Authors of Controversial 'Seattle Minimum Wage' Study Revise Their Conclusions (bloombergquint.com) 290
Seattle's increase in the minimum wage "brought benefits to many workers employed at the time, while leaving few employed workers worse off," reports the New York Times -- citing a new study by the same researchers who'd claimed last year that workers were hurt by the wage increase.
"The dire warnings about minimum-wage increases keep proving to be wrong," argues a Bloomberg columnist, in an article shared by gollum123: The authors behind an earlier study predicting a negative impact have all-but recanted their initial conclusions. However, the authors still seem perplexed about why they went awry in the first place.... The increase was an "economic death wish" that was going to tank the expansion and kill jobs, according to the sages at conservative think tanks... Despite their dire forecasts, not only were new restaurants not closing, they were in fact opening; employment in food services and drinking establishments has soared...
As we noted in 2017, the study's fatal flaw was that its analysis excluded large multistate businesses with more than one location. When thinking about the impact of raising minimum wages, one can't simply omit most of the biggest minimum-wage employers in the region, such as McDonald's and other fast-food chains, or Wal-Mart and other major retailers... There were two other glaring defects in the first study that are worth mentioning. The first is that its findings contradicted the vast majority research on minimum wages. As was demonstrated back in 1994 by economists Alan Krueger and David Card, modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way. Ignoring that body of research without a very good reason made the initial University of Washington study questionable at best. Second, there potentially is a problem with having a lead researcher -- economist Jacob Vigdor, whose affiliations among others include the right-leaning Manhattan Institute -- whose impartiality is open to question. Long-time Slashdot reader Martin S. writes that "When the UK introduced the minimum wage we had the same doom and gloom scenarios," adding that "the reality was very different." He argues that increasing the minimum wage "increased productivity so business did not suffer, reduced government spending on benefits, and increased the the velocity of money improving the overall economy.
"It had no measurable effect on unemployment."
"The dire warnings about minimum-wage increases keep proving to be wrong," argues a Bloomberg columnist, in an article shared by gollum123: The authors behind an earlier study predicting a negative impact have all-but recanted their initial conclusions. However, the authors still seem perplexed about why they went awry in the first place.... The increase was an "economic death wish" that was going to tank the expansion and kill jobs, according to the sages at conservative think tanks... Despite their dire forecasts, not only were new restaurants not closing, they were in fact opening; employment in food services and drinking establishments has soared...
As we noted in 2017, the study's fatal flaw was that its analysis excluded large multistate businesses with more than one location. When thinking about the impact of raising minimum wages, one can't simply omit most of the biggest minimum-wage employers in the region, such as McDonald's and other fast-food chains, or Wal-Mart and other major retailers... There were two other glaring defects in the first study that are worth mentioning. The first is that its findings contradicted the vast majority research on minimum wages. As was demonstrated back in 1994 by economists Alan Krueger and David Card, modest, gradual wage increases have not been shown to reduce employment or hours worked in any significant way. Ignoring that body of research without a very good reason made the initial University of Washington study questionable at best. Second, there potentially is a problem with having a lead researcher -- economist Jacob Vigdor, whose affiliations among others include the right-leaning Manhattan Institute -- whose impartiality is open to question. Long-time Slashdot reader Martin S. writes that "When the UK introduced the minimum wage we had the same doom and gloom scenarios," adding that "the reality was very different." He argues that increasing the minimum wage "increased productivity so business did not suffer, reduced government spending on benefits, and increased the the velocity of money improving the overall economy.
"It had no measurable effect on unemployment."
A lot of the arguments seem hopelessly simplistic. (Score:5, Insightful)
Either way. Why would you expect the effect of a minimum wage increase to always do the same thing, regardless of the size of the increase or other circumstances in the economy? I'd expect depending on the size and circumstance that the effects would vary.
It's kind of like how I feel about government spending. Politicians tighten the public belt when there's a recession and spend like crazy when times are good. They should do exactly the opposite. When times are good they're taking money out of an economy that's doing well at turning dollars to jobs. When times are bad they're keeping dollars in an economy that's not converting dollars to jobs very well.
Re:A lot of the arguments seem hopelessly simplist (Score:5, Insightful)
That's the core of Keynesian Econoics, which most mainstream economists these days consider voodoo,;as you can't write up a nice, neat, overly clever set of equations to describe; but which is the only economics which has been proven to work in the real world.
Re: (Score:2)
Well, again that seems simplistic to me. Keynes said you could just bury money in the ground and let people dig it up, and it'd have a stimulative effect, and I'm sure that's true. But I do think it makes a difference what you spend money on. The government should spend money on things like infrastructure that improve private sector productivity when the economy turns around.
