
What Minimum-Wage Foes Got Wrong About Seattle - herrkanin
https://www.bloombergquint.com/view/what-minimum-wage-foes-got-wrong-about-seattle#gs.n8hwiG0
======
elicash
All the top-level comments are making excuses for inconvenient facts. I'm
guessing a lot of folks on Hacker News believe themselves to be objective
analysts and yet are blind to how their bias against the minimum wage is
causing them to look foolish in ignoring any new information that might
possibly conflict with their world view.

The ONLY proper response if you're a critic of this study (if not with the
methodology, which nobody here has found ANY problems with) is to say, "well
there's a wide variety of findings on minimum wage." Instead, you have people
intentionally misreading the study, making ideological claims about the
"value" of the work minimum wage workers do, or a conspiratorial claim they
reversed because of "pressure" without any evidence whatsoever.

It's quite sad to see people so willing to reject inconvenient facts.

~~~
fzeroracer
The thing I find most obnoxious is that people don't seem to understand that a
minimum wage is necessary to prevent employee abuse. Without a minimum wage,
corporations will gladly hire people who are unable to negotiate hire rates
despite doing the same work as everyone else. The disabled, prison labor and
immigrants are all examples of people who have been historically abused by
companies in order to pay them much less.

Ultimately when any job is better than no job, people will take what they can
get. Companies know this, and will pay people obscenely low amounts to take
advantage of people without any other options. Therefore to protect them and
ensure they can have a livable wage, we need to maintain a minimum wage.

~~~
paulddraper
The thing I find most obnoxious is the "a better end naturally justifies
removing liberties" concept.

Suppose there was positive correlation between racial diversity and violent
crime in the US. Would you support de jure segregation, because it reduces
violence? Even if there seem to be good effects from segregation didn't
necessarily mean the government should dictate living locations.

Even if there are good effects from legislated prices, that doesn't
necessarily mean the government should dictate employment contacts.

~~~
goalieca
Your argument is moronic. De-segregation is not the cause of violence in your
hypothetical and if it was then you were imagining a racist dreamland.

~~~
davvolun
To play devil's advocate (you can read my response to OP to see how I feel
generally about the overall argument), it does seem to correlate that more
homogeneous societies, e.g. Japan, Norway, have lower crime statistics, or
lower violent crimes.

Possible reason being, the more likely you are able to socially connect with
your potential victim and the less likely you are to see them as the "other,"
then the less likely you are to feel justified in causing them harm.

KKK feels justified because other races are inferior, the rich feel justified
in exploiting the poor because poor people are lazy, e.g.

~~~
paulddraper
And you could find similar examples in the US as well. E.g, the least violent
state (Maine) also is the least racially diverse.

Like you say, it's not hard to believe that homogeneity (whether race,
religion, culture, ethics, politics etc.) causes less conflict. Naturally,
that's an awful justification for a terrible practice.

But you find many tunnel-visioned "the statistics justify the means"
arguments: minimum wage, gun control, privacy, etc. Proper laws are not just
about statistically good outcomes.

------
jillesvangurp
Germany actually just introduced minimum wage a few years ago. They did not
actually have this. Their unemployment rate is at an historic low. So the
arguments used against that here did not quite pan out either.

But of course Germany was a bit of an anomaly in Europe: this stuff is old
news to most of the rest of Europe.

Regardless of ideology, the debate seems to be about the cost of minimum wage
(especially on the right side) and not really about the benefits. The benefits
of not having abject poverty in your society are many. Minimum wage is an
important tool for that. Regardless of your position on this, you'd have to
consider both cost and benefits for any analysis worthy of that word.

To name just one such benefit, people with disposable income tend spend that
income on things. This is great for the local economy. So instead of funneling
money up the corporate hierarchy towards off shore accounts, a second house
for the CEO, or whatever, funneling money back into the economy where it
actually gets used has an effect on that economy: it grows.

Seattle seems to be doing fine demonstrating that this works as advertised.
More people can afford to go to restaurants so the restaurant business is
booming. That should not be that surprising to economists.

~~~
minton
> So instead of funneling money up the corporate hierarchy towards off shore
> accounts, a second house for the CEO, or whatever, funneling money back into
> the economy

I assume the CEO isn’t willing to generously give up their second house and
will find a way to push this cost onto all consumers including those happily
earning higher wages.

