
A Fascinating Minimum-Wage Experiment Is About to Unfold - stillsut
http://www.newyorker.com/news/john-cassidy/a-fascinating-minimum-wage-experiment-is-about-to-unfold
======
jgmmo
"Support a $15 minimum wage, support the future!"
[https://www.facebook.com/Robots4MinimumWage](https://www.facebook.com/Robots4MinimumWage)

~~~
toomuchtodo
* Increase minimum wage

* Support the continuing automation of jobs away

* Tax the income stream from automation and use it to provide strong social safety nets

~~~
mason240
That's what Basic Income is.

~~~
toomuchtodo
That's my underlying point. Everyone complains that the minimum wage is going
to drive more work to automation. Good. That's exactly what it should do.
_Those_ efficiency gains fund a basic income.

I can envision a future where we have two tiers of income. One for basic
necessities everyone gets, and another "luxury" tier, for services and goods
not necessary to survive.

~~~
kasey_junk
You can make a pretty compelling argument that we are already at a two tiered
system (at least in the west).

The problem is the definition of "basic necessities".

Imagine that functional immortality becomes a possibility. Does it fall into
the "basic" tier or the "luxury" tier. Drawing those lines is precisely what
we are doing everyday with politics.

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vfrogger
A few years ago I actually read the experiment regarding the NJ fast food
workers and the PA fast food workers shortly after NJ passed a minimum wage. I
saw it consistently being brought up in conversations regarding minimum wage,
which is very interesting to me for some reason.

So this is the report that was supposed to show that minimum wage increases
don't affect employment rate (infact, they actually might improve it),
however, when you look at the data presented within the study itself, you find
that indeed, the NJ employment rate seemed to increase, and the PA employment
rate seemed to decrease slightly. However, when you look at the number of
employees per fast food restaurant, you'll see that the NJ restaurants started
at a much lower number per restaurant than the PA restaurants, and then that
employees per restaurant metric raises up by the end of the study but it never
reaches the same number as the PA restaurants.

What that study actually seemed to show to me, is given the ample notice that
business owners had about the minimum wage increase, they thinned out their
workforce. Then the minimum wage increase came (the study actually started
shortly after the increase had already been put in place, I believe), and the
business owners realized they over thinned out the workforce, hired a few more
people to get to the right number which was still less than the PA number with
lower labor costs.

And since we don't exist in a vacuum, once a business owner realizes their
store in NJ can run on 18 people, why should they run their store in PA with
20? It could probably make due with 19.

However, no one ever brings up the point that per restaurant, NJ never had as
many employees as PA, essentially stating that PA was using more employees to
accomplish the same job as NJ, which is exactly what you would expect to
happen from an increase in labor cost.

Instead, everyone only focuses on the jobs added/lost during the short time of
the study. It's like I'm the only person in the world who actually looked at
the data in the report, instead of just reading the author's findings. Very
Frustrating to consistently seeing this study shown as proof that minimum wage
doesn't affect employment numbers.

~~~
crdoconnor
That study was replicated across other state borders. Same outcome. No
statistically significant change in employment detected.

The amount of vitriol thrown at that particular study is pretty shocking. You
can tell it's a threat. One "researcher" (Neumark) even went as far as to redo
the study with a restricted, _smaller_ data set in order to yield the
preferred outcome - a decrease in employment.

~~~
vfrogger
Perhaps the other studies were "better" and not as flawed in their methods
(starting a study after the minimum wage was put in place to see if there was
a decrease in employment leading up to the wage increase is a huge flaw, and
then failing to address why NJ had so fewer employees per restaurant is
another related big flaw). However, if these other studies take into
consideration these components, they would be very interesting. However, if
they are actual copies of the previous methodology, then I'm not interested in
them.

~~~
crdoconnor
>Perhaps the other studies were "better" and not as flawed in their methods

Their methods weren't flawed.

That study undermined the arguments of a very powerful group of lobbyists and
left them exposed. Of course they were going to do everything they could to
discredit it, including but not limited to outright lies and dubious
reinterpretation of the results.