Re: (Score:3)
Yes, the Federal government should increase spending during recessions and save up when the economy is going well. As you point out, the politicians are stupid and mostly just give money to their donors... i.e. cut taxes for the rich and cut spending on anything that might benefit everyone else regardless of the economy.
State and local government does have the constraint that they have to have balanced budgets so they tend to spend less when tax receipts go down during a recession.
Re: (Score:2)
the politicians are stupid and mostly just give money to their donors.
That may be self-interested and greedy, but it is not stupid.
If anyone is stupid, it is the voters that re-elect them.
Re:A lot of the arguments seem hopelessly simplist (Score:5, Interesting)
It's kind of like how I feel about government spending. Politicians tighten the public belt when there's a recession and spend like crazy when times are good. They should do exactly the opposite. When times are good they're taking money out of an economy that's doing well at turning dollars to jobs. When times are bad they're keeping dollars in an economy that's not converting dollars to jobs very well.
It depends on who you are, though. If you don't have a stable economic base or tax base (e.g. Greece) and/or don't have control over your own monetary policy (er... Greece again) then you don't really have a choice. You have to spend less when the economy is down because... you have less money to spend. Some economies are simply screwed up enough systemically that throwing more money into them will be a waste because they need to be fundamentally restructured. If your economy is totally based on something external you can't control (like oil prices or tourism) then printing more money is no better than a band-aid. There's no amount of money in the world that would make Venezuela's economy sustainable right now. So "austerity" is your only remedy if you don't have an economy that is fundamentally sound.
However, Keynesian economics will tell you that you should inject money into the economy when it slows down - much like FDR did in the United States during the Great Depression, or the "Obama stimulus" infrastructure spending in 2008. Keynesian thinking follows what you suggest, but it's only practical in cases where you have control over your own money supply and there is a reasonable chance that all the economy is missing is enough people spending money.
Re: (Score:2)
(er... Greece again) then you don't really have a choice.
The Greeks did have a choice. The problem is that they chose poorly and are now living with the consequences.
Even when the cost of their financial recklessness was becoming obvious, they continued to elect irresponsible populists who promised them cost-free bread and circuses.
In 2009, the average retirement age in Greece was 57. Germans work to 67. Why should a German factory worker get up and go to work every morning for an extra decade to pay younger Greeks to relax?
Venezuela's economy would do a lot better (Score:2)
I'm not saying Venezuela is some kind of wonderful, lord knows they've got their problems, but like all of South America they'd have a lo
Re: (Score:2)
Well, I wouldn't, but that is what Microeconomics 101 says (and Micro 401 just barely hints might not be entirely correct), and 90% of the Western world's economic policy since 1980 has been based on simplistic Micro 101 theories, so it directly affects all Citizens in those regions.
Not sure what country you're in (Score:2)
Socialism for the rich, Dog eat dog for the poor.
Re: (Score:2, Insightful)
Two questions:
1. Do you realize that 70% of Federal spending is on welfare and retirement benefits (in which Social Security and Medicare reside)?
2. Do you realize that Social Security and Medicare are in a deficit spending situation, are projected to both go completely bankrupt within 12 years without major reworking?
Re: (Score:2)
So what you're saying is that a tax cut now would be the ultimate in stupid?
Re: (Score:2)
Either way. Why would you expect the effect of a minimum wage increase to always do the same thing, regardless of the size of the increase or other circumstances in the economy? I'd expect depending on the size and circumstance that the effects would vary.
I suspect that many people want an easy answer, and they want it to fit their pre-conceived notions of how things should work. If changes to the minimum wage have a single, predictable effect upon the economy, then we have a way to manage at least some aspects of the economy (and a clear blame target when things don't go as desired). Complicated mechanisms with conflated context, cause, and effect relationships are messy, hard to understand, and don't lend themselves to simple policy decisions.
Re: A lot of the arguments seem hopelessly simplis (Score:2)
Obama spent like crazy when he inherited housing bubble disaster from Bush. Heck, I got a new road.
It's never simple (Score:2)
There's probably a ratio on how much you can actually get away with, unpredicted side effects, local culture...
Fewer entry-level opportunities (Score:5, Interesting)
On the local radio here in Seattle, the study's purveyors did mention that it hurt entry-level opportunities. Similar to what sounds like the case in Britain, employers focus harder on getting more for their increased payouts, holding out for more experienced employees when hiring, and pushing productivity higher. I would question whether that situation actually results in better value for the workers.
It seems a bit futile anyway. In an economic upswing, what the market gives, employers will tend to take, and what employers are then forced to give, the market too soon takes away when the cycle turns downward.
