
Minimum Wage and Job Loss: One Alarming Seattle Study Is Not the Last Word - moritzplassnig
https://www.nytimes.com/2017/07/20/upshot/minimum-wage-and-job-loss-one-alarming-seattle-study-is-not-the-last-word.html
======
cheald
David Neumark (who is no stranger to minimum wage research - it's his area of
expertise:
[http://www.nber.org/authors/david_neumark](http://www.nber.org/authors/david_neumark))
astutely observed that Card-Kreuger has been widely deployed to exactly that
effect
([https://twitter.com/NeumarkDN/status/888134129945952256](https://twitter.com/NeumarkDN/status/888134129945952256)),
effectively being used to say "MW is settled, now stop arguing about it".

I'm of the opinion that far too many people on both sides of the issue argue
their positions from ideology rather than empiricism, to our collective
detriment.

The headline is right - one alarming study _isn 't_ the final word, nor should
it be. But we seem to be rather quick to let one study confirming our biases
to be "the final word" when it confirms our priors, and rather quick to
dismiss it as "just one study" when it contradicts them. Neither position is
intellectually honest, and if we truly want to help the most vulnerable, we
have to do it in ways that are backed by the evidence.

~~~
tuna-piano
Posted in a previous thread, but I still don't understand this whole "Minimum
wage is good/bad" conversation, and it's really bothering me (especially from
economists).

\------

Every minimum wage increase is different!

Even the staunchest free market economist wouldn't claim that a hypothetical
minimum wage increase from $.10/hr to $.50/hr in Seattle would increase
unemployment. And even the staunchest socialist economist would not claim that
a minimum wage increase from $8/hr to $800/hr wouldn't increase unemployment.

Similarly, how can you compare an increase from $5-6 in New jersey in 2005 to
one from $11 to $13 in Seattle in 2017? You can't just make blanket statements
about this stuff.

The question is not "Are minimum wage increases good in general?" the question
is "Given the potential tradeoffs, is this specific minimum wage increase
good?"

~~~
AnthonyMouse
> The question is not "Are minimum wage increases good in general?" the
> question is "Given the potential tradeoffs, is this specific minimum wage
> increase good?"

That still isn't the right question because it's a false dichotomy.

At any _interesting_ wage, a minimum wage increase will increase unemployment.
An increase from $.10/hr to $.50/hr does nothing because approximately zero
people make less than $.50/hr to begin with. Once you get into wages that
people are actually paid, with high probability there will be some jobs that
can't be justified at a higher wage.

Imposing a minimum wage is taking from the people at the very bottom (who
become unemployed) in order to give to the people at the almost-but-not-quite
bottom. Which is why the whole exercise is folly.

It doesn't matter whether the higher wages outweigh the increase in
unemployment in any particular scenario because there is a third option --
increase income without imposing the entire cost on employers who hire people
at the bottom.

The simplest way to do that is a UBI. The UBI supplements everyone's wages,
which brings up the lowest paid workers to the minimum, and is paid for from
general taxes, which minimizes the economic damage by spreading out the burden
(and having the rich pay their proportionate share).

~~~
michaelmrose
In some I would argue most cases a job is still viable costs go up or profit
goes down.

If a company pays 65% of their employees the minimum and wages go up 5% the
company doesn't fire most of its workers it grudgingly pays more.

In a lot of cases the existing low wage is actually below market now and
subsidized by benefits like food stamps.

~~~
AnthonyMouse
> If a company pays 65% of their employees the minimum and wages go up 5% the
> company doesn't fire most of its workers it grudgingly pays more.

It depends on what the company's alternatives are. Many companies have only 5%
margins to begin with. And most people who suggest minimum wage increases
argue for more than just 5%.

> In a lot of cases the existing low wage is actually below market now and
> subsidized by benefits like food stamps.

That is one of the problems a UBI _fixes_. Since the money isn't contingent on
employment, employers can't pay less against the leverage that without a job
the employee would lose their food assistance.

------
jostmey
I remember my last visit to Baltimore. I saw a lot of homeless people. I saw a
lot of buildings in need of repair. There were people needing work and work
needing to be done (fixing buildings). I was left wondering what was
preventing the economy from functioning.

Every side of an argument has an element of truth. Businesses will not pay
people more than they must, which can be a problem if people don't have enough
money to buy propping up the economy. And for every rich philanthropist,
there's probably ten donald trumps.

~~~
c0nducktr
> I remember my last visit to Baltimore. I saw a lot of homeless people. I saw
> a lot of buildings in need of repair. There were people needing work and
> work needing to be done (fixing buildings). I was left wondering what was
> preventing the economy from functioning.

I'm reminded of this image:
[http://i.imgur.com/mwfN4cM.jpg](http://i.imgur.com/mwfN4cM.jpg)

For those using screen readers, the image is of a poster containing the
following text:

If you're unemployed, it's not because there isn't any work. Just look around:
A housing shortage, crime, pollution; we need better schools and parks.
Whatever our needs, they all require work. And as long as we have unsatisfied
needs, there's work to be done.

So ask yourself, what kind of world has work but no jobs. It's a world where
work is not related to satisfying our needs, a world where work is only
related to satisfying the profit needs of business.

This country was not built by the huge corporations or government
bureaucracies. It was built by people who work. And, it is working people who
should control the work to be done. Yet, as long as employment is tied to
somebody else's profits, the work won't get done.

~~~
ucaetano
"So ask yourself, what kind of world has work but no jobs."

The article gets it completely wrong. A world with a high minimum wage has
work to be done, for example, but no jobs.

There's always work to be done. The existence of jobs depends on somebody
willing to pay someone the market rate for that job. In many cases, the market
rate is too high for the value of the work performed.

