Do higher minimum wage laws stifle small business and cost jobs? Maybe not...

http://www.huffingtonpost.com/2014/05/1 ... 30852.html

freeman3 wrote:Do higher minimum wage laws stifle small business and cost jobs? Maybe not...

http://www.huffingtonpost.com/2014/05/1 ... 30852.html

Of course, these data are limited, measuring only businesses with fewer than 50 workers. They don't account for broader economic trends, such as the tech boom affecting West Coast cities like San Francisco and Seattle, that might affect job growth, noted James Diffley, chief regional economist at IHS, who helped make these charts.

California and Washington don't fare so great, generally.

http://www.bls.gov/web/laus/laumstrk.htm

freeman3 wrote:Do higher minimum wage laws stifle small business and cost jobs? Maybe not...

http://www.huffingtonpost.com/2014/05/1 ... 30852.html

Have we established why this should be a federal issue and not a state issue? Perhaps CA and other states can support a higher minimum, but several states with lower productivity would see increases in unemployment. Puerto Rico suffers from large unemployment because its general level of productivity cannot match the U.S. federal minimum as it is. They will really suffer if the Feds raise the minimum.

ray

Perhaps CA and other states can support a higher minimum, but several states with lower productivity would see increases in unemployment.

There's a chicken and egg angle to this ...
Businesses in jurisdictions with higher minimum wages need to drive the processes that increase productivity. In jurisdictions where cheap labor is abundant the businesses rely on the cheap labor.
Freemans point is that high minimum wages are not a barrier to growth, or the development of a complex economy.
On the other hand, low wages and benefits that makes it difficult for working class people to do much beyond subsistence living has kept economies from growing and developing. The greatest growth in middle class comes when the working class's lot improves. And the healthiest economies are those with a large thriving middle class.
I think that its fairly accepted that the US middle class is shrinking and has had enormous pressures on its standard of living over the last 30 years. Perhaps part of this is because the floor that is the wages and benefits of the working class, have also decayed over that time?
(An author on GPS on CNN this morning compared the current state of China to the Gilded Age in the US. If the Chinese working class begins to press for the reforms that came in the US from the 1890s to 1940 and grows its middle class to that of the US in the 60's... imagine how powerful that economy will become.

Ray

Puerto Rico suffers from large unemployment because its general level of productivity

The minimum wage has little to d with Puerto Rico's problems...
Among them:

Academically, most of Puerto Rico's economic woes stem from federal regulations that expired, have been repealed, or no longer apply to Puerto Rico; its inability to become self-sufficient and self-sustainable throughout history; its highly politicized public policy which tends to change whenever a political party gains power; as well as its highly inefficient local government which has accrued a public debt equal to 66% of its gross domestic product throughout time.
At a global scale, Puerto Rico's dependency on oil for transportation and electricity generation, as well as its dependency on food imports and raw materials, makes Puerto Rico volatile and highly reactive to changes in the world economy and climate.

Fundamentally perhaps the greatest problem for Peurto Rico is the extractive colonial relationship it has with the US...

Perhaps mandating a minimum wage higher than the country can support is part of the extractive colonial relationship.to which you refer.

ray

Perhaps mandating a minimum wage higher than the country can support is part of the extractive colonial relationship.to which you refer

What would be extractive about this?

This is extractive:

At the macroeconomic level Puerto Rico has been experiencing a recession for 8 consecutive years, starting in 2006 after a series of negative cash flows and the expiration of the section 936 that applied to Puerto Rico of the U.S. Internal Revenue Code. This section was critical for the economy of the island as it established tax exemptions for U.S. corporations that settled in Puerto Rico and allowed its subsidiaries operating in the island to send their earnings to the parent corporation at any time, without paying federal tax on corporate income

.

Ray

Perhaps CA and other states can support a higher minimum, but several states with lower productivity would see increases in unemployment

The businesses that depend most upon minimum wage earners are fast food and retail. If it were true that high minimum wages could not be sustained by these business sectors wouldn't you expect to see fewer of these kinds of businesses per capita in places with high minimum wages.
You don't.
check it out here.
http://www.businessinsider.com/this-int ... ate-2012-1

Ricky:

Ray

Perhaps CA and other states can support a higher minimum, but several states with lower productivity would see increases in unemployment

The businesses that depend most upon minimum wage earners are fast food and retail. If it were true that high minimum wages could not be sustained by these business sectors wouldn't you expect to see fewer of these kinds of businesses per capita in places with high minimum wages.
You don't.
check it out here.

http://www.businessinsider.com/this-int ... ate-2012-1

It's much more complicated than that ... you have to look at both labor supply and demand as well as product supply and demand. Then you have to think about the demographics of different states.

ray

It's much more complicated than that ... you have to look at both labor supply and demand as well as product supply and demand. Then you have to think about the demographics of different state

s
1. Your link doesn't work.
2. I understand the complexities of supply and demand and labor etc. I've been in sales and marketing and market research my entire career.
Even so, none of them offer much support for what is a simple position. "We (businesses) can't afford to raise the minimum wage "In my state, in my city, in my country ...."
Every time a rise in the minimum wage has been considered the same argument is made... Inevitaly the MW is raised and no one goes out of business...
http://www.businessweek.com/articles/20 ... ut-a-fight
Please point to some actual experience, anywhere, where the increase in minimum wage has created an economic rift whence occurred an above average business bankruptcy or closure . There's no evidence of such.
There is evidence that increases in minimum wages have aided the economy. (Poor people spend the money they get. )

Chris Rock said Minimum Wage says to the employee, If I could pay you less I would."
And he's right.

