Fast food workers are on strike. They want the federal minimum wage raised from its current figure of $7.25 an hour or $15,000 per year.
What SHOULD be the minimum wage? Curious what you all think.
It’s $10.25 currently here in Ontario and that’s tough to manage for people.
Some people aren’t worth more than $5/hr. (Some of these people are in high school, but others are fully grown.) I can’t support outlawing the only jobs they qualify for. Work is good for the soul.
Before you read my comment, go look at: http://www.youtube.com/watch?v=cAXcqO_zJgk
and then read http://singularityhub.com/2013/01/22/robot-serves-up-340-hamburgers-per-hour/. Go ahead, I’ll wait.
Back? Now, let’s think what we want the minimum wage, employment regulation at the low end generally, to do. I think we want workers to be able to feed their families, clothe their families, pay for essentials, be resilient to emergencies. I think we also don’t want to discourage employers from hiring people. If a minimum wage is higher than the possible profit to an employer from having someone on payroll, that’s a recipe for putting people on welfare, and you have made things worse. Elizabeth Warren said it should be $22.
At some point, you have raised the minimum so high that burger joints will put in electronic order pads at the door, install an automatic fry machine, and all you have left is the cashier and the janitor. And the landscapers split into two groups, one group has cobblestone laying machines and the other subcontracts to them whenever there’s a driveway. This is obviously a claim that when labor costs go up, employers substitute capitol equipment at a higher level.
Right now we have a system which has the potential to be pretty precisely adjusted – we have a relatively low minimum wage. Result: employers think carefully whether they make more profit with human burger flippers than with the machine, and generally pick the humans. We have food stamps, which are more generous to families with children. Result: money raised through the relatively progressive income tax system goes toward keeping hunger at bay, there is more food if there are more mouths, and it is at least difficult for parents to spend their money on vodka instead of chicken thighs. And we have the EITC, which supplements the money earned by employees at the lower end of the wage range, but which is not incident on the immediate employer so does not skew the employer’s decision away from hiring a cobblestone-layer or burger-flipper and towards a machine.
A further result is that when an unskilled middle class teenager goes for a job, he can get one and no one is going to send him food stamps or EITC, and he is not priced out of the market by a too-high minimum wage.
My inclination is that more money is probably better spent on EITC and SNAP than on minimum wage increases.
This is obviously a claim that when labor costs go up, employers substitute capitol equipment at a higher level.
That’s basically the mechanism by which standards of living have risen above subsistence agriculture. It’s a very good thing.
Also, I think that all this talking of “the market” is missing a great deal of the point. You have a small number of well-informed purchasers of labor (aka oligopsony) while labor has lots most of the institutions that allowed for it to bargain collectively. It isn’t a clear economic signal. It’s an outcome of a political process that needs to be fought out in a political sphere.
Oligopsony??!? Come on, there are thousands of small stores and fast food franchise holders and landscapers. They are competing like crazy to offer lowest-cost broasted chicken and mulch services. The reason organized labor has relatively little power is partly because the rich people who like docile and obedient household help have thrown open the borders and partly because everybody likes cheap household goods from China. That, and the huge drop in trans-oceanic shipping costs from container cranes replacing longshoremen.
There is plenty of evidence that the biggest employer in the world uses it’s power to lower wages.
Haven’t we seen that, if we allow companies to skimp on everything but generating profits, they do so, and then either 1) sit on the profits, or 2) turn it over to shareholders and/or increase CEO salaries? Job creation has been abysmal, but companies are more profitable than ever. The argument that high wages decreases job creation has an air of plausibility about it but appears to be empirically wrong. Given this, why don’t we raise wages and see what happens, rather than rely on hypothetical arguments about teenagers trying to get jobs, based on logic which has proven to faulty.
Our current unemployment rate is still over 7% and it’s been there or higher (up to about 10%) for the past five years..
Krugman had an article on the minimum wage just this week: http://www.nytimes.com/2013/12/02/opinion/krugman-better-pay-now.html?hp&rref=opinion&_r=0 in which he states that the dire warnings about decreased employment from increases in the minimum wage are mistaken. He cites this study:
Krugman had a paragraph on his blog http://krugman.blogs.nytimes.com/ that struck home with me:
“I think that in both cases [health care & 'flat money', but I think we can add minimum wage to this list] it has to do with the underlying desire to see market outcomes as moral imperatives.”
