This is another cartoon I made a two-minute timelapse video for.
Making these videos is easy and I enjoy showing them to folks, so I’ll continue doing them now and then.
Two things to watch out for in the timelapse video:
1) The moment I realize I’ve lost a bunch of lines I drew, and write “AAARGH” in big red letters over the cartoon. It goes by in about a split second.
2) Watch when I’m drawing panel four. You’ll see that I just can’t decide what I want there, and it’s fun (for me at least) to watch the ideas come and go.
I’ve been doing more of this format lately – a “talking pundit heads” cartoon which focuses visually not on the pundits, but on ordinary people in listening (or not listening) to the pundit. It’s the Doonesbury influence on my work showing. The punchline of this cartoon also feels very Doonesburyesque to me.
I drew panel two while looking at this photo:
I didn’t trace – not that I’m against tracing in some circumstances, but in this case it wasn’t necessary. But obviously I found a lot of details in this photo that I used in my drawing.
The photo, by the way, is by Amsterdam photographer Wynand van Poortvliet. There’s a gallery of his photos here, and some of them are really cool.
TRANSCRIPT OF CARTOON
This cartoon has four panels. Each panel shows a different character and a different scene.
PANEL ONE
A woman holds up her phone and is tapping on it with an intense expression. She’s sitting in a kitchen; an open laptop on the table shows two men talking to each other, a tie-wearing TV host type and his guess, who is wearing a style I think of as “expensive sloppy,” with a cream colored suit jacket over an open collar shirt with no tie. The woman doesn’t seem to be paying attention to the discussion coming from the laptop.
TV HOST: Our guest today is Billionaire Hedge Fund Manager Rick Datface, discussing his new book “The Conservative Guide To Fighting Poverty.” So is your book about improving safety nets? Raising the minimum wage?
DATFACE (from laptop): Heck no!
PANEL TWO
An man wearing a bright orange safety vest over a striped shirt is pushing a hand trolly down a city sidewalk. The trolly is piled with cardboard boxes of various shapes and sizes. He’s also wearing headphones over a knit hat, listening to the same program we saw in panel one.
DATFACE (from headphones): The minimum wage hurts poor people by killing jobs! Even if economists say there’s overwhelming proof it doesn’t! Every policy to help the poor hurts them, and if we care we should stop helping!
PANEL THREE
A close-up on a hand holding a smartphone; on the smartphone screen, Datface continues speaking. He’s holding up a finger in a “I’m making a point here!” gesture, and his expression is passionate. The video channel appears to be called “FUX.”
DATFACE (from smartphone): Even the so-called “incredibly effective” anti-child-poverty measures that weren’t renewed (thank god) definitely harmed poor kids in an unidentified way! Only trickle down works!
PANEL FOUR
A woman sits at a table, looking dejectedly at bills spread on the table in front of her. Behind her, there’s a dresser with a TV on top of it, and we can see Datface on it, holding his hands together in front of his chin and trying to look very innocent and wide-eyed.
TV HOST (from TV): So the only way to fight poverty is… Tax giveaways for billionaires?
DATFACE: And we hate taking the money! But we’ll make the sacrifice.
CHICKEN FAT WATCH
Chicken fat is a venerable (fancy word for old) cartoonist’s expression for meaningless but maybe amusing details in a comic strip.
PANEL 1: There’s a piece of paper held to the fridge door by a magnet. It says: “Shopping. 1. Food. 2. Water. 3. Oxygen. 4. Repeat.”
PANEL 2: There’s a walk/don’t walk in the background. The “don’t walk” side is a figure looking at its wristwatch, while the “walk” side shows the figure disco dancing.
Also, the street sign says we’re on “Unread Ave.”
And a piece of paper littering the sidewalk says “LOST my drive. If found…”
PANEL 3: The Chiron at the bottom of the image on the smartphone says “Shock: Cher Leads Invading Force From Mars.” And a second line says “Superstar says hostile invasion won’t affect tour schedule.”
The name of the video channel is “Fux,” which sounds a little like “Fox” and also a little like a dirty word! Wow, I just do the MOST sophisticated humor, don’t I?
PANEL 4: There are three bills on the table. They say “Overdue. Shame!,” “Past due you scum,” and “Pay up you dufus we’re not afraid to break some limbs.”
