An Assortment of Thoughts on the Minimum Wage

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James Hanley

James Hanley is a two-bit college professor who'd rather be canoeing.

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  1. Avatar Gabriel Conroy
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    says:

    Those types of facts are the main reason I have reservations about the minimum wage. For a long time (in internet time, that is), I’ve maintained a bias to the effect that it’s probably better to have more jobs and hours at lower pay than fewer jobs and hours at higher pay. That said, I suppose it depends on exactly what the job losses or hour losses are or how low wages have become in real terms.Report

  2. Avatar Doctor Jay
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    says:

    A couple of thoughts:

    1. The first job I ever had was at age 15, in 1972. I earned $2.50/hour. Adjusting for inflation, that’s about $14.50/hour

    2. Sea-Tac Airport is not within Seattle’s city limits. It’s in Burien, WA. My perhaps imperfect understanding is that it is the City of Seattle that has raised the minimum wage to $15/hour (which my item 1 makes seem a lot more reasonable than I first thought.) So something smells fishy about that story.Report

  3. Avatar Saul Degraw
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    says:

    Planet Money did a really interesting story about a mall that is divided between Santa Clara and San Jose. The story is interesting because one city increased their minimum wage and the other did not. So this is a great micro-example of what could happen.

    http://www.npr.org/blogs/money/2014/08/22/342232976/episode-562-a-mall-divided

    For those who don’t want to listen, a manager of a shoe-store on the non-raised side is having trouble recruiting good employees because the owners refused to raise the wages. He said this resulted in people coming into interviews obviously stoned, etc. The manager compensated through other benefits like working around his employees lives and schedules. In short, he needed to give other benefits. A woman who owns pretzel stands on both sides had her employees switch off for fairness sake. The Gap was divided between both sides and just raised wages.

    I think when it comes to minimum wage, the fights about it are more along the lines of social politics than actual economics. They are largely about class struggle and world view and what W.E.B Du Bois called psychic wages. The same goes for things like Taylorism and the recent story about the company that decided to monitor how long employees spent in the bathroom by installing punch codes or something like that without realizing that women and people with disabilities might need to spend a longer time for perfectly valid reasons.

    So when people cut hours, maybe some of it is because of legitimate economic reason but I suspect a lot of it is management and business owners as a class deciding that they think workers at level X should only have X amount of wages and Y amount of benefits and any attempt by workers to get more via strike and/or law is the workers simply being ungrateful fuckers. This is where the phrase “job-creators” came in. I think a good portion of management and business owners do think that they deserve people constantly kissing their asses.Report

    • Avatar James Hanley in reply to Saul Degraw
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      says:

      Weird things happen when we operate in multiple jurisdictions simultaneously, it seems. Here in my town there is a factory that straddles the city limits, half in, half in a township jurisdiction.* The city secured a grant from the federal government that could be used to fund some kind of industrial activity at the plant, but only on the city side of the line. So the factory had to literally invert itself, moving equipment for the new activity from the township side to the city side, and making space by moving other equipment from the city side to the township side.
      ____________
      *Here in Michigan, and in Ohio, we have charter townships, which function as municipalities, including having zoning and some taxing power, and the authority to resist annexation. These are (still, I think) the only two states that have this oddity, which developed as a response to annexation efforts by municipalities that angered residents who were thus brought within the city limits against their wishes. That’s why the city could not just annex the land the remainder of the plant sat on.Report

    • Avatar Brandon Berg in reply to Saul Degraw
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      says:

      So what I’m getting from this is that even at the very low end of the labor market, it isn’t true that employers simply set wages and working conditions arbitrarily, but rather must offer competitive terms of employment or be stuck with the dregs of the labor market. And conversely that employers who offer higher wages and/or better conditions are able to cherry-pick the best workers.Report

  4. Avatar Saul Degraw
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    says:

    I can confirm what Doctor Jay said.

    When I was in graduate school in 2006, I had a part time publishing job that paid ten dollars an hour.

    A classmate’s husband graduated college in the 1970s and he said his first job paid 10 dollars an hour but that was enough to rent an apartment, get a car, and be an independent adult. I would say in modern America it is largely impossible to be an independent adult on 10 dollars an hour unless you live in a very rural area and/or you live a monastic existence.

    Speaking of minimum wage, I found this interesting:

    http://www.slate.com/blogs/moneybox/2014/08/29/income_distribution_of_new_york_city_what_does_it_take_to_be_rich.html

    The article looks at San Francisco and NYC and breaks their populations down by income level and then compares those percentages to the rest of the United States.