That may not be the case (Score:4, Insightful)
Basically, Seattle's big enough that they're are probably outlying suburbs that have incorporated to dodge taxes and minimum wage laws (my city does just that). They're soaking up the new workers right now, probably right on the boarder. Heck, where I am right now I've got political signs for a proposition to pay for roads in the rich neighborhoods right down the street from me because those neighborhoods are technically another "city" than me. It's so they don't have to pay into the general fund but can take advantage of the city proper's amenities. Crap like this is why we have a national minimum wage.
In 20 or 30 years see the real results. (Score:2)
Most economies can handle small changes over shorter periods of time, but over the long haul we will see the actual results.
Re: (Score:2)
It will be interesting to see if giving minimum wage earners more money translates to an improved economy as many economists predict.
Re: (Score:2)
It will be interesting to see if giving minimum wage earners more money translates to an improved economy as many economists predict.
Most economists don't predict that it will improve the overall economy.
They predict it will (modestly) reduce income inequality, which is not the same thing.
Not surprising (Score:2)
We repeatedly hear if you cut taxes, people will have more to spend which will help businesses and the economy grow. Why wouldn't the same thing happen if you give people a raise? In fact, giving people a raise not only gives them more money to spend, it also raises the amount of taxes taken in.
Re: (Score:2)
In fact, giving people a raise not only gives them more money to spend, it also raises the amount of taxes taken in.
How does that even work out mathematically? If they weren't being paid more, then the business (or the customers of the business) would have that money instead. If the business keeps all of it, they pay more taxes on the extra profit. If the customers have it, they spend it elsewhere in which case it's tax neutral. If you wanted to look at the more complex reality, the people getting a minimum wage raise don't pay much in the way of taxes, so you probably collect more from taxing additional business profits
Re: (Score:3)
then the business (or the customers of the business) would have that money instead.
The amount of money these people earn allows them to become customers to others. The business can simply raise costs to cove the increase in wages. Also, businesses can use the increased cost of wages to deduct from their taxes. Overall, the velocity of money increases since more is being put into circulation.
If the business keeps all of it, they pay more taxes on the extra profit.
Businesses don't want extra profit. Any
Re: (Score:2)
Businesses don't want extra profit.
I think you really need to rethink what you're writing as this makes no sense at all. Sure, there's no incentive for extra profit at 100% tax rate, but no countries are even close to 100% corporate tax rates and up until recently the U.S. had one of the world's highest corporate tax rates.
Thus, having higher salaries lowers a businesses tax bill (see above).
It also potentially lowers their profits. But according to your logic, businesses don't want those. Think of it this way. If what you wrote were in any way true, you wouldn't need a minimum wage. Businesses would already b
I found this interesting (Score:2)
So it harmed small businesses the most! So all new businesses need to do is start out as a large multi state business with more than one location.
OK, simple enough, should we print up a pamphlet telling individuals who want to start a business how they should do it.
Just my 2 cents
It didn't harm small businesses at all (Score:2)
Re: (Score:2)
We need a national $15 wage and it needs to adjust for inflation (and "real" inflation, e.g. the price of the sorts of things a minimum wage worker buys, no fair including BMWs in that, no matter what talk radio tells you $15/hr doesn't buy you a BMW).
What is your perspective on the differences in buying power of that $15/hour wage in different locations? A $15/hour wage in San Francisco is very different than a $15/hour wage in Peoria. What would be the effect of that difference?
The reason why higher wages doesn't put (Score:2)
businesses into receivership should be obvious.
Businesses hire people when there's profitable work that needs to be done. They don't hire people when there's no work for them to do.
Minimum wage raises my wages (Score:2)
Scenario 1: Guy makes min wage. It's not enough. Guy works really hard, learns new skill gets new job making twice minimum wage. Enters new job market, wages in that market go down because supply just went up.
Scenario 2: Guy makes min wage. It's enough. Guy is content in his job and life. Doesn't enter my segment of the job market. My wages go up because supply goes down.
TL;DR;, Supply and De
Re: (Score:2)
Wonder what happens when you look at numbers (Score:2, Interesting)
https://www.google.com/search?... [google.com]
September 2009 (Seattle's peak)
Seattle unemployment 8.7%
Portland unemployment 10.4%
May 2018
Seattle unemployment 3.0%
Portland unemployment 3.1%
Portland Minimum wage 11.25
Seattle Minimum wage 15.45
Looks like Portland with a lower minimum wage had a larger and faster recovery especially since portland had a peak unemployment rate of 11.4% in Jun of 09
Odds are if Seattle hadn't raised its minimum wage it would have hit full employment faster, and would have reached the point wh
Re:Wonder what happens when you look at numbers (Score:5, Insightful)
And yet Seattle is still doing better than Portland. Portland only had a larger recovery because it was worse off.
