consumer surplus of that service is HUGE compared to what it used to be, in dollars, because I’ve got more dollars to go around. So we can afford it.
Where’s the magic in that?"

That was literally the most meaningless agglomeration of words I've ever seen. Not sure if it was even English.

Given that you clearly don't give two shits about anyone but yourself, and hold profound disrespect towards anyone who is different from you, it's not surprising that you are unable to understand that.

Troll Me, you are a turd. You can't pay for your barber to send his kids to college, because you are impotent and poor, but you can vote for men with guns to force all people to contribute or die, and then feel good about what you've done.

There are better ways to feel better about yourself, Thomas.

How the hell is it more efficient to leave a bunch of labor lying around unemployed?

a) it's not established whether they are very likely to become unemployed. b) even if some people do lose work, they can find prepare themselves to find jobs where the productivity of the business is sufficiently high to pay the higher salary.

I'm not saying it's always that way. But nor is it always the way you assume.

So if a barber doesn't have kids and hence, doesn't have college payments to make, how much should he be paid for his services?

Exactly. Which is why, in this case, an appeal to reason on the subject of price floors is a good idea.

Because it forces the left to contort itself with all kinds of ridiculous monopsony counterarguments.

If economists can't find common ground on such an obvious topic as this, they should just throw in the towel.

The world is more complicated than intro economics.

The logic of intro economics should be kept firmly in mind. But there are many potentially positive impacts of higher minimum wages. One of which is the "threat" of technological advancement. Another one of which is that it will bring more workers into the market. There are others ...

You're literally too dumb to even get Econ 101. Why do you insist on speaking as if you actually understand even something as simple as econ 101 introduction to minimum wages?

You know, AIG, there's a reason it's called a rapier wit, and not a battleax wit. Repartee is just not for you.

Meh, I can't get 10/10 every time, you know.

Do you remember that part of econ 101 where they emphasize that it's a MODEL? And how MODELS demonstrate key points, but do not reflect all of reality?

I guess you also skipped the lecture on market imperfections...

Not that I particularly want to jump into this, but, Nathan, burden is on you to demonstrate that labor is not a normal market good.

TMC - I argue that there is a supply response. Which there is. And that it is an empirical question whether the supply effect or the demand effect dominates. Which it is an empirical question, which will have different answers at different times.

And that's not accounting for the "threat" to engage in labour-saving technological innovation.

If all other effects are completely irrelevant, of course SOME employers will shed some staff. But other factors are not irrelevant.

Yet while to portend to support higher wages for low income earners, you also support massive immigration of uneducated people and massive macroeconomic manipulation to guarantee asset prices and seigniorage. Useful idiot.

Where did you get that idea from? I'm not one of those people who's positions on every subject on the earth can be predicted by knowing their position on some other issue.

I support the ideal of free movement of people, not the immediate implementation of it.

If you increase the price of something, demand for it is going to go down. The is basic econ. Why do we need so many studies before academics will admit this is the case?

But the supply will go up. Quality matters.

There's a word for when quantity supplied is greater than quantity demanded.

It's called "unemployment."

Because people really, really, REALLY want to believe there is a free lunch.

Where's the free lunch?

Owners are enjoying much surplus from technological advances they had little hand in creating, and over time, some of that surplus should be distributed via minimum wages.

By what magic does this appear as a free lunch to you? It is clearly a transfer of surplus from owners to workers. Whether that is economically optimal, from the perspective of long-run development, and in consideration of declining marginal utility (poor people get more value out of the additional dollar), it another question altogether.

There have been dumber posts on MR before. Surely. But, not that many. And most of them from from you, anyway.

There is also the option to live life from the kindergarten sandbox. A little too much sand in your eyes?

'Much surplus' what we're your investment returns last year for risking all of your saved up labor? The problem with people like you is more than your basic denial of economics and human nature, it is that you are a hypocrite too. Go invest your money in a charity if you believe negative profits can deliver a return. You don't actually belive thst, which is why you are privately selfish but publicly generous.