Now, the notion of becoming uncompetitive because of an increase in minimum wage is an interesting one... If every competitor has to increase their wages because of the minimum wage increase, who's competitiveness is affected?

I have seen many claims and theory that minimum wage increases cause problems. I can see very high ones might (as perhaps that proposed for Switzerland - although the cost of living in Switzerland is very high so pure currency equivalence does not tell the full story), but where is the actual evidence?

Whether it is done at a Federal level or by States (frankly I find that aspect one of the more tedious parts of American political discourse), the issue is are people being paid enough for it to be worth them working?

If not, why bother getting a job?

Ricky:

ray

It's much more complicated than that ... you have to look at both labor supply and demand as well as product supply and demand. Then you have to think about the demographics of different state
s

1. Your link doesn't work.

It was just a copy of your link -- and not a new link - that didn't copy all the way.

There's a lot of scholarly work on this topic. Here's a reasonably good summary. I believe I've posted it before http://www.nber.org/papers/w12663.pdf?new_window=1

A sizable majority
of the studies surveyed in this monograph give a relatively consistent (although not always statistically
significant) indication of negative employment effects of minimum wages. In addition, among the
papers we view as providing the most credible evidence, almost all point to negative employment
effects, both for the United States as well as for many other countries. Two other important conclusions
emerge from our review. First, we see very few - if any - studies that provide convincing evidence
of positive employment effects of minimum wages, especially from those studies that focus on the
broader groups (rather than a narrow industry) for which the competitive model predicts disemployment
effects. Second, the studies that focus on the least-skilled groups provide relatively overwhelming
evidence of stronger disemployment effects for these groups.

Dan:

Whether it is done at a Federal level or by States (frankly I find that aspect one of the more tedious parts of American political discourse),

Your unwillingness to engage in a conversation on federal vs. state prerogatives is disappointing. Aside from the constitutional issues, you have to realize that this is a very large country with diverse economic conditions. For example, in 2012, Maryland had a median household income of over $71,000 (I wonder why) whereas Mississippi was at just over half of that at $37,000 and Puerto Rico had a median household income of $19,400 or just 27% of Maryland. Does it make economic sense for these diverse economies to have the same minimum wage? Don't Puerto Ricans deserve more say in their economy? Should Greece have the same minimum wage as France?

Dan:

the issue is are people being paid enough for it to be worth them working?

If not, why bother getting a job?

Your concerned with the pull of jobs relative to the pull of state support. Yes, people should be better off working than they are by relying on state handouts. There's no better way to build a functioning society.

ray

Your unwillingness to engage in a conversation on federal vs. state prerogatives is disappointing.

I think everyone gets the notion that local conditions should allow local jurisdictions to respond with policy that makes sense . Its more expensive in New York, so a higher minimum makes sense.
However, it also follows that a federal minimum makes sense in order to protect citizens in some states from predatory or exploitative conditions.
The question is at what level are employers exploiting workers ? And are they able to exploit them only because they cannot afford to move to jurisdictions where the same labor is valued more?
The only reason some states are able to maintain a low minimum wage is because their labor force is immobile .


The really dumb thing about the minimum wage, and you and I have agreed on this before, is that it is't pegged to the rate of inflation. If it hasn't been raised in years, whilst everything else has inflated, how can it not be too low now?

Ray Jay wrote:Your unwillingness to engage in a conversation on federal vs. state prerogatives is disappointing.

Aside from the constitutional issues, you have to realize that this is a very large country with diverse economic conditions. For example, in 2012, Maryland had a median household income of over $71,000 (I wonder why) whereas Mississippi was at just over half of that at $37,000 and Puerto Rico had a median household income of $19,400 or just 27% of Maryland. Does it make economic sense for these diverse economies to have the same minimum wage? Don't Puerto Ricans deserve more say in their economy? Should Greece have the same minimum wage as France?

Puerto Rico is an anomaly, as it is basically a colony. One of these days the USA will figure out how to sort out the status of it's Imperial conquests, although of course with PR it is partly down to a three-way split in opinion between Independence, Statehood and the Status Quo.