Your logic suggests that if you stub your toe, you should break your femur with a hammer so you can have a bigger recovery./
Fuzzy headed thinking like that would be really really funny except that it needlessly increases suffering in the world.
Re: (Score:2)
Yes, 3.0% unemployment is BETTER than 3.1% unemployment.
I haven't done much healing this week, but that's just because my only 'injury' was a small bruise on my elbow. There simply wasn't much healing for me to do.
Re: (Score:2)
Re: (Score:2)
Looks like Portland with a lower minimum wage had a larger and faster recovery especially since portland had a peak unemployment rate of 11.4% in Jun of 09
You're conflating many different kinds of recovery. So what if they improved their employment rate when they're getting paid less? You could lower the minimum wage to $1 and get 100% employment on that basis. Would that be a recovery?
Re: (Score:2)
Well if you don't have a job you aren't being paid anything. What's more you are probably consuming tax funded social services.
You could lower the minimum wage to $1 and get 100% employment on that basis
Well seeing as the real minimum wage is always $0 aka unemployment that doesn't actually seem to work the way you think it does.
Out of curiosity just how much of the workforce do you think works for minimum ?
Re: (Score:2)
Re: (Score:2)
Well if you don't have a job you aren't being paid anything. What's more you are probably consuming tax funded social services.
Having a job at a minimum wage below poverty level does not significantly affect consumption of social services. It just allows an employer to take advantage of a taxpayer subsidized asset.
You could lower the minimum wage to $1 and get 100% employment on that basis
Well seeing as the real minimum wage is always $0 aka unemployment that doesn't actually seem to work the way you think it does.
Out of curiosity just how much of the workforce do you think works for minimum ?
A very large percentage of the workforce is affected by the minimum wage. It is a base. When you raise the base you raise the level of the workforce near the base. It is much like compressing a spring. Those closest to the base usually get immediate but somewhat lesser raises along with those at the base while the raises
Re: (Score:2)
Seattle raised it to $15.45 for large chains this year, with exceptions for smaller businesses that go as low as $14 without benefits and $11.50 with them. Meanwhile, Portland's current minimum wage is actually $12.00 and not $11.25 as you've stated.
Thus, it is presently possible to actually earn a smaller official minimum in Seattle than in Portland, provided you work for a small company with tips and/or good benefits.
When actually considering the past the situation is not that different: In 2009, Seattle' [seattletimes.com]
Re: (Score:2)
Not how you're supposed to do science (Score:2)
That introduces a confirmation bias, where studies will (after revision) on average have results which tend to confirm your preconceived beliefs. To avoid bias, all study results need to be nitpicked to the same degree. You may rem
Moderation is the key (Score:2)
Think of it this way. A man is told by his doctor that his blood sugar is too high, and he is in danger of diabetes. So he changes what he eats and reducers his A1C blood sugar from 8 to 6. He feels great. He has lost weight, looks good and thinks "Wow, if this is so good, I should do it some more. He cuts his food again and reduces his A1C down to 4.7. He feels even better, being in the mindset of more is better, changes his diet again, bringing his A1C down do 3, whereupon he falls into a comma,
Re: (Score:3)
You should account in your theory somewhere for the fact that in constant dollars per capita, federal total revenue has gone up 3x over the last 60 years [usgovernmentrevenue.com]. So maybe we're actually on average being required to pay 3x as much as we used to for a not significantly improved "product" from the federal government.
But don't worry, spending measured the same way over the same time period has gone up almost 4x [usgovernmentspending.com]
The federal deficits aren't a revenue problem, they're a spending p
"Increased productivity" is code word for (Score:2)
"Increased productivity" is code word for "eliminated half the jobs and made the remaining workers work twice as hard". I'm not sure that's a net positive for the working poor.
Re: (Score:2)
"I'm not sure that's a net positive for the working poor."
It isn't, nor do I notice it making it a drive to push for more automation. Most businesses would rather shut down because the lack of skilled people to help you automate isn't there and hiring skilled people for higher wages or salaries, they don't want to do. A lot of my vendors have employment expectations of a PHD equivalent working minimum wage. We have more MBA's, lawyers and psychologists than engineers, further making it worse for the worki
Adam Smith agrees (Score:2)
Re: (Score:2)
Thinking is hard. Future is discounted. (Score:4, Insightful)
When minimum wage goes up by a buck, the pizza joint owner knows his pay roll is going to up by 2000$ per employee per year. But all the people who buy pizza from him, their income goes up by 2000$ too. At 20$ a sale, if 100 more pizzas per employee get sold per year the payroll increase has been met. This is two additional pizza per week! Instead of asking, "would you pay your employees 1$ more per hour?" if you ask, "Would you like all your customers to get 1$/hr pay increase?" they might answer differently.