After 60 years of technological innovation, the real minimum wage is lower than it was 60 years ago. Why should the owner class enjoy greater than 100% of the benefits of technological progress?

So now you're dumb enough to think that there are two types of people in this world: owners, and people making minimum wage

The subject is the minimum wage, and the people on the other side of that are owners.

Shall we change topics to CEO pay and shareholders? Or should we stick with minimum wage earners and the people who pay their wages and make the labour demand decisions in relation to them?

Please, do continue speaking about "surplus". Maybe you can through in the "labor value of the proletariat" part and make it clear exactly where you are coming from.

Ooh, the Wall Street Journal, there's a credible source on this issue... give me a break.

There are a huge number of studies on the minimum wage, some saying it causes job losses, some saying it causes job gains, and the largest group saying it doesn't have much impact. Bringing up some new study and acting like it settles the issue is a joke.

Saying "it doesn't have much impact" seems like it'd be highly sensitive to the magnitude of the change. Going from 7.25 to 7.50 probably isn't going to move any needles in either direction. But going from 7.25 to 15 could be quite another issue.

I do agree that no study is going to settle this issue; luckily we're about to run a nationwide natural experiment. My prediction - both sides will contort the results to say that they were right all along.

"My prediction – both sides will contort the results to say that they were right all along."

I'm doubtful with the size of the changes that CA is planning, if that's going to be tenable for one side of the conversation. Assuming, that CA does't delay it via the economic downturn clause, then the minimum wage is going to rise from the current $10 to $15 per hour Jan 1st of 2021. If the next President doesn't push through a national minimum wage hike, then there will be a rather large difference between CA and the nation.

Either we see CA's youth/low skill unemployment trend diverge from the national average or we don't.

Some firms will go to other states where the minimum is lower. Those will be few in number, because California is very much about LOCATION.

Whether it will attract more workers or bring more workers out of the woodworks (or rather, the extent to which either of those) remains to be seen.

Lots of $15/hour workers sitting on the fence in California, are there?

Well, for sure, the illegals will benefit quite a lot.

According to morons, the minimum wage increase will bring to the labor force people who are worth $15/hr , but currently abstain from working at their market value. Brilliant.

How many talented spouses will stay at home at $7 an hour, but take on a part time job at $15 an hour?

1? 100,000? A million? The labour supply effect is positive. The empirical question is whether it is sufficiently large to counter the negative effect on labour demand. The only reasonable theoretical statement is "that's an empirical question, and will depend on specific conditions in a given time and place", even if empirically it is shown that one situation is more common than another.

Why is it that when people hear "California" they think "Silicon Valley and Hollywood." California is not very much about LOCATION for the kind of people currently making $10 an hour. When you hear about a policy affecting "California," don't think about how it might affect Mountain View, think about how it might affect Coalinga or Placer County.

The left has already demonstrated their opinion - the labor unions want exemptions. The useful idiots who respond to this blog aside, the leftists with real power know what this is about, it's about establishing ownership over people. The unions want to own slaves. They know they can get business people to purchase their slave labor at lower cost than $15/hr free men

Yeah, those union members should totally sue the unions who helped to cut those deals.

I don't imagine you'll find a single leftist that would defend what they did.

I can find millions of them. Here is what they argue: the $15 minimum wage is legislated to correct for asymmetrical power between an employer and a low income employee. Labor unions, on the other hand, already do this for their members. Given that labor unions are capable of fair negotiation, it is more efficient for them to be allowed to negotiste, which they may, in effect exchanging wages for workplace perks and other benefits.

It is a reasonable argument, but far too convenient in my opinion.

Just out of curiosity, out of the huge number of studies, which show that raising the minimum wage 50% - 70% doesn't cause job loss?

Of course, by 2021, automation will have a far greater affect at eliminating fast food and retail jobs in the the U.s. than the small wage hike experiments.