You should not, however, compare the US to the EU - they are not the same thing. If you look at France itself, however, it includes regions in the Caribbean (Guadeloupe and Martinique). The minimum wage there is not exactly the same as in Metropolitan France, but it is pretty high - and a few years ago was increased radically after large scale disputes. Given that Puerto Rico did better when there were Federal exemptions for various things, it would make sense for the island (if perhaps not the US government), to restore some of those, and perhaps the minimum wage could be part of that - although I'm not sure what the relative cost of living is there.

It may surprise you, but you can see variations of that same kind of order (37:70) in the earnings across regions of the UK - and we have the same minimum wage rates nationwide. London and Northern Ireland are about comparable. While it is interesting to compare current incomes, that could be a function of all kinds of things. When it comes to the minimum wage, I thing the starting point should be the cost of living, not just wage rates.

After all, perhaps states with low average wages are like that because they stick to the Federal minimum, while states with higher minimum wages are driving up incomes? There does seem to be a correlation (although the causation could easily be the opposite way around).

Dan:

the issue is are people being paid enough for it to be worth them working?

If not, why bother getting a job?

Your concerned with the pull of jobs relative to the pull of state support. Yes, people should be better off working than they are by relying on state handouts. There's no better way to build a functioning society.

Well, there are plenty of ways to build societies, but I would suggest that it should be like this:

Minimum benefits should at least cover basic living expenses, but not much more (A)
Benefits accrued due to work should be higher based on contributions (B), but not permanent (except for retirement pensions which should be guaranteed)
Work should pay more than benefits (C)

So, A is based on the cost of living. B is greater than A, on a sliding scale (because that encourages people to work as well), and the minimum wage should be set so that C is greater than max(B).

I understand that the cost of living can vary from state to state (or region to region), but my point is that I don't really care where the level is set. My point is that whoever sets the minimum wage, which is for C, should look at A and B.

By the way, I would make exceptions for people who are disabled etc - their particular cost of living could be much higher and so they should be given extra support, and that includes extra support if they want to work and are able to with some assistance.

I look at it from a slightly different perspective than Dan does (though I think we by and large want the same result--poor people making enough from a job to support themselves without government assistance). I am most concerned that poor people do not get taken advantage because of their lack of bargaining power. I am not so much concerned about small business, becaue they are much less able to dictate wages. That is why I found the data from small businesses doing well in high minimum wage cities/states so interesting. Why are small businesses doing so well in high minimum wage places?

You might think they would be the most susceptible to increases in labor costs but somehow they are doing quite well. To me it suggests that large corporations are using their bargaining power to reduce wages below what a poor worker should get given his productivity. Small businesses do not have that bargaining power and they have to pay wages more closely linked to worker productivity and they do better when the minimum wage is higher because now they are in a better position to compete against large corporations.

We have a society that can support a higher minimum wage (I'll stipulate that Puerto Rico is a differnt case).The federal minimum wage expressed in today's dollars was over $9.00 an hour from the late 1960's, with a high of 10.69 in 1968, until 1980 (gee, what a coincidence). It is now 7.25. Raising it to at least $10 ( I would argue for $12 after a couple of years of adjustment) seems reasonable given the fact that our economy has expanded so much since the 1960s.

freeman3 wrote:I look at it from a slightly different perspective than Dan does (though I think we by and large want the same result--poor people making enough from a job to support themselves without government assistance). I am most concerned that poor people do not get taken advantage because of their lack of bargaining power.

I am a union rep at work, and I am also very concerned about the power-differential between employers and employees. I just think such arguments are going to fall on deaf ears.

I am not so much concerned about small business, becaue they are much less able to dictate wages. That is why I found the data from small businesses doing well in high minimum wage cities/states so interesting. Why are small businesses doing so well in high minimum wage places?

You might think they would be the most susceptible to increases in labor costs but somehow they are doing quite well. To me it suggests that large corporations are using their bargaining power to reduce wages below what a poor worker should get given his productivity. Small businesses do not have that bargaining power and they have to pay wages more closely linked to worker productivity and they do better when the minimum wage is higher because now they are in a better position to compete against large corporations.

It is interesting. It's also a way that real data contradicts the theory and the fears of people who oppose increased minimum wages. Perhaps it's because people have more money to spend, and that encourages choice.

We have a society that can support a higher minimum wage (I'll stipulate that Puerto Rico is a differnt case).The federal minimum wage expressed in today's dollars was over $9.00 an hour from the late 1960's, with a high of 10.69 in 1968, until 1980 (gee, what a coincidence). It is now 7.25. Raising it to at least $10 ( I would argue for $12 after a couple of years of adjustment) seems reasonable given the fact that our economy has expanded so much since the 1960s.

Quite why the minimum wage has not kept pace with at least inflation is an interesting question. Could we track unemployment against the real value of the minimum wage to see if there is any correlation at all?

danivon wrote:Quite why the minimum wage has not kept pace with at least inflation is an interesting question. Could we track unemployment against the real value of the minimum wage to see if there is any correlation at all?

Someone already did it:

The Impact of Increasing the Minimum Wage on Unemployment: No Evidence of Harm

He also focuses on whether a rise in the minimum wage disproportionately hits the young.