But the small business people are extremely cautious. Especially the ones that inherited their business. The ones who started from scratch are less risk averse. The only certainty is the payroll going up. Customers might buy 2 more pizza a week, or they might affluent and go the steak joint once a while and his sales might not go up. So they discount any positive outcome that might happen due to increased purchase power of the customer base, and oppose minimum wage increases.
Small increases, gradually done, automatically going up to account for inflation would be the way to introduce it. Real wages have been declining in America since the 1980s. Slightly higher than inflation adjustment, something like 3 or 4% every year, year after year, would help the economy.
Re: (Score:2)
First we need to stop thinking of these businesses as job creators. The pizza joint is NOT the job creator.
You have it ass backwards, today companies manufacture wants via advertising for shit people largely don't need. They have an army of psychologists and scientists trying to get you addicted to their product. The average consumer is NOT savvy, one only needs to take a look at the numbers. There are 43 million people in poverty.
https://www.census.gov/library... [census.gov]
Re: (Score:2)
People may not want that kind of extra pizza spending. The people who once spend money on pizza may want to try other food, eat at home.
Their wage may go to a holiday, savings, a hobby, repairs, lifestyle.
Now the "pizza" shop is stuck with the gov wage demands to cover and the same number of pizza to make and sell.
The local wage pressure of the workers who deliver all the flour, meat, dairy products. So daily costs go up as part of pizza costs.
The "pizza"
So basically... (Score:3, Insightful)
The law destroyed a bunch of local businesses that couldn't make it on the new margins.
But a bunch of big multi-state/national corporate conglomerates hung on and expanded their reach...
Okay, good for the conglomerates and all.
But that means the profits are, eventually, leaving the state.
As opposed to remaining local the way it did with smaller owners...
Not sure that's something to crow about and celebrate.
Re: (Score:2)
That not money for improvements. Thats not spending for growth.
A new tax imposed to pay the same workers for the same job.
Money that cant be made back as the worker gets the money.
Gone is the ability to grow. No more saving for equipment, new products, new services.
Any money is now lost to a wage for the same productive level.
some inflation would be really nice (Score:3, Interesting)
For the folks at the lower to middle end of the economic spectrum, some inflation can be really nice. The propaganda against it is based more on the concerns of the upper class.
I remember the days of hitting more than 10% in the late 70s-early 80s. In the middle class, wages managed to mostly keep up while many of the bills did not - especially their fixed rate loans on homes and cars. My parents did well during that time. In a short time, inflation reduced the lifetime costs of their homes and cars by a double-digit percentage. That became a significant amount of extra spending money in their pockets for years to come due to the reduction in the proportion of their income going to those major bills.
Moderately higher inflation, especially for short periods as in the adjustment after sudden raises, can be a boon for the struggling worker class and even for large corporations with heavy long-term fixed rate debt. It is publicized as bad because it hurts financial institutions holding those loans, reducing the profit they make off of the less affluent.
Amazing (Score:2, Insightful)
That new wage is going to have to be (Score:3, Interesting)
Taken from needed equipment upgrades. So any competitive advantage is lost.
What does the business get for that finding money to pay for new wage spending? The same quality of worker.
The way out of that is to move to a much better city and state that allows a business to grow rather than be wage taxed.
Re: (Score:3)
What other statistics matter? Isn't the point of an economy giving people the goods and services they want and need? The root word for economics comes from a Greek word meaning "household". If economic theory does not look at what is good for households it is not economics.
Re: (Score:2)
Do profits matter more than people?
Re: Not the problem (Score:2, Insightful)
Re: Not the problem (Score:5, Insightful)
Profits today benefit owners today. That's all.
If you expect any loyalty from a company where you have sold your soul, you are very naive.
Re: (Score:2)
Re: (Score:2)
Re: (Score:2)
I think you need to read what you've just written. If you don't see a problem there, seek help.
Re: (Score:2)
Oh please. Your *only* point was religious.
Re:Matters what you can buy, not nominal dollar (Score:4, Insightful)
You are assuming the cost of living for a fast food worker is tied to the price of the product they work to produce and sell. I don't think that is a valid assumption.
If I were working fast food at lower-end wages as a head of household, eating out would be a sometimes thing not an everyday thing. You can shop and produce far better burgers at home if you put even a slight amount of effort into it.