~~~
vfrogger
OK, I'll retract my statement about the study starting after the minimum wage
was put in place, it looks like that isn't true. Furthermore, I will admit
that the results have been replicated in other studies.

After researching more into the subject I have come to the following
conclusion:

Raising Minimum Wages marginally has no effect on employment rates, only when
the increase in pay can be tolerated by employers by absorbing the increased
cost by increasing prices, reducing higher paid employee's wages, reducing
employee turnover costs, and reducing profitability.

The end result is a smattering of higher priced goods, lower paid managers,
and less incentive to start a business relying on low skilled workers. Also,
you can throw in some lower job turnover as well, since the cost of losing
your job is greater.

Of course, the next question is, when is "marginal", no longer "marginal"? Is
it $15/hr, $20, $50? At some point, alternative methods to manual labor will
become cheaper (such as dropping $100k upfront for a burger making robot).
Once we hit that point, things will get ugly fast.

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mattsfrey
Anybody consider the plight of the skilled laborer who invested time and
potentially money into being more marketable and is making $15, who is now
brought down to the level of people working menial unskilled jobs? Is this
fair? You can almost certainly be sure nobody will be given raises to maintain
wage parity.

~~~
Eric_WVGG
\- How do you call a skilled laborer being fairly compensated for his work
having a "plight"?

\- Also that laborer isn't being "brought down"; others are being "lifted up."
Others don't have to lose for you to win.

And anyway, if the proponents of a higher minimum wage are correct, then this
will result in a boom in the gross domestic product of LA as people who
previously couldn't afford homes, appliances, or better food will be spending
money on those things, increasing the income of LA businesses, which in fact
would lead to rising wages for those skilled laborers you're so worried about…
this is textbook Keynesian economics.

~~~
pdonis
_> this will result in a boom in the gross domestic product of LA_

At the expense of what? If you raise wages but don't increase productivity,
you're just robbing one sector of society to pay another. And nobody has
mentioned any change accompanying this that would increase productivity.

~~~
bdcravens
Haven't programmers been doing that for years? Pay me $75 an hour so I can
reduce the number of $20/hour employees you need.

~~~
pdonis
Yes, software certainly increases productivity, and that often results in
decreasing the need for low wage human workers. And if companies choose to
respond this way to increases in the minimum wage, it's not going to increase
the number of people who are able to make a living at low wage jobs, which was
supposed to be the point of increasing the minimum wage.

------
Mister_Snuggles
For another minimum wage experiment, the newly elected NDP government in
Alberta has also promised a $15/hr minimum wage.

[http://globalnews.ca/news/2008258/ndp-will-move-forward-
on-1...](http://globalnews.ca/news/2008258/ndp-will-move-forward-
on-15-minimum-wage-plans/)

It sounds like we will have a number of similar experiments to compare with
each other.

------
outside1234
I'm surprised that two other outcomes are not posited by this article:

1) Rise in inflation (this is ultimately going to hit the price of goods and
services)

2) Rise in cash under the table employment. People already can't afford union
work - this seems to push even more people to "hire the guy standing at the
corner outside Home Depot".

~~~
nasmorn
Both of these might happen but are somewhat independent of the question how
many jobs will be lost. If jobs are not lost but under the table employment
increases that would realistically be an even bigger win. If lots of jobs are
lost the reason might be one of the things mentioned by you but I cannot see
local wage increases drive inflation on its own, with a federal increase it
seems more realistic

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gscott
Due to the excessive amounts of labor in the market especially at the low end
there was never a reason employers would need to pay more other then retention
for business stability reasons. The minimum wage is just a needed correction
for this oversupply of labor otherwise the market would have corrected itself
already. Republicans argue for no minimum wage so more low end positions can
be created but it is unlikely we have the infrastructure to compete with China
or to turn ourselves back into a 3rd world nation.

