Posts tagged with: Living wage

10200456-largeIf you ask most people why they support raising the minimum wage they’ll says it’s because it helps the poor. But as David Neumark, a scholar at the Federal Reserve Bank of San Francisco notes, numerous studies have shown that there is no statistically significant relationship between raising the minimum wage and reducing poverty.

That finding may appear to be counterintuitive. After all, if poor people have low wages then increasing their wages should help reduce their poverty. To some extent, this is true. However, what is overlooked is that minimum wages target individual workers with low wages, rather than families with low incomes. The reason that distinction is important is because most workers who earn the minimum wage are in higher-income families.

That becomes more obvious when you think about the composition of the American workforce. If you are from a middle-class family, your first job is likely to have paid minimum wage. The same goes for all your friends who are from families higher on the economic ladder. And it’s the same for young workers today. Go down to the mall and you’ll find that the young men and women working in Forever 21 and Abercrombie & Fitch are not from families that are in poverty. Increasing the minimum wage merely ensures that these young people who are (mostly) from wealthier families get a pay raise.

The relationship between being a low-wage worker and being in a low-income family is fairly weak, as Neumark explains, for three reasons:
(more…)

1.21411In the latest addition to Mike Rowe’s growing catalog of pointed Facebook responses, the former Dirty Jobs host tackles a question on the minimum wage, answering a man named “Darrell Paul,” who asks:

The federal minimum wage is $7.25 and hour. A lot of people think it should be raised to $10.10. Seattle now pays $15 an hour, and the The Freedom Socialist Party is demanding a $20 living wage for every working person. What do you think about the minimum wage? How much do you think a Big Mac will cost if McDonald’s had to pay all their employees $20 an hour?

Rowe begins by recounting a job he had working at a movie theater for $2.90 per hour (the minimum wage in 1979). He served his customers, learned a host of new skills, and received several promotions in due course. Eventually, he decided to move on, pursuing areas closer to his vocational aspirations.

He worked. He learned. He launched.

Turning back to the present (and future), Rowe is concerned about the ways various labor policies have prodded many business owners to innovate ever-closer to full-blown automation, leading to ever-fewer opportunities for unskilled workers. “My job as an usher [at the theater] was the first rung on a long ladder of work that lead me to where I am today,” Rowe writes. “But what if that rung wasn’t there?” (more…)

Blog author: jcarter
Thursday, December 11, 2014
By

Summer-JobsGiving disadvantaged youth a summer job reduces violent crime, according to a new study published to the journal Science.

In a randomized controlled trial among 1,634 high school youth in Chicago, assignment to a summer jobs program decreases violence by 43 percent over 16 months (3.95 fewer violent-crime arrests per 100 youth). The decline occurs largely after the 8-week intervention ends.
(more…)

gaplogoThe furniture store Ikea has announced they will begin to base their minimum pay on what’s considered to be a “living wage” in each local area, rather than on what competitors are paying. Similarly, the clothing retailer Gap says it will set $9 as the minimum hourly rate for its United States work force this year and then establish a minimum of $10 next year.

This makes good business sense — but will lead to a lot of bad economic reasoning.

A prime example is the latest column by Slate’s business and economic writer, Jordan Weissmann:

Notably, Ikea isn’t raising prices on its furniture to pay for the raise. Instead, the company’s management says it believes the pay hike will help them compete for and keep talent, which is of course good for business. The Gap used a similar justification when it announced it would raise its own minimum to $10 by 2015.

Which I think hints at something about what would likely happen if the U.S. raised the federal minimum. Conservatives who argue that higher pay floors kill jobs tend to assume that businesses are already running at pretty much peak efficiency, and so forcing them to spend more on labor will lead to less hiring. But left-leaning economists see it differently. They tend to argue that increasing wages can lead to savings for business by reducing worker turnover, for instance, and forcing managers to make better use of their staff.

