Tuesday, February 23, 2021

$15 Minimum Wage

Scott Lincicome writes about the $15 Minimum Wage at The Dispatch.  He starts out by quoting Thomas Sowell, so he's already on my good side. (No Lewis or Chesterton quotes, though.) It's long, but recommended, but here is a quick summary:

Overall: If the goal is to help the poor and struggling, it will help some of those, but nowhere near as many as claimed.  It will hurt others, and this is being ignored by the bill's proponents.  

1. It favors bigger companies (Amazon) over smaller and reduces competition.  That's why Amazon is supporting this.  It is very much like regulation.  It affects them a little, but is devastating to any potential competitors.
2. It really matters where you live, either by state - are you shocked this will hurt jobs in red sates more? -  or by small town and rural businesses.  This is because of cost-of-living which is not the same everywhere.
3. 80% of studies say increasing the minimum wage does cost jobs, very disproportionately the jobs of the poor.  The proponents, like Paul Krugman, are leaning heavily on that 20% - and even some of those show mixed results.
4. There is a linked twitter thread on worker effects in Britain which showed me new things about less-visible ways workers are hurt - fewer benefits, harsher conditions.
5. It will shove poor workers into gray market jobs with fewer protections. 
6. It will have no effect on the poor outside the work force

7. Prepandemic - by the end of 2019 - we reached the lowest poverty rate ever without it. "Ever" is a big word.  Usually when we say lowest or highest, best or worst about some statistic we add the qualifier "since 1970," or "in the modern era."  We reached the lowest poverty rate in the history of the United States, even though the last minimum wage increase was in 2009.

8. If you want to help the struggling, cost of housing is likely one of the more efficient ways. That can be complicated, and even more prone to tradeoffs rather than fixes.


Mike Guenther said...

#4 Raising minimum wage would lower benefits.

In 2018, employer benefits cost 32% of total compensation with salary making up the remaining 68%. Raise the minimum wage and there's less money to spread around for benefits like profit sharing, health insurance or 401K's. Paid vacations and holidays also would be on the chopping block.

#8. Cheaper housing would help, except for local building and zoning codes and the fact of NIMBYism that is prevalent amongst the chattering class. They're the ones screaming the loudest about "Doing something", but only as long as it doesn't cost them anything or land in their backyard.

Zachriel said...

The minimum wage tends to distort the labor market. It raises wages for most, but leaves jobs out of reach for others. It works best when the minimum wage is not too far above the natural floor. Notably, large corporations will often pay their workers below subsistence, with their workers having to rely on government for food subsidies and health care. It acts as a subsidy to these large corporations.

The earned income tax credit (EITC) is a better solution to low pay, especially if the payments were to be doled out in each paycheck rather than in a lump sum at tax time. The EITC is based on family size, so it acts to support children and working parents. Universal health care would also create a more equitable and fluid labor market.

Texan99 said...

It transfers jobs from the bottom part of the under-15-an-hour crowd to the upper part. The unlucky part see their wages go to zero to fund the increase to the lucky part who keep their jobs.

Christopher B said...

I guess I'm just not smart enough to understand how benefits available to all comers who qualify (food stamps and Medicaid) are a subsidy to businesses but a direct cash payment available only to people with earned income, i.e. a job, isn't.

Zachriel said...

Christopher B: I guess I'm just not smart enough to understand how benefits available to all comers who qualify (food stamps and Medicaid) are a subsidy to businesses but a direct cash payment available only to people with earned income, i.e. a job, isn't.

That's right. All subsidies to workers required for basic sustenance are effectively subsidies to their employers, while all taxes, including those to pay for subsidies, distort the economy in one way or another. EITC would avoid distorting the wage-labor market especially at entry-level, and require much less overhead administration. Combined with universal healthcare coverage, it would make for a much more fluid wage-labor market.

Ronald Reagan said of a Congressional bill expanding EITC that it was “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

This discussion is contingent on believing that government has a role in helping those who are poor, of course.

Sam L. said...

Ahhhh, Pauley, the Beard, Krugman!

SJ said...


Notably, large corporations will often pay their workers below subsistence, with their workers having to rely on government for food subsidies and health care.

Late last year, I saw a study of people who receive food stamps, and their employers.