    Both San Francisco and NYC are above average at the margins. I.e. they have more people than the rest of the country in extreme poverty and extreme wealth. For example, 13.3 percent of San Franciscans earn over 200,000 a year but only 4.6 percent of Americans do. The percentage of San Franciscans who earn between 50,000-75,000 a year is 13.7 percent but 18.2 percent of Americans earn that much.Report

  5. Avatar Saul Degraw
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    says:

    http://mobile.seattletimes.com/story/today/2024422357/track-and_news_lite-1.1.2-./

    ‘This is a good example of what I mean by psychic wages. The story is about a right-wing free economics think tank in Washington that is deciding to work on Monday because Monday is Labor Day.

    Yes, bittersweet old Labor Day — the first Monday in September, the holiday that’s been around for generations and is known to most nonideologically blinkered Americans as an end-of-summer free day honoring all the hard work you put in the rest of the year.

    But to the Freedom Foundation, a business-backed Olympia think tank, the day is evidence of the power of unions, which to members equals the decline of America. Rather than stoop to taking a union-backed day off, they plan to fight the power by … working all day Monday instead!

    “I can’t think of a problem in society that can’t be traced in some way back to the abuses of organized labor, so it would be hypocritical of us to take a day off on its behalf,” said Freedom Foundation CEO Tom McCabe, in announcing the “work-in.”’

    I can only read this and think “really?”. These people hate the idea of unions and organized labor so much that they are going to work on a three day weekend simply because it is called Labor Day.Report

    • Avatar Gabriel Conroy in reply to Saul Degraw
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      says:

      I agree that’s an example of a psychic wage, assuming that foundation didn’t have a reason to work this Monday anyway and decided to just claim they’re doing it as a protest against unions.

      However, while it could be an example, it’s not the best one nor was it really what DuBois was aiming at. (Disclosure: I’ve heard of his argument, but haven’t read it.) I think he was focused more on white workers who refused to join with their black colleagues in organizing to advance common interests and instead preferred to accept less, but as “white workers.”

      I imagine the type of people who at a think-tank are operating on different assumptions or have a sense of “mission” that is less attributable to the workers I assume DuBois (me not having read the piece in question) was talking about.

      the first Monday in September, the holiday that’s been around for generations and is known to most nonideologically blinkered Americans as an end-of-summer free day honoring all the hard work you put in the rest of the year.

      Except if you work low-paid service jobs, then it’s a chance to serve other people who have the day off.Report

      • Avatar Saul Degraw in reply to Gabriel Conroy
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        says:

        @gabriel-conroy

        I admit to doing a variant of psychic wages but I think that many people in management do have attitudes that are still “just accept your station in life”. Keep in mind that I follow Cory Booker’s definition of what makes someone a reactionary is that they want to keep privileges and powers for themselves. This might not always be conscious but 2.5 years of freelancing has given me a bunch of “Really? You can’t do that one little thing you do for all your other lawyers just because I am a contract lawyer even though you take out taxes from my pay check and I am hear long-term…” These feelings leave a bitter taste in my mouth and are radicalizing me.

        I am not an anti-capitalist even though I believe in a strong safety net and a welfare state at social democratic levels including NHS styled health-care. I want to live in Marin or Westchester or Brownstone Brooklyn for Pete’s sake. But I think that a lot of people do believe in lots of small social distinctions and 2.5 years of feeling like I am treading water and not necessarily advancing can be radicalizing.

        “Know your place. Accept your place. Be a shoe.”-Tilda Swinton, Snow Piercer.

        I think a lot of people have this attitude.Report

      • Avatar Gabriel Conroy in reply to Gabriel Conroy
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        says:

        Well, it’s no fun treading water. I do think you might come to the table with different expectations while others are well used to be treated like you are. That doesn’t mean you’re wrong. It might actually mean you see it more clearly than others do.

        I don’t know anything about Cory Brooker, but I think his definition of “reactionary” could apply to almost anyone. It might be more of a eye-of-beholder thing. A person who doesn’t have a job and is prevented from having one because the field is unionized and it’s too expensive to hire him/her to get a foot in the door is, in a sense, a victim of “reactionary” unionists who want to keep their seniority privileges. A member of academe who has gone through the PHD process and thinks all instructors should do the same can, in Brooker’s sense, be considered a reactionary. A lawyer who thinks law school + bar exam ought to be the only way to enter the profession might be a “reactionary” in some ways.