Is there a mechanism in place to prevent this?

~~~
zachsnow
The same mechanism that ensures that the local coffee shop isn’t charging so
much that the owner has a second house in Bermuda — if you raise prices that
much you won’t be competitive.

Obviously in an particular case, who knows? But in general I think the
expectation is that the market will decide.

~~~
skidd0
A minimum wage isn't one coffee shop with expensive beans. It means Every shop
has expensive beans.

~~~
romed
Minimum wage raises in America generally come out of the landlord's pocket,
not the consumer's.

~~~
chrisdhoover
I’m not sure what your statement means. Can you explain what you mean?

~~~
romed
Landlords have wide pricing power. They basically get all of the money. Rents
rise until merchants make minimal margins. If the law says that wages have to
go up, that depresses margins and therefore rents.

------
manfredo
> But a new paper by the same authors (Sci-Hub mirror) shows that the rising
> minimum wage generated major increases for the workers who had the most
> hours, whose hours were only cut a little, but still came out ahead thanks
> to the wage increase; workers with fewer hours saw no financial harm from
> the rising minimum wage, working fewer hours and bringing home the same sum;
> and they found some harm to people who had the smallest number of hours)
> (which may actually reflect stronger demand for workers and fewer workers in
> this category of very-low-hour work).

Is this actually reversing the claim? Or just making a narrower claim that the
minimum wage hike increased _some_ workers. Most claims around the negative
effects of minimum wage say that workers will lose employment - not that those
workers who remain employed will suffer. By restricting the conclusion to "the
workers who had the most hours, whose hours were only cut a little"
essentially dodges the question of whether the change benefited workers as a
whole.

Ultimately, though, this is a subjective questions. If you have 10 workers,
making $12.50 an hour and if you had the option of making 9 of them get
$15.00/hr but one of them gets fired is it a good outcome? The pool of workers
are making a greater amount of money (it "breaks even" as other commenters
have put it), but does that $2.50 an hour increase for 9 workers offset the
negative of one of them getting fired? Maybe getting fired has less tangible
effects that make the net increase not worth it. That fired worker may end up
on the streets. Is instability of income is a greater problem than low income?
I'm not saying there is any right answer here, my whole point is that it's
subjective to determine what outcome is better.

~~~
olliej
If you’re concerned about and increase in _minimum_ wage, I’m confused about
why you have extra staff.

Alternatively you’re saying that the remaining 9 workers are going to be doing
an additional 1/9th of the work, so presumably the hours.

So all you’ve done is kick someone onto the street (I do love the claim that
you are on their side, while fighting against wages rising), while paying the
same amount - possibly more due to overtime wages.

So yeah, if your business is poorly run you may get a significant impact from
a fairly minor wage increase, but mostly because your business was already
poorly run.

~~~
Zanni
Presumably you don't have _extra_ staff; you have the amount of (relatively
unskilled) staff that can (and will) do the job in the time allotted. As soon
as you have to pay them more, you expect more from them. The workers that
can't deliver $15/hour in value get let go. The ones that can deliver stay on.
This is great for the existing workers that were already delivering that value
but were underpaid. For the workers that can only deliver $7.25/hour ...
they're never going to get (or keep) another job.

~~~
UncleMeat
Why weren't people paying the workers who deliver $15/hr in value that much
money? Those people are getting fucked by the system.

~~~
sundaeofshock
where do you think profit comes from? The excess value generated by employees
is extracted by the owners of the business.

------
xae342
This issue isn’t about economics of course, but what I don’t quite understand
is why the right feels like it’s an injustice to change the playing field,
like it’s cutting in line, or will put the laws of nature into chaos if
someone gets more than their fair share for the work they did. I really don’t
follow...

~~~
AnthonyMouse
> This issue isn’t about economics of course, but what I don’t quite
> understand is why the right feels like it’s an injustice to change the
> playing field, like it’s cutting in line, or will put the laws of nature
> into chaos if someone gets more than their fair share for the work they did.
> I really don’t follow...

