Small decrease in employment in exchange for ~25% higher wages for those employed? Did I get that right? Obviously every single row in the dataset is a unique human, but overall sounds like a big success?
It depends upon how you define "success." I visit California regularly, and since the new minimum wage law went into effect, I've noticed reduced hours, reduced staff, and increased prices. So now my normal breakfast spot isn't open when I want to go there, so I eat at home. The places I visit when they are open are mostly empty, because the customers don't want to wait longer and/or pay higher prices.
So aside from the fewer employees getting a raise, the businesses are now under financial stress because of the reduced revenue, the customers have fewer options for where to eat, and the State of California and the local city/county governments will receive less tax revenue from these restaurants.
Like most of the other recent California legislation, it's a "success" at further damaging the local economy and encouraging people like myself to stay away.
Is your usual breakfast spot a location with more than 60 locations? The minimum wage increase here only applied to chains with more than 60 locations.
A lot of what you're describing is nation-wide. Food is more expensive everywhere. Cost of living in California is up significantly. Rents for restaurants is significantly higher as well (at least anecdotally, my wife's family restaurant has to close because they doubled the rent after their lease was up, I have heard this is incredible common).
This study by UC Berkeley attributed a 3.7% increase in food price because of the minimum wage changes. It's quite likely that food overall getting more expensive is responsible for a lot of what you're seeing.
If we can't afford to pay people in California a wage where they can live here, then maybe the economy overall isn't sustainable? A $20 minimum wage is like $2800 take home per month and in many places that can barely cover rent.
You are correct that I was unable to summarize an incredibly complex tangled web of economics, sociology and politics in a few hundred words on a forum. I don't think any of us can do this. Of course it's an oversimplification. Is the comment I'm replying to also not doing this? Are you also not doing the same thing?
My only point is that this seems like an awful lot of confirmation bias. Something everyone suffers from.
Not all people suffer the same level of confirmation bias, especially across all topics. And, for most topics, broad consensus of experts is better and less biased than individuals.
A better example would be Los Angeles and the new $30 per hour minimum wage for hotel and airport workers. Conceptually it makes sense. The crux of the issue and some opposition is there are more people now who use those jobs for primary income for a family, where in the past it may have been perceived as jobs for supplemental income and no health benefits.
The problem is a California tax law that lets home owners pay the tax rate from when they bought the home despite the value increasing. It disincentives selling. Which leads to retirees sitting on family homes rather than relocating and releasing them back into the market.
How am I supposed to plan my retirement? Plan to leave my home of years, where I have built a life and have all my things? If you think that, you are a sick person and I have to imagine you are younger and only thinking "but I want that nice house, so f*k off old person, take some money and go die somewhere else."
> I've noticed reduced hours, reduced staff, and increased prices
Anecdotally, this also describes how things have played out in the South generally. (Southern states generally have no set minimum wage, so they mostly default to the $7.25/hr set in 2009.) Perhaps this is different in other regions?
I have similarly stopped going to most "fast" food restaurants because the waits are interminable.
This is in states where an hour of minimum-wage labor will not gross you enough money to buy a pound of store-brand ground beef.
> Southern states generally have no set minimum wage, so they mostly default to the $7.25/hr set in 2009.
You may be shocked to learn this, but just because they follow the minimum wage doesn’t mean companies are _actually_ paying minimum wage. Even in my southeastern state, McDonald’s is paying $12/hour. Why? Because there’s no takers, even in a LCOL area, at $7.25/hour! That’s why all this handwringing over the federal is so stupid. Local labor markets will dictate what an acceptable wage is.
That's great, I live in a HCOL area in a Southern state and McDonald's here also pays higher than federal minimum.
BUT in other parts of the state, especially rural areas, there are definitely jobs advertised for < $8/hr. In those areas, McDonald's is paying a premium wage compared to Local Burger Joint. McDonald's pays $12/hr so they can get a higher caliber of employee than Local Burger Joint. Neither pay as much as Perdue.
> what an acceptable wage is
We agree on this, but probably on what factors go into making a wage "acceptable" and the degree to which taxpayers in other parts of the state/country should have to subsidize those wages/owners' profits via social support programs.
(I understand there is a third group of people who don't really care if the working poor are able to eat, but in the spirit of charity I do not assume anybody willing to engage in discourse is in that group.)
> since the new minimum wage law went into effect, I've noticed reduced hours, reduced staff, and increased prices.
