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So you correctly valued SNAP (that is a nice calculator, when I’d read through the description of benefits, I misread the rent/mortgage deduction rules) and section 8 (you are correct on the number of rooms rule, I’d missed the child gender rule- on the other hand, we’ve switched from “Colorado” to “Boulder”, which makes a difference), but you still over-valued medicaid, which makes the difference between over median and under median. Which is the only thing that matters for RonF’s complaint (and the limited availability of section 8 means the number of people who are getting that $10k in rent support on an income of $20k is very small).
The limited availability of section 8 influences the effect on the median in a rather obvious way, no? If section 8 were available to everyone who qualified, then the minority of section 8 recipients who are within less than $10k of the median pre section 8 would be a much larger number than it currently is, so they would push up the median by a much larger amount than they currently do. You ask why the hell benefits don’t push many poverty level families above the median. The huge underfunding of section 8 would be a pretty obvious part of the answer. If we had a societal commitment to making sure that people with below local median incomes weren’t rent poor, rather than just a weird vestigial commitment to that, then the after-transfers median income would be higher than it is.
We don’t live in a society in which benefits push substantial numbers of below median incomes above the non-benefit median. I’d be happy to live in one that did. I’d be happy to live in a society that pushed the pre-benefit median incomes higher as well. I wouldn’t want to live in such a society without better tapering of benefits. A system in which a household with a $20k market income ends up with a $50k post-benefit income, but a $30k household (no medicaid, no SNAP, no EITC, no mortgage deduction, probably no employer provided health insurance (and only 15% marginal tax rate if they do), no section 8 in most of the country, but still getting CHIP coverage for the kids) ends up with a $35k post-benefit income is a stupid system.
And a solid nope on your “better screening” idea.
Oh, and RonF, the answer to your original question is:
Yes, pre-tax incomes as reported by the US census include federal transfers and the valuation of non-cash benefits. So that $52k median income includes any non-cash benefits.
Sorry, census income is cash income (so cash transfers like SS, but not non-cash programs like SNAP, etc). CBO income includes all transfers.
Oh, and table 1 in this report replaces our back of the envelopes with actual work.
Distribution of Before-Tax Income, by Income Group, 2009
Income Group Market Transfers Total Median based on Market
Lowest Quintile 7,600 22,900 30,500 23,500
Second Quintile 30,100 14,800 45,000 43,400
Middle Quintile 54,200 10,400 64,600 64,300
Fourth Quintile 86,400 7,100 93,500 93,800
Fifth Quintile 218,800 6,000 224,800 223,500
So the median is raised by $10k via transfers and non-cash job benefits, while folks like RonF (who I get the impression is 4th quintile) get an average of $7k via transfers and non-cash job benefits.
The 2009 Census median (market cash income and cash transfers) was $50k.
Minimum wage annoyances:
I have gotten many calls lately from people who have minimal skills, a lot of interest in working in a law office, and who would like to develop their skills on the job. They aren’t worth minimum wage, though: they simply don’t have the skills I need.
And I can’t hire them for below minimum wage, or allow them to volunteer. That’s true even though they would clearly want the job, and even though it’s pretty much the only way that they would be able to break into the “law office assistant” field. So they end up jobless, or they end up working at Stop and Shop (which gives them zero relevant experience to do what they want to do) or they end paying a community college five grand (which takes them 5 years to pay for, working at Stop and Shop) to teach them the same skills that I would have taught them, for free, as part of a sub-minimum-wage job. They lose; I lose. We all lose.
FWIW, the vast majority of people in that category have been nonwhite and non-native-English speakers. The people who are being harmed are the people folks are trying to help.
Sigh.
“The people who are being harmed are the people folks are trying to help.”
There is little evidence that the responsible parties are trying to help the people being harmed. The economic principle operating is not abtruse or counterintuive (even a lawyer understands it), it has been amply explained over many many years and many many implementations of or fiddlings with laws of this sort, and it is well within the competence of any employed person to see the consequences flowing naturally in plain sight. Nobody voting for one of these laws in the legislature is blind to what it will do.
Now, there are undoubtedly “folks” who support such laws, who do so because the particular economic fact in question IS a mysterious void to them…but they aren’t the driver.
Well, there’s a few things here. First of all, there’s G&W’s story. No doubt it’s true; pretty much any imaginable law has winners and losers. Repealing the minimum wage would have losers, too. Is there a reason we should rate the well-being of the folks G&W describes, above the well-being of those who would be harmed if the MW is revoked?
