OT: Minimum wage proposal in SD

[The-Shoveler]

Agree CAR,

We may lose a few jobs at first, but the increased spending would create more better paying jobs in a very short time IMO.

[EconProf]

[quote=CA renter][quote=EconProf]We economists are largely in agreement about raising the minimum wage: it will kill jobs.
The recently proposed mild increase in the federal minimum wage would cost about a half-million jobs, according to federal officials.
But the huge jump to $13.09 for San Diego only would have a far more powerful impact on employment within our city limits.[/quote]

Probably getting the 500,000 figure from the CBO, but you’re omitting some things, too:

———-

Effects of the $10.10 Option on Employment and
Income.

Once fully implemented in the second half of
2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is
about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers (see Ta b l e 1 ).

Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earnings during an average week in the second half of 2016 if the $10.10 option was implemented.1 Some of the people earning slightly more than $10.10 would also have higher earnings under that option, for reasons discussed below. Further, a few higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum-wage increase.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/44995-MinimumWage.pdf

————–

I’d say it’s a positive, overall.[/quote]

Thank you, CAR, for buttressing my point about a half-million jobs lost from a higher federal minimum wage by quoting the actual CBO language. But I don’t see it as a net positive.
First, yes, they say the range of job loss could be well under a half-million to over a million. But then they settled on a half-million jobs lost. Where is the positive in that?
Second, yes, some current workers now paid above the minimum wage will get a wage bump. And some of them will also lose their jobs–they are part of the half-million.
It boils down to employers acting rationally and wanting to maximize their profits. If you can put yourself in employers’ shoes, they balance their inputs like capital vs labor in order to be the most efficient. If the government suddenly dictates that they pay more for one of those, they will use less of it wherever possible. And they have the incentive to find all sorts of ingenious ways to do so: automate where possible (e.g. self-checkout counters), hiring two skilled workers to do the work of three unskilled workers, moving their business to a nearby suburb that did not raise the minimum wage to $13.09…the list is endless. And yes, none of this will happen immediately. But over time, the damage will be done.
The minimum wage is one of those emotion-laden terms that sounds good on the surface but underneath does real long term damage. Politicians act accordingly because they can count on the public not digging deep into the real effects. A century and a half ago a french economist, Bastiat, put it well: the seen vs the unseen. We pass laws according to our emotions and gut feelings, without examining the many secondary effects.

[EconProf]

[quote=The-Shoveler]Agree CAR,

We may lose a few jobs at first, but the increased spending would create more better paying jobs in a very short time IMO.[/quote]
Actually no.
This “increased spending” from the higher-paid workers is coming from where? The higher payroll outlays of employers who must pass it on to customers via higher prices. So consumers spend more at the impacted businesses and thus less at other businesses. The lost jobs at those other businesses are part of the full impact.
A beautiful example of the seen vs the unseen.

[The-Shoveler]

That’s not the way it will work IMO.

The increase in costs due to increase labor costs will not be as large an impact on the better paid workers so their spending habits will not change as much as the lower paid workers who have been left behind and will now have more to spend.

But we seem to not be able to agree on any of this so I will leave it here as I don’t have time for this.

[urbanrealtor]

[quote=EconProf]We economists are largely in agreement about raising the minimum wage: it will kill jobs.
The recently proposed mild increase in the federal minimum wage would cost about a half-million jobs, according to federal officials.
But the huge jump to $13.09 for San Diego only would have a far more powerful impact on employment within our city limits.[/quote]

EconProf:
That does not make practical sense.
Who works at min wage jobs now?
Its primarily restaurant and very low paid retailers.
Its not as though the Hillcrest McDonalds will become unprofitable because they have an extra hourly cost.
Successful fast food places regularly gross revenues in excess of $500/hr.
If there are 8 crew (a common compliment) all getting a $3/hr raise, that works out to a $24/hr carrying cost increase.
Therefore, its not a great burden.
Furthermore, these workers cannot currently be replaced easily by distant locations or by machines (they are already essentially machine operators and there is no economy in taking lunch in Santee).
Sit-down restaurants will see an increase of similar capacity but, again, this will only be acutely felt in places that overstaff servers (eg: Mr. A’s).
Places like the Olive Garden have a wacky high volume and will not be endangered.
The prices that will rise will be primarily for people who eat out at independent 3 star restaurants.
It will not harm most rank and file min wage workers because they don’t (or at least shouldn’t) eat out very often.
On the retail front: I doubt anyone will be in mourning due to a minor increase in WalMart prices.

In sum:
Very few business will be seriously affected because most are not that weak and their services cannot be easily replaced or relocated.

As per usual, your understanding of the relevant economics is pedestrian at best and foolishly misleading at worst.

[urbanrealtor]

[quote=EconProf]We economists are largely in agreement about raising the minimum wage: it will kill jobs.
The recently proposed mild increase in the federal minimum wage would cost about a half-million jobs, according to federal officials.
But the huge jump to $13.09 for San Diego only would have a far more powerful impact on employment within our city limits.[/quote]
Also, I think referring to yourself as “we economists” is a wee bit of a stretch.