We don't know what the effect of raising MWs 50-70% would be – out of sample extrapolation is always iffy. The biggest bump at state levels that I know of was about 45%, but that occurred after a prolonged period of wage increases, so that only tiny proportion of employees were significantly affected by the change.

Minimum wage: the only context in which free marketeers worry about what happens to unskilled workers. Looking forward to the MR post "the evidence is piling up that free trade kills low skilled jobs."

Not sure if Bernie Sanders supporter, or Donald Trump supporter. Either way, pretty sure you have no idea what the difference is between trade and price floors.

But then again, I repeated myself 3 times.

If a low-skilled job goes from one country to another as a result of free trade, there is no net loss in low-skilled jobs (it's merely a question of where the job is located). If the wage of a low-skilled job increases such that it makes it more economical to replace it with a machine, then that low-skilled job is lost.

Does the WSJ ever look at what it cites?

From the summary of the study:

" For workers aged 19–21 and 22–24, we find less consistent evidence of minimum wage effects on earnings and employment. But, even for these age groups, a higher minimum wage is found to reduce accessions, separations and the turnover rate."

The effect they found was for the 14-18 year old group.

In another study, debate over the minimum wage increased the number of cherry pickers hired by the WSJ.

Less people quit or are hired in the higher minimum wage equilibrium. Shocking. Look at the tenure of leftist employees - government, union, trust funders, and sellers of government power. Leftists like when employees never leave. Shocking.

Thomas, the fact is that the paper only finds an effect for 14-18 year olds.

As to your comment about leftist government employees for the plus 18 year olds explaining the constancy of employment, your prejudices overcame rational thought: what percentage of the population above 18 is a government employee.

Bill, the assertion seemed to be made that reduced turnover was a good, of itself. My comment was to sarcastically act surprised to find that leftists prefer reduced turnover, given that their favored employment schemes deliver exactly that.

The evidence is piling up that excessive inequality results in financial and economic instability - how do we know, well, duh. By comparison, a higher minimum wage is, well, peanuts in comparison.

What is "excessive" inequality?

True, so let's make licensing more reasonable and attempt to end corporate welfare and free the builders to push housing costs down. Have you ever seen mention of these here?

Damned communists and libertarians. A threat to national security, I say.

Did I miss something but the 'finding' was a 10% increase in the minimum wage resulted in a 1-2% decrease in teenage low skill employment?!

OK let's add some perspective here. Per http://www.bls.gov/opub/reports/minimum-wage/archive/minimumwageworkers_2013.pdf only 20% of teenagers make min. wage (the rest make more). But from the tables it appears we can say 55% of those earning the min. wage are 24 or younger so let's call that 'teen'

So if you increase the min. wage 10% then you increase income 10% for 99 out 100 people with the decrease being a teenager, who presumably has family as a support structure and is working part time. That's actually not sounding like a horrible trade off esp. considering a lot of those 99 people are adults who may not have any of the support resources the teen enjoys and the headline seems a bit deceptive, it's less "evidence is piling up that minimum wages kill jobs" and more like "evidence is piling up that minimum wages may kill A part time job while leaving a lot of other jobs with more income"

Of course a decrease in teenage employment may not actually mean a decrease in jobs. That job might have been simply given to a slightly more skilled teen or adult.

Granted there's a cost in a tiny decrease in jobs for low skilled teens....but is there no other way we couldn't boost skills in teens enough to overcome a 1% hurdle?

Don't get me wrong, my preferred method here is direct income supplements via a negative income tax or the Earned Income Tax Credit but sadly the right has drifted a long way from the thinking of people like Milton Friedman and targets such programs as 'spending' so perhaps minimum wages are a second best response since it is harder to undo increases once they are enacted and it is more difficult for the right to paint the wages min. wage workers earn as welfare since they do work for them.

Maths is hard. I know.

But if only 20% of teenagers make minimum wage, than an increase in the minimum wage does not translate to 99 out of 100 of them getting a pay bump, since 80 out of 100 of them are already making more than minimum wage.

