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Thread: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

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    Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    More evidence for those that don't believe basic econ applies to labor to ignore.

    Minimum Wage Hikes Reduced Employment of Low-Skilled Workers | CNS News

    Two economists from the University of California at San Diego took advantage of this natural experiment and examined employment changes in states that were “bound” and “unbound” by the law.
    “…we find that minimum wage increases significantly reduced the employment of low-skilled workers. By the second year following the $7.25 minimum’s implementation, we estimate that targeted workers’ employment rates had fallen by 6 percentage points (8%) more in ‘bound’ states than in ‘unbound’ states. Over the late 2000s the average effective minimum wage rate rose by nearly 30% across the United States. Our best estimate is that these minimum wage increases reduced the employment of working-age adults by 0.7 percentage points. This accounts for 14% of the employment rate’s total decline over this time period and amounts to 1.4 million workers. A disproportionate 45% of the affected workers were young adults (aged 15 to 24).”
    “We find that binding minimum wage increases reduced low-skilled individuals’ average monthly incomes. Targeted workers’ average incomes fell by an average of $100 over the first year and by an additional $50 over the following two years. …We provide direct evidence that such losses translate into meaningful reductions in upward economic mobility. Two years following the minimum wage increases we study, low-skilled workers had become significantly less likely to transition into higher-wage employment in bound states than in unbound states.

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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Quote Originally Posted by buck View Post
    More evidence for those that don't believe basic econ applies to labor to ignore.

    Minimum Wage Hikes Reduced Employment of Low-Skilled Workers | CNS News
    Supply and demand applies to labor, too. Minimum wage hikes always mean jobs will be lost. It is, however, quite arguable that the benefit to the economy we get because minimum wage workers have more income to spend offsets and possibly outweighs the detriment of those lost jobs. But it's not cut and dry and even though it is arguable, it is almost impossible to prove.
    You can't reason anyone out of a position they didn't reason themselves into in the first place.

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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Quote Originally Posted by Papa bull View Post
    Supply and demand applies to labor, too. Minimum wage hikes always mean jobs will be lost. It is, however, quite arguable that the benefit to the economy we get because minimum wage workers have more income to spend offsets and possibly outweighs the detriment of those lost jobs. But it's not cut and dry and even though it is arguable, it is almost impossible to prove.
    The CBO seemed to just fine.

    https://www.cbo.gov/publication/44995


    And the effects are common sense.

    Too many people think (not saying you are one of them) that when you drastically raise the minimum wage that it only effects the burger-flipper types. Not true. IT ripples through much of the entire economy.

    But it is economic common sense. If you raise the minimum wage from say $7.25/hr. to $9.00/hr., then you have to raise a WHOLE bunch of people's wages that have nothing to do with the minimum wage.


    Take a large factory. IF you raise Jake's pay from $7.25/hr. to $9/hr. - suddenly, Lauren - who was making $9/hr. is getting paid the same as the far more inexperienced and less capable Jake. So, now the company has to raise Lauren's pay to about $10.50 an hour just to keep the gap going. But now Steve - who was making $10.50 - is getting paid the same as his subordinate (Lauren). So you have to raise his pay to $12/hr..
    And so on up the pay chain, so that almost everyone in the company has to get a pay raise or have a worker's revolt from everyone except the minimum wage people.
    And that is what you would have all across America. You cannot just force minimum wage up by roughly 25% (without any increase in productivity, btw) and have no ripple effects.
    So, this means virtually everything manufacturered or serviced in America will go up in price as the extra pay raises work their way through the country.

    But remember, there is ZERO increase in productivity...so these products/services are no better...just more expensive. But since foreign countries that import those goods into America had no such increase in pay, then that instantly makes American-made products even less competitive with imports then they already were. That hurts sales. And that causes layoffs at those American manufacturers. And probably causes increased hiring at foreign manufacturers that import to America.
    Sure, the minimum wage people have more pay - but they are not idiots. They are going to buy the product that gives them the most for their dollars. And since American goods are now more expensive - but no better - since the big pay raise, then this new found pay will increasingly go offshore.

    On top of all that, those on fixed incomes - like the poor and seniors - are going to be hurt by all this since the cost of American goods and services will go up (you cannot just raise production costs substantially with no increase in prices). So the government will have to step in and give them more handouts to makeup for the dwindling amount they can now buy. And this hurts taxpayers as they have to finance this added welfare.


    Nothing is free in life. You cannot magically force people to pay employees more money - with no added increase in productivity - and magically get a better life for everyone. Life just does not work like that.

    It could maybe work (to a point - for a while) if the whole world had the same minimum wage. But it does not and all a huge increase in the U.S. minimum wage will do primarily (imo) is a) make U.S. goods and services more expensive and b) force more U.S. consumer dollars off shore to less expensive imported goods manufacturers.

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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Minimum wage went up to 9.15 in CT. From 8.25, or something. My company employees a lot of minimum wage workers. None of them got laid off. Not in any of the stores.


    The bottom line is this...a company doesn't hire or fire based on the expense of doing so, their primary reason is need. We NEED those employees, so even though the cost to employ them just went up, we can't AFFORD to let any of them go.