        Now, I’m hedging here, saying “can…be” instead of “is” and saying “in some ways” or “in a sense” instead of “definitely.” A union shop represents a contract that employers and employees agree to abide by. The PHD hurdle to be a professor, in my opinion, really ought not to be necessary, but there is a good argument that the PHD provides much more training and socialization into the profession than an MA. And a lawyer might argue, again in good faith and quite reasonably, that trusting someone with the privileges of a lawyer and ensuring clients can trust that a lawyer is responsible to some governing body, is a vital thing to protect clients and lawyers and the process of law school + bar exam, etc., is a good way to ensure that.Report

    • Avatar ScarletNumbers in reply to Saul Degraw
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      says:

      “I can’t think of a problem in society that can’t be traced in some way back to the abuses of organized labor, so it would be hypocritical of us to take a day off on its behalf,” said Freedom Foundation CEO Tom McCabe

      This is so ridiculous that it seems to have come from The Onion.Report

    • Avatar Mike Schilling in reply to Saul Degraw
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      says:

      Rather than taking a day off on Sept. 1 to honor organized labor, we will mark the final weekend of the summer on the previous Friday, Aug. 29.

      So they’re not actually making a sacrifice. Giving up a holiday with no compensation is what they want the freedom to make other people do.Report

  6. Avatar clawback
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    says:

    Is on-the-job training considered compensation now? Wow.Report

    • Avatar James Hanley in reply to clawback
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      says:

      I found that curious, too. So here’s a serious question. If, as that article suggests, on the job training improves prospects for future earnings, is it fair to consider it a form of compensation?

      Setting aside the issue of whether businesses should do it because it benefits them. Whether we assume they’re rationally maximizing their net benefits or assume they’re short-sightedly undermining their ow interests. Looking just at what the employees get out of it, is calling training compensation a reasonable position or not?

      It being a new idea to me, I’m not yet sure what to think.Report

      • Avatar Mike Schilling in reply to James Hanley
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        says:

        Not that new. Back in the 80s, I worked at a place that, when it hired new grads, put them through a 6-week training course which it valued at (IIRC) five thousand dollars. A portion of that was “forgiven” every quarter, but someone who left before three years owed them the remainder.

        In general, I’d want to ask whether the training is in that company’s procedures (“recurring expenses go in the blue folder”) or in generally applicable skills (“Take this week to do an online course in Python “).Report

      • Avatar clawback in reply to James Hanley
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        says:

        From the point of view of the employee, it seems clear that one could attribute some of it to generally-applicable skills development and some to domain-specific knowledge. In the case of a minimum wage job, surely it’s primarily the latter.

        From the employer’s point of view, clearly it’s almost always strictly an investment.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Mike,

        To clarify, I didn’t mean OTJ training was new, or new to me. Just that the question of whether to view it as compensation was a new one for me.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        And your comment helped me make sense of the question.

        My own on the job training has been limited to learning what goes in the blue folder. Usually it’s my soul.Report

      • Avatar Will Truman in reply to James Hanley
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        says:

        This is one of the reasons why it makes sense to hire people for less money initially and then actually give them raises over time. Increased productivity with experience is another, but it makes sense to say “We’re going to be paying you less at the outset because we’re also training you for the job.”

        So in a way, this outlook used to be more common than it is actually is now, when employers seem allergic to giving raises.Report

      • Avatar Lyle in reply to James Hanley
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        says:

        Or something that I understand was tried for a time when workers were short by Shell. Folks in disciplines were promised bonuses after X years if they stayed, and nothing if they left. You could do it with stock options as well, (as companies do with execs) in that stock options vest in a few years, and if you leave before the vesting date nothing. (Actually this is why you see such large signing bonuses when execs jump companies, the new company is expected to make up the lost income from the stock options and the like for the new exec, to make it worth her while to move.)Report

      • Nob Akimoto Nob Akimoto in reply to James Hanley
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        says:

        One of my professors in undergrad political economy had been looking into the effects of labor training/human capital development models between economies, which to me seems like an important variable to consider (albeit more difficult to code for) when doing cross-national comparisons.

        That is to say, depending on industry and country’s labor organization/training practices, the lack of on the job training might not be so important when viewed on an earnings potential basis. This is much more clearly the case in industries where labor costs are higher than minimum wage and where turnover can cost a substantial premium in productivity, but it’s an interesting variable to look at nonetheless.