The problem with that line of reasoning is that in the meantime:
- unemployment has declined, which means it's harder to find people wanting to work in such a place.
- inflation has kicked in, raising prices over the board.
In that context, attributing the changes you've seen to a particular policy is very very hard (and the linked paper doesn't do a better job than what you do here…).
Most of those in favor of the government interference cite the points that you made. They don't really ring true though. Inflation has slowed, but the changes in the restaurants were sudden, and coincided with the new wage law.
Is your normal breakfast spot a fast food joint? If it is not, it is my understanding that is not affected by the "higher minimum wages for fast food workers" regulation.
If it is a fast food joint... well, I can't speak for all of California, but the fast food places in the section of San Francisco that I live (and roam around) in seem to have a reasonably healthy amount of customers in them.
Perhaps things are different where you are, but I've noticed food getting markedly more expensive, have heard of commercial rents getting higher and higher, and have heard that many of the folks who would have done waitstaff jobs have decided to fuck off for places that were (at the time, if not now) less expensive than California. Oh, and there was the whole "flight from the expensive cities because WFH means that many folks don't have to tie themselves to an expensive, small apartment in a city they don't really like" thing a while back that gutted the downtowns (and leisure districts) of some-to-many big cities because -like- many folks exercised their new option to leave and left.
Were it me, I'd consider blaming factors like those before I blamed modest increases in wages.
I’d point to savings-driven relocation as well. It’s why some suburban towns have seen an increase in number of restaurants even as options in cities decline.
If the desire is to reverse that trend, the best way to move the needle is to bring housing prices (by far the largest living expense) in cities back down to earth so they’re affordable to normal people again, however that’s best done (probably building more housing, unlike SF which decided to instead prioritize offices and retail, leaving it vulnerable when the pandemic hit).
You need to factor rent increases into your thinking, both commercial and residential. Your breakfast spot is a business that no longer makes financial sense to operate.
Feed the location of a business into a trip planner and note every neighborhood within reasonable commute radius. Calculate the average cost of renting a room in these areas and then multiply by three. That's your de facto minimum wage because you have no applicant pool beneath it.
Adding on to this, your competitors in a better financial position are all paying well above minimum. There's probably a McDonalds across the street starting people at five bucks an hour more than you, and they have that wage plastered on a banner right out front.
If everything you wrote above is true (and I have no reason to believe otherwise), then the labor market should self adjust to the local economy and the government shouldn't need to step in and dictate a minimum wage.
People with better fitness for employment had their situation improved. People with less fitness for employment may be more likely to be harmed.
That’s a big success for the former group for sure. Whether that’s a policy success is slightly hazier than you presented I think, without other interventions to support those who are more likely to be harmed by the reduction in employment.
If it's actually only a 2.7% decline in employment relative to baseline then the increase in total wages paid would have to be very small to make this a bad policy.
I agree that a lost job should carry some kind of premium compared to a total increase in wages paid, and you also have to go and look at the total hours worked to get a good picture, but if the total relative increase in remuneration was higher than about 10% or so I think that's probably enough to be able to hand wave the employment decrease.
If it only turns out to be 5% I'd be a bit iffier about it.
In the UK we have a pretty generous minimum wage (for over 21s), I think even relative to $20 in California, and the effect on employment has been very small while minimum wage jobs now give a pretty OK life, so I'm inclined to support high minimum wages generally.
> If it's actually only a 2.7% decline in employment relative to baseline then the increase in total wages paid would have to be very small to make this a bad policy.
That seems unlikely to be just that though, this study was just on the people who lost jobs. If 20,000 people are out of a job, there is probably another larger cohort on less hours. And we also don't know how much wages rose. The people who were fired were the ones who could only justify being paid the minimum. The ones who stayed might already have been paid more like $17, $18 or $19/hr.
So yes to what you say, but the study doesn't say anything about whether total compensation went up or down.
Also low minimum wages are actually just corporate welfare.
The gap between what a minimum wage job pays and what it costs to scrape by is covered by government or charity, if they didn't do that the workers would die, which means the jobs don't get done, so that means the resource spent by governments or charities as a result of a low minimum wage is a subsidy for the employer. Instead of paying what it costs they get it for cheaper to create a fiction of "employment".
This right here. We should demand not to subsidize the richest companies in the world. The Walmart family can afford to pay their employees a living wage. Instead you and I pay for that in taxes, while they extract billions in profit and value from their business.
