From the report: "In an average week in 2025, the $15 option would boost the wages of
17 million workers who would otherwise earn less than $15 per hour. Another 10 million workers otherwise earning slightly more than $15
per hour might see their wages rise as well. But 1.3 million other workers would become jobless, according to CBO’s median estimate. There is a two- thirds chance that the change in employment would be between about zero and a decrease of 3.7 million workers. The number of people with annual income below the poverty threshold in 2025 would fall by 1.3 million."
By 2025, automation should be way ahead than we have here. I wonder how that would help or not help these numbers. Maybe the overdue recession will increase the jobless number. Or the economy will keep trucking on and the number would be close to zero. So many questions, so little answers.
Better automation tools would almost certainly increase the chance of large-scale job loss in the event of a minimum wage hike. From a business perspective, it's a cost-benefit calculation - when the cost of automating a job is lower than the cost of paying a human to do it, automation will eventually win. If automation cost goes down and human labor cost goes up, the threshold shifts in favor of fewer human workers (although the profits get redistributed to the remaining workers/owners, so you get a continuation of today's inequality push).
I suspect that most of those losses (be they 0 or 3.7m) will be in rural areas. Most wealthier urban areas are already pay within a dollar or two of $15 just for having a pulse. The rural areas are where people are still routinely paid close to minimum so more people will be put out of work in those areas.
Doesn't strike me as particularly balanced (from the economic not political angle), it takes a strictly negative view of the effect of minimum wage on employment. This is the view the theory would support but is actually in empirical dispute as dueling studies continue to come out. They don't account for a single positive effect on employment from raising the minimum wage, even in just the estimated ranges of the effect, yet just two years ago we had 600 economists sign a letter in support of a $10 min wage which included this statement:
"Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front."
Even within the document when they talk about the uncertainty of effect the minimum wage has on employment they're talking about uncertainty of magnitude (negative) and not uncertainty around the direction of that change.
Take a look at:
"By boosting the income of low-wage workers who keep
their jobs, a higher minimum wage raises their families’
real income, lifting some of those families out of
poverty. However, real income falls for some families
because other workers lose their jobs, business owners
lose income, and prices increase for consumers. For those
reasons, the net effect of a minimum-wage increase is to
reduce average real family income."
I think if you read that quote to different economists who study the minimum wage you would find very, very different opinions on how true it is.
There's some subtlety worth quoting in contrast to the headline:
"CBO estimates that there is about a two-thirds chance that the change in employment would lie between about zero and a reduction of 3.7 million workers."
"There is considerable uncertainty about the responsiveness of employment to an increase in the minimum wage. If employment is more responsive than CBO expects, then increases in the minimum wage would lead to larger declines in employment. By contrast, if employment is less responsive than CBO expects, then such increases would lead to smaller declines in employment. Findings in the research literature about how changes in the federal minimum wage affect employment vary widely. Many studies have found little or no effect of minimum wages on employment, but many others have found substantial reductions in employment."
Minimum wages have some power to make an industry favor higher-skilled work and automation(and therefore, more valuable work). When wages are low, the whole industry is obliged to use cheap and unskilled labor to stay cost-competitive. When that floor goes up, the businesses that shift their investment from labor and towards capital will survive by gaining the benefits of using automation. The resulting set of products are essentially a new marketplace: sometimes you produce more at lower cost, or less at higher cost but higher quality, but the consumer benefits from this introduction of technology either way.
Therefore the consumer-friendly policy interpretation is to gradually raise minimum wages as new methods of using capital are introduced, and allow the labor to transition from the unskilled to the skilled jobs.
However, what's left out is the skills gap in recruiting for the new jobs; it's hard to find qualified people, and it's hard to find a job right for you when the field is always changing. The market is not great at coordinating this transition on its own.
So raising the minimum wage without worker training is similarly bad to low-skill jobs lost from free trade? Are free trade and raising the minimum wage almost complementary?