The Chiron text on the TV in the background is so tiny that I doubt anyone will be able to make it out unless they’re reading this cartoon in the books (because paper is higher res). But for the record, the top line says “Study: Background Gag Too Small To Be Read.” And the second line says, “”No comment,” says incompetent cartoonist.” (Ironically, when I first posted this cartoon I misspelled “incompetent.”)
Also, the woman has a tattoo of Groucho Marx on her arm.
The Conservative Guide To Fighting Poverty | Patreon
Depressingly accurate.
I love the final touch of the rich person pretending to hate taking the money.
I struggle with this topic, because the argument on how the minimum wage hurts people is pretty straightforward:
You don’t get people to buy more of something by making it more expensive.
We understand this for basically every product in existence except for labor. If the price of bananas goes up, you’ll likely either buy less of them or, needing the bananas, you’ll buy as many of them as you’d need. No one really looks at prices on the rise and decides to buy a lot unless they’re looking to get in ahead of future rises. In this way, there are two competing interests: The number of hours worked, and the price of labor. And these things, to some extent, are negatively correlated.
And this is kind of the balancing exercise that lawmakers have to perform: How much of an increase can the market take before layoffs happen, and does the benefit to the workers effected offset those losses? Because the exercise obviously has limits. If you made the minimum wage $1000/hour, basically everyone would get laid off the market would crumble, and we’d end up with an almost entirely black market economy. Where that line is, is hard. In my opinion, it’s probably local. It might make the most sense to have a municipal minimum wage as opposed to a state minimum wage, because the cost of living in superlarge urban areas is a completely different beast than living in a smaller rural center, and trying to set rates based on the needs of people in large urban centers probably fucks up a lot of business models in rural areas.
Again… It’s hard to see that because the economy is complicated. You can kind of read between the lines, particularly in segments of the market that actually have a significant proportion of minimum wage earning employees, like food service. Restaurants in particular seem to get hard hit. California just raised their minimum wage to $20, and that caused closures, in fact, a survey of restaurant owners said that their top four responses to minimum wage increases would be, in order: Increase Prices, Lower Hours, Rework the Menu, and Layoffs.
And if you accept that to some extent, the math that employers do with minimum wage increases will negatively effect some workers, you should also ask yourself who the employees most likely to be negatively effected are: And the answer is the most vulnerable: People who aren’t educated, skilled, or experienced.
And that shouldn’t be a surprise because that’s how the minimum wage was designed.
While we can have conversations on how the minimum wage protects workers in the modern context, the people who brought in the minimum wage in America did not have worker’s rights in mind… At least, not all workers. If you Google the minimum wage, you’ll find all kinds of references to improving the conditions of sweatshops and the like… And I’m sure that there were all kinds of well intentioned people genuinely motivated by that. But bear in mind that we’re talking about Democrats in the late 1930’s, 20 years before Brown v BOE, and smack dab in the middle of Jim Crow. Part of the drive behind the minimum wage was job protectionism: The idea was that if you gave a minimum level of wage someone could earn, employers would be more discerning in who they hired, and that would benefit people with education, skills, and experience. Which at the time meant white men.
And the legacy of that carries on to today: Like I said before – Minimum wage job losses disproportionately effect uneducated, unskilled, and inexperienced workers, and those workers are disproportionately minorities.
The reason I say I struggle with this is because it’s 2024, and reality asserts itself: There’s a lot of people getting left behind because their employers won’t give out pay increases unless a minimum wage increase happens, and the minimum wage increases, I think, on balance, probably do more good than harm. But that’s real cold comfort to the people that get laid off.
Corso, an additional factor that wasn’t as important 90 years ago is how much and what kinds of labor can be replaced with automation. I used to work as a grocery cashier (Purity Supreme, Central Square in Cambridge, Mass.). Each item had to have a stockboy (there were no stockgirls) either put a price label on it or use an inked stamp to do so. At checkout I would grab each item, turn it until I could see the label, punch in each digit of the price on the cash register, hit a very large button with the outside of my right hand (left-handed people didn’t work as grocery cashiers), look to see that the correct price was indeed rung up, and grab the next item. At the end I would punch the “Total” button, read some small labels on the digits on the main display, add them, and punch them in as tax. That penultimate step meant that when I was hired I had to pass an addition test – using pencil and paper, as hand-held calculators had just been invented and cost around $100 and most engineering students were still using slide rules.