If anything we should be subsidizing small businesses to give a more level playing field against companies with global economies of scale.
> We should demand not to subsidize the richest companies in the world.
Not without overturning Dodge Bros vs Ford, I believe. The ruling created shareholder primacy, the privilege of shareholders to have maximum bites of the corporate apple. It rigidly protects shareholder (and by ext, executive) interests.
The never-ending wealth that flows from that - first buys politicians, then officials, judges and (eventually) every part of regulation & corporate oversight.
Have you actually looked at what Walmart pays? Even in areas where the minimum wage is still $7.25, they're paying nearly double as a starting wage. They raised their starting wage over $10 in 2017 and have consistently raised it even where they're not legally obligated.
Meanwhile, all raising wages in the current market does is implement a wealth transfer from businesses to landlords with minimum wage workers as the mules transporting the money.
If you let the housing supply remain this tight and just increase wages, you just bid up rents and make the most economically vulnerable fight over the insufficient supply of affordable units.
> what it costs to scrape by is covered by government or charity, if they didn't do that the workers would die
I take this to mean the assistance covers the gap to prevent death.
I would amend that to note the following: We can exist in a state of profound poverty w/o assistance for a very long time without dying. Persistent Hunger and crisis-level stress kills very indirectly; it commonly takes decades.
source: me + 5 kids. a decade of hunger-level poverty in a red state.
This isn't so straightforward. I would argue that they have some effect on the customers as well.
In the US, fast food restaurants are remarkably cheap, which is probably caused by low wages as well. If the workers were paid Danish or Swiss wages, quite a non-trivial part of the US population would be no longer able to afford a visit.
Now there is a wider question if that wouldn't actually improve their health, but that is already a bridge too far from the conversation. Miserly wages of restaurant workers do make the restaurants themselves more affordable to the general public, and the customers seem to be content about it.
No, it's not corporate welfare. Min wage hikes mean those workers unable to add that much value don't have jobs anymore, are left out of a workforce and thus cannot gain skills, and now require actual welfare.
Requiring companies to pay more than value added by an employee simply fire those workers.
The purpose of govt is to provide assistance, and perhaps training, so those on min wage can gain experience and skills to move up.
But that was the best job they could find. Presumably those people are going to be unemployed now. I mean, maybe they're kids and their families will have enough slack to just adsorb the change but in theory they need welfare checks now to survive since they probably can't justify anyone paying them $20/hr. So it actually costs the broader economy more than the salary they lost - firstly the work they were doing isn't being done, secondly someone else now has to work to earn the keep of the person who was just laid off because the job that paid them around what their skills were worth just got regulated out of existence.
You'd probably have to know more about what the jobs were. Certainly there's more self-service and fewer people waiting around to help customers in large stores than there were at one time. And small-time retail has also fairly visibly declined in favor of big-box and online purchases.
The abstract states that there are 2.7% less fast food jobs, not 2.7% less jobs. There might be 2.7% less fast food restaurants as a result of this change, but in their place will be other businesses that employ people of higher than minimum wage. Those businesses might hire the best fast food workers while the average fast food worker continues to be employed doing fast food. As a result, there may be no people who have now become unemployed as a result of this change, and only increases in wages. The data is inconclusive.
Regardless, instead of arguing over which commercial property takes which spot and trying to engineer the perfect fit with the limitations we are dealing with, we should be increasing the amount of places that are zoned for commerce. This will bring increased demand for labor, which will increase wages.
> but in theory they need welfare checks now to survive since they probably can't justify anyone paying them $20/hr
Are you implying that there are people in the world who just can't do anything productive enough to be worth $20/hour? That they are so useless that this was the only thing worth doing with them?
That seems fucking insane. If that's true, we have a huge problem with misallocation of value.
I think it's self-evidently true that there is a not ignorable group of people who can't create enough value to be worth being paid $20/hr (plus the employer-paid overheads) and have that be something that an employer would voluntarily do.
Around 10% of the population does not score highly enough on the ASVAB (an aptitude test for the military) to qualify for military service. The military, like any large employer, has an awful lot of jobs that require minimal skills and aptitude and for 10% to be Category V [unqualified for military service] based on aptitude, I would expect they wouldn't be the employees to create $20+/hr in value for private sector or other government employers either.
