Re: Guest Post - Minimum Wage

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I should have clicked through before asking my question, because Drum links to the example of Puerto Rico as a partial answer.


Posted by: heebie-geebie | Link to this comment | 05-22-15 5:40 AM
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I ate at Ivar's not long ago. It was good but it felt really strange not to leave tip.


Posted by: Moby Hick | Link to this comment | 05-22-15 5:42 AM
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In case anybody wants a review, the salmon was very good as were the potatoes. I ate the green beans out of a sense of duty, which is about as good as it gets with me and green beans. And then I successfully fought my cousin for the check, which means I'm now middle aged officially.


Posted by: Moby Hick | Link to this comment | 05-22-15 5:59 AM
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Many restaurants have been so doing in Oakland this year - a journalist was keeping a map, probably not updated anymore, but it lists 11.


Posted by: Minivet | Link to this comment | 05-22-15 6:12 AM
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You mean the other Oakland in California?


Posted by: Moby Hick | Link to this comment | 05-22-15 6:31 AM
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On Twitter, I saw someone whose cover photo was a sign from a protest that said "No more Oaklands." I agree, it's confusing enough as it is.


Posted by: dalriata | Link to this comment | 05-22-15 6:36 AM
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Lefty web sites frequently compare the current minimum wage, or any proposed adjustment, to the 1968 minimum wage. There was a big jump in the minimum wage from $1.25 to 1.65 between 1966 to 1968, coinciding with the Vietnam-era boom economy, a substantial increase in welfare benefits, the invention of medicaid and medicare, and some other things that might be expected to cause inflation. Inflation jumped over 4% in 1968, the highest rate since 1951, and stayed above that level for more than a decade. Economists disagree on how much the minimum wage had to do with inflation. Notably, the unemployment rate actually went down (possibly connected to the draft).

http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

http://money.cnn.com/interactive/economy/minimum-wage-since-1938/

http://www.multpl.com/unemployment/table


Posted by: unimaginative | Link to this comment | 05-22-15 6:38 AM
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I thought that it was pretty well established that high inflation of that period was because of the combination of military spending with increase in social programs. That is, it could have been avoided by not escalating the war in Vietnam.


Posted by: Moby Hick | Link to this comment | 05-22-15 6:42 AM
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Anyway, I recall lots of IPE classes talking about the inflation of the 70s and none of them mentioned the minimum wage at all. It was guns vs. butter where butter was direct government spending. Also, the dollar overhang and resulting collapse of Bretton Woods were crucial, but the were historically contingent events that really don't have a good parallel today.


Posted by: Moby Hick | Link to this comment | 05-22-15 6:46 AM
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8: The higher minimum wage was part of the increase in social programs. Inflation probably would have been less if either of the two sides of the equation had been less expensive.

Or maybe not. This is economics.


Posted by: unimaginative | Link to this comment | 05-22-15 6:50 AM
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8: The higher minimum wage was part of the increase in social programs. Inflation probably would have been less if either of the two sides of the equation had been less expensive.

Or maybe not. This is economics.


Posted by: unimaginative | Link to this comment | 05-22-15 6:50 AM
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Yes, Johnson could have kept inflation at bay by forcing down non-military consumption so that military spending wasn't inflationary, but "No raises, No social programs, and a bigger war" is probably not a very good way to win an election.


Posted by: Moby Hick | Link to this comment | 05-22-15 6:53 AM
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With the usual caveat that although economists think of inflation as being a bad thing, it isn't necessarily, unless you're a bank holding fixed rate mortgages. For my parents, who had unionized jobs that gave inflation-equivalent raises most years, and a fixed rate 30 year mortgage entered in 1971, 1970's inflation was a wonderful thing. I could have used a higher inflation rate when I was paying off student loans.


Posted by: unimaginative | Link to this comment | 05-22-15 6:53 AM
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It's also on topic to point out that if you eat salmon twice in the same day, it really goes through you. I'd guess because of all the oil, but I'm not a doctor.


Posted by: Moby Hick | Link to this comment | 05-22-15 7:02 AM
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Minimum wages ever too high anywhere?

