[kardashev]

The article is a bit misleading. The minimum wage is $11/hr. in Seattle and will reach $15 for large businesses by next year, and by 2021 for small businesses.

Amazon by itself is bringing in thousands of people per year, none at the minimum wage. To attribute a good economy in Seattle to a minimum wage is a non-sequitur.

I find it curious though how some can think raising pay by fiat will help the poor. If this were really so why would there be a schedule to phase it in slowly over 7 instead of immediately? I think part of the reason is that it is expected for natural monetary inflation to cancel out the effect of the min wage increase. If we assume 2% target inflation from the FED then that would be a 15% reduction in buying power of the dollar, reducing the burden on businesses for the increase in wage price.

With phased-in increases we tend to see effects that are within the error of margin. Naturally if there was an overnight price increase on anything there would be immediate measurable ramifications, which is probably why the phase-ins are always slow. If people truly thought the effects were positive then they would push for the changes to be as immediate as possible to leave no room for doubt about the effect of the policy.

Meanwhile the homeless situation in Seattle is getting progressively worse. With the increase in minimum wage, some people are paid more, but at the expense of some poor people not being able to acquire a job at all. Certainly we could find a better way of handling things.

[firethief]

> If this were really so why would there be a schedule to phase it in slowly over 7 years until full implementation instead of immediately?

The article's premise is that the benefit to the economy from increasing the income of the lowest-earners outweighs the higher costs to businesses. If this is the case, raising the wages overnight would be disastrous, because businesses would have to pay the surprise higher costs before the economy had a chance to strengthen as a result of the greater spending.

Implementing the policy faster doesn't just get the same results faster, it gets different results.

[bko]

I was shocked to learn that there are more people that earn below minimum wage than there are that earn minimum wage [0]. I don't know if these people are exempt from minimum wage (report doesn't say) or are just being paid under the table. Either way, I fear that these employees may lack legitimacy and legal right afforded to other employees. A higher minimum wage, especially significantly higher, will increase the number of these shadow employees.

[0] http://www.bls.gov/opub/reports/minimum-wage/archive/charact...

[gotthemwmds]

> I find it curious though how some can think raising pay by fiat will help the poor.

Er, I don't know how much time you spend around "the poor", but I can guarantee giving them piles of cash money will help, regardless of how much ivory tower logic the average HN reader can spin on it from their $3000/month condo with a Tesla in the garage.

I will admit I stopped reading your comment after that sentence.

[godd2]

There are people whose labor is worth $8/hr but not $11/hr. Raising the minimum wage will not result in "giving them a pile of cash", it will result in them no longer having a job.

[crdoconnor]

There are people whose labor is worth $20/hr+ who are desperate enough to accept 8.

"How much value do you bring in?" only puts a ceiling on pay negotiations. Desperation is what drives the actual number.

There are many, many more people like that which is why minimum wage rises almost always come straight out of profit margins:

http://www.nelp.org/content/uploads/2015/03/NELP-Big-Busines...

There is, of course, the matter of the vast amount of economic propaganda saying the opposite. That's driven by what economists call "incentives".

[narag]

There are people whose labor is worth $8/hr but not $11/hr.

You seem to think value and price are the same thing and both can be absolutely determined. Also it sounds weird to talk about people's labor as if they were potatoes, while you assert that minimum wage will result in them not having a job as if it's a nature law.

I'd try to reason with you, but it seems we're not in the same world anyway.

[godd2]

> I'd try to reason with you, but it seems we're not in the same world anyway.

Claiming that I'm too unreasonable to debate with won't win you any points.

> Also it sounds weird to talk about people's labor as if they were potatoes

It's not weird since it's something that has a market value. People are not their labor. Someone's labor can be bought and sold, and the availability and price of labor is subject to the same economic laws as potatoes.

Some potatoes are worth $0.60 but not $0.80, and if the price of potatoes were dictated to be $0.80, the $0.60 would go in the trash.

I don't want potatoes or people's labor to go in the trash.