One reason might be that the MW hurts many more people than it helps. But the minimum wage helps a huge number of workers. If the minimum wage was creating an even larger class of losers, we’d be able to tell because empirical studies would consistently show that raising the minimum wage brings with it rising unemployment. But that’s simply not what empirical studies show. What empirical studies show – and the better-designed they are, the more they show this – is that the sort of minimum wage laws we have in the real world have no effect on employment. (Or increases employment slightly – but that might be statistical noise). Even when focusing on groups predicted to lose out from the MW (like teenagers), studies fail to find any large effects of the MW on employment.
Robert, your argument assumes that every knowledgeable person agrees on what the effects of the MW are. That’s demonstrably, and obviously, not true.
Some past posts of mine that are relevant:
The minimum wage and teenagers | Alas, a Blog
The Minimum Wage, Global Warming, and Expert Consensus | Alas, a Blog
The Minimum Wage In Washington And Idaho | Alas, a Blog
Power Line on the Minimum Wage | Alas, a Blog
Amp, I gave quick readthroughs of all the posts you linked. While I acknowledge that it’s possible that you have an on-topic post somewhere, none of the ones you cited here are more than tangentially connected to what G&W is discussing. You have posts that talk about the effect on the total unemployment rate, about the effect on distinct age, race, and gender combinations, whether a different wage in distinct but close-set geographical areas creates a competitive deficit, etc. – all good and interesting stuff.
But G&W isn’t saying that a high minimum wage reduces net employment, or any of that.
“I have gotten many calls lately from people who have minimal skills, a lot of interest in working in a law office, and who would like to develop their skills on the job. They aren’t worth minimum wage, though: they simply don’t have the skills I need…And I can’t hire them for below minimum wage, or allow them to volunteer. That’s true even though they would clearly want the job, and even though it’s pretty much the only way that they would be able to break into the “law office assistant” field.”
He is speaking of low-skill individuals (at least in this specific job context) who want to trade free or cheap labor in exchange for vocational training, an economic arrangement very common in a free economy, but which is also very vulnerable to being exterminated by well-meaning regulation. Undoubtedly, there are abusive cases; lawyers with legions of unpaid zombie file clerks who think they’re getting training but aren’t, or what have you.
The minimum wage makes it illegal to pay someone less than $X, but the ineluctable side effect of that rule is that the illegality in turn makes the labor of someone whose skills are worth <$X, actually unsellable – at least to the law-abiding. True, this does not show up in the total unemployment level, because employment is a hugely complex set of systems and tradeoffs. The people with skills worth <$X find other paths, or drop out of the workforce (thus disappearing from the 'unchanged' statistical picture you're fond of), or take training in other, more expensive forms.
This is the economic principle that everyone, from Marx to Milton, agrees on; a transaction that the rules make illegal, even though all sides of the transaction were willing to make it, won't occur among law-abiding people.
It may well be that the overall social benefit of the law swamps the loss from these foregone transactions; I don't think G&W was arguing that his lost army of $3/hr fetch-and-carry servitors was automatically more important than the gain achieved somewhere else in the system. He's simply noting that this relatively easy and accessible path to skill development is foreclosed by the law, and the existence of that set of costs seems to go unremarked by the law's proponents.
Robert, I’m not sure that we disagree on the larger issues here. Yes, there are some cases where some people are made worse off by a minimum wage – just as there are some cases where people are made worse off by the lack of minimum wage. I doubt anyone here is denying that.
That’s simplistic and in most cases wrong. Workers don’t have a single value; they have a variable value depending on a variety of factors. For example, I’m worth more than minimum wage if you want to hire me to draw a cartoon, but I doubt I could get minimum wage as a carpenter. Likewise, the person who built my desk gets far more than minimum wage as a carpenter, but I doubt he could land a job drawing comics.
Someone who G&S won’t hire at $X as a lawyer’s aid may well be worth $X in some other occupation. Even if that person has no skills, that doesn’t make her unemployable at $X; I spent years doing phone survey work, a job that only required literacy and the ability to speak. My first job was at a grocery store, (ETA:) and not all my co-workers were literate, or spoke English fluently. Both those employers provided training for new employees.