But it is about economics. The theory of the minimum wage is that you take
money from some hypothetical fat cat capitalist who would otherwise have
stored it in a mattress to no avail and instead give it to a hard working
stiff who can benefit their lives with it.

The problem is that there are also a multitude of other things that can happen
instead, pretty much all of which are bad and do actually happen in practice.
The money may come from someone other than a fat cat, like a local small
business owner or a working class customer. If prices rise, local businesses
may be less competitive, resulting in higher unemployment and a smaller tax
base (resulting in lower tax revenues or higher tax rates or both). The
working stiff may lose their job. In the worst case, the entire business may
close down. It's quite a bit worse than cutting in line.

If you really want to understand the problem, list every consequence can think
of for a minimum wage of $1000/hour. Most of the problems still apply at $15,
just at a smaller scale.

~~~
iciac
The theory of the minimum wage is just the theory of a price floor. The effect
on employment is dependent on the market composition and the cross-price
elasticity of labour. Comparing a price floor of $15/h (highly substitutable
unskilled labour) with $1000/h (unsubstitutable specialist labour) isn't
really tenable.

For most minimum wage positions you'll find the bulk is employment by large
firms (potentially under a franchise arrangement), labour is substitutable,
and wage-bargaining power is weak. Total production is more likely to be
driven by demand, and a (relatively) small unit cost increase is likely to be
absorbed (if anything, we'd expect it to affect firm profit more than
purchased labour).

You're correct that less competitive SMEs may be affected more here, operating
as a price taker for both their product and labour. These firms however will
be disproportionately affected by any external market movement - there's
nothing particularly magical about a minimum wage increase.

~~~
AnthonyMouse
> The effect on employment is dependent on the market composition and the
> cross-price elasticity of labour. Comparing a price floor of $15/h (highly
> substitutable unskilled labour) with $1000/h (unsubstitutable specialist
> labour) isn't really tenable.

The proportional composition of the markets wouldn't be exactly the same, but
they're both highly diverse markets. It's not just unskilled labor, it's
anything with an oversupply of qualified labor, e.g. internships or childcare.
Even unskilled labor has a wide variety of potential substitutes depending on
context.

> For most minimum wage positions you'll find the bulk is employment by large
> firms (potentially under a franchise arrangement), labour is substitutable,
> and wage-bargaining power is weak. Total production is more likely to be
> driven by demand, and a (relatively) small unit cost increase is likely to
> be absorbed (if anything, we'd expect it to affect firm profit more than
> purchased labour).

Perhaps, but that doesn't mean there is low elasticity of demand. There is a
price at which a large company will automate the job or move the entire
facility to a location with lower labor costs.

And a large firm may have a profit margin equivalent to $4/hour rather than
$1/hour for a smaller firm, but raise the wage from $10 to $15 and they're
both making layoffs (or forced to raise prices).

> You're correct that less competitive SMEs may be affected more here,
> operating as a price taker for both their product and labour. These firms
> however will be disproportionately affected by any external market movement
> - there's nothing particularly magical about a minimum wage increase.

Which is why we prefer to avoid those other things as well.

~~~
iciac
Automation usually requires a high fixed cost to enable long-term low-
operating costs. If you suppose a decreasing unit installation cost or scale
construction over time you'll eventually hit a point at which companies will
automate, especially if there's added efficiency (two examples: McDonald's
certainly didn't shift to kiosk solely due to minimum wage, nor could we set
an hourly wage low-enough that a typist pool could compete with a common word
processor).

Ditto for location shifting: it's dependent on a) the transferability of the
activity, b) the cost of shifting, and c) the price differential between the
two locations. Minimum wage may be a component in this decision - but it will
not be the only one.

For context: I work as a policy economist in Australia, principally in
regional employment. The minimum wage rate here is (AU) $18.93/h, unemployment
sits at trend around 5.5%. In my experience the primary driver for regional
employment (often less complete markets) is labour demand rather than the cost
of supply.

~~~
AnthonyMouse
> Automation usually requires a high fixed cost to enable long-term low-
> operating costs.

Sure, but it still has a relationship to wages. You take the fixed cost and
amortize it over the expected lifetime of the equipment, add the operating and
maintenance costs and compare to wages. If the automation costs $25,000/year
per employee replaced then you use it as soon as employees cost more than
$25,000/year. It's clear what happens when the cost of an employee rises from
$20,000 to $30,000.