Yes, all those bad things could happen if we raised the minimum wage. But, they haven’t, in the past (empirical evidence, as opposed to theory). So, why don’t we try it and see what happens?
As Krugman says, the EITC and other transfers can be synergistic with improved minimum wages.
The minimum wage in Oregon is $8.95 per hour. And Oregon law does not permit “tip deductions”: waitstaff and other employees who receive tips are entitled to the minimum hourly wage and get their tips on top of that.
A friend of mine just paid a lightly documented cleaning lady $40 for four hours of cleaning work. (The cleaning lady’s night job is at a chicken factory.) This is in an unfashionable medium-sized town in Texas.
Similarly, I just paid two very legal guys $30 to blow and bag our leaves (I don’t think it took them over an hour). When they mow our 1/4 acre lawn in the summer (which is also about an hour for two guys), it’s $35. (That’s the best quote I’ve ever gotten–the previous one I got was $40 for a different yard.) Likewise, when I last paid a private cleaning lady, her pay worked out to $20 an hour ($80 for about four hours), which was a really good deal compared to the chain services (she went to jail eventually, but that’s another story).
Granted, in all of those cases there were expenses involved (cleaning supplies and leaf bags and gas for the leaf blowers), but it’s pretty clear that the natural floor for this type of moderate-skill, high-effort activity in our area is about $10 an hour, even in our very inexpensive area and in an area with lots and lots of native poor and illegal aliens and lots of tolerable real estate well under $100k. (Note that the minimum wage doesn’t really apply to these cases, as it’s pay-per-job, not pay-per-hour.)
As I mentioned in a previous thread, very few workers make minimum wage or less.
“Perhaps surprisingly, not very many people earn minimum wage, and they make up a smaller share of the workforce than they used to. According to the Bureau of Labor Statistics, last year 1.566 million hourly workers earned the federal minimum of $7.25 an hour; nearly two million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.55 million hourly workers at or below the federal minimum.
“That group represents 4.7% of the nation’s 75.3 million hourly-paid workers and 2.8% of all workers. In 1979, when the BLS began regularly studying minimum-wage workers, they represented 13.4% of hourly workers and 7.9% of all wage and salary workers.”
A high minimum wage makes marginal workers unemployable. Think about your most entitled niece (the one who needs to have her cell phone surgically removed), your ne’er-do-well brother-in-law (the one who never met a job he couldn’t get fired from), that guy mumbling to himself and pushing a grocery cart down the middle of the road, the surfer dude living off a couple hundred in food stamps and his shopgirl girlfriend’s largesse and working sporadically and with very little enthusiasm, and imagine how hard you’d have to work yourself to wring $10 an hour worth of labor out of any of them. (One of my relatives recently had to fire two of our cousins because the kids would not put down their cell phones on the job.)
Pretty much no new entry level retail employee is worth $10 an hour (and let’s bear in mind that from the employer’s end, the employee is actually considerably more expensive than that per hour).
Also, bear in mind the existence of such things as college, internships, and “volunteer” programs. If you go to college, you spend upwards of $50k a year for the opportunity to read, write, and do lab work pretty much full time. You’re paying to work! Internships are not quite that bad–there, you might only be working for free, for instance campaigning passionately to raise the minimum wage (?).
Of course, if you’re paying college credit to do an unpaid internship (which happens), then each hour spent on the job site could be costing you lord-knows-how-much. And then there are volunteer programs. The Peace Corps, for instance, does not pay minimum wage. When I was a PCV in the 90s, I made the princely sum (for the Russian Far East) of $400 a month. That included an apartment (market rent, about $50 a month), but even if we include the apartment and assume a 160 hour work month, that comes out at under $3 an hour.