~~~
pdonis
_> Due to the excessive amounts of labor in the market especially at the low
end_

Why is this true? It's not a natural condition. The natural condition of a
free market is an equilibrium between supply and demand. If you have excess
supply, it means the market is not at equilibrium, which means either (a) it's
in transition because of some recent change (not likely since the oversupply
of low-end labor has been around for quite a while), or (b) the market is not
free--something is skewing the supply-demand balance. The obvious candidate
for that is...existing minimum wage laws.

 _> The minimum wage is just a needed correction for this oversupply of labor_

Raising the minimum wage will not "correct" the oversupply of labor; it will
make it worse. There will be more people wanting jobs, and businesses will be
able to afford fewer of them.

~~~
nasmorn
Since I studied economics I can attest that what you say is true for markets
of n infinitely lived households that require no minimal sustenance, given a
few technical conditions such as free disposal of excess supply and such. In a
world perfectly corresponding to this model the supply and demand relation is
perfectly understood. How it changes when the conditions are not exactly equal
to those used to solve the model is much less clear

~~~
pdonis
_> How it changes when the conditions are not exactly equal to those used to
solve the model is much less clear_

The model I'm describing, while it is certainly an idealization, is not for
that reason inapplicable to the real world. Idealized models are useful in
understanding the underlying factors at work in a real situation, even if the
real situation contains other factors that are not modeled. Often you can add
those other factors in as constraints (for example, there's no reason why a
microeconomic model has to assume "no minimal sustenance"; you just add the
minimum requirement for sustenance as a constraint). Or you can expand the
model to include interactions that were not previously captured (for example,
if waste disposal is a significant factor, you can expand your model to
include the economic transactions involved).

------
dismal2
This debate would be a lot simpler if we just agreed to eat the poor.

~~~
angersock
Efficiency and progress is ours once more!

------
naturalethic
The fascinating part will be the emergence of a larger black market for labor.

~~~
drzaiusapelord
The real fascinating part is how quickly we'll have robotics doing a lot of
those job when municipalities push out mandatory $15 to $20 an hour laws.
These low level fungible workers have been mislead by the far left into
thinking this is all "free money" and things like unemployment, lay offs,
automation, etc can't happen. A lot of companies have tested automation
solutions and have been shy to launch them for a variety of reasons, mostly
political.

$15 an hour full time is a $31,000 a year job. In most markets that's entry
level white collar college educated material that will work exempt for you.
Fry cooks and dishwashers who think they can get that via legislation are
going to be surprised at how quick they can be replaced with machines or in
other ways be made redundant.

Personally, I think we should just move to as much robotics as possible and
setup some kind of minimum welfare income and call it a day. All this pussy-
footing around with unions, minimum wages, etc just delays the inevitable.

~~~
jonnycowboy
Do you think a person working full time should be classified as poor?

~~~
drzaiusapelord
Yes. If you're some teenager selling ice cream for the summer and being taken
care of by your parents, you shouldn't be making $35,000 a year.

The larger question, of course, should be answered by the customers of
McDonalds or Target. Are they willing to pay twice the cost of goods so
everyone who works there can make more money? Probably not, and those
businesses will probably fold. Now you have everyone complaining about
unemployment and the lack of affordable goods. Do you pass yet another law to
make those cheap? Who pays for this stuff in the end? You can't economically
dictate everything unless you want to migrate into command-economy communism,
and the world tried that fairly recently with disastrous results.

Not to mention price inflation for common goods once the local econony has
everyone getting $15 an hour. Great, now everything costs more and the people
who weren't minimum didn't get a raise.

~~~
21echoes
this is a ridiculously warped view on minimum wage

1) The average age of a minimum age worker is 35, and _88%_ are not teenagers.
So no, the example in your first line should not be "you're some teenager",
it's "you're a parent working two jobs and still on food stamps".
[http://www.nytimes.com/2014/06/10/upshot/minimum-
wage.html](http://www.nytimes.com/2014/06/10/upshot/minimum-wage.html)

2) Talking about the cost of goods _doubling_ is straight-up fear-mongering.
Walmart set their minimum wage to $9, so raising it to $15 wouldn't even be
doubling if minimum wage labor was literally their only cost of business.
That's not even close to true, of course, but let's be generous and assume
it's 1/3 of their sales minus CGS (~120B, so 40B). Their sales were ~500B last
year, so with literally no other changes, they would only have to raise prices
by 5% to go to $15 minimum wage.