        One might also look at OTJ training as being some form of fixed cost rather than as being endogenous to the variable cost column, which raises all sorts of peripheral issues.Report

      • Avatar Mad Rocket Scientist in reply to James Hanley
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        says:

        Mega Aerospace Corporation, when training new people to work in the factory, has a 6 week course it runs them through. From what I recall, the course was paid a very small wage, more of a per diem or stipend. If you successfully completed the course, you were eligible to be hired by the company (I don’t think you were immediately given a job, but went into a pool of candidates).

        Once hired, you got all sorts of OJT, etc. & a starting wage of $15/hr (I think, probably more now) I remember during the last strike, the union going on about how the workforce were highly trained & skilled aircraft mechanics who deserved more pay, and others (quite rightly) pointed out that they were no such thing, that what they were was people trained to assemble specific aircraft in a specific way according to the companies processes (in short, no one on the line had an aircraft A&P license by virtue of working on the line).

        The point for this segway was that at the time (& even today, although less so), the company had incredibly generous education benefits, which included stock awards upon completion of a degree granting program or certificate program (vested after 3 years, I think). Completing any related educational program also factored heavily into everyone’s raises. By & large, the class of employees who took advantage of those benefits were the professional employees. The line workers, while very much eligible for the benefits, didn’t. Not even to do the 6 month program that would get them their A&P license.

        I guess what I’m getting at is, if minimum wage employees are given opportunities to improve their economic value to an employer, how many are taking that opportunity, and of those that aren’t, why not? What incentives are in play to keep them from reaching for more?Report

  7. Avatar James Pearce
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    says:

    “Note that this assumes no changes in hours employees work.”

    So it assumes a “best practices” management style.Report

    • Avatar James Hanley in reply to James Pearce
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      says:

      Well, no.Report

      • Avatar James Pearce in reply to James Hanley
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        says:

        Well, not really, it’s true.

        But assuming there would be changes in employee work hours assumes a poor management style.Report

      • Avatar James Hanley in reply to James Hanley
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        says:

        Well, no.Report

      • Avatar James Pearce in reply to James Hanley
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        says:

        I’m rather sick of your schtick, James, so let’s make a pact.

        You stay. And I’ll stay away.Report

      • Avatar Dave in reply to James Hanley
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        says:

        For crying out loud…

        @james-pearce

        But assuming there would be changes in employee work hours assumes a poor management style.

        I’ll address your comment the way that I wish @james-hanley had done so (kids, can we puh-lease stop with the back and forth bullshit? Everyone? Everyone?)

        As risky as it is starting an argument with a first principle, I’m going to throw one out here – investors want to get paid pursuant to the risks they take via a return on their invested capital. This isn’t political ideology. It’s Pre-Business 101 as taught by Captain Obvious.

        If wages are forced up because labor laws change, because labor is a variable cost, managers will do what they can to mitigate the cost increase before doing anything to pass those costs on to customers. @james-hanley ‘s post has a number of real world examples of this.

        Whether this is good or poor management is both subjective and irrelevant. Subjective because good or poor is going to depend which side of the fence you’re on. If you’re a worker, it’s not so good. If you’re an investor, this is what you want your management to do (i.e. control costs). It’s irrelevant because it’s going to happen no matter how poorly people think of the practice.

        That’s why I’m not paying much attention to the AFL-CIO study. Of all people, you’d think that people within organized labor would know how management reacts to changes in wage levels. This particular gem from the AFL-CIO report was an eye opener:

        Increasing the minimum wage takes money out of one set of pockets and moves it to another set of pockets. There has been a long-running debate in economic literature about the effect of increasing the minimum wage – about whether it is a damper or a stimulus for employment.

        There are two things to consider:

        1) Whether or not existing employees are made better off from minimum wage increases and the evidence here suggests that it isn’t happening.

        2) Whether or not minimum wage increases negatively impact employment on a more macro level. What I’ve seen here is that while the overall impact is still debatable (not a matter of “if” but “how much”), the positive impact argued by the AFL-CIO study is based on the very false assumption that moving money from one set of pockets to another is accepted (typical amongst the folk-economics mindset that argues that capital can take a lower profit). Such an assumption demonstrates profound ignorance towards the way capital works in the real world. It’s not that simple.Report

      • Avatar Brandon Berg in reply to James Hanley
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        says:

        @dave The problem, as you may have noticed, is that certain people have a knack for issuing single sentences of garbage so tightly packed that it can take a page or more to debunk because of all the ignorant assumptions baked in. And sure, you or Hanley or I can do that every once in a while, but it’s a full-time job, and ain’t nobody got time for that.