> Is there any good economic theory on how to set minimum wages?
It's not an objective question, it's a question of balancing effects which depends on subjective preference, so even if there were solid models which would precisely predict all the effects (which there aren't, even approximately) they wouldn't be theories on how to set minimum wages.
(If you mean ideological theories as opposed to scientific theories, then there are plenty of those on the topic in economics, though whether they are “good” or not is a matter of taste.)
An organic farmer friend of mine, who works a leased plot single-handed, told me he figures he's making $12/hour at it. The plot is big enough to scale up, but at $15/hour here in California, he doesn't see a way to make it work.
Highly-automated agribusinesses, especially those located elsewhere, don't have this problem. Neither do farmers willing to break the employment law. But my friend for some reason doesn't seem to want to become a professional criminal.
It'd be very interesting to see if people on the fight for 15 campaign would support starting off by setting a $15/h floor for temporary labour (H2 class) visas.
If the government wants someone to have something (more money, healthcare, etc.) then the government should provide that something to someone.
All of these programs that shift costs onto employers are fundamentally flawed for many reasons. The most obvious reason is that lots of people aren't employed.
One might also argue that a minimum wage that is too low burdens tax payers because it means the employees must seek out public assistance. In which case one wonders if a business is worth sustaining if it cannot adequately cover its labor costs without the government propping it up via subsidies.
I still haven't seen that math work but am intrigued by the idea as too many people are being left behind today let alone as automation continues to proliferate.
The counter point to that is that the current minimum wage for a full time job with no time off comes to ~15k a year just barely over the poverty line for a person living alone and under the poverty line for two people living together without kids. So in reality with even a small amount of time off or not working 40 hour weeks 100% of the time minimum wage isn't enough to keep someone off Federal/State assistance.
This is basically a subsidy to these companies by the government supporting lower wages for them when they're already quite profitable.
UBI would be but I'm personally more ok with it given it won't be JUST to businesses. It'll benefit everyone with businesses also being included. Also raising the money for UBI will probably include a lot of funding via business taxes (including maybe having the employer paying much of the cost of the UBI of their employees).
>But, yeah, thinking that getting a “small” million-dollar loan would make him look like a everyman turned self-made success is pretty out-of-touch.
The weird thing is, it still worked. And you could probably fill a book with things he's said that would have killed anyone else's political career. He should get out of real estate and politics altogether and sell DuPont whatever it is that keeps shit from ever sticking to him.
To make matters worse, he had been getting direct cash transfers from his parents starting as a child so even $1 million 1970's money is understating it significantly.
I'm just wondering why we seem so fixated on 15$. Have we considered if 9$, 12$ or any other value might be more optimal from a utilitarian perspective?
> The first option would raise the federal minimum wage to $15 per hour as of January 1, 2025. That increase would be implemented in six annual increments starting on January 1, 2020. After reaching $15 in 2025, the minimum wage would be indexed, or tied, to median hourly wages. The $15 option would also gradually eliminate exceptions to the minimum wage for tipped workers, teenage workers, and disabled workers.
> The second option would raise the federal minimum wage to $12 per hour as of January 1, 2025. The $12 option would be implemented on the same timeline as the $15 option but would not index the minimum wage to wage growth after 2025. It would leave in place current exceptions.
> The third option would raise the federal minimum wage to $10 per hour as of January 1, 2025. The $10 option would be implemented on the same timeline as the $15 and $12 options. Like the $12 option, it would not index the minimum wage to wage growth and would leave in place current exceptions.
People are fixated on $15 because for decades they have seen no increase in the nominal wage for 10 years and no real increase for 50. So, they are more susceptible to the demagoguery of a Bernie Sanders who shouts "$15! $15!" than they would have been if they had been treated with humanity and dignity for the previous 2 generations.
I don't understand why the federal minimum wage isn't pegged to regional costs of living. I'm sure a $15 minimum makes sense in San Francisco, but should we force small, rural towns to also pay $15?