I admit, that’s unfortunate for a grocery store worker who’d rather be a lawyer’s assistant but can’t be hired by G&W at the wage G&W can pay. But the claimed virtue of MW law is not that everyone in the country can have exactly the job they want. (Nor will getting rid of the MW mean that everyone can have exactly the job they want.)
If they drop out of the workforce without even looking for work, then how do they know they can’t find work? If, on the other hand, they look for work before they drop out of the workforce, then that would show in unemployment statistics.
Even if they don’t bother looking for work, it would be trivially easy to prove by showing a strong statistical association between increased MW and a decreased workforce. I’m pretty sure no such strong association exists, however.
I think g&w has made clear before that he doesn’t actually have enough work to justify employing a legal assistant (as demonstrated by the fact that he doesn’t have one). If he actually had need of a legal assistant, he might well choose to hire someone who had no experience but seemed otherwise promising, and give them on-the-job training. The extra money spent paying minimum wage while the person was not actually worth minimum wage would potentially be more than repaid by the greater loyalty of the employee and by the fact that people mostly make significant wage increases during lateral hires, not during continued employment, so if you hire an inexperienced person for minimum wage and then give them a modest raise when they have completed training, you will quickly make back the training wage because you are underpaying them relative to the market rate for hiring an experienced employee, and they’ll need to stay on for at least a year or two to register as experienced and not flaky to the next lawyer they apply to.
On the other hand, if there is currently a glut of legal assistants looking for work and he could get an experienced one for near minimum wage, then it probably isn’t good for anyone for g&w to be training up new legal assistants to further glut the labor market.
So the problem is not that g&w can’t pay people who aren’t worth minimum wage a starvation wage while they learn, the problem is that g&w isn’t actually in a position to hire legal assistants, and while he has the time to be able to do good by doing pro bono work, he apparently doesn’t have the extra cash to do good by hiring minimum wage interns.
My workplace hires about 15 summer interns, who are paid $4k plus living expenses for 12 weeks (so roughly $12.50/hr). It probably is not cost effective compared to hiring additional people with experience (hell, we’ve hired CS graduate students for less than that, who did excellent work), but that is not the point. We do it because we have a commitment to education and are not cash poor.
Also, if g&w really wants to provide free and unpaid training for legal assistants, he merely needs to provide unpaid or sub-minimum wage stipended internships and make sure that they are actually structured as legally valid underpaid internships. It is true that people will side-eye him and think him an exploitative asshole, but then he is expressing regret that he is not legally allowed to pay people sub-minimum wages for useful work (if it weren’t useful work he would be able to structure it as unpaid training). Even if he were legally allowed to do that, people would side-eye him and think him an exploitative asshole.
I’m not actually against the minimum wage. But to use a more clear example:
I hired an intern who was… well, not the sharpest knife in the drawer. I will not hire her back. I *would* hire her back, but not for
Sure! I personally think that this person was not naturally suited to be a lawyer. But she has quite a bit of sunk cost, and it would probably be sensible to try to leverage them if she could.
If she had the experience to substitute for her natural skill set, she’d be much more employable in this very competitive market. Without them, she relies on favors, like the fact that I hired her in the first place because she went to my school. but those only carry so far.
It’s more complicated than “employment.” There are all sorts of things which are ties up in that: job changes; “working harder,” longer hours, changes between full time and part time employees; changes in benefits; changes in costs to customer; changes in profits; changes in salaries of more highly paid workers; etc.
The thing that people generally hope for is that the company (generally presumed to be the evil oppressor) will reduce its overall profits. Money to the people!
But while that sometimes happens, that is only one solution. Sometimes the company will raise prices: that has its own set of effects, especially if the company is serving poor people. Sometimes the company will reduce salaries for the middle folks: that can result in people making $40k/year instead of $45k/year, while the top management and profits stay the same; it’s not clear if this is a net social benefit. Sometimes they’ll just hire more people who work as temps or as 30 hour/week employees, to reduce overall costs. And so on.
It’s certainly true that the simplistic “raising MW reduces employment and therefore has significant economic costs that outweigh the benefits” is incorrect. But it’s also true that the equally-simplistic “because employment isn’t really affected by MW, then the benefits of the MW outweigh the costs” is also incorrect.
Sure I do. Which is why I have had plenty of them, and am hiring one now.
I might.