The GAO released a report on SNAP recipients (often called 'food stamp recipients'), including some data on their employers. The blogger who studied the GAO report noticed:

It found that, among SNAP recipients who were wage earners, they were more likely to work at small employers (like the mom-and-pop grocery) than large ones. 41.1% of SNAP recipients worked at employers with 1,000 or more employees; in comparison, among the non-SNAP-receiving workforce, 45.9% worked there. 4.7% of SNAP recipients worked at employers with 500 to 999 employees vs. 5.5% of the rest. In comparison, 17.6% of SNAP recipients worked at employers with fewer than 10 employees, vs. 13.5%, and 17.2% worked at 10 – 24 employee-sized employers, vs. 14.6%. To do some addition: 34% of SNAP recipients worked for small employers vs. 28.1% of the rest of the workforce.

The disparities, and the concentration among small businesses, are even starker for Medicaid recipients which the report also analyzed: 40.8% of Medicaid enrollees work at businesses with fewer than 25 employees, compared with 27.4% of the non-Medicaid workforce.

The string of numbers quoted there gives me the impression that you are more likely to find SNAP recipients, or medicaid recipients, working for small businesses than for big corporations.

This runs counter to most people's intuitions on the subject. It also runs counter to most rhetoric that I see or hear about big corporations, salaries, and public benefits.

I suspect that most people are simply unaware of the details of who receives benefits, and which companies employ a larger portion of the people who receive benefits.

Cranberry said...

Many teenagers gain work experience with minimum wage jobs. The work history gained thereby is valuable. A $15 minimum wage is a barrier to teen employment.

The upper class gets around this through internships, which are frequently unpaid.

David Foster said...

I have talked with a machinist, who said that many recent H/S graduates have trouble reading a micrometer because they never learned to do arithmetic with decimals, and with a carpenter, who made a similar comment about rulers/yardsticks and fractions.

Lack of basic math and language skills makes people a lot less valuable to employers.

David Foster said...

Crabberry..."The upper class gets around this through internships, which are frequently unpaid."

This is a very good point. Maybe any minimum-wage bill should also forbid unpaid internships?

Grim said...

I find myself in the unusual position of agreeing with Z. He's right about this stuff -- well, maybe not universal healthcare, but definitely about the use of federal benefits to subsidize companies and other employers.

When I was a kid, the local sheriff's department set its wages at just the right level to allow deputies to collect all federal benefits. If you want someone to work for you full time, someone has to pay enough for them not to starve to death. Otherwise, they won't be able to show up for work because they're dead. If there are no benefits, then that somebody has to be you who pays them. But if the Feds will pay them X for housing, and Y for food, and Z for child care, and Q for whatever, those figures can all come off your budget.

The effect of that is that American taxpayers in general are being involuntarily taxed to pay for a county in rural Georgia who wanted police. Walmart can do the same thing.

Texan99 said...

You always did like this argument. :-)

KCFleming said...

Argy-bargy about minimum wage is fine. I am unalterably opposed to $15 or any set wage.
But the people in charge don’t give a tinker’s damn about the downsides (or the upsides) of 15.
The In-Charge aren’t doing it for the poor.
They don’t want it to work.
They want people to suffer (here, small businesses, their customers and employees).
They *want* decline.

They’re not misinformed or misguided or even just power-mad.
They’ve chosen an evil thing *on purpose*.

You won’t change their minds with facts.

Cranberry said...

@David Foster, I'm wary of unintended consequences. The largest problem of upper and upper-middle class families using internships is that the people often deciding what goes into a bill do not face the consequences in their own children or grandchildren.

Any system can be gamed, so trying to force people to behave in certain ways often backfires. However, what about a rule that one cannot directly hire an unpaid intern, and the position has to be of limited duration, say a month? Likewise, what about allowing a starting wage, for a limited, probationary period, for people just entering the workforce? So the internships can't serve as a trial period effectively only open to the children of the rich, or those willing to starve.

I'd also (while being a dictator) require the internships to be open to more than a small set of colleges. Perhaps, only 10% of interns can come from any one college, and it can't be the same 10 colleges.

I do agree that many employers limit employees' hours, as they don't want to pay for benefits. The games some large employers play with employees' hours are brutal.

David Foster said...

Cranberry...I don't think that a one-month job would be enough, in most cases, for the intern to actually learn much of anything about the work or for the employer to learn much about the intern.

I don't know much about the history of apprenticeships, but I *believe* that in most cases, the employer only had to provide the apprentice with meals and a place to stay...which would translate into a low but survival-level wage in our society, since employers don't usually provide dormitories and 3 meals a day (except for some Silicon Valley companies)