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California poised to raise minimum wage to $10

money.cnn.com

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Re: California poised to raise minimum wage to $10

#21

Post by yetanotherphd »

AaronFriel wrote: post #9

I'm going to head off all the armchair economists, including the two* who have already replied as of 15 minutes after the article was posted. http://www.igmchicago.org/igm-economic-experts-panel/poll-re... Here's a real survey of actual economists, who largely agree, weighted by confidence, that "The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently s…

The question "The distortionary costs of raising the federal minimum wage to $9 per hour and indexing it to inflation are sufficiently small compared with the benefits to low-skilled workers who can find employment that this would be a desirable policy." contains asssumptions that are very objectionable to someone trained in economics.

To most economists, it is wrong to think of the minimum wage as a tradeoff between distortionary effects, and a benefit to the workers. In particular, why do we want to benefit workers on the minimum wage? It seems that the people we really care about are people with a given (low) yearly income, and we can easily give/take benefits from them using the tax system.

To the extent that economists support a minimum wage, I assume it would be because it forms some kind of "default contract" that is less prone to cheating (e.g. promising one wage and delivering another).

Re: California poised to raise minimum wage to $10

#22

Post by Steko »

jrockway wrote: post #12

Interesting thought: say you're a state that's broke and desperately in need of revenue. What happens if you raise the minimum wage so the extra tax the minimum wage workers are paying covers the deficit?

You'd need a large increase because people making minimum wage are a small part of the income tax base (many don't pay taxes on net). Large increases to the minimum wage would tend to be counterproductive at least in the short term.

Re: California poised to raise minimum wage to $10

#23

Post by yetanotherphd »

foobarbazqux wrote: post #11
vowelless wrote: post #5

Here is a map showing minimum wages across the US: http://www.dol.gov/whd/minwage/america.htm

Wow... the inequity seems to be concentrated in the deep south. Something else is concentrated in the deep south too.

"Something else is concentrated in the deep south too."

What are you referring to? It could be republicans, Black people (yes, look at a map), poverty, etc.

Re: California poised to raise minimum wage to $10

#24

Post by elnate »

toomuchtodo wrote: post #16
forgingahead wrote: post #3

Now watch teen unemployment jump, and prepare for a future generation of people who couldn't get early work experience, and so become less employable in the long-run.

Teen unemployment is already running around 22-23 percent: http://www.bls.gov/web/empsit/cpseea10.htm The question is, how many people are working minimum wage jobs who aren't teenagers.

Article says 90% are over 20.

Re: California poised to raise minimum wage to $10

#25

Post by forgingahead »

mikeyouse wrote: post #18
forgingahead wrote: post #3

Now watch teen unemployment jump, and prepare for a future generation of people who couldn't get early work experience, and so become less employable in the long-run.

I don't get this.. Is the theory here that companies have $X in a bucket to pay staff, Employees each make $Y, so X/Y is the number of employees? Because that's not how it happens at all. Companies don't hire more staff than they require. If McDonalds needs 10 employees per shift to operate, they're going to hire 10 per shift no matter if they cost $8/hr or $16/hr. The amount of work determines the number of employee…

The general principle is that an employee has to cost less than the money they bring in. The best HN-related example is that if you work for a software development firm, and if they bill you out to clients at $100 an hour, your total cost to them (your hourly wage + taxes + healthcare + benefits + extra) has to be less than $100.

To properly phrase your example, yes it is depend on "work", but work is dependent on revenue. If McDs needs 10 employees per shift where they generate $800, each employees total cost per shift cannot be more than $80, which works out to about $10 CTC (cost-to-company) per hour in an 8-hour shift.

If you now mandate that the worker salary MUST be $12 or higher than $12, McDs is losing money. So you either pray for an increase in business (sales), or cut costs (ie, fire people) and automate.

And lower-skilled jobs are easier to automate. It's easier to automate fast-food checkout by having (for example) iPads for people to place their orders, so your human workforce can just be the cooks at the back and the janitorial staff.