Now, with lasers and microprocessors I would just grab the item, sweep it past a multi-laser display, and grab the next item. The packager had already printed a bar code on the label, and someone in a central office had put the price for that item in a database. It’s a lot faster, which means that you need fewer people (or more) as grocery clerks. It also means that said clerks no longer need to be able to add and subtract.
There’s a lot of jobs like this. Moore’s Law has greatly accelerated bringing us to the point that fewer jobs requiring limited skills are available. Couple this with the degradation of education in this country that has increased the proportion of the population that have limited skills and you end up with the creation and expansion of an underclass that cannot support themselves or any children they have.
I don’t have an easy solution to this. Having a large number of people working for wages they cannot live on and becoming dependent on government to make up the difference does not build a strong society. Having the government heavily tax a few wealthy people and redistribute the money in grants and services to make up for low wages only increases the dependence of the population on the government, which is a horrible thing.
I wonder what the effect would be if government authorities revoked the business license of any publicly-traded company where the CEO was paid more than “x” times the wage of the lowest-paid worker (or “x” times the average wage of all the workers). But overall about the only thing that government can do here is fix the educational system. The rest is cultural.
@Corso: I found this analysis from the US CBO: https://www.cbo.gov/publication/55681
They estimate that result in the loss of 0-2 million jobs, if I read the chart right. However, they also note that the increase would result in about 0.5 million fewer people living in poverty. They also project a drop in household income. Sounds bad, huh? Except that the drop is entirely in people with an income of at least 6x the poverty level. Everyone else experiences an increase in income with the greatest income increase being in those living below the poverty line. All in all, it looks like a reasonable trade to me.
Caveats: I have not vetted these numbers or, indeed, the source.
But more hardware and software engineers, plus mechanics to maintain the machines.
At some point, theory – which is what you’re doing now – needs to be informed by empirical evidence. And the empirical evidence on the minimum wage is clear: The overwhelming majority of empirical studies have found little to no effect on employment from raising the minimum wage. It’s not even close.
Right-wingers tend to cherry-pick from the studies on the left side of that graph. But that’s just as misleading as it would be for me to cherry-pick the studies all the way on the right to claim that increasing the minimum wage increases employment.
Interestingly, it’s also been shown that there’s a significant publication bias in FAVOR of the “minimum wage causes job loss” hypothesis. The above graph shows what studies have found with that bias in place. Without publication bias, the case for your theory would look even worse.
True. Also, if we set a national speed limit of 1 mph, that would be terrible for the economy. Neither of these hypotheticals is at all important or tells us anything about policy in the real world.
You’re right about the racist origins of the minimum wage – but you’re leaving a lot out. As you know, the original federal minimum wage law didn’t cover agricultural, restaurant, and nursing homes, among other groups – fields where a huge number of Black workers worked. They didn’t do that because they wanted to help Black workers; they were racists who didn’t want the minimum wage law to apply to Black workers, when avoidable. (Or they were compromising with racists because it was the only way to get a minimum wage bill passed.)
In 1966 the Fair Labor Standards act extended the federal minimum wage to (imperfectly) cover those fields, which lead to a large increase in Black wages. “The 1966 extension of the minimum wage can explain more than 20% of the reduction in the racial earnings and income gap during the Civil Rights Era.”
Real-world minimum wage laws are almost always phased in – it’s not a jump to $14 from $8, it’s “raise wages $2 every other year for the next six years” or something along those lines. If raising the minimum wage actually causes a disaster – something that right-wingers have always predicted without ever once being right – then it would make sense to backtrack. Lacking that, though, imo we should raise the minimum wage modestly but frequently until we find the best level for it.
Actually, minimum wage increases – insofar as they ever have a negative effect at all on unemployment – have a very small effect. What we’re really talking about, in all likelihood, is increased unemployment by increasing the average time it takes someone to find a job. So before the minimum wage increase, Joan would have had to have searched ten weeks to find a new job, and post-minimum wage increase it takes her 12 weeks. (Numbers just made up for this example, but I think they’re realistic.)