I’m not sure that people really understand how expensive on the job training is. It’s even worse for a small business person because the only one who can DO the training is…. me. Training someone costs me a shitload of money because it means that I, personally, have to take time out of making money. And it takes a lot of time: I take on interns because I think it’s the right thing to do, not because they really make me money. I actually lose money.
Dude. This is not 1940. There is no such thing as employee loyalty these days, especially among the younger set. Forming a business on that model doesn’t usually work unless you’re unethical (i.e. refuse to give good references, etc.)
I find it fascinating that most of the people here seem (outside this context) to be extremely focused on allowing people to do what they want; individual freedom is highly valued. But in this context, both you and Amp seem quite willing to use the law in a manner that will practically prevent someone from doing what they want (and have the career that they want) in favor of the interests of other people.
I’m not entirely consistent here, either, so I don’t blame you. But do you see how that seems strange, nonetheless?
A fascinating point.
I could certainly pay my staff more if I stopped doing pro bono work.
It’s not instantly clear which one is a greater social benefit, right? This is part of the “complex issues of social cost” that I was discussing with Amp.
… which is, presumably, because you are either charging more, or not spending as much on other, competing, social interests.
Which is great! Your own business should be able to make those decisions about whether or not it will provide services to poor people; whether it will donate to a given social cause; and how many people it will hire at “more than they’re worth” just because it believes in them.
In a fantasy world I wish I could balance those things, too. Practically it’s unworkable (which is why I don’t support repealing the MW) but i wish I could get a “providing social benefit elsewhere” card.
This is functionally impossible to do.
If I take someone unpaid, law requires that they provide NO BENEFIT to me. For me to supervise a “no benefit” intern (i.e. one who never gets the mail, and never does anything to help me) would cost me in the range of $10,000-$20,000 in lost work per year. The only way that people do it legally is to run a huge firm, providing extremely expensive services, and then to take it as a loss. Even then it’s hard to do right.
Don’t be an insulting dick. And don’t misuse the English language.
Exploitation involves taking advantage of someone else’s circumstances to squeeze them for less than they are worth, generally in a case where there are few (if any) viable alternatives. “You don’t want to starve? Guess you had better work as a miner for $1/hour, because I’m the only job around. Sucks to be you; here’s a shovel.”
Exploitation does not involve a refusalto pay someone more than they are worth, especially in a case where there are multiple alternatives for employment. “You want to get training in a law office? Well, you can have it but you’re untrained enough that you won’t get paid at first. If you don’t like it, there are a variety of minimum-wage-ish jobs for which you would qualify. When you’re trained I’ll consider you for a fully paid job, or you’ll be well qualified to enter the market. In the end, it’s basically the same thing as attending a training program while working for me part time at minimum wage. But we both save the money which goes to the middleman; and you don’t have to commit to a semester at a time; and you don’t have to commute two places; and you are more available to me; and you can leave at any time without owing anything to the trainers; and so on.”
You can argue social benefit and you may be right. But to call it exploitation is ridiculous.
Look: a typical 1L intern wants to volunteer for good reason; as a practical matter they’re worth about zero. They want to ask questions all the time; they want to learn how to draft documents; they want to be taught all the legal tricks; they want to they want to do things like “spend 8 hours sitting in court watching an interesting trial” or “be the fly on a wall during a deposition” and then ask questions about it; and so on.
I think you do CS work, right? that’s not comparable. I suspect that the average college grad knows WAY more about computer science stuff than the average law school graduate (to say nothing of a first year) knows about the law.
I really don’t know what to make of comments like “generally presumed to be the evil oppressor.” Do you really view everyone who favors the MW in such a shallow and stereotypical way? Mainstream Democrats are hardly extreme leftists, and the MW is a policy broadly supported by mainstream Democrats.
I also feel you’ve put me in kind of a catch-22. You bring up unemployment (you not hiring people who you’d like to hire but for the MW), Robert seconds you, I respond by pointing out that the unemployment problem is actually so small it can’t even be measured, and you reply by saying that I’m being simplistic and incorrect by talking about unemployment. Oy vey, G&W!
Anyway, let’s get less simplistic. It’s true that the increased outlays for MW have to come from somewhere. But it’s not true that people who favor the MW – or at least, not people who are sophisticated in how they think about economics – are hoping for reduced profits. That’s one acceptable outcome, but only one of many.