Re: California poised to raise minimum wage to $10

#26

Post by grecy »

mullingitover wrote: post #13

I'd really like to see an experiment conducted that can put the whole debate to rest: raise the minimum wage in half of the states, lower it in the other half. Run this experiment for three years and compare the results, and apply the strategy with the best outcome to the rest of the country.

This has been more or less done, on a more global scale.

Have a look at the minimum wage in every developed country compared to America. Now have a look at the standard of living for the average person on the street in all those countries compared to America. You have your answer.

Comparatively, America is a developing country.

Re: California poised to raise minimum wage to $10

#27

Post by refurb »

foobarbazqux wrote: post #11
vowelless wrote: post #5

Here is a map showing minimum wages across the US: http://www.dol.gov/whd/minwage/america.htm

Wow... the inequity seems to be concentrated in the deep south. Something else is concentrated in the deep south too.

What is concentrated? Areas with a low cost of living?

Re: California poised to raise minimum wage to $10

#28

Post by elnate »

ahallock wrote: post #17
mjn wrote: post #10

Earlier quoted context omitted.

It's $20 here in Denmark (de-facto, via the union wage-negotiation system) and I have no complaints. It means service-industry things like restaurants are considerably more expensive, but then since everyone makes at least $20/hr, that isn't a huge problem for affordability. It basically makes everyone middle-class.

It sounds like all that's happened is a form of inflation.

I'm from NZ and lived in Denmark for three months so here's some anecdata. Some prices increased but most are comparable to home, where the minimum wage is approximately half. The only things that are increased greatly are ones with the primary cost in personnel. Clothing and groceries are about the same, fuel too.

Re: California poised to raise minimum wage to $10

#29

Post by vwinsyee »

forgingahead wrote: post #3

Now watch teen unemployment jump, and prepare for a future generation of people who couldn't get early work experience, and so become less employable in the long-run.

Overall teen employment is very, very slightly affected by a minimum wage, after adjusting for spatial and temporal inhomogeneity. At least that's the consensus from most recent articles I've seen on the topic.

The consensus is less conclusive on specific effects on minority groups. I've seen at least one paper showing short-term unemployment increase in minority groups. I've also seen at least one paper showing increased employment/earnings in younger, more affluent teens.

Some of the recent well-cited studies:

http://www.irle.berkeley.edu/workingpapers/166-08.pdf (2011) Looking at 1990-2009 CPS data: "Including controls for long-term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long-run effects."

http://onlinelibrary.wiley.com/doi/10.1111/j.1467-8543.2009.... (2009) "A 10 per cent increase in the minimum wage reduces employment by about 0.10 per cent (see column 4 of Table 3). But even if this adverse employment effect were true, it would be of no practical relevance. An elasticity of −0.01 has no meaningful policy implications. If correct, the minimum wage could be doubled and cause only a 1 per cent decrease in teenage employment."

Re: California poised to raise minimum wage to $10

#30

Post by johnsonman »

forgingahead wrote: post #25
mikeyouse wrote: post #18

Earlier quoted context omitted.

I don't get this.. Is the theory here that companies have $X in a bucket to pay staff, Employees each make $Y, so X/Y is the number of employees? Because that's not how it happens at all. Companies don't hire more staff than they require. If McDonalds needs 10 employees per shift to operate, they're going to hire 10 per shift no matter if they cost $8/hr or $16/hr. The amount of work determines the number of employee…

The general principle is that an employee has to cost less than the money they bring in. The best HN-related example is that if you work for a software development firm, and if they bill you out to clients at $100 an hour, your total cost to them (your hourly wage + taxes + healthcare + benefits + extra) has to be less than $100. To properly phrase your example, yes it is depend on "work", but work is dependent on re…

If you now mandate that the worker salary MUST be $12 or higher than $12, McDs is losing money. So you either pray for an increase in business (sales), or cut costs (ie, fire people) and automate.

Or you increase prices. Or a combination of the three.

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