I know from experience that being unemployed and trying to find a job is incredibly frustrating, and no one likes two extra weeks of frustration. But overall, assuming Joan’s job is effected by the minimum wage at all, Joan will earn more that year than she would have if the minimum wage hadn’t gone up.
Ron:
It’s so incredibly rare that you make an economic suggestion I agree with that I just had to comment on this.
I don’t know that I’d want the exact mechanic you suggest, but I do think some sort of connection of the sort you’re discussing could be worth trying out. I don’t know if any government has tried it in the real world. (I also don’t know how the issue of subcontractors would be handled.)
@8 – I don’t think very many subcontractors are publicly traded companies. The big temp companies, maybe?
What I meant was, I think CEOs would probably be motivated to outsource low-paying work to subcontractors as a loophole to Ron’s proposed rule.
Thank-you, Amp. I didn’t have the energy to point to the actual, empirical studies YET AGAIN. Let’s see if they disappear from this thread, just to resurface in another on this topic six months or a year down the line with the same tired, repeatedly refuted theories, backed up with no data.
Just based on economic studies / statistics and no political considerations, what would be the optimal minimum wage right now? Obviously $1000 / hour would be too high, but what would be the effective upper cap?
Karen – I don’t think anyone knows? Certainly not based on empirical studies. And I do agree with someone – Corso or Ron, I’m too lazy to read back and check – who said that the optimal minimum wage probably varies from place to place. Which I interpret to mean that the Federal minimum wage should just be setting a floor.
Currently, Washington and California both have minimum wages of about $16 per hour, which is the highest statewide in the country. (Although some cities like DC and NYC have higher minimums than that). It doesn’t seem to have caused any big problems (although restaurant owners claim otherwise – but they always claim that.) The Federal minimum wage is $7.25. I’d like to see the US move to a higher Federal minimum wage – $12 an hour, say – gradually implement it and see if it causes problems so bad that it’s a bad idea. If it doesn’t cause any problems, then raise it higher. But that’s just my preference.
Hi Karen, like Amp and Corso suggest, I think minimum wage needs to vary regionally. So, the trend of higher state and local minimums is a good thing.
As an aboslute floor, we could begin by asking, “What does an average, healthy person need to provide for themselves to keep working month after month after month?” and divide that by 40 hours/week. Less than this, and people without family support, charity support or help from the government are seriously risking going into a death spiral, where they can’t provide for the basic needs (food, shelter, clothing, transit, basic healthcare, etc.) that will allow for them to continue working.
Practically, I’d guess that the floor would be about 3x the cost of renting a room (on the grounds that, traditionally, rent should be 1/3 of one’s income). I think few places in the country pass even that low bar now.
Dianne, @6:
True. However – first, there are far fewer of either needed compared to the number of clerks and stockboys that automation displaced. Second, have you tried hiring engineers lately? My company hires network engineers. People who have the capability of doing so and actually get the education needed to be an engineer are in short supply, especially if you want one that is an American citizen. We generally have requisitions open for months (even more than a year occasionally) before we can fill them, and they want and get 6 figure salaries. The people being displaced (both the current holders of those jobs and the people who would get them in the future) are not going to become engineers. The machines need far fewer mechanics as previous cash registers because they have far fewer moving parts.
Amp @ 10: there ought to be a way to include subcontractors in that.
Amp @ 13: that was Corso.
@Karen: My suggestion would be the wage that would allow a person to live above the poverty line if they work 40 hours a week. Or maybe 30 hours. Adjust as necessary for inflation or deflation.
@Ron: I’d find the argument more compelling if there weren’t restaurant owners and similar people who hire “unskilled” labor weren’t whining about how no one wants to work any more and it’s soooo hard to find people to fill their positions.
I’m afraid I’ve never tried to hire a software engineer in my life. My nephew, who is one, was looking for a job for about 10 seconds before finding one, though, so I’ll agree that there is likely not an oversupply. But that’s an argument for better education, not de-industrializing.
Agree that things are completely off-kilter on minimum wage in the US. That shouldn’t be a surprise, since the federal minimum has not changed since 2009. I agree with everyone who said that minimum wage should be dependent on locality, but having a more reasonable federal floor is a good start. Also getting rid of tipped minimum.