~~~
Domenic_S
Lies, damn lies, and statistics.

Take this table for example, where your linked article got its information:
[http://www.cepr.net/blogs/cepr-blog/update-low-wage-
worker-1...](http://www.cepr.net/blogs/cepr-blog/update-low-wage-
worker-1979-2013)

Notice anything interesting about the age bands?

16 - 19 (4 years)

20 - 24 (4 years)

25 - 34 (10 years (!))

35 - 64 (30 years (!!!))

65+ (? years)

The 35 - 64 band is especially egregious because it includes both people at
the peak of their careers and retirees (who often take throwaway jobs to stay
busy or supplement early SS @ 62).

Ok, so everyone's got an agenda, no real news there. The money shot is here:

> _“All of us used to think minimum wage meant a wage you could live on,” de
> Blasio said_

Wat? Who used to think that? Roosevelt didn't think that when he introduced
the FLSA, actually the major win there was _the abolition of child labor in
America_. At some point the thought around minimum wage went from "the minimum
amount you have to pay so you're not basically whipping child slaves all day"
to "the wage we need to buy iPhones and 2 cars".

The actual question is, what level of lifestyle should minimum wage/basic
income/whatever support? Is that level adjusted for local prices, or do you
have to live in a "designated poor person area" to survive (ie, is the amount
the same in SF as it is an Akron)? What about if someone blows all their BI on
liquor or gambling and becomes homeless, do we give them more? Who is
responsible?

I don't have the answers, and ultimately the discussion is pointless because
no group of people will ever agree on this.

~~~
21echoes
... are you replying to the right comment? i didn't talk for a second about
what de Blasio said, and those age bands don't do anything about the stat i
cited: that 88% of minimum wage employees are 20 or older.

~~~
Domenic_S
I was responding to the "average age is 35" portion; the average is useless
without more discreet bands because the post-retirement and going back to work
post-empty-nest communities are so large. 88% being non-teens is a meaningless
metric without more information -- I had a few minimum-wage jobs in college,
and I was not a teenager then.

------
MrZongle2
I look forward to spending $14 on a Big Mac in Los Angeles in 2020.

~~~
OrwellianChild
Look, here's the basic calculation... Fast food wages are about 26.5% of cost,
including 3.3% profit. [1]

I inflated wages to $15 from L.A.'s current $9. I maintained 3.3% profit.

    
    
                     Old Wage  New Wage
      Wage Rate      $9.00     $15.00 
      Wage           26.5%      37.3%
      Other Expense  70.2%      59.4%
      Profit          3.3%       3.3%
                    100.0%     100.0%
    
      Cost Increase  18.3%
    		
      Old Big Mac Meal [2]  $7.00
      New Big Mac Meal      $8.28
    

We'll live.

[1] [http://www.heritage.org/research/reports/2014/09/higher-
fast...](http://www.heritage.org/research/reports/2014/09/higher-fast-food-
wages-higher-fast-food-prices)

[2] [http://www.expatistan.com/price/big-mac/los-
angeles](http://www.expatistan.com/price/big-mac/los-angeles)

~~~
MrZongle2
+1 for sources and data, but keep in mind that the minimum rate hike doesn't
fully rise to $15 until _2020_. If this were happen immediately, then I'd
probably concede your point.

But we've got a while between now and then, and I think both inflation and the
rising cost of beef will play a role. And who knows if automation will play a
part?

I bet that $8.28 for a Big Mac meal in 2020 will seem like a good deal.

------
xacaxulu
How should the market reward minimum skills or minimum investment into
marketable skills, or minimum effort in the work place?