So, should all of those things (college, unpaid internships and full-time volunteer programs) be illegal?
mh – Here is a Jonah Goldberg post about machines substituting for waiters at Applebees: http://www.nationalreview.com/article/365606/minimum-wage-and-rise-machines-jonah-goldberg
So. In the glorious future, you enter your order on a tablet, and it is a robot-fried burger, which is brought to your table by an overhead system of chains and wires (http://www.fritzskc.com/, or by Bezos’ drones: http://www.dailymail.co.uk/news/article-2338364/Flying-fish–table-Sushi-restaurant-offers-diners-taste-future-gadget-designed-deliver-food-25mph.html).
We have a common problem, actually, shared by Obamacare and the idea of minimum wage increase: the money is coming from the wrong source. Both have decent goals: people ought not die of reasonably treatable conditions, people ought to live reasonably comfortably and not be humiliated if they are willing to work. These things are expensive! And Obamacare gets the money, mostly, by extracting it from middle-income people to transfer to poor people. Obamacare does not allow actuarially sound rates, and result is some 35 year old couple makes $95000 a year working two jobs and their cost for their health maintenance plan goes way up because their plan has to give rates no more than triple theirs to 60 year old smokers. There’s a welfare value, a moral value, to making sure the 60 yo people can pay for health maintenance plan. But I see no good policy reason that the subsidy should come from the poor bastard who has just worked his way up to assistant manager of a shoe store. It should come from The Man Behind The Curtain, Nancy Pelosi and Larry Ellison and David Koch and Jeff Bezos.
Raise the minimum wage, and you are doing something similar: putting at least some wages above the value of the work being produced. You require that this money be paid by the guy running the burger joint, or the lawn service, or Wal-Mart. Result is that the burger joint invests in at-table order takers, burger machines, and delivery drones, Wal-Mart lowers its already low standards for instore cleanliness and speed of restocking, and a bunch of people are at home on welfare instead of working for crap wages. Yes, the crap wages are not adequate for a comparatively decent life. But, we the taxpayers are paying ALL of the welfare costs, and in addition (‘the devil finds work for idle hands’) people on welfare don’t develop work skills and fit themselves for better jogs. A better way? top up the crap wages with a supplementary payment from the general tax base. Make a decision: any job which is worth $8/hour to a private employer is presumptively worth doing. And the govt will pay a supplement to get that wage up to what we think is a decent standard. That’s generally the idea behind the EITC, though it could be made a lot better by making the checks smaller and more frequent, and having the feedback quicker.
Banging on another drum: every semi-skilled immigrant who comes into the country is competing for jobs with the semi- and un-skilled workers already here. That means open borders (also called ‘immigration reform’) is a real attack on existing citizen poor people, who get squeezed out of jobs which could have been there. And this bids down the wage level employers have to pay to compete for workers.
Are there more ideal ways of helping people than Obamacare and the minimum wage? Yes, yes there are. Are there other ways being pushed by an opposition party that currently exists right now. No, there is not.
In the real world, we don’t actually have an opposition party arguing for a different structure for universal care. We have an opposition party demanding a near 100% subsidy for health care for someone who is 65 and screaming that a subsidy of around 33% for somebody who is 64 will destroy the republic and is unconstitutional in some way that they can’t make clear to me or the actual Supreme Court. The choice is Obamacare or massive and growing numbers of uninsured. No Republican in office proposed an alternative that might cover people until after the holding the government hostage to shut it down.
I think the EITC is just great, but it’s very hard to ignore the fact that the Republicans who used to push it have been mostly driven out or sidelined and replaced with people who are happy to cut food stamps in the middle of the worst economy since the Great Depression. So, I think that when Krugman says increasing the minimum wage is a good idea and most of the people who say it isn’t are actively undermining portions of the safety net while not actually taking any steps to enact those portions of the safety net that they say are good, I’m going to go with Krugman. He’s been wrong on things in the past, but he isn’t obviously and blatantly operating in bad faith.
Hear him! Hear him!
“[Krugman has] been wrong on things in the past, but he isn’t obviously and blatantly operating in bad faith.”
As a matter of fact, it’s pretty clear that Krugman is operating in bad faith, or perhaps he’s forgotten what he used to know (Krugman is 60 and hence may be beginning an early cognitive decline).