[inflagranti]

>> I'd try to reason with you, but it seems we're not in the same world anyway.

> Claiming that I'm too unreasonable to debate with won't win you any points.

It did with me... Seriously, I think you misconstrued this statement as a personal attack, whereas IMHO its simply used to highlight the flaw in your logic: If we have a complex system where A implies B and B implies C and C implies D and so on which possibly goes back to A in subtle ways, but you're just saying "A implies B, B implies no A, hence this won't work, QED" you are assuming a very simplistic view of reality.

You cannot just stop at one step and draw a definite conclusion from that. As pointed out, the wage increase can be rolled over to a price increase for instance, instead of now having to fire everyone. I'm not saying that no loss of labor could occur, but definitely it's only one of many possibilities and the economy is a highly complex system with all kind of direct and indirect effects that are at play here.

All that said, I would actually argue for basic income than a minimum wage as it will completely eliminate the possibility of the labor loss resulting in a wage loss, but in absence of this, minimum wage seems still better than having an increasing amount of working poor.

[tcbawo]

Some have argued that skilled labor actually benefits the most from a minimum wage increase (can't find a citation offhand). This is caused by wage inflation as employers must increase compensation to retain workers.

I'm trying to understand your potato metaphor. The US government has a long history of setting a price floor beneath agricultural products.

[woodpanel]

Let me try it: Saying that my labor isn't worth $11/hr surely doesn't sound nice to me. But the intentions of saying that to me are making a huge difference. If you're just being mean, begrudging, racist or otherwise inhumane - offense is duly taken. But there can be a compassionate intention too. Denying that this intention could exist, leaves me believing the world is against me instead of actively acquiring working skill.

Coming from the other side of $8/hr I can assure you that you'll had so much inhumanity coming at you, you will very likely recognize the true intentions.* Looking back, I cannot thank the moments of compassionate harshness enough and could almost get angry at those denying these moments exist. Instead I say to them: It's easy to wear those rose-colored glasses if you don't have to live with its repercussions.

* granted, this works well on a personal level, maybe not so well if it comes out as a political press release

[narag]

It seems that you misunderstood me, probably my fault. It's not a question of humanity. Treating labor just like any other good is terribly naive. How economy works is much more complex since good salaries feed the demand while a huge mass of poor people near the level of societal exclusion will cause unrest and problems for everybody. See Venezuela, not so long ago one of the richest countries of the subcontinent. It's in the best interest of middle classes to have a decent social net, specially considering you never know what the future holds for yourself.

[misterbishop]

Funny how moralistic value enters into the discussion when it comes to pricing wages. When it comes to any other commodity, the standard is supposedly "whatever the market will bear".

[bko]

It's not moralistic. It's "worth" in the sense that how much marginal revenue that person produces. If you have to pay someone to sell $9 worth of coffee an hour, they're not "worth" more than $9 an hour, regardless of morals.

[JoeAltmaier]

Then the store should change their prices, or perhaps close. If everybody is paying the same overhead (like staffing all day when they make money only during peak hours) then competition will operate as normal, prices may change to reflect costs etc.

Staffing is more complicated than "how much they sold during their shift"?

[bko]

Sure, they'll try and pass off the costs to their customers. But with a higher price, there will likely be less coffee sold and less employment regardless.

Yes, staffing is more complicated, but min-wage labor cost for a restaurant are a significant portion of the costs and profit margins are very thin [0]. Many won't be able to absorb a ~50% increase in labor cost.

[0] http://www.sfgate.com/bayarea/article/Economics-of-running-a...

[sprafa]

Morality is always there, or should be. Picketty has shown that our understandings of the Market as anything conducive to a stable society were a fiction caused by recent history.

[JoeAltmaier]

It may be reasonable to treat people better than corn futures or furniture, yes.

[alasdair_]

This is generally why we (as a country) invest in things like education and, later, retraining programs.

Eventually, of course, many things will be automated away by higher wages. At that point, basic income is a reasonable thing to consider.