The unliveable minimum wage is made worse by the horrible scheduling situation many people working minimum wage jobs find themselves in. It can be very difficult to get 40 hours a week in many “stereotypical” minimum wage jobs with large corporations because it is in the employers’ best interest to keep people part time if they can find enough workers to do so. Hours are scheduled weekly at best, and change every week, so it is really hard to have multiple minimum wage jobs to get to 40 hours. This also wreaks havoc with anyone who has dependents.
People who hire “unskilled” labor often complain about how no one wants to work anymore, but they CLEARLY mean no one is willing to tolerate the working conditions they are willing to provide. It isn’t always about wage, but that is definitely a large part of it. Other places have much more stringent minimum wage laws, and companies there manage to employ people and make money despite that.
Dianne @ 5
You aren’t quite reading that right. When the CBO (which usually generates legitimately good data) measures something like this, all the numbers are netted off.
Increasing the Minimum wage to $15 by 2028 causes, by their calculation, approximately 300,000 job losses. Those losses would only be in states that have less than a $15 minimum wage currently, and it’s unlikely that the person making a $65,000 salary gets laid off because of minimum wage increases. The likelihood is that while, net, more people get raised out of poverty than people enter poverty based on that change, the people who enter poverty would tend to have been marginalized to begin with. “More people are better off” is cold comfort to the people most hurt. It’s why I struggle… If the answer were easy, I’d agree with you.
Amp @ 7
I disagree with you, obviously. If Dianne hadn’t already linked the CBO, I would have, I think my basic premise is unassailable: You don’t increase the demand for something by increasing the price of it. The best case scenario for an increase proponent is that the job losses could be hidden and offset by job creation in a growing market.
Understanding that, I’m not convinced that the reason that most data shows that minimum wage causes job loss is so much of a “publication bias” error as it is that the majority of publications reflect reality.
I mean, really… How would you tell the difference?
Of course they are and do. They demonstrate that the policies aren’t scalable, that there are competing interests, and that there are limits that are ridiculous.
Speed limits are essentially a safety rule: If we limit the maximum speed that someone travels, the likelihood of catastrophic collision decreases. If we limited speed to 1 MPH, you’d basically eliminate all traffic fatalities. That’s good, right? Except we’d never do that, because the costs of doing that, the competing interests, would be catastrophic in different ways. So obviously a balancing of those interests needs to take place.
Similarly, there is obviously a balancing exercise with the minimum wage. More is not necessarily better, because at some point the competing interests become more costly than the benefits of an increased minimum wage. I shot out $1000 as something obviously out of bounds. But what about $100? What about $50? What about $25?
If, as you said earlier, the historical costs of increasing the minimum wage has not led to significant job losses, I would suggest that might be because the historical balancing exercises were done effectively, not because minimum wage increases can’t have adverse effects, because they obviously can.
I suppose it’s possible, but I think you’re discounting the effects on people. About 1.3% of wage earners make the Federal minimum wage, which maths out to maybe a million people in America. According to the CBO, if you increased minimum wage to $15 by 2028, the resulting job losses would be approximately 300,000. It is likely that the people most effected by those job losses would be the people already making minimum wage… Which means that a National increase to $15 could reasonably, by the CBO’s numbers, cause up to 30% of minimum wage earners to face some level of joblessness for some amount of time.
That’s rough.
Amp @ 13
That was me! I’ll blow your mind further and suggest something else I think you’d agree on: $7.25 is probably too low, almost regardless of where you’re talking about. I’m not sure what the number should be, but my instinct is it should be >10. And then, once it’s increased, as opposed to this perennial discussion on how much of an increase is too much, I think we should peg it to a metric like inflation and have it automatically increase annually to preserve that minimum buying power.
In reading this back, I thought to myself… “Dean, you might have just blown your own argument out of the water, what if pegging the minimum wage to inflation between 2009 and now generated a $20 minimum wage?”
So I did the exercise: Inflation was 46% between 2009 and 2024, if we had pegged the National minimum wage to inflation in 2009, it would currently be $10.60.
Not that that’s dispositive or anything, but I’m always happy when my instinct maths out.