Minimum wage essentially outlaws all work that generates less than a certain
value.

~~~
imtringued
>There's always work to be done.

In theory wages can be negative. So there will always be infinite demand for
work to be done unless the government sets a minimum wage.

~~~
ucaetano
Actually, negative wages are allowed by the government.

But the main confusion is between work and job. Works is anyone performing a
task. A job is someone paying you for that, and in the strict sense, someone
hiring you to do it on a contract.

------
microcolonel
Minimum wage laws don't tend to increase real wages, at best they reduce
hours. In some cases (data indicates this in Seattle) the reduction in hours
overshoots the increase in rates. Labour has a utility to employers, and if
the employee can not provide utility that the employer can translate into more
than a minimum wage's worth of value, then they simply can not be hired for
that rate at that time.

I am taking time away from work right now, which is possible due to my frugal
lifestyle and fairly high skills. I would love to do part time work to keep me
on my feet, even below minimum wage. There are endless things around town that
I'm sure somebody is willing to pay something for.

There is no such thing as a living wage, there might be such a thing as a
living salary. Due to good planning, my expenses are tiny, my living income
would be maybe two thirds of the U.S. poverty threshold (in the U.S. I could
still afford health insurance at or below the poverty line with my other
expenses), and that's in a real city.

------
moritzplassnig
You can find the original study (from the University of Washington) here:
[http://www.nber.org/papers/w23532](http://www.nber.org/papers/w23532)

And the UC Berkeley study here: [http://irle.berkeley.edu/files/2017/Seattles-
Minimum-Wage-Ex...](http://irle.berkeley.edu/files/2017/Seattles-Minimum-Wage-
Experiences-2015-16.pdf)

------
neilwilson
The problem is one of perspective, and looking at the problem from the wrong
point of view.

We _want_ jobs replaced by technology. That is, after all, one of the reasons
we're all in this technology game. It is what drives forward productivity and
leads to an improved standard of living.

The issue is seeing the private sector as the creator of jobs. It is not. It
creates jobs only as a side effect of investing capital. If a capitalist can
get the entire job done by machine, they will do - unless human labour is
very, very cheap.

So to get the investment effect we need labour to be expensive.

And that means that the private sector isn't the place to look for jobs in the
long term. The public sector has to create them so there are always more jobs
that there are people: [https://medium.com/modern-money-matters/running-a-
modern-mon...](https://medium.com/modern-money-matters/running-a-modern-money-
economy-ada9682a5fb9) Then the private sector has to compete for labour, and
will choose to invest to eliminate jobs more often than not.

The issue was best described by Kalecki in the 1940s.

"It is true that profits would be higher under a regime of full employment
than they are on the average under laissez-faire, and even the rise in wage
rates resulting from the stronger bargaining power of the workers is less
likely to reduce profits than to increase prices, and thus adversely affects
only the rentier interests. But 'discipline in the factories' and 'political
stability' are more appreciated than profits by business leaders. Their class
instinct tells them that lasting full employment is unsound from their point
of view, and that unemployment is an integral part of the 'normal' capitalist
system."

[http://web.archive.org/web/20170202134920/http://mrzine.mont...](http://web.archive.org/web/20170202134920/http://mrzine.monthlyreview.org/2010/kalecki220510.html)

------
axaxs
It kind of is. I'm not against a higher minimum wage...in fact I welcome it.
But let's be honest, it's going to crush small businesses and force larger
ones into automation. The real problem is that this cuts into the unskilled
lifeline. Unskilled labor is dying, these people must learn a trade. I have no
hypothetical solution for those unable or unwilling, sadly, outside of UBI
which presents its own issues.

~~~
neilwilson
Try creating jobs and pay people for doing them. Look around and you'll see
there is much to do.

It's not hard once you get beyond the mistaken idea that the private sector
creates jobs. It doesn't and doesn't want to. It creates them only because it
has to.

------
bsder
At the very least, the "control group" in this study seems problematic:

"But a quick look at the data suggests something else may be going on. Between
the second quarters of 2014 and 2016, earnings in Seattle grew by an
incredible 21 percent, as opposed to 6 percent in parts of Washington outside
the Seattle area. And the first quarter of 2016 was exactly when the very
large gap in overall wage growth between Seattle and rest of the state (where
the control group comes from) really opened up, coinciding with the timing of
the job loss found by the University of Washington team. At this point we
don’t know enough, but clearly there are some missing pieces to this puzzle."

And, I'm kind of surprised they are matching to the rest of Washington rather
than against Vancouver, Tacoma or Spokane only. The rest of Washington is so
different that I just can't imagine it being a useful "control".

------
jessaustin
_Comparing the losses (in yellow) with the gains up to $19 (in maroon)
suggests that..._

If they're going to pick such non-intuitive colors, why not just have a
grayscale graphic? Does this help the colorblind?

------
WheelsAtLarge
I'm a supporter of people earning a living wage. The problem with raising the
minimum wage is that no matter what the minimum is it will never be enough.
Nobody want's to earn minimum after you've worked at the same place for years
and have someone new come in and earn the same on the first day on the job.
Once minimum hits everyone wants a raise too and inflation picks up,
eventually the problem returns. It's human nature. Additionally technology
will be brought in to reduce costs by reducing jobs.

The fix is to give every one that needs it an income credit. Right now it's
only possible through the federal income tax, but you need to qualify, but it
should also be in the state income tax too and the qualifications should be
income only. Let's say you worked 2080 hours for the year then for every hour
you worked you should get some amount that will raise your income to some
agreed on minimum.

This has the benefit of stopping the tit for tat raises.

------
known
Does minimum wage provide impetus to
[https://en.m.wikipedia.org/wiki/Maslow%27s_hierarchy_of_need...](https://en.m.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs)