Re: (Score:3)
Your Post is Preposterous (Score:5, Informative)
"Think about that for a minute. Why don't we just set minimum wage to $5,000 / hour?"
You throwing out a massively different number than what any serious human being is talking about is just ridiculous and meaningless in this context. Obviously there's an upward limit somewhere. Where exactly that is, as with many things in economics, we don't precisely know but as this report is pointing out we clearly haven't hit it yet.
Re: Your Post is Preposterous (Score:3, Interesting)
The extreme counter example also highlights the idiocy of the parent poster: set wages to $0 and then burger prices will be free!
Re: (Score:2)
Sorry. You need to summon a technician and have them review your script.
#NPC
Re:Matters what you can buy, not nominal dollar (Score:5, Insightful)
Fifty years ago in the US, even 25 years ago, that might have been a problem for the general economy. However for the last 20 years (at least) productivity gains and real wage gains have been transferred almost exclusively to households in the top 10% of income, and the wealth gains have been transferred almost exclusively to households in the top 1% (or even 0.5%) in wealth. So if general prices rise by 25% today that money is not going to be extracted from the pockets of those in the 80% range because they don't have it - it will mostly be paid by those in the 10% and then transferred down. Which is what our personal and corporate income tax bracket structure and reasonable dead-people-are-not-citizens inheritance taxes accomplished prior to 1980.
Re: (Score:3)
Historically many societies have done that, and as noted even under current US law when a person dies they are no longer a citizen. However, since we use open markets (which have mostly evolved into capitalism) to organize our economy it is considered a matter of incentive to allow some percentage of the accumulated wealth no longer owned by the dead body to pass to designated heirs - helps keep the rich at the
Re: (Score:3, Insightful)
Why not just set the inheritance tax at 100%?
After all, the person is dead and the government has better uses for the money than giving it needlessly to the spouse, children or other family members who didnt make it.
Note the presumption here that it's the government's money to give in the first place. And nevermind that the now-deceased has already paid taxes on those earnings or properties over his or her entire working life.
There are just so many things that are morally wrong with this argument. You seriously just argued that a widow should not inherit his or her spouses assets? What about children who's parents die young? Kick the kids into the streets, because screw you kiddies, the government deserves whatever
Re:Matters what you can buy, not nominal dollar (Score:5, Interesting)
On the day that minimum wage went up 15%, all of the fast food restaurants increased prices by 25%.
This makes no sense, and I think you just made it up. The cost of labor went up less than 15%, since not all workers were below the threshold. Other costs, such as COGS, rent, utilities, did not go up at all.
At fast food restaurants labor is about 25% of revenue [chron.com]. So a 15% rise in wages is less than a 4% rise in total cost.
So maybe they just used the wage increase as an excuse to raise prices? No, that makes no sense either. Businesses can change their prices anytime they want, and they do it all the time. They don't need an "excuse". If the market would bear a 25% increase, they would have raised prices long ago.
Your entire scenario sounds like made up bullcrap.
Triggered change. Don't change prices daily (Score:2)
Costs change all the time. For example, the price of tomatos changes weekly. Fast food places don't change their prices daily by 1% or 2%. Instead, every couple years they change prices. The minimum wage hike was significant enough that it forced a price reset. That reset included othet actual or expected cost increases.
Re:Triggered change. Don't change prices daily (Score:4, Insightful)
"Costs change all the time. For example, the price of tomatos changes weekly. Fast food places don't change their prices daily by 1% or 2%. Instead, every couple years they change prices. The minimum wage hike was significant enough that it forced a price reset. That reset included othet actual or expected cost increases."
Cool, so if they were already so close to a price reset then it wasn't really the increase in minimum wage that did it at all. A bad tomato harvest would have done just the same.
Re:Triggered change. Don't change prices daily (Score:4, Insightful)
That reset included othet actual or expected cost increases.
Yet, after waiting for years, they all increased their price by the exact same amount on the very same day? That seems wildly implausible.
And if the price rise had little to do with the min wage increase, they why bring it up?
Re: (Score:3)
According to the CPI [eater.com] The price of a cheeseburger went up from 80 to 81 cents in 1993 and then down to 78c in 1994. If you saw a 25% increase in your area it sure wasn't widespread
Generally speaking about 30% of the cost of a restaurant food item is labor [forbes.com] So if labor costs go up by 15% it seems unlikely that would mandate a .25% price hike to break even.
If you have facts to share, please link to them.
Re: (Score:3)
The minimum wage increase directly caused 30%-50% of the price increase through increased costs.
4/25 = 16%
plus the price of hamburger buns, lettuce, cups etc, all made by low-wage employees, went up.
