Minimum wage increase causes unemployment

[Surlethe]

A study (warning: pdf) has found that the minimum wage increase likely caused around 160,000 jobs to not be created this summer, and that a 10% increase in minimum wage causes a 0.19% increase in unemployment, so the response is quite small. I scanned the study, and it seems that they did not correct for cyclical unemployment.

N.B.: I did not quote the study here because I don't have the time to edit it into a presentable format.

[General Zod]

Not terribly surprising, but is 160,000 minimum wage jobs really an improvement even if they were created? How many of those would have been long term employment vs. temporary labor that would last just a few months?

[Mr Bean]

As has already been pointed out elsewhere if the minimum wage were adjusted for inflation to match the same levels it was in 1979 the Federal minimum wage should be 9.10$ an hour, not the 7.25$ it is now. And I have to say, unless you live in crackhouse-Mcslumsville, finding someplace which takes 400$ or less to live is next to impossible. Witness DC where even the crackhouses charge 700$ a month rent. And buying a house? On minimum wage? ahahhahah, that's almost funny.

Seriously the number of people in this country on "minimum" wage is staggering, McDonalds for example gets around it's jobs being called minimum wage by adding 5 cents or so onto employee's per hour. Many fast-food chains do that to avoid being added into minimum wage statics. EPI.org estimated that the number of people living on "almost" minium wage is close to 40 million.

"almost" refers to being within 50 cents of the current minimum wage of 7.25$

[Gerald Tarrant]

The table on page 5 seemed to best express the impact of minimum wage increases

Code: Select all

  State                           Percentage of Min
                                    Wage workforce 
                                   Who've lost jobs      

Alabama                             14.88% 
Georgia                             26.02% 
Idaho                               11.91%
Indiana                             22.43% 
Kansas                              11.18% 
Louisiana                            3.14% 
Maryland                            34.83% 
Minnesota                           55.10% 
Mississippi                         24.05% 
Nebraska                             3.65% 
New Mexico                          16.69% 
North
Carolina                            54.11% 
North Dakota                        14.63% 
Oklahoma                             8.75% 
South
Carolina                            25.79% 
South Dakota                         9.32% 
Tennessee                           19.63% 
Texas                               10.02% 
Utah                                15.63% 
Virginia                            22.21% 
Wisconsin                           28.18% 
Wyoming                             18.17% 

and also from the summary of the study

The minimum wage is a tool to increase worker incomes.
The cost of using this tool is a small loss of employment options
for low wage workers. This brief study reinforces the
dominant findings that the responsiveness of employment to
a minimum wage increase is small, with a 10 percent increase
in the minimum wage increasing the unemployment rate of
0.19 percent. Though we do not yet have the available data,
it is safe to conclude these job losses are likely clustered in
rural areas and among young workers, who represent the bulk
of minimum wage employees. This is what others have found
and we expect later studies to confirm this.

These results should be interpreted with some caution, as
is the case with all minimum wage estimates. However, it
should be clear that efforts to mitigate poverty among the
working poor could be done so at a smaller cost to the economy
through the extension of Earned Income Tax Credits, a
rebate of employee contributions to payroll taxes (Social Security
and Medicare) or an alternative negative income tax.

[The Grim Squeaker]

As has already been pointed out elsewhere if the minimum wage were adjusted for inflation to match the same levels it was in 1979 the Federal minimum wage should be 9.10$ an hour, not the 7.25$ it is now. And I have to say, unless you live in crackhouse-Mcslumsville, finding someplace which takes 400$ or less to live is next to impossible. Witness DC where even the crackhouses charge 700$ a month rent. And buying a house? On minimum wage? ahahhahah, that's almost funny.

Seriously the number of people in this country on "minimum" wage is staggering, McDonalds for example gets around it's jobs being called minimum wage by adding 5 cents or so onto employee's per hour. Many fast-food chains do that to avoid being added into minimum wage statics. EPI.org estimated that the number of people living on "almost" minium wage is close to 40 million.

"almost" refers to being within 50 cents of the current minimum wage of 7.25$

Why should someone with the skillset (or lack of thereof) make more than minimum wage (or a fraction more than that)? Why should someone in his early 20's or lacking in experience and education make that much more than it?

The fact that a higher minimum wage reduces new (mainly low end) job creation is an old, old fact. What's next, that extremely high job security makes it harder for new firms to start and makes owners reluctant to hire?
Oh, Oh, I know, extremely high tax rates may make less people invest! Tax loopholes may be exploited!