This CEPR paper lists eleven “possible channels” that the funds to pay for MW could be coming from, and discusses the existing empirical evidence for each one:
1. Reduction in hours worked
2. Reductions in non-wage benefits
3. Reductions in training
4. Changes in employment composition (i.e., hiring more highly-skilled MW workers, to the detriment of lesser-skilled MW workers)
5. Higher prices
6. Improvements in efficiency
7. “Efficiency wage” responses from workers (i.e., workers who are paid more work harder).
8. Wage compression (this is what you called “reducing salaries for the middle folks,” although typically this would be done by reducing or skipping raises, and in their analysis it’s not solely the middle folks).
9. Reduction in profits
10. Increases in demand (minimum wage as stimulus)
11. Reduced turnover
None of the effects seem especially large – which makes sense, since the minimum wage increases we’ve seen have not been large. But some are preferable to others, clearly, like 10 and 11. The authors think that 11 – the savings to businesses from reduced turnover – is where most of the money to pay for the MW is coming from, but there may be small effects happening through some of the other channels as well.
Another thing to keep in mind when discussing MW: It’s not alone. The lower the MW is, the more the Earned Income Tax Credit (EITC), and also food stamps, become subsidies to employers wishing to pay low wages. If we want a greater proportion of the benefits of EITC and food stamps to go to low-wage workers, rather than to employers, than we need a minimum wage law.
When you say, “legal assistant, ” g&w, what do you mean by that? What’s the job description?
I ask because my dad has been hiring unskilled (legally, they have to be able to type and speak at least conversational Spanish) people for years as legal secretaries – at significantly higher than minimum wage to start. He trains them himself. He can tell within a couple of weeks if they’re hopeless and send them on their way. If they aren’t hopeless, the vast majority become good at the job. Some stay for years, others move on to firms that can pay a lot more than my dad can.
Which is all to say, what is a legal assistant? A quick googling comes back with results that are extremely similar to the legal secretary position at my dad’s firm.
Anecdote v Anecdote. Sunday, SUNDAY, SUNDAY!!!!
No, just some of them. Seriously, though: that was mostly but not all snark. Many people do seem to assume that the minimum wage should be borne by a company’s profits, i.e. “look what the corporate hacks get; surely they can afford to raise the minimum wage.” There are a large # of such folks who conflate “should” and “will;” i.e. they seem to assume that a MW increase will be borne by the profiteers and not by the consumers, other workers, etc. I’ve read that paper; I’m not at all surprised you’ve read that paper; I suspect that most folks have not.
And by me, FWIW. But of course, that’s in a “reality” world, which is to say that it may not be an ideal or even a good option, but it’s better than the alternative. And Democratic support is also in a “faction” world, where they need those people to vote for them and to exchange in other areas: surely you don’t think that everyone who votes for or openly supports the minimum wage would stay the same in a secret ballot? (of course the same is true on the other side as well.)
Perhaps you are correct, though again that’s in the “…assuming everything else stays as it is” camp.
Tossing out a few random examples:
-You could tie minimum wage to profits (you’re allowed to pay less if you make less.)
-you could tie minimum wage to the provision of other social benefit (you’re allowed to pay less if you donate more.)
-You could tie minimum wage to the employees’ alternatives (you’re allowed to agree to work for sub-minimum, provided that you’re able to qualify for a more highly paid job.)
That last one is both the least practical and the most compelling, at least from a moral perspective. If someone has an alternative that pays minimum wage or better, and if they would prefer to take an unpaid position, then they are obviously getting more benefit than the alternative. That is to say that the benefits TO THEM of the unpaid job exceed the benefits of the paid job. And because the alternative is a minimum-wage job which is assumed to be per se acceptable, then it takes “exploitation” off of the table, at least in the common usage. (Sure, you can still make an argument about some sort of inherent worth of certain types, i.e. that I am such an outstandingly trained person that it is exploiting me to pay me minimum wage even though other people who earn minimum wage are not exploited. But those arguments are weak at best, and exceptionalist/moralistic drivel at worst.)
Here’s a question to illustrate that:
Is it unethical to allow relatively well educated (and often relatively well to do) people to work without regard to minimum wage in exchange for training, so long as they do so voluntarily? Should we be interfering in their choices in the name of protectionism?
If so, is it ethical to allow relatively uneducated (and often relatively poor) people to sign up for training programs that cost them money, even if they do so voluntarily? Shouldn’t we be interfering in their choices too, also in the name of protectionism?