> nor could we set an hourly wage low-enough that a typist pool could compete
> with a common word processor

Sure you could. No one would willingly take the job for so little money, but
that doesn't mean the dollar value doesn't exist. But nobody needs to "save"
those jobs because there are many other jobs that pay more. A $0.05/hour job
is useless when there are unfilled $10/hour jobs. But a $10/hour job can be
better than unemployment when there _aren 't_ unfilled $15/hour jobs and the
employer's automation threshold is $12/hour.

> Ditto for location shifting: it's dependent on a) the transferability of the
> activity, b) the cost of shifting, and c) the price differential between the
> two locations. Minimum wage may be a component in this decision - but it
> will not be the only one.

It's not a matter of it being the only factor, it's a matter of whether it
pushes the number over the threshold. Which is what happens at the margin.

------
ctdonath
Still makes it practically illegal to produce less than $15/hr value. Can't
produce that much? no work for you.

This ensures that, even in the article's revised view, those who _do_ suffer
are those most needy.

~~~
olliej
I’d love to know how you get to that conclusion.

~~~
bognition
Its basic accounting. If you have to pay someone $15/hr, they better be
providing at least that much value back to you, otherwise you're running a
charity

~~~
RangerScience
Flip it. If you're gong to pay someone $15/hr, you better have something that
needs doing that's worth that much to _you_.

One way to look at employment is that it's your responsibility, as the
employer, to know how much a job is worth to you; it's their responsibility to
perform that job.

If you're having people do something that's not worth what you're paying them?
I would say that sounds like you're not running your business very well.

~~~
kgwgk
That’s the point: business won’t have people do something that’s not worth
what they have to pay them. That’s what the OP said: “Can't produce that much?
no work for you. This ensures that, even in the article's revised view, those
who do suffer are those most needy.”

------
bigfartchili
As a small business owner in a state that recently passed minimum wage hikes
up to 50% higher than 5 years early let me share my experience. We have raised
wages pretty dramatically but realistically it has absolutely nothing to do
with the minimum wage hike. Since unemployment is so low in our state we
actively need to compete with other businesses to hire people and the
strongest selling point is offering better wages. Now obviously the hike has
forced us to pay more than we regularly would.

The results of this is that we have raised the amount we charge customers.
Those customers then complain that their having to pay more for the same
service. At the same time every single apartment in this area has had its rent
increased by a large margin. Cost of goods have gone up. Cost of services has
gone up. House prices has gone up as labor cost has as well. The people making
15 per hour before are now getting paid the same as the entry level workers.
Any employee that has been loyal to the company has not had the same wage
increase as the other workers yet they are paying more for everything they
purchase.

In my opinion minimum wage hike is “working” simply because of the low
unemployment rate and the booming economy. The statistics don’t really paint
an accurate picture. Ask any of my employees if they are better off today than
they were 5 years ago and most would say no. The employees we have had for 5+
years would say they are worse off today.

------
DINKDINK
So an economic free lunch, cool. /s

"Ce qu'on voit et ce qu'on ne voit pas"

~~~
CPLX
There are certainly conceivable changes to economic policy that result in net
gains to all parties. There’s nothing theoretically impossible about arguing
that such a thing has happened.

------
AnthonyMouse
Policy-based evidence making. Reasonable economists find an inconvenient
result, so pressure them to recant. Then they print something that doesn't
contradict the original result, but it's less adversarial to the policy, so
call it a reversal in the headline.

> 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.

In other words, small changes have small effects. But also small benefits.
What's the point of something that at best only breaks even?

~~~
CPLX
A policy that is generally break even from an efficiency standpoint but
reduces unwanted negative outcomes like poverty and income inequality is a
clear win.

~~~
AnthonyMouse
> A policy that is generally break even from an efficiency standpoint but
> reduces unwanted negative outcomes like poverty and income inequality is a
> clear win.

But the break even is on poverty and income inequality, even before you
consider the inefficiencies. _Then_ the money has to come from somewhere --
either the employer (in many cases a local small business) has to eat it, or
they pass it onto the customer in the form of higher prices. It also makes
local businesses less competitive against the likes of Walmart and Amazon.