[an]

[quote=urbanrealtor]
Who works at min wage jobs now?[/quote]
The largest group of min wage workers are in households making $100-200k/year. Majority of min wage workers are <25 years old. As I said in my earlier post, raising minimum wage by that much will definitely give a big boost to automation. The big fast food chains will be able to do that pretty easily while the struggling mom and pops will go out of biz, its their final nail in their coffin. Since this won't affect me, I say, lets do it and so we have a case study to point to in the future. I would much rather order my food from a computer in a non fancy restaurant anyways.

[The-Shoveler]

The experiment has been already been done

http://www.bloombergview.com/articles/2014-02-21/where-a-higher-minimum-wage-hasn-t-killed-jobs

Washington state, for example, has the nation’s highest rate, $9.32 an hour. Despite dire predictions that increases would cripple job growth and boost unemployment, this isn’t what happened.

[EconProf]

[quote=urbanrealtor][quote=EconProf]We economists are largely in agreement about raising the minimum wage: it will kill jobs.
The recently proposed mild increase in the federal minimum wage would cost about a half-million jobs, according to federal officials.
But the huge jump to $13.09 for San Diego only would have a far more powerful impact on employment within our city limits.[/quote]

EconProf:
That does not make practical sense.
Who works at min wage jobs now?
Its primarily restaurant and very low paid retailers.
Its not as though the Hillcrest McDonalds will become unprofitable because they have an extra hourly cost.
Successful fast food places regularly gross revenues in excess of $500/hr.
If there are 8 crew (a common compliment) all getting a $3/hr raise, that works out to a $24/hr carrying cost increase.
Therefore, its not a great burden.
Furthermore, these workers cannot currently be replaced easily by distant locations or by machines (they are already essentially machine operators and there is no economy in taking lunch in Santee).
Sit-down restaurants will see an increase of similar capacity but, again, this will only be acutely felt in places that overstaff servers (eg: Mr. A’s).
Places like the Olive Garden have a wacky high volume and will not be endangered.
The prices that will rise will be primarily for people who eat out at independent 3 star restaurants.
It will not harm most rank and file min wage workers because they don’t (or at least shouldn’t) eat out very often.
On the retail front: I doubt anyone will be in mourning due to a minor increase in WalMart prices.

In sum:
Very few business will be seriously affected because most are not that weak and their services cannot be easily replaced or relocated.

As per usual, your understanding of the relevant economics is pedestrian at best and foolishly misleading at worst.[/quote]
UR, you are citing busy fast food places in Hillcrest, but the range of minimum wage workers in America covers a wide swath of industries–agriculture, leisure, lodging, mom and pop stores, etc. The jobs are entry level, and almost no one stays at minimum wage for long. Also, almost never is the minimum wage earner the only income source for the household. The handicapped and the risky hire, especially minority youths and high school dropouts get these jobs at the bottom of the income ladder in order to prove themselves and move up from there. I’d rather not cut off the bottom rung of the income ladder for these people.

[spdrun]

$9.32 isn’t $13.

[an]

That logic makes absolutely no sense. What SD is proposing is 40% higher than Washington. If you think that’s a valid argument, there’s really nothing else to say. Also, it would take a few years to see what the true effect is. Also, what Washington has is only 15% more than CA. Like I said, bring it. We’ll see how it turns out in 10-15 years.

[CA renter]

[quote=EconProf][quote=The-Shoveler]Agree CAR,

We may lose a few jobs at first, but the increased spending would create more better paying jobs in a very short time IMO.[/quote]
Actually no.
This “increased spending” from the higher-paid workers is coming from where? The higher payroll outlays of employers who must pass it on to customers via higher prices. So consumers spend more at the impacted businesses and thus less at other businesses. The lost jobs at those other businesses are part of the full impact.
A beautiful example of the seen vs the unseen.[/quote]

You’re also making the erroneous assumption that all added costs would be passed on to the consumer. Guess what? Profit margins are at all-time highs. There is no economic law that states that profit margins should always remain the same or grow over time. Time for workers to finally get a greater share of the profits that they’ve created in the first place.

[CA renter]

[quote=The-Shoveler]The experiment has been already been done

http://www.bloombergview.com/articles/2014-02-21/where-a-higher-minimum-wage-hasn-t-killed-jobs

Washington state, for example, has the nation’s highest rate, $9.32 an hour. Despite dire predictions that increases would cripple job growth and boost unemployment, this isn’t what happened.[/quote]

There are many studies showing that minimum wage laws and increases in minimum wages result in negligible or superior economic effects. I have yet to see any legitimate studies showing that minimum wage laws have a deleterious effect on the economy.

[Reality]

[quote=CA renter][quote=EconProf][quote=The-Shoveler]

You’re also making the erroneous assumption that all added costs would be passed on to the consumer. Guess what? Profit margins are at all-time highs. There is no economic law that states that profit margins should always remain the same or grow over time. Time for workers to finally get a greater share of the profits that they’ve created in the first place.[/quote]

Yeah, like the workers have risked the capital to start a business. Workers are free agents who either agree or not to work for a certain amount in a free market.

If their skills demanded $13 an hour they would be getting it already.

[EconProf]

Good point JohnAlt. There seems to be an automatic assumption among advocates of minimum wage hikes that all low paid workers are exploited. The fact is that their productivity tends to be low, so their contribution to the firm does not justify an arbitrary wage hike dictated by the government. However, once they prove themselves through experience, promptness, learning, etc., a rational, profit-maximizing boss will pay accordingly (or risk losing them to a competitor). That’s our market system, greatly simplified.

[Author]

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