        And yet, people being monkeys, they tend to have their beliefs reinforced by seeing others express agreement, even when totally unbacked by any sort of argument. So we’re loathe to let this sort of nonsense go unchallenged. “Well, no” seems about as decorous a way as any to register opposition to this kind of thing without expending the effort necessary to explain in detail why it’s wrong.Report

  8. Avatar Damon
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    says:

    Pretty much what’d you’d expect when a variable cost goes up. Business manage all kinds of costs and changes.Report

    • Avatar Dave in reply to Chris
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      says:

      @chris

      The effects of minimum wage are complex and dynamic, operating on many different interactive levels of causality, and it’s been my experience (and occasionally my habit) that people cherry pick the results that fit with their preferred narrative. Or put differently, economics.

      Edited by Dave – last comment incomplete:

      Chris, do you have a business background? The reason I ask is because what you claim is complex and dynamic isn’t really all that complex and dynamic when the rubber has to hit the road and those that have to live with minimum wage increases adjust accordingly.

      To me, this is why I don’t pay much attention to the academics on this issue. I don’t care what is or what is not statistically significant if it conflicts with 1) my understanding of how businesses operate and 2) what I’ve seen when employers try to screw workers over every which they can, especially those in the lower wage brackets.

      I suppose you can say I’ve boxed myself into a “preferred narrative”, but it has less to do with political ideology and more to do with personal and professional experience.Report

      • Avatar Dave in reply to Dave
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        says:

        That’s perfectly ok.

        I explained the reason I asked the question above. I revised my comment to give you the reasons why I think the way I do. My initial comment was lacking the substance that it needed. I guess I hit the blue button. Sorry.Report

      • Avatar Chris in reply to Dave
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        says:

        Yeah, I get that wages, increases or decreases, affect real people on the ground in very concrete ways. And because I’m not a business person, my interest is less in how individual businesses compensate for minimum wage increases than the overall effect of those increases on wage earners and the economy in general. And these things are complex and dynamic, not in small part because different businesses react differently: some raise prices, some cut hours, some hold onto employees (perhaps to avoid having to train new people at a higher cost), some lay people off, some move to places where the minimum wage has not increased, some just make more money and it balances out. I imagine which strategy a particular business takes depends in large part on the specific business, where it is financially, where it is in terms of its growth, what’s going on with the economy around it, etc. All the more reason, when judging minimum wage hikes as a policy, to look at the overall effects, which are, again, complex and dynamic.Report

      • Avatar Mad Rocket Scientist in reply to Dave
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        says:

        & how the wage law is applied. Is it graduated & applied in steps over a long period of time, or a single shot in the arm? Is it applied evenly, or are some businesses exempt (in Seattle, small restaurants/diners are exempt, but not if you are a franchise of a larger chain – so the Pete’s Sub Shop is exempt, but the Subway across the street is not, even though the Subway gets no help from the national chain with regard to wages).Report

      • Avatar Chris in reply to Dave
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        says:

        MRS, right, which is why economists doing research on minimum wage and its affects on wage earners and economies have had such a difficult time figuring it out: there are so many pieces at play. For example, there is research showing that it hurts low income families, but helps low income individuals. There’s research showing modest rises in unemployment, and research showing modest drops in unemployment. There is research showing increases and research showing decreases in separations. Because what findings you get in research on minimum wage effects is largely dependent on your methods: how big of an area do you look at, what time scales do you look at, what types of businesses do you look at (does it affect retail, tip-earning restaurant, and fast food employees the same?), the existing economic conditions in the area you’re looking at, and so on, and so fort.

        One of the things about the papers I linked above is that many are based on new, more robust statistical methods, with better datasets, then pretty much everything that came before 2010. But there’s still no real consensus on what raising minimum wages means generally, and whether it’s a good thing, among economists.Report

    • Avatar Mike Schilling in reply to Chris
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      says:

      people cherry pick the results that fit with their preferred narrative. Or put differently, economics.

      Careful: when I say exactly that, I’m an idiot.Report

      • Avatar Dave in reply to Mike Schilling
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        says:

        Calling people idiots violates the commenting policy, but I may have the view that people that hold that position lack a few necessary pieces of knowledge (i.e Dave’s Law of Big Business and Capital).

        I don’t hold that against anyone personally. An idiot shouldn’t refer to others as idiots.Report

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