States That Raised Minimum Wage See No Slow-Down In Job Growth 778
An anonymous reader writes: The U.S. Department of Labor has released data that some proponents of raising minimum wage are touting as evidence that higher minimum wage promotes job growth. While the data doesn't actually establish cause and effect, it does "run counter to a Congressional Budget Office report in February that said raising the minimum wage to $10.10 an hour, as the White House supports, would cost 500,000 jobs." The data shows that the 13 states that raised their minimum wages in January added jobs at a faster rate than those that didn't. Other factors likely contributed to this outcome, but some economists are simply relieved that the higher wage factor didn't have a dramatically negative effect in general.
10.10 per hour (Score:5, Informative)
Depending on where you live (state taxes?), that's at best a cool $350-$365 after payroll taxes (259-270 Euros) per week for a family of two to four.
After necessities like food, rent, electricity, phone, transportation, clothing, and so on, it's going to take some wicked budgeting skills to have any disposable income at all. Get it together Washington.
Re:Short-Lived? (Score:2, Informative)
I bet jobs growth has increased because the delta between minimum wage in those regions and unemployment is great enough to motivate folks to get jobs. This will stabilize in a short time and I think jobs growth will stall and stagnate.
That may be true, but there is a difference between jobs and job growth. Job growth in one year means there are more jobs. Forever.
9 States automatically increased (Score:5, Informative)
Um, yeah, talk about misleading.
"Nine of the 13 states increased their minimum wages automatically in line with inflation: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont and Washington. Four more states - Connecticut, New Jersey, New York and Rhode Island - approved legislation mandating the increase"
Correlation really does not indicate causality when you read the entire article. North Dakota has an oil boom, which is spiking employment. Ohio still grew, despite a MW of $7.95. The whole complaint by the CBO was that jobs would be lost if MW was increased to $10.10 across the ENTIRE COUNTRY. In these 13 states, most are no where close to $10.10/hr.
Florida Best Performance. (Score:5, Informative)
The best performer is Florida which only raised it's minimum wage to keep pace with inflation by 14 cents/hr.
"The number of jobs in Florida has risen 1.6 percent this year, the most of the 13 states with higher minimums. Its minimum rose to $7.93 an hour from $7.79 last year."
In reality inflation is much worse for low income people in Florida so in real terms the minimum wage decreased for those people.
Re:Short-Lived? (Score:5, Informative)
If you read the rest of the summary, they do make the note that while they can't say that that growth is the result of increasing the minimum wage, it doesn't negatively affect it either.
Re:10.10 per hour (Score:0, Informative)
A family of four living on a single minimum wage income is entitled to multiple federal benefits that greatly offset their living expenses. if they are paying out of pocket to feed the kids, they're doing it wrong.
Re: Economists (Score:4, Informative)
Re:Economists (Score:3, Informative)
It's a bit baffling how "some economists" weren't fully cognisant of what would happen when the minimum wage was raised. I mean it's not as though it's the first time it has happened, the effects should be well known by now.
The problem is that it's not clear what happens when the minimum wage increases. It's also not clear whether something different happens when a city or state does it versus a national change.
Case in point: thirteen states increase the minimum wage and employment increases faster (on average) in those states than in those that do not increase the minimum wage. The presumption in the post is that the causality is that increasing the minimum wage causes employment increases. What if the causality goes the other way? Increasing employment could make states more willing to raise the minimum wage. Correlation does not indicate causality, so economists can't differentiate between the two explanations.
There's actually been quite a bit of study of the effects of raising the minimum wage. The problem is that it's impossible to produce a real double blind study. Without that, there will always be reasonable doubt. In one study, they won't be able to eliminate the possibility that employment would have gone up faster without the change. In another study, they won't be able to tell if people are moving from the comparison area to the change area for the higher wage jobs. In another study, perhaps employment increases occur because kids drop out of school to take jobs.
Economics isn't anywhere near as mature a science as physics or chemistry. It doesn't lend itself to repeatable experiments. Without objective data, subjective opinions take a far greater role.
Re:Crazy (Score:5, Informative)
So the $600 pre-refund of taxes that Bush2 put in place (which made a negligible increase in per paycheck take-home) and the SS 2% rebate by Obama (which had a similar result) were useless? No, they weren't, they were identified as having an impact on the economy, even though the money wasn't even in consumers hands when it was announced/started.
Minimum wage has nothing to do with minimum ability. It sets a price floor for labor. The people who lose out are those just above the minimum wage floor who see their less skilled/experienced/tenured coworkers elevated to a higher wage while theirs remains stagnant. (This happened to me, btw, and it sowed a short period of discord in that company)
For businesses with very small margins, the costs will be transferred pretty much one for one. As the margin of the business increases, the cost will be passed on in a proportionally smaller magnitude. People are (almost) never hired because they're "cheap" but because work needs to be done to meet demand. Just as nobody hires people if their taxes go down, or fire people if taxes rise. Might it delay hiring? In some instances it makes greater efficiency more valuable, with businesses investing in machines (which are built by people) instead of people. However most of the time it's just a cost of production. If you need to make more silk shirts and the cost of silk goes up, you don't buy less silk - you buy as much as you need to meet demand.
