House republicans move towards $7.25 minimum wage

[JeffWartman]

And lets not forget about what happened to the UK after they made the mistake of putting a minimum wage into effect back in 1999.



The number of jobs grew.

Which has no correlation. The number of jobs grew not because of the small increase in real wages that the British workers realized, but because other, more major economic reforms that were passed in Britain around that time were more substantial. Read BaronVonBigmeat's post on the previous page, he is exactly right:

That's somewhat true, but that's because they didn't go over the market price of unskilled labor by much. ie, if the true market wage for a burger-flipper is $5 and you set the minimum wage at $5.25, then you may not see massive job losses. You also won't see any significant benefit to the remaining workers. Set it to a real "living wage", say $12/hour, and you'll see problems. The market price of basic labor at Wal-Mart, Home Depot, etc. and especially in big cities is already at $7+, so if this passes you might not see much happen. Rural areas with lower living costs and wages would be effected more.

 

[JeffWartman]

For the record, I'd rather see the Federal minimum wage get a regular, albeit small, increase than to watch the jackasses in Congress get their regular pay hikes.

Just saying....

No doubt about that

 

[Mr. P]

For Mr. P:

I believe Card and Krueger in Myth and Measurement make a good argument about the positive effects of the minimum wage. They go through many older studies of the impacts of minimum wage and conduct their own research on recent changes in minimum wage laws.

In the end I would describe the results as questionable (but that is just my opinion. Some economists strongly support this work while others have done work discrediting it), but it does put into question the standard stylized model that says raising minimum wage will decrease employment.

Their work points out where the traditional supply and demand model ignores some supply side effects, signaling and matching, and efficiency effects that may be more important to the final equilibrium than previously believed.

Thanks for the info, elephant.

I’m not an economist and at $41 bucks I probably will never read the whole study. I approach this stuff from a logic and common sense and free market angle.

What I have found on the net regarding this study is interesting, and for me like many others, raises doubt in the conclusions of the study.

It appears the study was focused on New Jersey and Pennsylvania, specifically on the fast food businesses.

Like I said I haven’t read the whole study, but to apply that comparison to the entire Country seems disingenuous. In fact, my guess is they focused on major chain fast food restaurants (I could be wrong), leaving Mom & Pops out. That’ll skew the bottom line.

The big National chains, McDs, Burger King etc. have the financial power and brand recognition to “prop” a store with higher costs, if they elect not to for whatever reason, they close it. Mom & Pop on the other hand don’t have the same options.

Mom and Pop have, say, (example) $100 per month budget for labor. The Government steps in and says, “Pay more”, now what? They like any other small business must adjust by; reducing product, reducing hours of operation or reducing employees. They don’t have a choice. Can they survive, can they raise prices? Maybe. I’d like to know if business failures were included in the study.

Now, this study also says, from what I’ve read, unemployment didn’t increase.
Question and I think it’s reasonable. If a minimum wage worker loses their job do they run to the unemployment office and join the statistics, or go out and find another minimum wage job, or just remain invisible? My guess is they get a job or remain invisible. Meanwhile Mom and Pop have closed their shop because they can no longer compete.
What bugs me about this is it has nothing to do with how Mom and Pop ran the business, but everything to do with Government intervention.

 

[elephant]

To Mr. P,

I believe you are on the right track about how to interpret this study. I think the big idea I took away from this book is that raising minimum wage does not necessarily do what simple theory predicts.

Here is one overly simple example of one effect that is not well accounted for by supply and demand graphs:

Raising minimum wage might increase diposable income for the lowest income earners. This group also has the highest marginal propesity to consume - actually greater than 100% because of loans and credit - give them a dollar and they spend $1.05. So giving them more money means more spending thus firms hirer workers to meet the new demand caused by the new income.

Combine this some other previously unconsidered effects and what we thought we knew is no longer really that good of a model.

Here is an attempt to answer some of your questions:

People who are eligible tend to collect unemployment. So they will effect the statistics.