If you're trying to make the argument that the overall social benefit is higher than the social costs...ok...that can be debated. But its not merely a function of how many got a pay bump and how many lost their jobs. It's also a function of what it did to costs ad profits for consumers and producers.

It's rather obvious that the 100 people he was referring to are ones earning the minimum wage. Similarly, we do not discuss the salaries or effects on CEOs when talking about the minimum wage (although presumably the effect would be downward, but I think the anti side prefers to avoid that, since it might make the concept rather more popular).

Math is hard. It's harder if you're stupid. And boy are you stupid :)

Try this exercise. 10% increase in minimum wage for 20 people. A 100% decrease in wage for 2 people.

Which is greater?

Well if you completely fabricate examples unrelated to either the initial comment or the study, I guess you can make numbers say anything you want.

Here's some more math.

A business decides to go with a 100% asshole ratio. Then they find themselves with a 99% decrease in business.

Another business decides to go with a 0% asshole ratio. Then they find themselves winning all the business lost by their asshole competitor.

Which is greater?

I knew this math example was too hard for you.

The 10% increase, the report says, causes a 2% decrease in teen employment. Did not mention any other groups. Take 100 people on min. wage, about 50 will be teens and 50 will be adults. The 50 adults see 10% more income when the wage is increased by 10%. Say 1 teen is fired, that's 2% of the 50 teens making min wage. You are still left with 49 teens who also get 10% more income. You then see 10% more income for 99 people at the cost of 100% decrease for one teen.

In AIG's example you have 22 people, two of whom lose their jobs. That's a decrease of employment of about 9%.

To use actual numbers, assume everyone makes $100 with the min wage. 99 people get the increase 1 gets canned, total income has went from $10,000 (100 * $100) to $10,890 (99 * $110) after the increase. In AIG's case there's no change in total income, the 20 remaining people are simply splitting the paychecks of the 2 who got fired.

Actually you do not provide enough information to answer your question.

Why am I not surprised?

The Evidence Is Piling Up That Salt Makes Food Tastier.

The Evidence Is Piling Up That Water Is Wet.

The Evidence Is Piling Up That That Economists Write An Awful Lot Of Rubbish.

Bird economist at work.

http://www.coldbacon.com/pics/kliban/bkbirdshit.jpg

>The Evidence Is Piling Up That Water Is Wet

Yeah, right. Check your "sources" -- Fox News and the WSJ? Give me a break!!

I'll stick with Krugman. And now I'm going to dry off in the shower.

seems like a maximum wage would be more effective and make more sense

Noooooo, what about the human rights of the 1%!!!!!!

We'll know there is wage progress when universities pay all professors $25,000 -- but they get to keep tips students give them for good teaching.

Pro tip: Always read the paper first

"First, even with controls for spatial heterogeneity we find that the youngest workers in local labor markets with higher minimum wage levels experience the most pronounced positive earnings and negative employment effects. As is often seen in the literature, these effects are not always found for older workers in the youth labor force we study.The second result is that higher minimum wage levels are associated with substantially lower worker turnover. Separations from quits and layoffs are smaller and so is the number of hires in a given period. We have interpreted these results in the context of a matching model framework whereby reduced separations create proportionately fewer job searchers and job vacancies, which in turn helps explain the lower number of accessions."

and...

"Another possible reason for a negative turnover rate elasticity is that a higher minimum wage may shift the employment distribution away from high-turnover, low-wage firms to low-turnover, high-wage ones"

So, min wage increases, reduces turnover, but then in turn reduces availability of new jobs as there are fewer job vacancies.

So this is the finding of the paper, which is not exactly ground shattering.

Taking the conclusions at face value .... so, is that a good thing or a bad thing?

The US has had a minimum wage since 1938? But evidence is accumulatig?

It would be nice if the feedback cycle did not push a century.

Economics.