[General Zod]

Why should someone with the skillset (or lack of thereof) make more than minimum wage (or a fraction more than that)? Why should someone in his early 20's or lacking in experience and education make that much more than it?

Experience matters somewhat less than demand for a given skillset. If a position is in high demand but low in available workers with the needed skills, wages will go up to get those filled. If it's always in demand but has an abundance of workers capable of filling the roll, the wages will go down, etc.

[Count Chocula]

The Heritage Foundation did a study on minimum wage demographics. Click here for the article.

Interestingly, the study found that almost twice as many females as males work in minimum-wage jobs, and the average family income of 16-24 year old workers is over $60,000. According to this study, in 2005 1.9 million or 1.3 million Americans, depending how you look at it, earn min wage. And, most of them are white women. I didn't expect that.

[Darth Wong]

The Heritage Foundation?

In my experience, every political group with "Heritage" in its name is a rabid right-wing crypto-racist conservatard group (small wonder, since "heritage" is about inheriting things through blood lines). The fact that their motto is "leadership for America", their front page worships Ronald Reagan, and they publish articles like "Christianity: Lifeblood of America's Free Society" does nothing to make me think this group is an exception to that rule.

[Count Chocula]

Okay, here's data from another possibly "rabid right-wing crypto-racist conservatard group": The U.S. Department of Labor. Their 2007 study is fairly close to what the Heritage Foundation wrote about the 2006 figures, i.e. a majority of minimum wage workers are white women, and a majority of minimum wage workers are in families with a household income well above the official poverty line.

The Heritage Foundation study was the first hit when I Googled "minimum wage demographics" - the Dept. of Labor is the third down.

[Darth Wong]

So what significance does this have, relative to the debate going on in this thread? Are you trying to say that minimum-wage workers are actually doing fine because the Bush Administration says that the poverty line is set at a certain number? And what relevance does the racial issue have to any issue under discussion in this thread at all?

[Covenant]

Your methodology is flawed since you're using an average instead of actually following the curve. Secondly, a family income is a two-person income by default, but that doesn't mean they're both making 30k. Someone making 7.75 per hour working 40 hours a week for 48 weeks in a year is working 1920 hours for a total of 14,880 in raw income if we're discussing families where someone is in a near-minumum bracket. That means one person making about 15k and the other making about 45k.

Someone with a 45k job is not average worker, so adding one of them to your 15k minimum wage poverty person isn't an honest picture of the minimum wage issue. More than 70 percent of American individuals make 50k and less, with half of that number--a third of everyone--making 25k and less, so you can do that math. If they lived a single income, few people would be able to really have what you considered to be a comfortable middle-class life, and it's not fair to demand that marriage be considered the default status. It does help--it's hard to have a house and send kids to college on 50k, ya' know--but I find it absurd to say that if I have financial woes my solution is to marry. All this shows is that it's still extremely hard to raise kids on your own, and that a pair of minimum wage earners would not only be working a lot, but making barely anything. And that's really the issue behind wanting to raise minimum wage. It'd probably make more sense just to tax their income less though, so I'm not sure I feel a minimum wage hike is the best way to do it, but I just wanted to weigh in on the numbers.

[Count Chocula]

Relative to this debate:

I printed the report and looked at the map charts on pages 2 and 4. I didn't check them all, but here's what I saw.

Florida: no change in wage rate, employment DOWN .5% - .6%
Georgia: $.70 increase in wage, employment DOWN .5% - .6%
Alabama: $.70 wage increase, employment DOWN .1% - .2%

Three adjacent states, three different results. I live in Florida, and the economy here is struggling. I'm would not be surprised if there were fewer jobs created from June to July - retail businesses are hurting, including restaurants.

And the winners:
Arkansas: $.70 wage increase, employment UP .5% - .6%
West VA: $.70 wage increase, employment UP .9% - 1%

In AR and WV, the minimum wage went up and so did the employment rate. These two states seem to be acting counter to the trend of the article, except for the glaring datum that states with no increase in the minimum wage also lost jobs. You can infer from the study's charts that something besides the change in the minimum wage is happening.

I agree with Surlethe's comment about not accounting for cyclical unemployment; a June-July 07 and June-July 08 comparison may have been more revealing. The authors of this paper put a lot of effort and thought into it, but I think they could have had a better paper by at least considering other factors in the unemployment picture.

As far as the racial/sexist comment goes, it has no relevance. It just surprised me, is all.