Here’s the 1998 Krugman on the minimum wage:
“What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America” (as this book’s back cover has it). Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects. This will to believe is obvious in this book: The authors not only take the Card-Krueger results as gospel, but advance a number of other arguments that just do not hold up under examination.”
From Taranto’s Best of the Web, a side-by-side comparison of the two Krugmans talking about unemployment insurance.
The new Krugman:
“Here’s the world as many Republicans see it: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer.”–former Enron adviser Paul Krugman, New York Times, Dec. 9
The old Krugman:
“Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of ‘Eurosclerosis,’ the persistent high unemployment that affects a number of European countries.”–”Macroeconomics” by Paul Krugman and Robin Wells, second edition, 2009
Something really weird has happened to Paul Krugman over the last decade or decade and a half, and somehow his liberal admirers don’t notice how radically he has changed.
That’s not bad faith or decline. That’s knowing the difference between the unemployment systems of Europe and the U.S.
“That’s not bad faith or decline. That’s knowing the difference between the unemployment systems of Europe and the U.S.”
The problem is that with repeated extensions of the term of unemployment insurance, our two systems are in fact converging, and so we should expect European levels of unemployment here. I see that the UK currently has a rate of around 7.5%, which is pretty nearly exactly our current rate, while the EU as a whole has an unemployment rate of 10.9%.
It’s simpler to say, ‘whatever Kroogs says, I am for it’ than to actually look for a better answer. Myself, I don’t think much of him, it seems to me he regularly finds a way to justify whatever will make him popular at Princeton cocktail parties. But I ‘m glad you acknowledge that Obamacare and the minimum wage are suboptimal ways to help people. dave.s.
I said nothing remotely like “I’m for whatever Krugman says.” I didn’t say that because I don’t think that. What I said was that nobody arguing the other side of the issue has said anything remotely convincing. Krugman has been writing pieces, based on data-driven articles, about the effect of the minimum wage on unemployment while those arguing against him have apparently decided what everything they needed to learn was covered in the first week of Econ 101 and only needs supported by anecdote.
And I hate to quibble over terms, but “suboptimal” isn’t what I was trying to say. They are optimal in the sense of politically possible outcomes currently. I was quite clear about my thinking on that..
In related news:
“A top diplomat at India’s consulate in Manhattan who lobbies for women’s rights has been busted by the feds — after allegedly mistreating her female nanny. Devyani , India’s 39-year-old deputy consul general for political, economic, commercial and women’s affairs, was busted Thursday for allegedly helping to submit fake documents to the US State Department saying she was paying the woman $4,500 per month — when, in reality, the caregiver received only $573 monthly, or a measly $3.31 an hour.”
As I mentioned on a previous occasion, diplomats are rather notorious for their abuse of domestics.
Here’s a mash note from Neumark in the Times for the EITC: http://economix.blogs.nytimes.com/2013/12/09/the-minimum-wage-aint-what-it-used-to-be/?_r=2
Like me, he thinks it’s kind of a plus that my kid doesn’t, and the low-income adult worker with a family, gets benefit from EITC. And he takes it as a given that an increase will drive down employment at least somewhat.
“slow, inefficient, wage-sucking line cooks of yore”… http://www.zerohedge.com/news/2014-01-12/meet-smart-restaurant-minimum-wage-crushing-burger-flipping-robot
I’m coming to think the minimum wage should be REDUCED and wages supplemented with a substantially improved EITC. You don’t have to smash the looms if they never get built in the first place.
$150000 and it replaces twelve people. http://modernfarmer.com/2014/01/robot-can-find-2-tons-perfect-grapes-12-minutes/ AND the cabernet is better at the end of it all.
Bill Gates knows about burger flipping machines! http://www.cnsnews.com/news/article/susan-jones/bill-gates-raising-minimum-wage-does-cause-job-destruction
But, he’s rich, so he is probably in bed with the Koch brothers, right?
George Will gets bonus points for citing Animal House! http://www.washingtonpost.com/opinions/george-will-democrats-policies-make-income-inequality-worse/2014/03/14/97d5074e-aada-11e3-adbc-888c8010c799_story.html
Enter your email address to subscribe to this blog and receive notifications of new posts by email.
Join 37 other subscribers