Push cart vending is universally criminalized in the United States, and that wipes out a lot of jobs and business opportunities. No one seems to care.

The minimum wage is worth crapping on every day.

We have a Mexican push cart vendor in my neighborhood now. So that is probably illegal?

The left criminalized that.

Not very effectively. There are an estimated 50,000 Street vendors in Los Angeles. There is even a compliance program:

http://publichealth.lacounty.gov/eh/sse/StreetVending/strVending.htm

Note that this is a public health issue, and paranoia about "the left" says that you just want freedom from hand washing, refrigeration.

It is the left and you've identified their motivation - public safety. It is not news that regulation tends to favor incumbents and always delivers higher cost of compliance per unit to smaller firms. It is somehow poetic to juxtapose leftist regulation killing small firms and the concept of the individual as the smallest minority, minority protection being a sport of the left.

Truly hand washing is a communist plot.

The minimum wage probably does have an effect on employment. But, while plain vanilla microeconomics would have us believe that this is a strong and obvious effect, the reality empirically, is that the employment effect of a minimum wage is quite subtle and affects only a pretty small part of the labor force. Given the much higher degree to which microeconomics translate into empirical reality, that is quite surprising and notable.

Huh? Nobody doubts that the effect is both small, and limited. Since only a small % of the labor force works at minimum wage rates, and since increases in minimum wages are both small and may well be non-binding (i.e. they are already below the market clearing price to begin with). Then there's second and third order effects which will be even harder to detect.

So no, economics doesn't tell you any of the things you claimed. It says precisely that tiny changes in minimum wage laws in high-wage states, will affect a tiny % of people, and will have a tiny impact.

Now, fast forward to a 50% jump in minimum wage...:)

Keep in mind that a $15/hour minimum wage is...higher than the average wage for most of New York State!!!!!

50% of the counties in New York will face a minimum wage that is higher than what 50% of the people in those counties make. Do you think those small business owners in Watertown NY or Oswego NY or Elmira NY, are going to be able to find qualified candidates to be worth $15/hour in those s**tholes? Will they be able to charge their customers higher prices, if their customers are already dirt poor?

I don't think the Mayor of Watertown NY makes $15/hour.

This is going to be a beautiful...beautiful...self-destruction of NY and California! I'm already loving it! :)

The consumers in up state NY will have more money to spend since 50% or more of them will get a pay increase so they will be able to afford the new higher prices for local services. Any analysis of a change that assumes everything else is fixed will overestimated the effect on the new equilibrium

Free lunch. Why not $100 per hour.

First answer was going to be 'look up what marginal means' but I think a better answer is look up what a non-linear function looks like. Changes on the small scale may behave very differently than a huge change.

Perhaps an example from the other side of class warfare will enlighten you. Cutting the tax rate from 50% to 40% might actually generate more tax receipts. But cutting it from 50% to 1% probably will not.

Small increases in the min. wage to create a 'floor' might end up producing results that either have a very small cost relative to their benefit or even no cost at all while a huge increase (to $100/hr say) will behave exactly as traditional economics predicts.

One imposes more distortion in EqPrice and the other reduces such distortion. I appreciate the effort but it's not analogous. I look forward to another attempt.

Yeah, but sophisticated labor saving devices (burger flipping and pizza making and taxi driving robots) are getting cheaper and better all the time. We may find that the small effect on the labor force suddenly and unexpectedly becomes a big effect...and once the machine has been purchased the cost is sunk.

If investment in machines that improves productivity Is a bad thing, should we also have tax policies that discourage investments that eliminates low skill jobs,

That's exactly what a minimum wage is.

I feel fairly confident in stating that the increased wage pressures will cause many, many small business owners to the brink and likely to exit their business, often at substantial losses. Many are hanging on a thread with low margins and profits, if any.

So I would expect that you will see lots of businesses got out of business quickly while others will struggle and the owners will put more seat equity in if they can while they attempt to recoup these costs with increases in their price, which there is no guarantee that they will be able to do so. The pressure for lower costs, especially in the food service industry is intense.