East Germany just after unification is an example. Basically anyone capable of useful work with the ability to relocate fled immediately. For those remaining:

The Treuhand, staffed almost entirely by Germans from the west, became the virtual government of eastern Germany. In the course of privatization, the agency decided which companies would live and which would die, which communities would thrive and which would shrivel, and which eastern Länder would be prosperous and which would not. It also decided who might or might not buy eastern firms or services.

And this was with what amounted to ethnic harmony and plenty of wealth to go around.


Posted by: lw | Link to this comment | 05-22-15 7:18 AM
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15: Did they undo /weaken it, or just wait?


Posted by: Minivet | Link to this comment | 05-22-15 7:45 AM
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16. Waiting continues, of various flavors. Angela Merkel's pretty content, but I don't think it's an appealing place for labor or for capital.

In 2010 there was a lawsuit in Germany because a job applicant was declined with the hint "Ossi" and a minus on her application documents. A German court decided that this would be a discrimination but not because of ethnic reasons, since East Germans are not an ethnicity.[27]

Wiki page that looks pretty interesting:
http://en.wikipedia.org/wiki/New_states_of_Germany


Posted by: lw | Link to this comment | 05-22-15 8:02 AM
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Minimum wage is one of the issues I'm least confident about. It does intuitively make sense that a higher mw will lead to fewer jobs.


Posted by: torque | Link to this comment | 05-22-15 8:11 AM
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That's assuming we currently have a fair, free market in labor. Which I don't think we do. Corporate profits are at an all time high (as a percentage of the economy) and wages
lower than they have been since the 50s.


Posted by: Moby Hick | Link to this comment | 05-22-15 8:17 AM
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On the topic of minimum wages, DeLong linked to this Onion piece last night. The list of "cons" is fabulous:


Posted by: NickS | Link to this comment | 05-22-15 8:46 AM
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It seems it can reduce jobs a bit, but other things it can concurrently lead to that blunt that: lower executive salaries / profits; more and better training of workers; raising prices.

What's interesting in the data (I'm telling this secondhand, can probably dig up the link) is that when they do big multiple regression analyses of employment by locality across the country, controlling for as many other factors as they can get from the databases, a higher minimum wage does seem to have some negative impact on jobs (if not that bad). But when they study paired natural experiments, two similar localities where one raised the wage and the other didn't, there's virtually no effect. So the first category of study may be confounded with more economic growth in the last 50 years being in places like the South for reasons mostly other than minimum wage.


Posted by: Minivet | Link to this comment | 05-22-15 8:47 AM
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The differences are not so large once inflation is taken into account. Washington state's minimum wage is $9.47 this year (and has been indexed to inflation for a while). Seattle's minimum wage is now $11 and won't hit $15 for 3-7 years (different for large and small employers).

LA's current minimum wage is $9, which will rise to $15 over 5 years. SF's current minimum wage is $12.25, as is Oakland's.

US GDP currently clocks in at $100,000 per worker per year in the US. If someone chooses to work full-time shouldn't they be guaranteed 20-25% of that? That's $10-12.50 an hour nationwide. Or, put another way, US GDP per hour worked is currently $67. 20% of that is $13.40 an hour.


Posted by: F | Link to this comment | 05-22-15 8:55 AM
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18: Effect size. What fraction of minimum wage jobs bring so little value to their employer that a raise would consume that surplus, and so unnecessary to the core business that the employer would sooner let those positions go unfilled than, say, raise prices (bearing in mind that all competitors would be facing the same dilemma)? I'm guessing it's tiny. Now consider that the redistributive effects of wage increases will stimulate demand, and so whatever price increases that may result will be more easily born by customers and it's obvious that any effect on the employment rate will even be negative.


Posted by: Eggplant | Link to this comment | 05-22-15 8:57 AM
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23: Which I think is why the main reason employers are fighting this is because of the effects it will have on employees earning well above the current and future minimum wage. That is, they are worried about the people making $20 hour who aren't easily replaceable and are likely to look at $20 differently when it is no longer twice minimum wage.


Posted by: Moby Hick | Link to this comment | 05-22-15 9:14 AM
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One of my Facebook friends took credit for getting the minimum wage passed by having sat next to the now-mayor at my first wedding in 2003 and bending his ear about his reporting on the Santa Fe minimum wage.


