Minimum wage growing pains in Seattle

How is it that people believe basic economic laws can be subverted by government edict? How can people ignore what's happened to the most disadvantaged in society as the wage floor has been raised? Absolutely horrid employment rates for youth, undereducated, challenged and minority employees should speak to anyone with an ounce of compassion in their soul.

The first rung on the ladder of success has been raised so high that it's now out of far too many people's grasp. And if you can never get a hand on the ladder, you never develop the skills necessary for climbing.

Not everyone is lapping up the UW study like the delicious conservative-flavored kool-aid that it is:

There's this:


And then there's also this:


I smelled something fishy when I first read of the UW study, as it flies in the face of a lot of other research. It's also not even a published study. It's a non-peer-reviewed "working paper," and oftentimes when people release info from something like that, it's because they're trying to get publicity for results that might later have a tough time getting through peer review.

Very few of the people that I hear complain or otherwise rail against minimum wage increases have any relevant experience at all in running the type of business that would be most directly affected by such an increase (or, any experience in running a business of any kind at all). I often hear conservative politicians lament how even reasonable increases would hurt the poor widdle multi-million dollar corporations, whom they often affectionately and laughably refer to as "small business owners."

That, of course, doesn't apply to all people who criticize minimum wage laws, as some people have raised valid concerns about the dangers of artificial price floor effects (but I feel those concerns are often over-exaggerated like Chicken Little). But, that seems to be what I hear most from the most ardent opponents of minimum wage laws/increases.

Minimum wage increases have the most impact on the service industry, not these fictitious mom-and-pop "small businesses" that conservatives muse about (sort of like when they trot out the fictitious, maudlin example of "small farms" when they defend corn subsidies to large agro corps). Retail is obviously having its own problems, but those have everything to do with online retailers like Amazon and almost nothing to do with minimum wage increases.

Before I left the shitty corporate world to return to research/academia full time, I used to help run operations for a mid-sized regional restaurant chain. My operational budget was roughly $16 million annually, so each year I had to plan out a line-item budget for my entire area as well as individual budgets for each unit in it. I can tell you for a fact that most restaurant chains (full-service, QSR, and fast-food) absolutely have the funds to pay all of their hourly employees $15/hour and still make good profits. Most of them don't pay their employees shit, however, because they don't really care about their employees. Their first priority is "maximizing profitability." But, they only care to "maximize" it for the shareholders and bonuses for people at the top. It rarely, if ever, goes down to the workers who are the ones who actually make the money for the company.

This is something that many conservatives don't care about and that many US libertarians just can't seem to grok. People who run corporations don't act with much rational interest for the welfare of their workers because rationality has jack-shit to do with our economy. That's a fact that classical economic theory totally ignores but which an ass-load of research has conclusively demonstrated. Workers are easily replaceable commodities, which is why they're often referred to as "human capital" in job postings that ask for managers who can "successfully leverage human capital" (which, to me, sounds a lot like "human cattle").

If a restaurant company is even marginally profitable, they can afford to pay their employees good wages while still making a profit. However, they fight tooth-and-nail not to have to do this, because then the people at the top wouldn't make "as much" of a profit (it won't be "maximized"). That's why your restaurant server only gets paid about $2.13/hour, because Herman Cain lobbied the shit out of Congress in the 90s to prevent minimum wage laws from applying to tipped restaurant employees, who comprise the majority of restaurant employees.

Of course, we should guard against ludicrously high increases. But reasonable increases are desperately needed. If we'd tied the minimum wage to inflation decades ago, we wouldn't have a problem as severe as we have now. But, unfortunately, conservatives who are vehemently anti-increase have just as rational a reaction to reasonable minimum wage proposals as they have to reasonable gun control proposals. Even a logical, reasonable, evidence-based suggestion is treated as, "Hell no! They're comin' fer muh guns/money!"

These people don't care about their employees. They care about money in their own pockets. Capitalism is not driven by "market forces;" it's driven by selfish avarice.