[calibraxis]

It will stimulate the economy to promote more jobs. "There are people whose labor is worth $8/hr but not $11/hr" is a non-sequitur because this fuzzy concept of "worth" varies in time & space. (For example, demand-push inflation will change the numbers.)

[godd2]

> It will stimulate the economy to promote more jobs.

It will increase the cost of labor, and result in fewer, more expensive goods and services.

We can both claim things all day.

[lukeschlather]

The money doesn't just vanish when you raise the minimum wage. People who make less than about $20/hour are going to be spending pretty close to 100% of any additional income they get. It's fair to suggest it might raise the price of goods and services. All real-world examples of minimum wage hikes I've seen show real wages going up even though inflation does eat some of the gain.

But as far as reducing the amount of goods and services available, that isn't really backed up by anything. It's crazy that we're still relearning the lesson that we learned in the first half of the twentieth century, which is that when you raise the wage floor, consumer spending rises, which drives economic growth.

[grecy]

> There are people whose labor is worth $8/hr but not $11/hr.

And yet, if they moved to a different country, their labor would be worth much more!

Funny how that works...

[Chos89]

Like the people who clean your buildings, so I can assume companies will stop using cleaning services? If some job needs to be done it will be paid.

[user5994461]

As a matter of fact yes.

To have been in a country where there are "high" minimum wages, the low value added jobs are the first going away because they're too expensive for what they are.

Cleaning service is one of them.

[godd2]

> If some job needs to be done it will be paid.

The opportunity cost of a service is the limit for which one would be expected to pay for it. If forced to pay $1,000,000 to have someone clean your bathroom, you'd end up cleaning it yourself.

[MichaelBurge]

Grocery stores have something like a 1-2% margin, and people are often price-sensitive when shopping for food. So they'd have trouble raising prices. Probably they'd try to depend on self-checkout machines more. I imagine fast food companies like Taco Bell would lose sales.

High-margin software companies wouldn't care about the cost of their janitors, like you suggest.

[drakonandor]

> High-margin software companies wouldn't care about the cost of their janitors, like you suggest.

The CEO might not, but an enterprising facilities manager would certainly try to cut expenses by replacing the pleb who vacuums the hallway with a plus-size Roomba.

[tropo]

Yes. The telephone sanitizers become too expensive, dooming us all:

https://en.wikipedia.org/wiki/List_of_minor_The_Hitchhiker%2...

[richdougherty]

The economics of a minimum wage is much debated. See: https://en.wikipedia.org/wiki/Minimum_wage#Economics_models

However you are both making different points. @kardashev is making a the classic argument against a minimum wage. You're arguing that giving low income people more money will help them.

It's not hard to think of other ways to top up incomes that don't involve setting a minimum wage. The simplest would be to pay low income people money directly instead of through an employer. A direct transfer system like this would probably satisfy economists more than a minimum wage would, since a direct payment has less of a negative effect on economic behaviour than a price mandate.

[crdoconnor]

>The economics of a minimum wage is much debated.

The economics of minimum wage among 'respectable' economists is debated in a similar way that the global warming "controversy" is debated by big oil. It's good for business to make people believe that there's a strong link between job losses and raising the minimum wage.

Meta-analyses of studies find an embarrassingly low level of statistical significance between job losses and raising the minimum wage:

"Several researchers have conducted statistical meta-analyses of the employment effects of the minimum wage. In 1995, Card and Krueger analyzed 14 earlier time-series studies on minimum wages and concluded that there was clear evidence of publication bias (in favor of studies that found a statistically significant negative employment effect). They point out that later studies, which had more data and lower standard errors, did not show the expected increase in t-statistic (almost all the studies had a t-statistic of about two, just above the level of statistical significance at the .05 level).[87] Though a serious methodological indictment, opponents of the minimum wage largely ignored this issue; as Thomas Leonard noted, "The silence is fairly deafening."[88]"

Profits, on the other hand - the elephant in the room when it comes to studying minimum wages - almost always take the brunt of the rise in wages:

http://www.wsj.com/articles/minimum-wage-increases-likely-to...