Posted by: k-sky | Link to this comment | 05-22-15 3:57 PM
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One of my Facebook friends took credit for getting the minimum wage passed by having sat next to the now-mayor at my first wedding in 2003 and bending his ear about his reporting on the Santa Fe minimum wage.


Posted by: k-sky | Link to this comment | 05-22-15 3:57 PM
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In seriousness, the more restaurants that do away with tipping the better. Even more important is getting past the idea that servers make up the majority of tipped employees. They aren't, and since the debate tends to focus on the sliver of them who do well by tips, worrying about them is a huge distortion.


Posted by: k-sky | Link to this comment | 05-22-15 3:59 PM
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The New York Times is especially good here:

The restaurant industry, however, will not go down without a fight. The Los Angeles City Council has pledged to study the potential effect of allowing restaurants to add a service charge to bills to meet the increased costs. It is past time, however, to stop coddling an industry that has come to regard itself as entitled to special dispensation. If restaurants can't pay their servers the minimum wage, they need to pay higher earners less or raise prices. If restaurants are franchises that can't afford to pay adequate wages, their corporate parents should share the burden.

Posted by: k-sky | Link to this comment | 05-22-15 4:00 PM
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If restaurants businesses can't pay their servers employees the minimum wage, they need to pay higher earners less


Posted by: E. Messily | Link to this comment | 05-23-15 5:16 AM
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27: Under these proposals would they wage the restaurant minimum wage to a lower level than the new regular minimum wage?


Posted by: Bostoniangirl | Link to this comment | 05-23-15 5:48 AM
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My worry is that landlords who serve low-income renters will simply raise their rents and take it all for themselves. This is what happens in communities with large military populations whenever the housing allowance is raised, both at home and overseas.


Posted by: Paul Woodford | Link to this comment | 05-23-15 7:13 AM
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Interesting. I'd think that in a place as big as LA, landlords wouldn't have quite the same grip on the market (and there'd still be people off the books making less) but it'll be something to watch.


Posted by: ogged | Link to this comment | 05-23-15 7:23 AM
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Plus, Section 8 would probably kick in less as incomes go up.


Posted by: Moby Hick | Link to this comment | 05-23-15 7:38 AM
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Rents are so high now that it's hard to see them going up much as a result of this, and I doubt they're meaningfully set by the minimum wage rate here anyway. Even at $15/hr mist single-person housing is unaffordable or barely affordable, so my guess is that most minimum wage earners are doubling up in other households, living with parents, etc. LA has a real housing crisis; it doesn't have the absolute most expensive housing, but it has the worst (highest) rent/income ratio in the country.


Posted by: TRO | Link to this comment | 05-23-15 7:47 AM
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More here


Posted by: TRO | Link to this comment | 05-23-15 7:55 AM
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LA has a real housing crisis

What a mess. This is the house directly behind my parent's old house. Two million for something they're going to bulldoze.

Street view of the house I grew up in. That right there tells the tale of housing in that area for the last couple decades.


Posted by: gswift | Link to this comment | 05-23-15 10:25 AM
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So,it's only $400k down and $7,500 a month? People ought to be lined up around the block.


Posted by: CharleyCarp | Link to this comment | 05-23-15 12:52 PM
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That is four houses, right?


Posted by: Moby Hick | Link to this comment | 05-23-15 1:06 PM
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SF's goes up each year to reach $15/hr in 2018, http://www.sfgsa.org/index.aspx?page=411

The pretty comprehensive analysis by the City pre-adoption showed that the overwhelming majority of workers making minimum wage are not "teenagers with summer jobs", an argument against that is so in its face asinine it drives me around the bend. Who the heck do they think is man in the tills during school hours? Do fast food restaurants routinely shutter en masse during school hours?

Unsurprisingly many of these jobs are held by people trying to support a family. Some of them are indeed teens working nights and weekends but at least in SF many of those teens are contributing vital family income. These aren't "summer job mess about with your friends at the golf pro shop" jobs.


Posted by: dairy queen | Link to this comment | 05-23-15 1:16 PM
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27: Under these proposals would they wage the restaurant minimum wage to a lower level than the new regular minimum wage?

There's been some talk of a total compensation model (watch it, mayor) but it would require a change in state law.


Posted by: k-sky | Link to this comment | 05-23-15 4:11 PM
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