There are a significant number of people with developmental conditions such as Fetal Alcohol Syndrome or Down's Syndrome who, realistically, are never going to be capable of generating $20/hr of economic value. The higher we raise the minimum wage, the more of those people we condemn to permanent dependence on government aid.
It's too soon to say. Increasing the cost of labor will reduce jobs in the short term, and increase the cost of fast food. In the medium term, that may lead to people cutting back on fast food, which then leads to more job loss.
If fast food companies have perfect knowledge of their market, then the immediate job loss would be all that happens, but they don't so it will take some time to adapt to the new market, and see if consumers will bear the increase in cost.
That's not even considering substitutes for labor, which have never been as competitive as they are now. AI, robotics, single-purpose machines, etc. One negative to a minimum wage is that we don't actually know the market price of labor. When there is a shift from humans to machines for labor, it will happen quickly and without warning, rather than slowly as humans become dissatisfied with decreasing wages.
Also, you only really need to cover any increased taxes, everything else you pay them is someone else's income (fast food workers probably spend almost all their income). So your getting a big income increase to people very likely to spend it, this creating more employment.
Maybe here this will be offset by decreases in welfare program usage and the very, very high effective marginal tax rates that creates.
Indeed, the positive for increasing minimum wages is that it makes robotics and automation more cost effective.
With Silicon Valley being in California, one might think this is done on purpose—favoring the automation sector over the wage holders.
Once these companies get some scale in California, they can then drive prices lower to be competitive in other states.
In the end, sacrificing minimum wage workers in California will lead to (generally California based) automation companies taking this revenue across the country.
Labor reduction in fast food doesn't necessarily look like 'automation'
It's things like self-ordering, machines that make change (if cash handling still matters), conveyor ovens/charbroilers, more centralized food prep, self-service and automated beverage dispensing.
Plenty of automation is happening outside of California though. Here's an Illinois bases company's blurb about beverage automation [1].
Reducing labor in small amounts increases service capacity, and in large enough capacity lets you operate a restaurant with a smaller minimum crew.
It does really disfavor low productivity industries.
Actually, a core part of Sweden's original plan for social democracy was to have "solidaristic wage policy" where high wage workers would accept a lower wage in exchange for a higher one for low wage workers. The idea was you'd both squeeze low productivity businesses out _and_ provide a windfall to high productivity ones, who could expand faster.
Robots will always be cheaper, it is not a matter of if they will come, it is a matter of when. That is no reason the state should subsidise workers for big corporations by allowing them to pay such low income that workers are often eligible for social security.
If the total salary has gone up, for less work done, it is a positive change. You can solve the inequal distribution via taxes and benefits.
Start: 100 people paid $100
After minimum wage change: 90 people paid $125, 10 people paid $0
After tax increase: 90 people paid $113 + $12 taxes, 10 people paid $108 from taxes
Now everyone is paid at least as much as they were before, and fewer people are forced to perform labour
In practice it was only 3% unemployment not 10%, which means the tax increase is less and there is more of an incentive to continue working. You can also pay the displaced workers less than their original wage, to reach an equilibrium where everyone is happy with either work+more money, or leisure+less money. Or have it be age-based with an earlier retirement. Or have people work part-time.
We need to stop seeing having a job as being inherently good. Being able to live is good. Humanity should strive for 100% unemployment.
"Less work done" doesn't look like a positive change, you can't tax your way out of a smaller pie. Specially if you strive for humanity to produce no pie to start with.
I disagree that increased employment and increased labour always makes the pie bigger. If minimum wage was low enough, we would decommission our cement mixers and use a human with a shovel instead. But that's not an improvement. Automation is happening, jobs can be replaced right now. The problem is that humans are too cheap to bother automating, and that the profits of the automation are not being distributed to the displaced workers.
Paying more for less is never a positive change, it's an inefficiency that is costing someone and resulting in less goods for society. It's a net loss. That money paying for less is now not being spent where it was before, making that place lose out.
Well, on the other hand, it can be seen as something like a eugenic program to cleanse society of those unworthy of the state. After all, there is nothing stopping them from going to work somewhere else where there is no such minimum wage.
People dont think holistically about the economy. They think there are jobs. When they go there are that fewer jobs. Immigrants come in a steal jobs. Etc.
But in an economy, each richer consumer creates more jobs. The McD employees now buy better food, creating work for that supply chain. Or they can pay for education. Or they buy a takeaway coffee more often.
The immigrants who come and do jobs work hard for lower pay them spend that money into the economy.