>It's not hard to think of other ways to top up incomes that don't involve setting a minimum wage.

Right, if you particularly wanted to avoid cutting into the profits of companies like Walmart, there are other ways you could top up incomes.

[richdougherty]

> The economics of minimum wage among 'respectable' economists is debated in a similar way that the global warming "controversy" is debated by big oil.

I know climate scientists are pretty much agreed on global warming. I thought economists disagreed about minimum wage still. That Wikipedia page seems to suggest that more and more economists are supporting a minimum wage over time, but there is still not a consensus. Does that sound right to you?

> Right, if you particularly wanted to avoid cutting into the profits of companies like Walmart, there are other ways you could top up incomes.

I was just trying to make a technical point about the existence of alternatives to the minimum wage. Many of the people who advocate these alternatives have good intentions about helping people in need.

[crdoconnor]

>I know climate scientists are pretty much agreed on global warming. I thought economists disagreed about minimum wage still. That Wikipedia page seems to suggest that more and more economists are supporting a minimum wage over time, but there is still not a consensus. Does that sound right to you?

Let's just say that I'm very impressed with the incorruptibility and dedication to the scientific method that ~95% of climate scientists hold. Especially since it's not like the oil companies haven't tried to tempt them to stray.

Not every profession is as upstanding as theirs when money and power enters the mix.

[oconnor663]

> Right, if you particularly wanted to avoid cutting into the profits of companies like Walmart, there are other ways you could top up incomes.

I don't know enough about the literature to comment on that part, but this is an uncharitable summary that sounds like its criticizing the motives of the other side.

Obviously if we were raising taxes to pay for schools or NASA or something, we wouldn't want a tax that targets Walmart more than Google. That would be weirdly political and probably inefficient too. You can make the same argument about paying for transfers, even if you don't have any particular love of Walmart.

[crdoconnor]

>that sounds like its criticizing the motives of the other side.

I'd say that it's 1/3 bad motives, 1/3 group think and 1/3 the naive belief of propaganda.

I don't, for instance, believe that this billboard/overt threat was paid for by average citizens expressing their concern over lost jobs:

http://images.gawker.com/itqtvwbe3c0skb99wirm/c_scale,fl_pro...

Or this expensive Times Sq Billboard:

http://www.gannett-cdn.com/-mm-/49a08e277b870c1416bcca4a7562...

What do you think motivated the people behind this to throw money at it?

>Obviously if we were raising taxes to pay for schools or NASA or something, we wouldn't want a tax that targets Walmart more than Google. That would be weirdly political and probably inefficient

Walmart in fact already receives indirect "weird political assistance" to the tune of $6.2 billion dollars via your taxes:

http://www.forbes.com/sites/clareoconnor/2014/04/15/report-w...

I'm fairly certain that they wouldn't mind at all if their workers got a $8 billion subsidy paid for by your taxes, and if they could cut their wages by $1 billion at the same time. Alice Walton would be overjoyed at the extra $800 million going towards her staff's incomes.

[tropo]

I've seen the opposite in recent respectable economics textbooks.

In any case, a thought experiment: the 99% should get a $99/hour minimum, don't you think?

[crdoconnor]

>I've seen the opposite in recent respectable economics textbooks.

I bet it wasn't Greg "the rich can do no wrong" Mankiw's textbook ;)

>In any case, a thought experiment: the 99% should get a $99/hour minimum, don't you think?

What's the thought experiment designed to achieve?

Hiking to $99 / hour immediately would likely trigger a bout of extremely high inflation - likely to a level which would hamper growth (as people would be more scrambling to protect their wealth rather than spending their money on useful products and services).

Personally, I'd hike to $20 and then put the wage up by $1 / hr every three months until inflation hit ~10% (~12-15% is the point at which inflation starts hampering growth) and from then on target that level of inflation via the minimum wage and welfare payments.

That would drive a huge amount of economic growth (spending would jump) and bring down inequality to more manageable levels.