Do you think people will stop shopping at low-wage outlets just because prices rise a tiny bit? Where else will they get their stuff?

At this point I'm starting to believe you are just trolling, because clearly even you can't be this dumb.

You're right. That's dumb. When prices rise by 2% I stop eating and choose to wander the streets naked. Or, in protest at the small price hikes, I start shopping at elite outlets, where I can buy 1 meal a week instead of 21 and can wear the same designer outfit 365 days a year - because I refuse to pay the small increase in prices.

Because that's what people are like.

So in other words, you...LITERALLY...don't understand the meaning of the word "marginal"?

Like...LITERALLY...

Considering that low income people are the main clients of budget places, the empirical question of whether more money ends up in the pockets of low income families is pretty key.

If my wage goes up by 50% but my costs go up by 2%, what happens to my demand? And if demand for those products rises as a result (another empirical question, not to be resolved using econ 101 MODELS), what happens to labour demand of those companies?

Margins apply to more than one variable at a time.

Ordering a pizza in Scandinavian countries costs about $40 minimum. You so ordering a pizza at that price?

Considering that I would be earning at least $20 an hour, I don't see why not. You could look at it this way. How many hours do you have to work at the minimum wage to pay for X?

Anyways, the number one ranked pizza delivery joint in Stockholm according to Yelp has a maximum price of what you suggest is the minimum price: http://www.yelp.com/biz/feca-stockholm?osq=best+delivery+pizza.

Roughly speaking, a pack of budget brand cigarettes costs about the same worldwide in this view. Which is 20c for a pack of smokes in Zimbabwe and about $20 for a pack of smokes in Australia.

Do you think that people paying a tiny bit more for stuff are still going to keep having that money to spend on the other things they would otherwise spend it on? If they are a tiny bit more on hamburgers, then they are spending a tiny bit less on vacations or whatever. Someone else is getting paid less so that burgers flippers get paid more. And there's no reason to think that the people getting paid a bit less are any more likely to be millionaires than burger flippers.

Considering that all of the increase in prices is precisely due to people who spent most or all of their income having MORE money, no, I do not think that is relevant.

If there is a macro concern, assuming that the employment effect is not important, I think it is the question of whether the money will be allocated by wealthy owners/shareholders or low paid workers in a manner which is better for the economy. So ... are the owners spending that money to invest in capital and technology improvements, or are they upgrading their hotels on holiday and adding more new features onto their biannual new car?

Who said anything about wealthy owners? The costs will be passed on to a broad array of people, from workers who will lose their jobs, to consumers who will pay more for their goods, to shareholders who will receive lower dividends. There's no particular reason to think that most of those people will be "wealthy". And of those who are "wealthy" at ;least *some* of that money would have been invested in captial and technology improvements.

My point is that your contention that if prices go up a tiny bit it will have no marginal effect is just obvious bunk. If prices go up, the money to pay those higher prices comes from somewhere. Even if we assume that hamburgers have zero elasticicity, we can't assume that EVERYTHING has zero elasticity and people will just come up with the money out of nowhere to keep spending exactly what they always spent.

OK. Look at it this way. Low value business models may not thrive. But if the actual willingness to pay can survive a small increase, by passing on costs (to low wage consumer who may have MORE money to spend), then they will have no/small/negative problems.

Where did I say there would be NO marginal effect? What if .... the marginal effect is positive? If low income people have more money to spend, some businesses will clearly make MORE money.

There are both demand and supply curves. You're focusing exclusively on who bears the cost, with zero consideration of who benefits?

For a consideration of a) fairness and b) macro effects, consider something redistributive in the opposite direction. Say, you double income taxes on minimum wage earners so you can offer a tax deduction for $1000 lunches for business executives. This leaves more money in the pockets of business executives. Should we focus on the benefits of more money in the pockets of business executives or less money in the pockets of minimum wage workers?