Agricultural workers are exempted from minimum wage laws. Manufacturing workers are not paid the minimum wage. 2% of full time workers earn the minimum wage, and they are not working in cup factories.
Re: (Score:2)
"Agricultural workers are exempted from minimum wage laws."
That's not entirely true, is it? They are not exempt from federal minimum wage laws. Further, they do not generally pay for their housing or transportation on seasonal contracts.
A minimum wage hike at the federal level would have an effect on ag products cost.
It's a classic right wing narrative (Score:5, Interesting)
The answer is productivity. As productivity rises one of two things happen. Wages go up and we're all better off, or wages stagnant and decline and only the folks at the top are better off.
Productivity has more or less doubled since the 70s with wages staying the same, so anyone want to guess which of the above happened?
Oh, and be careful when measuring productivity. Right now "productivity" is technically down because there are fewer start ups producing less money in the economy, but raw manufacturing and farm outputs are way, way up, which is the type of productivity that most effects wages.
What's bizzare is watching all these economists try to come up with theories about why wages aren't going up during full employment. A few are finally saying "Unions are dead so workers have no bargaining power" but _very_ few. The right wing figured out some time ago they need to control the media narrative so they just bought everything [vox.com]. You can do that when you're the last man standing after an economic crash you caused and got bailed out of.
No arguments here (Score:5, Interesting)
Also, well, we are going to need some kind of immigration because Americans, like the rest of the first world, just aren't having enough kids. If you want your 401k to not collapse you're gonna have to let them in. A better economy can only do so much for birth rates.
What you really want and need is more social programs paid for by the wages those immigrants earn and the wealth they generate. Single Payer health care's a great start. How about a federal jobs program? Infrastructure spending? The real problem with immigrants is that you as a worker don't get any benefit from them (me neither, btw). The best way to change that is with Democratic Socialism. Let 'em come here and work, but make sure the money they bring in doesn't just go to the top.
Re: (Score:2)
That aside, you're ignoring that the other costs incurred by a business aren't also tied to the cost of labor for their respective suppliers. You have to look at how increases in m
Re: (Score:2)
you might pay the same amount as you always did, but get a smaller burger or fewer chicken meat wads.
Ahhh, this explains why portion sizes have been declining. No wonder Americans keep getting skinnier.
Re: (Score:2)
I don't often eat fast food, and I do eat it even less frequently when i find myself in Seattle. That being said, I also know that the chains in "Seattle proper" have all got airport style prices for the same gutter-quality crap that is dollar menu everywhere else. I'm guessing here, but I think people put up with this in part because they know the workers are making what would have been almost close to a living wage 10 years ago, and it makes them feel good about themselves. Seattle is all about the good v
Re: (Score:2)
"or 3 on a soft drink, or 10 on a meal from any of these chain restaurants"
Because they're stupid. If I find myself out in the field and hungry where I haven't made plans already (no boxed lunch or anything) I hit McD or Carls Jr. for a "hold me over" meal.
McD - Chicken Sandwich + 1 large diet coke. Cost $2.00 + tax
Carls jr 1 or 2 sliders + large diet coke. Cost $2.00-$3.00 + tax.
Enough to fight off the hungries without totally killing you on fats/carbs the $4.00+ burgers will. And the soft drinks are
Re: (Score:2)
Most businesses employ at least some lower wage workers.
Most businesses do not employ any minimum wage workers.
Increasing the minimum wage will result in increased costs of business and thus prices
Of course. That is the deal. We all pay slightly more, and the lowest paid get a raise. TANSTAAFL, so that money has to come from somewhere.
So is this a good policy to reduce income inequality? No not really, because most minimum wage workers are not poor, and most of the poor are not minimum wage workers. Most minimum wage workers are 2nd or 3rd earners in households averaging $53k in income.
Meanwhile, 60% of households below the poverty line have
Re: (Score:2)
On the day that minimum wage went up 15%, all of the fast food restaurants increased prices by 25%.
I won't accuse you of lying, but I will credit you with "motivated mis-remembering". The reason why actual studies by actual economists are important is to understand what really happens rather than replying on made-up anecdotes.
Wages make up 25% of the cost of fast food on average. To cover a 15% wage increase not more than a 4% food price increase would be required.
The claim that "all of the fast food restaurants increased prices by 25%" fails the credibility test on several levels.
Fast food is a very com
What do you think the other costs are? Who makes (Score:2)
You're right that direct labor costs are about 25%-30%.
Food costs are also about 25%-30%, paying ng for things like hamburger buns and lettuce.