If they could get higher paying job they would already do so. No legal immigrant dreams of working at McDonalds. No illegal immigrant would be employed by McDonalds.
They will decrease on their own if people think about where to get food, and not about extra money for the lottery.
> and maximum stock investments as well?
No, there are no restrictions. Any amount of investment. But there are only government's stocks and the terms of return on investment are determined by the government
> Will I still be allowed to hunt for food?
Only deep in the sparsely populated provinces. To avoid armed rebellions.
> Society is something better encouraged than gamified.
You'll be surprised at what methods encourage people best.
Read the biography of Korolev, who sent the first satellite and the first man into space. A case was fabricated against him, he was sentenced to 10 years in a gulag, but after a year he was transferred to a prison for engineers, on the condition that he will be a very effective engineer.
And he was. The results of such encouragement were amazing and almost unachievable by any other methods.
> And he was. The results of such encouragement were amazing and almost unachievable by any other methods.
Oh boy. You've missed the glaringly obvious. They only did this because they couldn't pay him. In other countries that paid their engineers they produced more and better products. History is clear and obvious on this fact.
> You'll be surprised at what methods encourage people best.
There's very little surprise when you study the actual science of human psychology and performance and not the journals of demented cold war generals.
Anyways, thanks for being honest about wanting to create a Company Scrip Town, I and many others, of course, will never cooperate with you. You're right to fear rebellion.
> They only did this because they couldn't pay him.
But they could. But no amount of money will encourage an engineer as much as the need to escape the gulag. Especially if you add some variety to their experience by staying in the gulag.
> In other countries that paid their engineers they produced more and better products.
It is precisely for this reason that the overwhelming majority of engineers in the USSR were not threatened with the gulag for inefficiency. And many believe that this is a good thing, and that "efficient" engineers threaten to destroy the labor market entirely.
> History is clear and obvious on this fact.
Yes. The Soviet space program created by Korolev is the pinnacle of human engineering thought, only God is above it. History is definitely clear and obvious on this fact
> I and many others, of course, will never cooperate with you.
That's the best part. You will vote yourself out of economic freedom, and then there will be no reason to ask about your opinion. Just look at the trends and public opinion on the necessity for economic freedom. You are already in checkmate if you look a few moves ahead.
This has been tried, and actually does work reasonably well.
Well, not maximum wages as policy but policies where high productivity workers take a lower wage than they could individually bargain for in exchange for boosting wages of low productivity workers.
It provides a windfall to the most productive industries and a squeeze to the least productive ones.
Nah, they didn't lose them, they got employed elsewhere for what they are worth, so if we do random calculations, it was probably something like 25% increase for many of them.
The unemployment statistics were not influenced by raising the minimum wage here, so you can assume that the people who lost their low paid jobs simply moved elsewhere and got better paid jobs. It's mostly the employers' loss, which is how it should be. If you can't afford to start a business, don't start a business.
> Small decrease in employment in exchange for ~25% higher wages for those employed?
It's a 25% higher minimum. It doesn't mean everyone was making the minimum before the law. Certainly not all were. (It would be interesting to know actually how much the wages went up on average.)
Also, do we know if prices went up? Because that could have a negative effect on the rest of the local population.
First, 2.3 to 3.9% decrease in fast food employment in a year isn't really small given only a fraction were affected by increase.
Second, the effective wage increase for fast food employment was actually quite a bit lower than 25% since several large municipalities had higher minimum wages and not all fast food restaurants were affected.
Yes. The paper doesn't go into detail about the wider economic effects in the state in business growth, tax revenue, and less reliance on public assistance.
One issue with a minimum wage is there isn't a great economic theory for what it should be. So even if this one had good effects, it doesn't mean $25 per hour would also have positive effects. It's also possible a personally beneficial outcome was a net-negative.
And the "decrease in employment" could very well be attributed to other factors, like inflated prices and shallow pockets of consumers, translated to them skipping on fast food more often...
Sounds like a net increase then in the money put into the California economy. Perhaps that has helped other sectors as well — like retail seeing more money spent in their stores as a result.
So aside from the fewer employees getting a raise, the businesses are now under financial stress because of the reduced revenue, the customers have fewer options for where to eat, and the State of California and the local city/county governments will receive less tax revenue from these restaurants.
Like most of the other recent California legislation, it's a "success" at further damaging the local economy and encouraging people like myself to stay away.