[gotthemwmds]

What I'd really like to argue for is twofold: 1) meeting people where they're at and making no demands of them, 2) lessening the day to day misery of anyone by any amount using practical means that can be implemented immediately.

I strongly feel that large amounts of no-strings cash to people who need social-service type help is one of the best things you can do for them.

No strings housing is a good start too, and I am proud to have voted for the woman currently running the 1811 Eastlake building (Nicole Marci -- Google her or that address, if interested) in a local election this year.

I have been volunteering with various harm reduction type organizations off and on for almost 20 years.

[hacknat]

> If this were really so why would there be a schedule to phase it in slowly over 7 instead of immediately? I think part of the reason is that it is expected for natural monetary inflation to cancel out the effect of the min wage increase. If we assume 2% target inflation from the FED then that would be a 15% reduction in buying power of the dollar, reducing the burden on businesses for the increase in wage price.

All things being equal? Come on...I doubt it. The inflation will certainly be a bit of help to the businesses, but don't forget that the status quo has been raising the minimum wage piecemeal, and the Washington minimum wage is at quite a differential from Seattle. Also, don't forget that once Seattle's minimum wage is in full effect it's chained to the CPI, so it's not just a raise on the minimum wage it's a permanent minimum wage.

[lukeschlather]

Seattle doesn't have a job shortage, Seattle has a housing shortage. Not to say it's easy for poor people to acquire a job, but it's a lot easier to find a job in Seattle than it is to find a place to live.

[pessimizer]

> Meanwhile the homeless situation in Seattle is getting progressively worse. With the increase in minimum wage, some people are paid more, but at the expense of some poor people not being able to acquire a job at all.

Without an increase in minimum wage, people with a minimum wage job will still be homeless.

[user5994461]

With an increase to minimum wages, the housing price will increase and they'll still be homeless.

We could argue that the increase may also impact people who earned more, the one at the limit won't be able to afford their places anymore and will become homeless.

[crdoconnor]

>With the increase in minimum wage, some people are paid more, but at the expense of some poor people

No, at the expense of profit margins.

>Certainly we could find a better way of handling things.

The only other more direct way to move money from profit margins to the minimum waged would be to raise taxes on profits and effect a direct money transfer. Something tells me that you're not a fan of that either.

[WalterBright]

Amazon has an estimated 25,000 employees in Seattle,

http://www.seattletimes.com/business/amazon/amazon-sales-ris...

and has been on a hiring binge lately. Seattle's population is 652,000. Amazon clearly has quite an outsize influence on the city's employment makeup.

(Microsoft's campus is in neighboring Redmond, not Seattle. Some years back I read an article claiming that Microsoft had generated some 10,000 millionaires in the Seattle area.)

[enraged_camel]

Seattle's minimum wage, once fully rolled out, will be tied to inflation.

[xt00]

Yea these articles with zero evidence are basically pointless. The unemployment rate being low in most places that are desirable to live such as Seattle generally are short term problems. So give it a couple of years and there will be enough workers. Many people are moving to Seattle now from many other places. The high minimum wage generally won't end up being a huge deal except it just becomes a higher tax on everybody. Basically $7 sandwiches become $8 sandwiches and so on. Also most places that have 2 workers like an espresso stand the manager will see if he can get away with only 1 worker. So you waste more time buying a latte. So the more useful article would be something like, "restaurant owner sees 10% business increase and after surveying his customers finds that nearly all of the new people at the restaurant make minimum wage of $15, also his costs are now higher so his net result in profits is about 5% improvement year over year.. This situation has been anecdotally confirmed by about 15 other restaurants in the area.. All the while the population in that particular area only increased by 2%." I guess journalists are not economists or engineers.. :-/

[RandomName2020]

The purpose of high minimal wage is to decrease inequality. It cannot become equal tax on everybody, unless you inject money into the system. The ones who are at very bottom would gain a lot, a lot more than increase in the cost of a latte. For example, for an apartment to become less affordable for a software developer, it has to become more affordable to a janitor. I am not even talking about the goods from Targets and Walmarts, which cost exactly same across the country.