Who do you think makes hamburger buns, low-wage workers, or guys in suits? Who harvests, sorts and packs lettuce? People working close to minimum wage, or people making $125,000?
What do you think happens to the cost of making hamburger buns, tomatoes, and cups when minimum wage goes up 15%?
Re:Not the problem (Score:5, Interesting)
That is absolutely, 100% not true. As in false. As in bullshit.
https://benjaminstudebaker.com... [benjaminstudebaker.com]
https://www.jstor.org/stable/4... [jstor.org]
Re:Not the problem (Score:5, Interesting)
Re:Not the problem (Score:5, Informative)
but perhaps there's someone with an economics background out there that can explain exactly why minimum wage increases don't drive inflation as much as some people fear it would or should.
Increases in the minimum wage likey do cause a small increase in inflation, but the effect is small enough that it is lost in the noise.
1. Most increases in the minimum wage are small, and they are one-offs, not tied to inflation.
2. Only 2 percent of full time workers earn the minimum wage [aei.org]
3. 2/3rds of min wage workers get a raise within a year if they stick with the job.
4. Many minimum wage businesses are not as labor intensive as you think. McDonalds spends about 25% of their revenue on labor, and many of those workers make more than min wage.
"Inflation" is not a very good argument against minimum wages increases. A better argument is that it doesn't do much to help the poor because ... most minimum wage workers are not poor. Most are part time 2nd or 3rd earners in their households. The average household income of a minimum wage earner in 2016 was $53,000.
A better policy would be to increase programs targeted directly at the working poor, such as EITC.
I noticed you used Average household income (Score:2)
You can't target the working poor. The right wing will put in so many exceptions that your attempts to will fail. In Missouri they just put a work requirement in place for Medicaid. They didn't raise the income threshold before you get kicked off Medicaid. You can probably guess where this is going...
There's an easy way to see how badly off min wage workers are: even with all the attempts to deny them access to gov't help
Re:Not the problem (Score:4, Insightful)
And yet inflation remains stubbornly near historic lows.
In theory, I would've expected inflation and unemployment. But that's not the actual outcome we've seen at all. And if there's ever a time to increase the minimum wage, it's when unemployment and inflation are exceptionally low. Keep increasing the minimum wage until we start to see some movement on the inflation and unemployment numbers, and that's when we'll know we've found the right number and can freeze it for a while.
Re: (Score:2)
Well government wants it low because of unprecedented borrowing, in good times, at rates not seen since WWII.
Re:Not the problem (Score:5, Interesting)
This gets more money flowing into the economy where it's needed, at the lower end.
That in turn increases demand for pretty much everything, which increases sales, which increases demand, etc.
Don't forget that this money is already in the system, but now instead of going to the top of the economic food chain where it mostly sits static or in stocks, bonds, or off shore accounts where it does absolutely nothing for the economy, it's now flowing through many hands at the base of the economic chain where it actually does good.
The rich don't create jobs, they stifle the economy. The richer they get, the worse it becomes. These are very well known and studied economic realities among economists. Many of them, including winners of the Nobel Prize for Economics have talked about this in language us non-economists can understand.
As to it violating what is often called "common sense". That's pretty common with reality not conforming to what uneducated humans expect.
Re:Not the problem (Score:5, Interesting)
I wish you guys would stop talking about the "rich" and the "minimum-wage" as thought it was some sort of binary thing.
You need everybody with _some_ money to spend, you do _not_ need multi-multi-billionaires. You need _some_ millionaires, more who are _"pretty well-off"_, even more who are _"reasonably well-off"_ and as many as you can get of people who manage OK and sometimes have a bit over for something extra.
The fabulously rich just tie up money that mostly does nothing useful to society, the "minimum-wagers+" are the _core_ of your economy.
Mac
Re: (Score:2)
Eh. Multi-multi-billionaires do stuff that millionaires can't do, like fund a charitable foundation focused on some mission. Unless your view is that sort of stuff should always be done by government, even "multi-multi-billionaires" serve a useful function in society.
Re: (Score:2)
You won't find the problem in employment statistics. Business has to run and will do what it needs to in order to keep running. You'll find the problem in the cost of goods and services, and ultimately the value of a dollar. In other words, inflationary effects and cost of living increases.
You misunderstand the concept of wealth inequality. If low-wage workers earn more in relation to the median wage, it decreases the inequality gap. Also, it means that low-wage workers have more disposable income to invest in things like consumer goods, eating out, & training & education to get better jobs. In the end, everyone benefits.
Re: (Score:2)
That wasn't done right. We'll do it right this time!
Re: (Score:2)
Then you should be making it yourself.
Re: (Score:2)
No one ever accounts for the velocity of money