Both the conservatives and the left-leaning economists are largely correct. Higher pay floors do tend to kill jobs and increasing wages can lead to savings for business by reducing worker turnover. But where Weissmann and other liberals go wrong is in assuming that businesses can still prevent worker turnover when the minimum wage is increased.
(more…)

Terminator-2-Judgement-Day-posterI oppose implementing Skynet and increasing minimum wage laws for the same reason: to forestall the robots.

It’s probably inevitable that a T-1000 will return from the future to terminate John Connor. But there is still something we can do to prevent a TIOS from eliminating the cashier at your local McDonalds.

In Europe, McDonalds has ordered 7,000 TIOSs (Touch Interface Ordering Systems) to take food orders and payment. In America, Panera Bread will replace all of their cashiers with wage-free robots in all of their 1,800 nationwide locations by 2016. There is even a burger-making robot that can churn out 360 gourmet hamburgers per hour.

I, for one, welcome our new fast-food robot overlords. I’m just not ready for them yet.
(more…)

Seattle-mystWhen I was growing up I had a buddy—let’s call him “Bob”—who was constantly asking, “What happens if we do . . . ?” Bob’s curiosity, however, only led him to wonder about foolish actions. He never pondered, for example, what would happen if we all volunteered at the senior citizens center. Instead, his thinking ran more along the lines of what would happen if we jumped off the senior citizens center.

The reaction of me and the rest of my friends was always, “Let’s find out!” But we were more prudent than Bob (or maybe just more cowardly) so we’d encourage him to try whatever reckless idea he had in mind so we could learn from his experience. We learned, for instance, that if jump off the 3-story senior citizens center, a stack of cardboard boxes will not be enough to sufficiently break your fall.

Bob’s shenanigans would daily provide for us what social scientists would call a “natural experiment.” A natural experiment is a study of the effect of an independent variable, which has not been planned or manipulated by the researchers, on a dependent variable. (The word ‘natural’ in the term natural experiment therefore refers to an event that is not planned by the researchers.)

The city of Seattle is about to pull a Bob, by foolishly raising the minimum wage to $15 per hour. The effect on the citizens of Seattle will be almost entirely harmful. But it will provide a natural experiment on the effect of raising the minimum wage laws that the rest of American can learn from. Anyone who isn’t already convinced that increasing the minimum wage has a detrimental impact on employment and harm minority workers will, in a few years, have solid proof. We will all be able to look to Seattle to see the difference between good, albeit naive, intentions and sound economic policy.

Here are some of the effects I predict the policy will have in the next three years:
(more…)

Blog author: jballor
Monday, January 6, 2014
By

The following is a letter written in response to a post from my friend Brad Littlejohn on the topic of the minimum wage

Dear Brad,

Thank you for your thoughtful and substantive engagement on the question of the minimum wage. I don’t think the conversation we had on Twitter earlier did justice to your work here, so I’m offering this response in hopes of furthering the conversation. I hope you find it fruitful. I certainly have. I should also note that I have been assuming the context of policy proposals to increase the minimum wage at the federal level in the United States. There are certainly aspects of what we’re discussing that apply to a greater or lesser extent in other contexts and at other levels of government, but at the level of individual states, for instance, the stakes are somewhat reduced and ameliorated by the realities of federalism.

You write that you “want to reflect a bit more fully on what’s wrong with one of the common conservative arguments against the minimum wage: that the laborer is only worth his productivity.” I have significant concerns with equating someone’s worth with the economic value of their labor in the marketplace. I do not argue that the laborer is only worth his or her productive work. I argue that a worker’s work is only valuable in a market setting insofar as someone is willing to pay for it. I agree that there is a subjective element to work that is in some ways intimately identified with and inseparable from the person doing the working. But I do maintain that the worker and the work can, and indeed must, be distinguished. Perhaps what we disagree about is that you think the wage someone is offered is primarily a signal about how much that person is valued. I think that the wage someone is offered is primarily a signal about how much that person’s work is useful to others.
(more…)