~~~
RangerScience
That would only happen if the employees with cut hours then didn't spend their
now-free hours on other stuff. If they just end up twiddling their thumbs,
sure, maybe it's break even.

Maybe the people whose hours get cut are those who need the extra time more
than the extra cash. Maybe they take that extra time and use it making money
elsewhere, outside of the scope of what the study could measure.

Do you know what those people did with that now-free time?

~~~
AnthonyMouse
> Maybe they take that extra time and use it making money elsewhere, outside
> of the scope of what the study could measure.

A study measuring hours worked that didn't account for hours worked in other
jobs would be pretty useless.

> Do you know what those people did with that now-free time?

Something valued at no more than their original wage, as demonstrated by the
fact that they had been willing to not do it in exchange for that amount of
money. Meanwhile the thing they were previously doing at work was valued at
least in that amount, as demonstrated by the fact that the employer had been
willing to pay that much for it.

~~~
RangerScience
> Something valued at

I mean, good point, almost a great point, except, by whom? There are other
forms of value than money.

You're right that it's unlikely they've made up the overall reduction in wages
by doing something else and why, but you're missing what I'm trying to point
out.

~~~
AnthonyMouse
I gather your point is that the employee gets the value rather than the rest
of society. But that's just the broken window fallacy.

Most companies' margins are small. More than 90% of the value typically goes
to someone else -- customers, other employees, suppliers (and their
employees), etc. Even the business owners for a lot of small businesses are
only scraping by. There is no guarantee that 0.75X value can outweigh 1.25X
value just by going to one person rather than another, and all the usual
reasons to expect that it won't.

~~~
RangerScience
Oh hmm, no, that's not my point. My point is that unless the study also looked
into what the people with fewer hours then did with the now-free hours, we all
have insufficient information with which to make a good/bad judgement call on
it.

I don't follow your utilitarian math. Can you rephrase?

> that the employee gets the value rather than the rest of society.

I don't think drawing this line is reasonable. The employee is part of
society, trying to reason from a starting point of separating them from it
just seems silly.

As far as I understand your argument, I definitely do not agree that it's a
broken window fallacy. In your view, what is the broken window in this case?

(Not the fallacy, the thing that would be the literal broken window).

------
wnevets
of course it doesn't.

It also didn't bring ford down a ~100 years ago like all of the economists
predicted then either.

~~~
randyrand
is there an upper limit to minimum wage ?

what would it be and why?

------
ggm
Needs to get more coverage, weighted by the impact the first claim had. Would
a wayback machine for citations help find who is in duty bound to say "that
thing we said, cited? they retracted.." or not?

------
ChrisLomont
Left out of the boingboing praise, but in the abstract:

"On net, the minimum wage increase from $9.47 to as much as $13 per hour
raised earnings by an average of $8-$12 per week. The entirety of these gains
accrued to workers with above-median experience at baseline; less-experienced
workers saw no significant change to weekly pay. Approximately one-quarter of
the earnings gains can be attributed to experienced workers making up for lost
hours in Seattle with work outside the city limits."

That seems opposite to the summary in Boingboing. It's also in agreement with
many studies and theory which should price the lowest performing out of jobs
as they cannot add enough value to make it worth an employer hiring them.
Increased wages by fiat long enough merely increase inflation.

~~~
Retric
Wages are not a uniform entity. Increasing the minimum wage has very minimal
economic impact becase it makes up a tiny fraction of the US economy. Consider
increasing pay 7$ per hour for all 542,000 US workers workers making minimum
wage * 40 hours a week * 48 weeks a year = 7.2 Billion per year that’s chump
change at under 0.04% US GDP. (That’s right not under 4% but under 0.04%.)

Yes, many people make more than minimum wage, but not 7$ more than minimum
wage. However, for them it’s a smaller increase so again it does not add up to
much.

~~~
ChrisLomont
I don't see how it addresses the issues in the research. Care to explain?

If min wage is set to X, anyone incapable of adding more then X to an employer
is priced out of the job market. In this research the rise in wages resulted
in reduced hours which were made up in neighboring markets which did not have
this min wage.