Corso @19:
I would support an increase in minimum wage to $10.60, because the alternative appears to be no increase at all. However, I would point out that the minimum wage in 2009 was already low compared to historical values. In 1970, the minimum wage was $1.45. According to this kind of random website I found, the equivalent of $1.45 in 2024 is $11.74. So that might be a reasonable place to start. However (again), the economy’s productivity has grown quite a bit since 1970. I’m not sure how to calculate it, but I think that an order of magnitude is a conservative estimate, which would imply that the equivalent per unit productivity (whatever that is) would be around $117.40. Which, I will agree, is unlikely to be feasible. Except. I wonder what the average CEO makes in 2024 compared to 1970 and whether it’s more on the order of 100X than 10X.
Per capita GDP has risen by a little less than a factor of 3 since 1970. If the minimum wage had kept pace with that, it would be around $30/hr. A better analysis from Dean Baker puts the productivity scaled minimum wage at $25.50 now ($21 in 2020) and notes that the minimum wage did track productivity from its introduction in ’38 until ’68.
Charles @ 21
I think the problem with thinking like that is twofold:
First, the increase in productivity between 1970 and 2024 is probably better attributed to automation, efficiency, and global markets than it is labor, so I’m not sure why labor would be tied to productivity.
The second, more serious problem is that over the last 50 years, the system has grown around the reality of the environment. I mean, think what you just said through to the natural conclusions: If minimum wage, to keep up with the standards of 1970 should have been $25.50, but it’s instead $7.25, you would expect things like the standard of living, or the poverty level to reflect that.
But the math on that doesn’t really work. I mean, I’m right there beside you saying that the number is low, and again, this metric backs me up:
In 1970, a person leading a family of four on a full time minimum wage income was measured at being about (((1.45*2080)/4000)-1)*100) 25% below the poverty line. Where in 2024, that same person would be at about (((7.25*2080)/31000)-1)*100) 51% below the poverty line.
But if we worked off your math and measured a person making $25.50 in 2024, they would be measured at (((25.50*2080/31000)-1)*100) 71% above poverty.
And if we reversed that to see what it would take in 2024 dollars to be at the same 25% below poverty line as the minimum wage was in 1970, we find that would need ((31000*0.75)/2080) $11.17.
Which again isn’t prescriptive, my point is that markets are complex, my instinct here is that if we did peg the minimum wage to a productivity metric, we, and particularly low wage earners, would probably be better off than they are now, because it wouldn’t have allowed wages to stagnate quite like they have. But we wouldn’t be 70% better, we couldn’t be, there isn’t supply for that to happen without raping and pillaging vast amounts of treasure from the rest of the world. It couldn’t come from billionaires: if you took every dollar from every billionaire in America and spread it among everyone else you’d get like $17,000 (7.5 trillion/333 million). Which, don’t get me wrong, I’m sure some people would love, but that’s not even a down payment in most markets.
My gut tells me that had increased the minimum wage gradually to $25.50 in 2024, we would have seen inflation to gobble up a good deal of that, and we’d be having a variation of this conversation over the benefits of a $40 minimum.
Or we could increase the minimum wage to keep up with inflation and not bother having this conversation again. Or have this conversation about whether the minimum wage should be increased more than inflation in order to increase the spending power of the average person and therefore improve the economy. As far as I can tell, the biggest problem with the economy at the moment is that so much wealth is tied up in the hands of a very few people where it is utterly useless. Give poor people money and they buy things or invest it (sometimes foolishly, of course) or save it for major purchases. All of which help the economy. Give more money to rich people and they just sit on it, making it useless from the economic point of view or do something ridiculous like build rockets with it because some other rich person did so before and they have to keep up (even though they have less than no plan for what to do if they succeed) or fund fascist politicians. None of which helps the economy and certainly doesn’t help the world in general.
$53,000 minimum full time wage would probably produce some pretty big alterations to the system (diverting profit to labor, potentially decreasing productivity, thereby decreasing the productivity linked minimum wage over time), but to my mind ensuring that a single full time income can keep a family of four reasonably far out of poverty seems like a reasonable target. Of course, minimum wage doesn’t need to be the only tool for that. EITC, refundable child tax credits, food stamps, public housing, and UBI all seem like reasonable supplements to a $11.25 Federal minimum wage.
