Friday, January 17, 2014

Washington Post spreads bullshit about minimum wage

While looking for something else, I accidentally stumbled on to the Washington Post's Op/Ed page. 

And then I saw this:

Robert J. Samuelson
Robert J. Samuelson
Opinion Writer

Minimum-wage mirage?

And for some reason, I read it.

So, it starts out sounding pretty sane.

This minimum wage business is tricky. On its face, raising the wage seems an easy way to fight poverty. Just pay low-wage workers more. After all, some scholarly research finds that, within reasonable limits, there’s no job penalty. A higher minimum doesn’t reduce employment much, if at all.

That's it. Just end it there. We should, of course, raise the minimum wage. There is no downside. That's it. It's really just that simple!

  Unfortunately, it may not be that simple.

Oh, God. . .  Okay, go ahead. How is it not that simple?

Unfortunately, it may not be that simple.
Democrats propose raising the present federal minimum of $7.25 an hour to $8.20 this year, $9.15 in 2015 and $10.10 in 2016. Assuming no job losses, almost 28 million workers would benefit by 2016, estimates the Economic Policy Institute (EPI), a liberal think tank. That’s about 17 million who now make less than the proposed minimums, plus 11 million slightly better-paid workers who would get increases to keep them above the minimum. 

Oh, well that does complicate things - oh, wait. no. no, it's still pretty simple.

 Someone working 40 hours a week at the minimum would see annual wages go from $15,080 now to $21,008 in 2016. Today’s annual wage is about 20 percent below the federal poverty line for a family of three, while the 2016 wage would slightly be above the line for a family of three (though not of four), says EPI. Not all workers would receive big increases, because many work part-time (46 percent), don’t stay for a full year or already are above the minimum. Still, wage gains could be sizable. 

Yes, sizable. Going from below the poverty line to just slightly above it. Let's call that "sizable." Sure.

Now, if you're trying to say that $21,000 a year is still a starvation wage, especially  for someone trying to support a family, you'll get no argument here. But since you write for the Washington Post Op/Ed page, I'm guessing that that is not the complicating factor you're referring to.

Economist John Schmitt of the Center for Economic and Policy Research, another left-leaning think tank, says that recent minimum-wage studies find that “modest increases” have “little or no employment effect.” Businesses turn to other ways of absorbing the added costs rather than reducing payrolls or workers’ hours, he says. Better-paid workers mean less turnover. This cuts firms’ recruitment and training costs; it also raises workers’ productivity, because they’re more familiar with their jobs. Finally, firms adopt “small price increases.” 

So, it's a win-win! When does it get complicated?

All this sounds plausible; it may also be incomplete.
For starters, the minimum wage is a blunt instrument to aid the poor because it covers many workers from families that are well above the federal poverty line.

Wait. Your objection is that raising the minimum wage would help too many people?

By the administration’s figures, 53 percent of workers who would benefit from a higher minimum come from families with incomes above $35,000, including 22 percent with incomes exceeding $75,000.  

Okay. If you have two adults working full-time at a paltry $8.45 an hour, that adds up to about $35,000/year. Do you think that couple is going to be able to support a family on that?

Next, economists still disagree on the job effect. In studies — and their review of other studies — economists David Neumark and J.M. Ian Salas of the University of California at Irvine and William Wascher of the Federal Reserve conclude that higher minimums do weaken low-wage employment. Under plausible assumptions, even a small effect (say, a 1 percent job loss for each 10 percent increase in the minimum) implies nearly a million fewer jobs over three years. 

Oh, come on! No one really believes that. Businesses hire only the workers they need. It's not like they've been hiring  extra workers just because they can afford extras. And the amount they have to pay their workers doesn't change the number of workers they need. They may have to raise prices a smidge, or maybe, God forbid, have a slightly smaller profit margin, they aren't going to go without needed employees just because of a small increase in the price of labor. And make no mistake, what is being proposed is a pretty small increase.

First, the proposed increase is huge. By 2016, it’s almost 40 percent.

Oh my God. Huge? Yes, it's almost 405, but it's less than three dollars an hour. Back when I worked fast food, we usually had about 5 or 6 employees on duty at any one time. I think that's still pretty typical. So if an average fast-food restaurant has to make up an extra $15-$20 each hour, how big a deal is that? Maybe the dollar menu needs to become the buck-and-a-quarter menu. I can't see this being a big deal.

By 2016, it’s almost 40 percent. Similar gains usually have occurred when high inflation advanced all wages rapidly. The minimum mainly kept pace. That’s not true today. Compared to average wages, the proposed hike in the minimum appears to be the largest since the 1960s.

So, because the minimum wage has not kept pace with inflation, that's a reason for not trying to catch up?  There wouldn't need to be this "huge" increase if the minimum wage had kept up. If it had kept up, it would be significantly more than $10.10/hour.

Second, businesses have been reluctant job creators. They curb hiring at the least pretext. They seem obsessed with cost control. 

So if it isn't a minimum wage hike, it will be something else. It will be a bad horoscope or inclement weather, or a hangover. Businesses never like hiring people. Why pretend that keeping wages at subsistence levels is going to change that? The minimum wage has been a poverty wage for a long time and you don't see businesses running out hiring people now, do you? 

Would employers take the minimum’s steep costs in stride — or react by cutting hiring and automating more low-paid jobs (example: supermarket checkouts)? 

You mean, they might do what they're already doing?There is no wage low enough to keep businesses from trying to automate, or try other ways to get more work done with fewer employees. Those of us with regular jobs see this every day.

 Which matters more for low-income workers: added jobs or higher incomes? There’s a powerful symbolism to raising the minimum, but the notion that it can be boosted sharply without any job penalty may be a mirage. 

 Well, here's the thing. Higher incomes will lead to added jobs. Because the people making those higher incomes will have more money to spend, which means increased business. . .you know, it's really just basic Econ 101 stuff. Everybody knows this, except, apparently, for the op/ed section of the Washington Post.