    We have also not raised prices....well, except for beef. Beef is skyrocketing all over the place, though.
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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Quote Originally Posted by Papa bull View Post
    Supply and demand applies to labor, too. Minimum wage hikes always mean jobs will be lost. It is, however, quite arguable that the benefit to the economy we get because minimum wage workers have more income to spend offsets and possibly outweighs the detriment of those lost jobs. But it's not cut and dry and even though it is arguable, it is almost impossible to prove.
    I believe that the cite in the OP made a comment about that:

    “We find that binding minimum wage increases reduced low-skilled individuals’ average monthly incomes. Targeted workers’ average incomes fell by an average of $100 over the first year and by an additional $50 over the following two years. …We provide direct evidence that such losses translate into meaningful reductions in upward economic mobility. Two years following the minimum wage increases we study, low-skilled workers had become significantly less likely to transition into higher-wage employment in bound states than in unbound states.”

    This evidence on income is particularly important because some statists make a rather utilitarian argument that it’s okay for some people to lose jobs because others will benefit.

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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Quote Originally Posted by KevinKohler View Post
    Minimum wage went up to 9.15 in CT. From 8.25, or something. My company employees a lot of minimum wage workers. None of them got laid off. Not in any of the stores.


    The bottom line is this...a company doesn't hire or fire based on the expense of doing so, their primary reason is need. We NEED those employees, so even though the cost to employ them just went up, we can't AFFORD to let any of them go.

    We have also not raised prices....well, except for beef. Beef is skyrocketing all over the place, though.
    Here is an example of what occurs, from an article on CT:
    In Connecticut, some minimum-wage workers say raise hasn't helped much - LA Times

    "Because you're raising the cost of hiring, you can get this unintended consequence where some of the people on the margin have their hours reduced," he said.

    When Segui began working at Dunkin' Donuts, she was scheduled for 35 hours a week. A few months ago, she and other workers starting getting fewer hours. She now works from 20 to 27 hours a week.
    Increases in the minimum wage between 2003 and 2007 had no effect on state poverty rates, according to a study by conservative-leaning economists Joseph Sabia and Richard Burkhauser, in part because only 11% of the workers helped by the increases lived in poor households.
    More important, though, I'm sure you'll agree, is what occurs in more than one individual or job location - i.e. at the state level. Here is how it effected workers in CT:
    How Minimum Wage Increased Unemployment and Reduced Job Creation in 2013 | Research | American Action Forum


    Min wage at the time of the study: $8.25
    unemployment rate increase due to MW over federal level - total population: 1.48%
    unemployment rate increase due to MW over federal level - Teenagers: 4.67%

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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Quote Originally Posted by buck View Post
    More evidence for those that don't believe basic econ applies to labor to ignore.

    Minimum Wage Hikes Reduced Employment of Low-Skilled Workers | CNS News
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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Quote Originally Posted by KevinKohler View Post
    Minimum wage went up to 9.15 in CT. From 8.25, or something. My company employees a lot of minimum wage workers. None of them got laid off. Not in any of the stores.


    The bottom line is this...a company doesn't hire or fire based on the expense of doing so, their primary reason is need. We NEED those employees, so even though the cost to employ them just went up, we can't AFFORD to let any of them go.

    We have also not raised prices....well, except for beef. Beef is skyrocketing all over the place, though.
    You do not hire people just on need. If that was the case, then pay would be irrelevant.

    And your company has not raised prices for probably one of two reasons. a) they do not think they can because their customers will not bear it; or b) your comapnies profit margin was so great that they have no need to raise prices.

    But one thing is 100% for certain - all other things being equal, your company is now making less money then iot used to assuming they are paying their people more money with zero increase in productivity. That is a fact.

    Just because they have not yet raised prices does not mean they do not want to or will not soon be forced to. It just means they have not yet.

    Nothing is free in business. If you raise costs then you have to raise prices or you will lower profit. Period.

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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    Quote Originally Posted by buck View Post
    More evidence for those that don't believe basic econ applies to labor to ignore.

    Minimum Wage Hikes Reduced Employment of Low-Skilled Workers | CNS News
    Wait a second... So what you are saying is that a commentary/opinion piece written on a very conservative website...

    cnsnews.com
    The Right News. Right NowTM.

    ... a site that thinks sourcing it's own parent company's study is unbiased in any way...

    Study after study by the Media Research Center, the parent organization of CNSNews.com, clearly demonstrate a liberal bias in many news outlets bias by commission and bias by omission that results in a frequent double-standard in editorial decisions on what constitutes "news."

    You mean to say that they are saying something super uber-duber completely conservative? All while saying that you should only trust them because it's EVERYONE ELSE that is biased...

    Color me shocked.
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    Re: Minimum Wage Hikes Reduced Employment of Low-Skilled Workers

    You will have to forgive me if I am unconvinced by a column on an economics blog site. Particularly considering that on one day the right wingers are gripping about how all the jobs being created are low wage / low skilled jobs, but then the next day they claim the minimum wage is killing low wage / low skilled jobs.

    I know, I know, I know…. Its economists that wrote the column. Well economics is a bit unique as a field of science, as in more than any other scientific field the individual economists personal beliefs and ideology seems to influence their analysis. For example, on the same economics site one can find this gem: Global carbon taxation | VOX, CEPR , a column written by economists arguing for a carbon tax and for what the optimum rate for it should be. Somehow though, I doubt any of the right wingers on here will be starting a thread on it.
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