Low value business models? Now you are making explicit normative judgements about businesses based on profitability. But when most leftists make such judgements, we know that they aren't talking about 40 year old white women with MFA degrees, who talk like NPR hosts, and make art at sub minimum wage. They are talking about businesses that employers the (not by choice) low productivity workers. It's somehow related to the concept of work as a dirty thing for the aristocracy - zmp hobby or art pursuits are more honorable than dirty blue collar work. Then consider how the left hates the white blue collar man. Then consider how the left celebrated ACA putting people out of work. Then consider how the left says everyone deserves a liberal arts education, and it's a shame if they don't receive it. The elitism is obvious.

I'm willing to be persuaded by evidence, but I need to know what the hypothesis is, especially when the claim is so counter-intuitive as raising cost won't diminish demand. I know that if the minimum wage were $0.50/hr. I'd sure try to hire a maid. I know this. There is no question that any minimum required wage eliminates potential jobs. So, what are the proponents of a minimum wage actually claiming it will be good for? It will certainly be good for those employees who are below that wage now and retain their job & hours. But it obviously reduces the market's efficiency when it comes to wage allocation, so what is the hypothesis that needs further evidence? I really don't understand why proponents of this aren't laughed out of any rational discussion, I really don't.

Just because the minimum wage is 50 cents an hour doesn't mean you can hire a maid for 50 cents. Hell try hiring one for $7.25. It might be possible in Brownsville or something, but nowhere I've ever lived.

I pay my maid/cleaning person in Hawaii $150 per job for two hours work. Great gig if you can handle it. I went through a lot of people to find one that is this good.

Li Zhi, Yeah, prices go up, but incomes go up by about the same amount, so no big effect (assuming monetary accommodation) on aggregate demand. You are merely transferring income from consumers to low-wage employees. In any case we expect the income effect from proposed increases to the MW to be minimal. Substitution effects, as several commentaries have noted, are harder to suss out.

Well if the impact is measured by employment, isn't this circular?

"We study the effect of the minimum wage on labor market outcomes for young workers using
U.S. county-level panel data from the first quarter of 2000 to the first quarter of 2009."

I seem to have a faint recollection of something big happening around 2008 to 2009. Also most of the minimum wage increases in the study happen around then ...

http://informationtransfereconomics.blogspot.com/2016/05/this-is-what-confirmation-bias-looks.html

Say, there are a million people at the minimum wage. The minimum wage rises and their average income goes from 20k to 30k a year. BUT, 0.1% lose jobs (at least temporarily).

The total amount of money earned by that group rises from $20 billion (20k * 1 million people) to $29.7 billion (30k * 990,000 employed).

Given the fabricated assumption that 0.1% will lose work, at least temporarily ... Should we focus on the 10,000 who have to retrain or hits the streets looking for work, or for the economy to evolve new positions which may make use of them? Or should we consider that $29.7 billion is greater than $20 billion?

It seems rather unlikely to me that the people on the anti- side of the argument could actually care less about the group who they exhibit significant faux concern about. How so? They basically NEVER consider the aggregate wage bill of the group. If they actually cared about these people, that would be relevant to them.

I think your BC accounting is a little off. First, if the demand elasticity for low-wage workers is .1, a 50% increase implies a reduction in low-wage employment of 5% not .1% (who knows? this is out of sample extrapolation). Hence, 950k employees gain an increase of $10K or $9.5 billion. 50K low-wage workers lose their jobs. Second, they lose $20K per, or $1 billion total. So low wage workers gain $8.5 billion net. Third, consumers pay $9.5 billion more for goods and services and experience a deadweight loss of about $250 million. Hence, the increase produces a net social loss of $1.25 billion, which is pretty trivial, especially if low-wage workers are heavily concentrated in low-income families. This, of course, assumes that the the higher wage floor doesn't create significant rationing inefficiencies, crowding out additional folks who are currently working for low wages.

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