Just for numbers though, labor as a share of GDP between 1970 and 2019 has fallen from ~50% to ~42% according to one chart I could find, so shifting profit back to labor would increase the average individual wage from $62,000 to roughly $75,000, which would allow the upper portion of the wage distribution to be pretty much unchanged while giving the bottom 60% a wage of $53,000. Alternatively, the upper 20% of wage earners have seen huge growth in wages since 1970, so shifting wages to a tighter distribution would also be possible (say, a maximum wage of 5X the minimum wage). Any sort of shift along these lines would produce huge changes in the market for goods and services (e.g. thje loss of the $250k+ individual income range and the massive expansion of $53,000 incomes would completely change the housing market for new houses, probably favoring Levitowns rather than McMansions)
@CharlesS
Maybe a naive question, but why would an increased minimum wage decrease productivity? Happier people who are not food insecure or lacking in housing are likely to be more productive and if the change does encourage automation, wouldn’t that also improve productivity? Is there historical data that says otherwise?
Incidentally, it occurs to me that the argument about increased minimum wage would encourage automation doesn’t make as much sense as it first appears. Because if automation is more profitable, companies will switch to it regardless and if the margin of profit is close enough that changing minimum wage will put it over to automation instead of human workers, it was pretty close to begin with and the increase probably accelerated things by no more than 5 years.
One thing I find amusing is that corporations often ask us to suspend belief in the law of demand when it comes to policies that they want passed.
For example, brick-and-mortor stores often charge more for similar products than Amazon. Then they wonder why their sales are down, and blame an imaginary “shoplifting epidemic.” Then they go to the U.S. Senate and demand a ban on online retail to allegedly “prevent shoplifting.”
But you don’t always decrease the demand for it, either. Sometimes the demand is more inelastic than that. That’s why the prices for textbooks are so high – the demand is extremely inelastic. The professor assigns a book, and the students have to buy that book regardless of if it’s $20 or $80, so there’s no significant loss of demand caused by raising prices.
You’re basically saying that the costs of a wage increase will inevitably be covered by employers hiring less; you consider this “unassailable.” But that’s only true if you assume the demand for employees is very elastic. But if it’s mostly inelastic, then the costs will be absorbed in other ways. Increased unemployment is only one of about a dozen possible channels for absorbing the costs of a minimum wage increase. There’s no theoretical reason to believe that unemployment is the only channel that’s viable, and there’s an enormous amount of empirical evidence showing that minimum wage increases are not being measurably compensated for in that way.
What other theoretical channels exist? Quoting economist John Schmidt: “Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.”
Note that no one of these has to absorb costs by itself; instead, the minimum wage is probably absorbed by a combination of methods. (There is more evidence for reduced turnover at present, but more evidence may appear in the future which changes that picture.)
That’s not what “most data shows.” The majority of economic studies have found that the minimum wage has zero or near-zero measurable impact on unemployment. I’m going to repeat this graph, and hopefully explain it better this time, since you didn’t understand what it says.
“Elasticity,” again, refers to how much the demand for something changes in response to a change of price (in this case, a change of wages). Negative elasticity, in this case, would mean unemployment goes up; positive elasticity means employment goes up. And zero elasticity, in this context, means that there’s no change in response to the minimum wage.
Each dot is what an empirical study of minimum wage effects found. The enormous cluster of studies around “zero” is because the large majority of studies found little or no effect on unemployment associated with increasing the minimum wage. That is what the majority of studies found.
The Y axis shows how precise the study is, “measured by the inverse of the standard error.” The higher on the Y axis a study is on this graph, the smaller its expected error is. So we can say two things from this graph: Most of the studies found little or no impact on unemployment, and the most statistically reliable studies – the ones high on the Y axis – are without exception clustered near that “little or no impact” point.
That’s what a funnel plot – the type of graph I posted – is for. It’s a standard way of detecting publication bias.
The graph I posted earlier has (iirc) 64 studies. Here’s a similar graph that includes over a thousand studies, which I’m pasting in because it makes the statistical bias even clearer.
As you can see, the most common result, and the result found most by studies with the greatest statistical power, are all clustered around that “little or no effect on unemployment” point on the X-Axis. That is what “most data shows.”