Re:10.10 per hour (Score:5, Informative)
Just so. When the minimum wage is so low that one can't support a family on it without government aid, then government aid to the worker is effectively subsidizing the employer's business model; it's socialism for capitalists.
Re:Crazy (Score:4, Informative)
I heard it argued recently that capitalists aren't interested in increased economic activity, only in increasing their share of economic activity. Suppressing labor markets and high unemployment helps.
Re:Local testing works? (Score:5, Informative)
Re:Local testing works? (Score:5, Informative)
Moving to the state whose laws work best for you may work for people who can move, but I expect the people affected by these laws are pretty closely representative of the set of people who can't move.
Even when people are supposedly more mobile, moving is a big thing for most people so they do not do it.
Here in the UK we had a 50% tax rate imposed on the very richest a few years ago. There were lots of stories about how this was going to drive away people who were successful abroad but in the end it made very little difference because while these sort of exceeding rich people might threaten to take their family somewhere else, but then when they talk to their wife and she refuses to move more than a 20 minute drive from her family and refuses to move the kids out of school and away from their friends.
A few years ago I wanted to move to the states as there were few companies that I could have worked for that might have appreciated a few niche skills I had picked up in their field. Although I would have been a ton financially better off in the states and we could have bought a much bigger house to start a family in than the 3 bedroom London house we have now, my wife would not have moved that far away from the family support. I could have explained how the US tax code would have benefited us until I was blue in the face but she simple wouldn't have cared enough to pay attention.
The idea that people will move is just a scare story that the rich use to try and maintain the ability to pay less in taxes or employers use to justify being able to pay as little in wages as possible.
Re:Crazy (Score:5, Informative)
States with the healthiest job situations were the first to increase minimum wage.
Inconceivable.
Well, it should be noted that only 5 of the states that raised the minimum wage this year have a Gross State Product per person above the national average (Connecticut, New York, New Jersey, Washington, Colorado). The other 8 have below average economies, but are still gaining jobs at a faster rate. Also if you look at the job growth in 2013, these 13 states may have outperformed the average by 0.065% but they are on track to beat the average by 0.3554% this year.
So it looks like these states do not have the healthiest job situations, but still performed better than those who did not raise the minimum wage (by this ridiculous metric that is).
A better metric is comparing how job growth is growing or stalling. The four states with the highest minimum wages are California, D.C., Oregon, and Washington, who all have minimum wages about $9 per hour. Of those four areas, job growth has slowed by 27% on average year over year (comparing June 2013 - May 2014 to June 2012 - May 2013). If you look at the four states with the lowest minimum wage (Arkansas, Georgia, Minnesota, Wyoming), their job growth has grown by 26% on average year over year. So if you want to compare the trend of job growth increasing or decreasing, it looks like raising the minimum wage does hurt significantly.
source [senate.gov]
Re:Local testing works? (Score:5, Informative)
Are you suggesting that there's a huge amount of US workers just waiting to pick fruit and plant pine trees?
I would say for for a thousand bucks an hour, you'd have people lined up around the bloc to pick fruit and plant pine trees. (1000$/hr is a silly high wage, but it makes a point that higher wages will drive workers to a job)
The problem is that with the glut of ultra-cheap labor, the wages for picking fruit and planting pine trees has not increased enough to drive workers to these jobs. When a business utilizes the ultra-cheap labor, the only way for other businesses to match their competitor's prices is to also utilize the ultra-cheap labor. Businesses following the rules will struggle to get by and possibly close down - being unable to cut costs as much as the businesses that aren't playing by the rules.
Unless the government steps in and severely punishes the use of illegal immigrant labor, the problem will persist.
Re:Local testing works? (Score:4, Informative)
Why would you accuse conservatives of having Marxist economic views?
If the shoe fits...
Spare us your histrionics. Forcing businesses to pay employees a wage determined by politics will either 1) be irrelevant because the the minimum wage is set below labor market rates or 2) cost jobs and, if the minimum wage is set very high, cause businesses to close.
So why didn't it cost jobs in the 13 states that tried it? Did you RTFA? Your theory is shot to hell.
As for the rest, nobody has contemplated a law forcing one particular employer to pay higher wages. Your imagined outcome doesn't happen when everyone is equally required to pay a fair wage. You're also breaking the argument by analogy by insisting on an unrealistic starting condition. Nobody has suggested $300/hr or anything close to it. The effect of $15/hr would increase the cost of a Big Mac by $0.20. Meanwhile, a bunch of people could actually afford things, which means sales and hiring staff to serve them.
Re:Local testing works? (Score:2, Informative)
Many libertarians re-define slavery to mean paying taxes or putting people in chains and literally whipping them until they work. They ignore the constructive slavery of being forced to work for next to nothing because that's what the offered wages are in the vain hope of not starving long enough for a miracle to happen.
In some ways, the modern minimum wage slaver is worse than the literal slave owners of old. The slave owners of yesterday HAD to provide food, clothing, shelter, and health care to avoid losing their investment. The modern ones palm that responsibility off on society.