Minimum Wage Policy for Non-Trade Labor Service Contracts

From here: EPI comments on Minimum Wage Policy for Non-Trade Labor Service Contracts

Excerpt:

The Port Authority’s minimum wage policy is a well-designed and important policy for maintaining the safe and effective operation of the New York metropolitan region’s airports. By establishing a gradually rising wage floor for contracted airport workers that will reach $19.00 an hour in 2023, the Port Authority is setting a standard that will help the airports’ contracted service providers to attract and retain a skilled workforce, cut down on costly and potentially dangerous turnover, and help ensure the smooth operation of critical pieces of regional and national infrastructure. Strong wage standards, such as those adopted by the Port Authority, will be increasingly important as the health of the labor market continues to improve and employers face fiercer competition to recruit and retain staff.

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A large body of research has shown that raising wages generally, and setting high minimum wage standards specifically, leads to meaningful reductions in employee turnover or “churn” among affected workers. Extensive additional research documents the links between higher wages and improved productivity.

One reason higher minimum wages reduce turnover is that, after a raise, workers stay at their current job longer, as they are less likely to search and find even higher paying jobs. A second reason is that, after a minimum wage increase, it becomes more cost-effective for employers to invest in their current employees rather than lay them off and hire new, untrained workers.

The most comprehensive analysis of the turnover-reducing effects of higher minimum wages—by professors Arindrajit Dube, T. William Lester, and Michael Reich, published in the Journal of Labor Economics in 2016—finds strong evidence for both of these channels (Dube, Lester, and Reich 2016). Using nearly 200 minimum wage changes resulting from state-level and federal minimum wage increases, the study finds that raising the minimum wage significantly reduces worker turnover. Employees with the sharpest reductions in turnover are those who would otherwise stay employed at their workplace for only a short amount of time. As a result of reduced worker turnover, wage increases cause the workforce to become more experienced at their jobs, the study also finds.

These findings have been confirmed by other studies on the minimum wage in the U.S. and elsewhere.

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The time has come to take the misery out of presently far too low Minimum Wage rates ($7.25/hour) throughout the US. The above is just one bold step in that direction.

Your BigMac is gonna cost 0.30/0.50 cents more by doing so ...

I haven't yet read the study the EPI have referenced re: turnover. I have, however, been a senior partner in a global consulting firm. I can tell you for a fact that we pay high wages and still have high turnover rates. The whole industry (at least at the top) does (click here too), and there's no way in hell someone's going to tell me that ~$80K/year for a freshly graduated 21-22 year-old having no real experience pertinent to consulting, other than being bright, is a bad wage, particularly given the very real prospect that that will double in five to seven years and quadruple in about 15 years. Accordingly, my gut says that a wages haven't enough to do with turnover rates to materially lower them.

From the article:Well, hell. Insofar as my firm and its peers are paying utter novices ~$80K/year, just how damn "significant" need the wage increase be to "sharply" reduce turnover? Paying a given wage that's higher than is currently paid for "non-trade labor" may indeed reduce turnover, but how many firms want to pay more than $80K/year. If someone with little experience doesn't find that wage adequate to keep them in-place, why would someone having more experience and earning less think so?

That said, what I've written above is abducted. I'll read the study to see what forms the basis of the information the study the EPI's article refers to. I think something's up either with the way the EPI have represented the study's results or with the methodology of the study, but having not read the study, I'm in no position to say.

EPI comments on Minimum Wage Policy for Non-Trade Labor Service Contracts at LaGuardia, John F. Kennedy, and Newark Liberty airports

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What is going on with Mssrs. Cooper and Zipperer? Their article purports to talk about "non-trade" laborers, yet all the job examples they mention are trade-type jobs. Some are somewhat (?) skilled trades, but trades nonetheless....Nary a nurse, engineer, architect, pilot, accountant, consultant, contracted administrators/managers, or any other type of non-trade worker. Of course, the distinction between a trade and a non-trade position is imprecise, but not one position described struck me as a non-trade one. To wit:

• General job category descriptions the authors referred to:
  • "Using nearly 200 minimum wage changes resulting from state-level and federal minimum wage increases, the study finds that raising the minimum wage significantly reduces worker turnover."
  • "San Francisco’s adoption of a citywide minimum wage in 2004 led to “substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants”
    • What job that pays minimum wage is a non-trade job?
• Specific jobs the authors referred to:
  • Airport security screeners
  • Ramp employees
  • Fast-food restaurant staff
    • Well, both are trade positions, not non-trade.

Then there is the stuff the authors mention that doesn't even make sense as a factor in how wage increases are beneficial. For example:

• "Higher wages can also increase the efficiency of managers or owners of firms by acting as a shock that compels managers to identify cost savings or remedy longer-term problems."
  • Say what? Regardless of what worker pay be, among the things managers are paid to do anyway is "identify cost savings or remedy longer-term problems." According to what Cooper and Zipperer's (C&Z) normative line, the wages, presumably of low wage non-management/non-owners, should be increased because by doing so, managers/owners will then be compelled to do that which they are already supposed to be doing.
    
    While that's what managers are paid to do, it's a little different with owners. It's their firm, so if they want to mismanage or poorly manage it, well, that's their right to do so as owners. I mean, really. If the owner has to be "compelled" to "identify cost savings and remedy longer-term problems," maybe the firm and its owner(s) should exit the marketplace as principals and re-enter it as factotum employees.

Lastly, C&Z mention a host of benefits of increasing the minimum wage, yet not once in the whole letter do they provide a quantification of the net benefit accruing to anyone (other, obviously, than to the workers who receive the wage increase, which C&Z don't actually quantify, but as more money is more money, they don't really have to in the context of the worker). Not once do C&Z bother to say something such as "this or that study found that when wages increased, XYZ performance measure increased by ABC percent or absolute value.

Am I saying C&Z's case is normatively apropos or not? No Do I inherently oppose increasing workers wages? No. What I'm saying is that their argument is based entirely on a lot of qualitative information for which C&Z provide no corroborating cost-benefit metrics; consequently, their argument isn't at all compelling, unless one simply has a tender spot for low-wage workers and/or inaptly managed firms that employ those low-wage workers.