~~~
Retric
I was addressing your inflation statement which is really not supported by
evidence.

In terms of pricing people out of the workforce, that’s not nessisarily a bad
thing on net assuming a strong safty net. But again separate argument.

~~~
ChrisLomont
Two things: raising the min wage puts upward pressure on wages above the min
also, so your estimate is not correct. Someone making min+1 will still expect
to make min+~1 after the hike. Also, inflation need not be national to be
inflation.

This is why places with higher min wages tend to have higher overall wages and
higher overall prices. These things do not operate in a vacuum.

Look at prices where wages are low compared to process where wages are high,
e.g., SF versus smalltown Alabama.

So there is ample evidence that these things are related. By taking national
averages you necessarily miss the local variation which clearly shows a
price/wage correlation.

------
stuaxo
This implies that the critism was honest.

(Disclaimer, haven't read the article)

------
village-idiot
Minimum wage is nothing more than a privatized social safety net.

------
josephh
WSJ's take on the same study: [https://www.wsj.com/articles/seattles-fake-
free-lunch-154102...](https://www.wsj.com/articles/seattles-fake-free-
lunch-1541026906)

~~~
fiblye
The Wall Street Journal also likes to frame $260,000 and $650,000 incomes as
typical Americans struggling to get by (originally posted on WSJ regarding
Obama-era tax increases):
[http://i.imgur.com/bdgZa.jpg](http://i.imgur.com/bdgZa.jpg)

It's hard to regard this Rupert Murdoch publication's opinions on money as
grounded in any sort of reality.

~~~
phd514
The article
([https://www.wsj.com/articles/SB10001424127887323689604578220...](https://www.wsj.com/articles/SB10001424127887323689604578220132665726040))
said nothing of the sort. It said that while the bulk of the tax increases
were at the high end of the income spectrum, many individuals and couples with
incomes in the 180k-500k range could see significant tax increases, too. That
was contrary to the general portrayal of the "American Taxpayer Relief Act" as
retaining the Bush-era tax cuts on everyone with less than 400k in income.

~~~
fiblye
> It said that while the bulk of the tax increases were at the high end of the
> income spectrum, many individuals and couples with incomes in the 180k-500k
> range could see significant tax increases, too.

It's amazing that a non-insignificant number of people on HN don't think
that's on the high end of the income spectrum. In most places in America,
you'd be considered quite handsomely rich if you're making $200,000 a year. It
puts you very, very solidly in the top 5% of earners. $300,000 puts you in the
top 1%.

That people think that's "contrary to the general portrayal of the American
Taxpayer Relief Act" is bizarre. A comic with objectively high income earners
making sad puppy dog faces because 1% of their massive income is gone is a
sign that the publisher is out of touch with the reality that typical
Americans face.

~~~
wahern
$200k wasn't in the top 5%, even in 2013. Squarely in the top 10%, though.
Source:
[https://www.cbo.gov/publication/51361](https://www.cbo.gov/publication/51361)

~~~
ejstronge
> $200k wasn't in the top 5%, even in 2013. Squarely in the top 10%, though.
> Source: [...]

This is incorrect. The source you cite lists the average income by percentile
group, which is not the metric one wants - the average income of the top 5% is
skewed by the incomes of very high earners.

One actually wants the lowest income in a percentile group; the top 5% started
at around 197,000 in 2013.

Source: pg 16 of the 2013 Census income report

[https://www2.census.gov/library/publications/2014/demographi...](https://www2.census.gov/library/publications/2014/demographics/p60-249.pdf)

------
paulpauper
yeah but does that take into account reduced benefits. Amazon raised minimum
wage to $15/hour, which got a ton of press, but simultaneously eliminated
stock compensation for those same employees, which got much less press.

~~~
icelancer
This was still a major net positive for the employees of the warehouse,
because the stock compensation was nearly worthless given vesting time and so
forth.

~~~
AnthonyMouse
> Several Amazon warehouse employees have criticized the move, stating they
> would actually be losing thousands in incentive pay.

[https://www.theverge.com/2018/10/3/17934194/amazon-
minimum-w...](https://www.theverge.com/2018/10/3/17934194/amazon-minimum-wage-
raise-stock-options-bonus-warehouse)