[xt00]

So what I'm not clear on, and I wish people would provide some real example would be this issue of how businesses that currently employ people working at minimum wage actually are affected -- do they pass on the cost increase to their customers, hire less people, accept less profits, or are the increases in cost offset by more sales. I personally don't like the idea of a minimum wage being set by random politicians. So if $15 is good and it helps the economy, then why now $25/hour? I mean sure let's raise it or whatever so their is some base level of the ability for people to live, but where is the point of diminishing returns, I would actually like to know rather than just be like, $15/hr, yay!! Then 3 years later, "based upon the great success of $15/hr, lets go to $18/hr!!" its like uh ok what is the background reason for stating that the economy can absorb it other than saying "I dunno, I want my boss to pay me $18/hr, so lets vote yes!" Of course if he hires less people because of that (and I'm not fearmongering, I'm just saying lets say that actually happens), then that's not good right?

[malyk]

Oakland passed a new minimum wage ordinance last year (the year before maybe?) and a lot of the small local businesses around me raised their prices. They also put cards on their menus explaining the increases. It's possible they stopped hiring. It's possible the let go of staff. But most of them definitely raised their prices a bit.

But the thing is, these places aren't the places that people living on minimum wage frequent. They are yuppie/hipster magnets with overpriced lattes and fancy salads and fancy burgers, etc.

The corner store didn't raise prices. The grocery store didn't raise prices. The gas station didn't raise prices. Landlords didn't raise prices.

My impression is that the direct financial impact of raising the minimum wage in the form of increased prices only impacts people who have more disposable income.

Now, there are other impacts (like lost jobs, lower hiring, etc) but the consensus from economic studies seems to be that those effects aren't statistically significant.

So, minimum wage earners have more to spend on necessities and those of us fortunate enough to have more disposable income have to spend $2-$3 more for a meal or $0.50 more for a coffee.

[RangerScience]

> Yea these articles with zero evidence are basically pointless.

> Basically $7 sandwiches become $8 sandwiches and so on

Do you have non-zero evidence for this prediction?

> This situation has been anecdotally confirmed by about 15 other restaurants in the area

I guess you have anecdotal evidence for this situation. Is it somewhere we can access it?

[jayjay71]

There's actually a great way to track that - look at the cost of a Chipotle burrito in different cities. The price for a burrito in San Francisco went up with perfect correlation when the wage increased in San Francisco. The reason it's particularly useful for Chipotle is because they are entirely corporate owned, which means there are no franchise owners distorting the data (or rather, franchises are independently owned and many are not well run, and restaurants with lower prices would be used as data points to justify the wage increase when that restaurant may in fact be failing).

Not too long ago it was part of my job to analyze the minimum wage hike and how it will effect fast food restaurants. Like most things in the real world, the nitty gritty details are complicated. The gist of it is that fast food restaurants in the United States are going to become even less profitable as the minimum wage increases. And in an industry where it's considered great if your margins are 5%, that can be pretty bad.

[ryuker16]

Don't minimum wage people purchase slot of fast food? Wouldn't a minimum wage hike lead to increased sales to offset the hike?

I repair alot of I. T. At many major chains so I visit them regulary. They seem pretty efficient and an extra $20 an hour of labor costs doesn't seem like a game changer. Especially if it reduces turn over or improves employee moral. Would definitely hurt something like a stake n shake.. 24/7 operation and tons of kids.

[RangerScience]

Interesting! I like this method.

Edit: Can we see the results of your analysis anywhere? That would be super interesting.

[xt00]

Actually maybe it didn't come across clearly, but I was saying it would be ideal if the article actually gave some kind of useful information such as the fake example that I provided. You are actually asking me the exact question I wish to ask of the person who wrote the original article.. basically can they please provide a real example versus the whole "the unemployment rate is low and the minimum wage is high!" and no mention of the obvious correlation vs. causation argument.