That's the question Oregon asked. What they ended up doing was a tiered minimum, based on regions and economic studies.
In the Portland area, $15 is barely enough. Reasonable minimum target. This is true for various places along the I-5 corridor. Maybe Bend too.
In other regions, it may be $12, or even $11, depending.
Overall, it's reasonable and the expectation is increased demand will not impact the number of people having jobs much at all.
I agree with you. What should be done is a baseline study every few years. Take some basic metrics:
Housing
Food
Transportation
Health Care (overlooked now, but should not be, or we do universal care to keep it factored out)
Utilities, water, power, etc.
Roll all that up into a "just making it" index of some sorts and work from there.
My thoughts on this have arrived at a place where I do not see it being productive for labor to yield an income less than it actually does cost to exist and show up for work. When we do that, it's a subsidy, and we are all paying indirectly, and for some, very directly as those costs do accrue no matter what, and they get paid by someone no matter what, or people simply do not exist and or show up for work.
Often, the more direct payments fall on family and others close to the person unable to labor and meet basic needs. This gets expensive. Retirement, and other bigger picture things are impacted, and because we do not see those outcomes present right away, they too get ignored.
For all of us, taxes and such needed to fund services are indirect payments --subsidies essentially.
In some cases, a subsidy makes sense. Happy to do my part. However, in a general sense, I really do not want to be subsidizing businesses that could operate just fine and pay labor what it costs to exist and show up for work.
Same here. They should set a minimum FedCore wage and each county, not each state, sets a CoLA. So the local min wage would be FedCore + County CoLA. CoLA would ideally be the one of the residence of the worker.
They hammer these 2 points relentlessly year after year: Tax cuts for the rich are good for the economy. A minimum wage for the poor is bad for the economy.
Of course they are only interested in what's good for all, and not what is good for their wealthy readership.
Raising the minimum wage is only a band-aid. Within a few short years, inflation picks up and your $15/hour won't really go as far anymore.
Australia and Scandinavian countries are good examples of this in action: high minimum age, but everything is ridiculously expensive.
It's much better if we provide education, so people better themselves and increase their value in the workplace.
I feel like this is only used by the politicians, who don't really care about people getting out of poverty, and want people to not only vote for them (for getting a government-enforced raise), but be dependent on them for life.
UK's experience since introducing a minimum wage doesn't bear this out. All the warnings of inflation, fewer jobs and so on were given. They haven't come to pass.
Even those you might expect to stand against a minimum wage, like some of those bodies and the Tory party who argued hard against its introduction, have called for increases beyond inflation.
The minimum wage was set only to $4.71/hour in 1999. The reason there was no inflation is because most companies were probably paying somewhere around this wage already. Just because there was no minimum wage set, doesn't mean there wasn't a minimum wage dictated by the free market.
Let's try doubling it, like having a $15 minimum wage and see what the actual changes would be.
The current proposal is to index it to wage inflation after it's $15/h
"increased from such amount by the annual percentage increase, if any, in the median hourly wage of all employees as determined by the Bureau of Labor Statistics; and"
Here's the publication: https://www.cbo.gov/publication/55410 Here's the report: https://www.cbo.gov/system/files/2019-07/CBO-55410-MinimumWa...
From the report: "In an average week in 2025, the $15 option would boost the wages of 17 million workers who would otherwise earn less than $15 per hour. Another 10 million workers otherwise earning slightly more than $15 per hour might see their wages rise as well. But 1.3 million other workers would become jobless, according to CBO’s median estimate. There is a two- thirds chance that the change in employment would be between about zero and a decrease of 3.7 million workers. The number of people with annual income below the poverty threshold in 2025 would fall by 1.3 million."
By 2025, automation should be way ahead than we have here. I wonder how that would help or not help these numbers. Maybe the overdue recession will increase the jobless number. Or the economy will keep trucking on and the number would be close to zero. So many questions, so little answers.