[weemadando]

Can I point out that this is likely due to the massive amount of cheap, immigrant (read: slave) labour available in the US? After all, why pay minimum wage when you can get some illegal latinos to do it for a 1/3 of that?

[Illuminatus Primus]

The Heritage Foundation?

In my experience, every political group with "Heritage" in its name is a rabid right-wing crypto-racist conservatard group (small wonder, since "heritage" is about inheriting things through blood lines). The fact that their motto is "leadership for America", their front page worships Ronald Reagan, and they publish articles like "Christianity: Lifeblood of America's Free Society" does nothing to make me think this group is an exception to that rule.

Its a GOP, far-right propoganda organ. Its not considered a reputable source.

[Covenant]

Can I point out that this is likely due to the massive amount of cheap, immigrant (read: slave) labour available in the US? After all, why pay minimum wage when you can get some illegal latinos to do it for a 1/3 of that?

A lot of people already do that, and it's not suprising that most of these low-income jobs are related to the service industry, and especially food service, which seems to be entirely handled by illegal immigrants.

"Within the service occupations, 1 out of every 5 food service workers earned $5.15 or less per hour. Three out of every 5 workers paid less than the minimum wage were, in fact, employed in food service occupations."

[General Zod]

"Within the service occupations, 1 out of every 5 food service workers earned $5.15 or less per hour. Three out of every 5 workers paid less than the minimum wage were, in fact, employed in food service occupations."

How many of these food service jobs were waitressing or other positions that depended on gratuity? Many of those aren't even required to pay minimum wage, which is probably where a good chunk of the 1 in 5 figure comes from.

[Enigma]

"Within the service occupations, 1 out of every 5 food service workers earned $5.15 or less per hour. Three out of every 5 workers paid less than the minimum wage were, in fact, employed in food service occupations."

How many of these food service jobs were waitressing or other positions that depended on gratuity? Many of those aren't even required to pay minimum wage, which is probably where a good chunk of the 1 in 5 figure comes from.

Yup, I knew a guy that used to work at Hometown Buffet in Ohio and he got paid a little over $2\hr. Needless to say he didn't stay there for long.

I hope though that the job prospects and wages aren't going to be too shitty when I move or else I might have to fall back to being a courier.

[Ekiqa]

In regards to the food service workers, there's probably a different minimum wage for them.

In Canada, those who serve food and get tips, are paid less than minimum wage, as the tips are expected to make up the majority of their pay. Thus, they get paid like $6 an hour, as opposed to about $8 or more in Ontario.

[Enigma]

In regards to the food service workers, there's probably a different minimum wage for them.

In Canada, those who serve food and get tips, are paid less than minimum wage, as the tips are expected to make up the majority of their pay. Thus, they get paid like $6 an hour, as opposed to about $8 or more in Ontario.

I thought the min wage in Ontario was $10? Isn't that what Dalton McGuinty's Liberals did?

[Covenant]

"Within the service occupations, 1 out of every 5 food service workers earned $5.15 or less per hour. Three out of every 5 workers paid less than the minimum wage were, in fact, employed in food service occupations."

How many of these food service jobs were waitressing or other positions that depended on gratuity? Many of those aren't even required to pay minimum wage, which is probably where a good chunk of the 1 in 5 figure comes from.

You would be correct. That's what the original article asserted, but regardless, they still don't make that much--and I wasn't really trying to point blame. I don't tip much when I go out. I had a job where I was on my feet for twelve hours, dealing with frustrated people and trying to juggle fifteen groups at once, remembering who was going where, what they were getting, when they were leaving, and I never got tipped. Of course, that would have been illegal, as it was a county fair gate security that I was working!

[Ekiqa]

I thought the min wage in Ontario was $10? Isn't that what Dalton McGuinty's Liberals did?

As of now, its $8.75 general, $8.20 for high school students, $7.60 for liquor servers.
It goes up $0.75 next March and the one after for general, $0.70 for students, $0.65 for servers.

[Guardsman Bass]

How strong does that increase in unemployment hold when other factors are creating employment - like an economic boom?

At the same time, the minimum wage in the United States as is is already low enough that in most places you can't really live off of it unless you have a second income (usually in the form of a spouse working). Even if you completely repealed the minimum wage, you're going to hit a point where unless you don't mind a large part of your population living in shantytowns, very few people are going to be willing to work for it except those for whom this is a temporary situation or they have no choice (such as migrant workers) or people for whom this is simply a source of discretionary income (teenagers).