The reason they used PA and NJ is because they are similar in many ways, share a large border - in case workers move to get new jobs - they changed their minimum wages at different times, and they are not outlier states in any statistical way; they are decent representatives of the US believe it or not. One was a control and the other a treatment state. Oh and the data was available - very important.

I believe (I would have to check though) mom&pop type restaurants generally pay above minimum wage or because they have tipping they are exempt or because they employ family they are exempt from a variety of pay and hours worked rules. This makes them a decent group to study - we should only see effects at places highly impacted by the laws - the large chains. A quick aside: I believe a chain called Whataburger (?) pays their employees above the proposed minimum wage and is considered much better than McD or BK both for food and as a place to work - this might be an example of "efficiency wages".

I believe (again I would have to double check so give me a few days) job turnover, new job starts, relocation, total number employed and some other stuff were included in the study specifically to address some of your concerns about discouraged workers and business closings - which might result in misleading interpretation of rasing minimum wage.

I'll post some more over the weekend when I have some more time.

 

[bush lover]

I did all the math, including utilities, rent etc. Trailer park rent is about 200 bucks a month, and light bill, propane etc is about 50 bucks. So a dude making 5.25 an hour times 40 hours equals 210 a week, or around $900 a month. So according to my calculations, there is plenty left over for beer or gambling. He could even save a little (hint, buy oil stocks dude!)

 

[PsuedoGhost]

The sad fact is that for the vast majority of low income, unskilled to moderately skilled workers the minimum wage will have no affect. Seriously, who still makes 5.15 an hour? I never made 5.15 an hour. Always more. I was making 6.79 as a courtesy clerk at a grocery store... Who makes 5.15? Only fast food workers and some people who get obscene amounts of overtime. Those are the only people who still make 5.15.

The change in the minimum wage is likely to have little to no impact on the vast majority of businesses. You just cannot get employees for 5.15 anymore. Plenty of other businesses need the manpower and pay the premium to get it.

 

[elephant]

The sad fact is that for the vast majority of low income, unskilled to moderately skilled workers the minimum wage will have no affect. Seriously, who still makes 5.15 an hour? I never made 5.15 an hour. Always more. I was making 6.79 as a courtesy clerk at a grocery store... Who makes 5.15? Only fast food workers and some people who get obscene amounts of overtime. Those are the only people who still make 5.15.

The change in the minimum wage is likely to have little to no impact on the vast majority of businesses. You just cannot get employees for 5.15 anymore. Plenty of other businesses need the manpower and pay the premium to get it.

I am glad someone mentioned this. The local fast food joints where I am offer like 6.50 or more to start. The 5.15 is a wage I have not seen anywhere.

Great point.

 

[RyzinEnagy]

The sad fact is that for the vast majority of low income, unskilled to moderately skilled workers the minimum wage will have no affect. Seriously, who still makes 5.15 an hour? I never made 5.15 an hour. Always more. I was making 6.79 as a courtesy clerk at a grocery store... Who makes 5.15? Only fast food workers and some people who get obscene amounts of overtime. Those are the only people who still make 5.15.

The change in the minimum wage is likely to have little to no impact on the vast majority of businesses. You just cannot get employees for 5.15 anymore. Plenty of other businesses need the manpower and pay the premium to get it.

I live in New York City and you don't see 5.15 here just about anywhere, I have friends who work off the books and started at 6.75 as supermarket cashiers. From what you say it's basically the same. Correct me if I'm wrong, but I'm going to assume you live in an area where the cost of living is at least somewhat high and there are many areas of the country where the cost of living is significantly lower. I'm just going to repeat what a couple of others in this thread have said that this should be a state issue. In places like the plains states who place near the bottom in per capita income, 5.15 might be a livable wage, and like someone posted above me, someone who lives in a trailer park can live somewhat comfortably on 5.15, but in a place like New York, California, or Florida, even for teenagers (and you can't forget the teenagers who work to help their parents support the family in such a high-cost-of-living area, and moving somewhere else is prohibitedly expensive for these people) 5.15 an hour is not much money at all.