In an unbiased system, the direction of statistical deviation from the most common finding would be random. So the most common result would be where most of the studies cluster, and then due to random error, we’d find a similar number of studies clustered on both sides of the most common result.
But a random distribution of outliers isn’t what we see with minimum wage studies. The outliers aren’t clustered randomly around that point; they are clustered to the left. And the outliers have significantly less statistical power than the ones clustered near the center. This tells us that something other than random chance, and something other than the studies on the left having more statistical power, is dragging the results to the left.
(Funnel plots are an extremely standard and well-established way of detecting publication bias, and they’re been used for that purpose for almost forty years.)
Dianne:
I think that’s a fair question. My thought wasn’t that an increased minimum wage would decrease productivity growth directly, but rather that a substantially decreased non-labor portion of GDP (required to keep a $50,000 minimum wage from being part of a very squashed income distribution) would mean there was less capital to be reinvested in automation, and that might mean slower productivity growth. But I’m not an economist at all, and I would bet that economists wouldn’t agree amongst themselves over whether that would have happened if the balance hadn’t shifted away from labor after 1970.
[Edited to add: Also, I think your version in which a higher minimum wage increases productivity is also plausible, and I expect there are economists who would support that.]
Basically, I think that a $25/hr minimum wage would probably require/create a pretty serious shift in the way the economy works (either a narrower wage range or a shift of balance from capital to labor), and if we’d kept the minimum wage tied to productivity growth since 1970, then the economy would probably be different than it is now in some significant way (shifting 8% of the economy from capital to labor has to make some big difference besides just making most people better off, that 8% was doing something, and it probably wasn’t all simply going to buy mega-yachts).
Personally, I’d still rather live in a society where everyone is above poverty and the ratio of minimum wage to maximum wage is much smaller, and I don’t think productivity growth is necessarily a good thing in and of itself.
@Dianne:
The education is out there for those who want it. Fewer want it. American kids are far more interested in using technology than they are learning to understand how it works and create more of it.
Been there, done that. Working in a restaurant means you’re working evenings and weekends. Not an attractive prospect. It is hard work and the clientele can be rude or even at least verbally abusive.
@JaneDoh
Consider that people running a restaurant can’t do anything about people preferring to go out to eat on evenings and weekends, nor about the fact that there’s a certain number of a$$holes who like to abuse waitstaff (other than tossing them out if they get too disruptive). It’s valid to hold that employers can improve job conditions but often do not. However, lots of jobs that don’t require a lot of skills are inherently undesirable because of hours or conditions that an employer has no control over. People with alternatives (more marketable skills or gov’t support programs) are going to tend to avoid such jobs; unskilled people have fewer options. Supply vs. demand will drive down the pay for those jobs if there are more employable unskilled people than there are such jobs.
@CharlesS:
Automating takes capital. Larger companies have easier access to that than smaller ones. Note that your large grocery and hardware chains are far more likely to have self-checkout lanes than the local corner store. As far
bcb @26
The shoplifting epidemic is hardly imaginary. I have no brief for the cause involving online shopping or not, but you’ve got all manner of stores that have started locking up displays of things like razor blade refills in drug stores. “Shrinkage” has jumped up in the last few years and it’s causing a problem for all kinds of stores. One of the reasons that stores like Walgreen’s and Target are starting to pull out of inner-city neighborhoods is because theft is making them no longer profitable. Even stores in MY neighborhood are starting to lock stuff up.
Ron@30: I suspect if there is an increase, some of it is due to automation (it’s easier to sneak something past an automatic checkout than past a human, not even to mention honest incompetence in using the machines), some to poverty (stealing diapers and formula is probably not due to malice), and some to hype. Is there really more “shrinkage” compared to the past or is that just a convenient excuse for incompetent upper management driving the store into the ground?
Remember, also, that a huge amount of shrinkage takes place before the items ever hit the shelves. The internet has made it easier than ever to sell stolen stuff, and to make money it’s better to steal the stuff early, while it’s still conveniently in boxes. They get stolen either off the trucks or by working with a store employee (in exchange for the employee getting a cut).
Although I’m sure some individual stores are outliers, taken as a whole there doesn’t appear to have been a shoplifting epidemic. From a Brookings overview:
Relevant to this discussion: California has been adding fast food jobs after raising the fast food minimum wage to $20. Source