That's the only "basic economic law" that really matters here and the only one people follow in real life.

Disagree. One of the big problems--in my view--with economists and policy wonks is the assumption that some metrics can be held constant, or at least can be depended upon to perform in a fully predictable and consistent way. Inflation is such a metric. It's important to remember that inflation is a consequence of many of the things that it also impacts, and it's not really consistent at all. Look at this:

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

Those are month to month inflation rates from 1914 to now. Economists and wonks will proclaim that the average rate of inflation is 3% per year or so and that may be technically true, but most recently look at 2015. Or farther back the early eighties. Or 1949-1950. You can't tie something like minimum wage to inflation, imo. It's too volatile, because raising the minimum wage ripples up the ladder. And that can't help but impact other things. In the end, what we'd get a rate of inflation that fluctuated even more.

In my view, people are--in a very broad sense--seeing wealth accumulation at the tippy top reach ridiculous heights and are assuming that the economy is broken all the way down. But that's a major error, imo. I would agree that there's too much money in large corporations. Hell, there's too much money in the stock market, imo. People with wealth like Bezos, Gates, and so forth really shouldn't exist. Not to mention the thousands upon thousands just below these top dogs. But by and large, they're not there because minimum wage is too low. Raising the minimum wage isn't a solution, at all imo. And it's not going to really save many people at all.

Because at the operational level, you're right Opty: it's all about maximizing profits. Which is exactly why raising the minimum wage creates incentives to decrease employment. One can't say that raising the minimum wage will automatically do this, because there are too many other factors involved, but that's where the incentives are, no way around it. Per the article I linked to, again:



That's all correct, imo.

Which means--imo--that raising the minimum wage, especially in chunks, is a crap shoot with regard to the real-world consequences. It's as likely to hurt some as it is to help others.

I think there are very few jobs (if any) where a person's time is worth less than $15 an hour. I actually can't think of any at the moment. If someone has to stand around waiting for customers because business is slow, does that mean they're less "productive"? I mean, I could see if you got to read books, write, do things you'd do in your free time while you weren't otherwise being productive for the company. "Piece work" is fabulous in this regard, provided the pay is fair for each "piece." But when someone is chained to a store or restaurant, or cleaning, or picking fruit, or mowing lawns, and their work is deemed not "worth" $15 an hour? That's bullshit.


And I'm sorry but it's NOT true that someone is willing to employ someone for $15 an hour if they're "worth" it. Most people are going to pay the least amount they can get away with paying. Some people call that "the market" but I agree with Opty - it's called selfish avarice. This can be offset by a situation where an employee not getting paid decently can just go down the street and get a similar job where they get paid more -- works great where there is a greater demand for workers than for jobs. But that's not always the case. In fact, it seems to be rarer and rarer these days.

Also, you don't magically develop extra skills that make you worth more from doing manual labor or taking orders at a drive-through.

New York recently passed a law saying you can't ask someone's last/current salary in a job interview. Why? Because a bunch of employers were offering to pay whatever your last/current salary plus x%. Let's call it ten percent to make life easy. So -- if your current job paid 50k, they'd offer to pay you 55K. If your current job paid 100k, they'd offer you $110k -- for the same goddamn job. You could be equally good, maybe better as other candidates, but it didn't matter. You would be offered half the pay the other guy was for the same damn job.

As you can imagine, this tended to trap people into lower salaries essentially forever.  Too many employers were following this practice, and there weren't enough jobs on the ground for employees to be able to thumb their nose.

I'm a big fan of the new law. I think it only makes sense to look at a job and what it requires in skills and work, and set a salary. Then you hire the most suitable candidate who wants the job and pay them that. If a great candidate comes in and asks for more, you can decide if you think they're worth it, and if so, pay accordingly. No law against that.  But you can't low-ball someone just because their last job paid less.

Anyway.  Employers were not naturally foaming at the mouth to pay people what they were worth.