vagabond

So it's not happening to just airline pilots. What else is new, eh?

TPROP4ever

and the downward spiral to the predicted end on 12-12-2012 has begun....

lifter123

The downward spiral began long before this study...from other articles I read, the late 1980's seemed to be the peak for employee's, and has been slowly receeding from that point. There's really no way to tell what will happen in the future.

UpThere

Not only do you work more and get payed less, you are saving even less as well. With inflation and the price of everything in general going up the past several years, even if you averaged a 3 or 4 percent increase in salary every year, you still have less in your pocket. This has been going on year after year... where will we be in 15 or 20 years?

lifter123

I'd probably guess in a financial situation worse than the past couple of years, but we still won't come close to a major meltdown like Iceland has on their hands.

Winged Wheeler

Not sure how I missed this one. The story in the original post narrates a predictable response by business when the minimum wage is tinkered with.

Regardless of what the law says your time is worth, the value of your labor is what the company gets in return for your paycheck. When the minimum wage is raised the company will, very predictably, find innovative ways to restore the balance (in their eyes) between what work is being done and what wages are being paid.

Firing, or not hiring, those whose training and skills are now not worth what they must be paid is predictable. Compelling the higher paid employees to do the low skill tasks in addition to their own (more work--same pay) is also predictable. Finally, the higher unemployment creates downward wage pressure (more work--less pay).

Minimum wage laws are a bad deal for everybody.

WW

FighterHayabusa

This sounds good, but lacks real evidence. It is pretty hard to find a study that correlates unemployment with minimum wage (except to say that they do not correlate). Also, in reality, average incomes correlate very well with minimum wage.

check this graph for the "real" minimum wage:
U.S. Minimum Wage History

and this graph for inflation adjusted average incomes:
Average Income in the United States Visualizing Economics

The most obvious case is around 1948 - 1965, where the real minimum wage increased dramatically along with the real average wage increase. Where average wages are largely flat of late, we see decreases in the real minimum wage.

When the observation is made that inflation adjusted average incomes always go down when the minimum wage is hiked and held in actual dollars - what's actually happening is the REAL minimum wage is being lowered by inflation, taking average incomes with it.

Winged Wheeler

The studies do seem to be rare, but they could be done. The fact that most workers make more than the minimum wage makes necessary a more specific study that looks at minimum wage vs. unemployment for low skill workers.

I don't get the point of comparing minimum wage to average income in this discussion.

A CATO author writes:

Minimum Wage Wizardry | Cato @ Liberty


Ezra Klein over at TAPPED, the American Prospect blog, takes William Niskanen to task for his opposition to the minimum wage below. “[W]hile reasonable people can disagree on the impact of minimum wage laws,” Klein writes, “it’s time they stopped.”


Wow! Why? What’s the debate stopper?! Klein says, “Just crosscheck this list of state minimum wage laws with this rundown of state unemployment rates.” Turns out that there is an inverse eyeball correlation between high minimum wage and high unemployment rates. QED? Well, no. This factoid might help Klein’s case if it wasn’t totally meaningless in isolation from auxiliary assumptions.

That pattern is perfectly consistent with Niskanen’s claim, which is, after all, just an application of the bedrock Economics 101 principle that if the price of something goes up, consumers will tend to buy less of it. In fact, Klein’s pattern might be evidence in favor of Niskanen’s claim. Here’s some more Economics 101 to explain why high minimum wages and low unemployment rates might be expected to go together.


A high unemployment rate indicates a significant oversupply of labor relative to available jobs. In that case, you expect the price of labor to be low, since it is so abundant. If there is already a minimum wage—a lowest legal price—high unemployment will tend to drive wages toward that floor. Let’s say it’s $4 an hour. Now, if there is already high unemployment, and you raise it to $5 an hour, lots of people will have to get a raise, since lots of workers are probably being paid something close to the lowest legal wage. Employers will not be able to afford to give all those people raises. So unemployment would increase further. Now, the effect is quite different in places that have low unemployment rates. In a tight labor market, wages will be higher. So fewer people’s wages will be near the price floor. And so if you raise the floor, fewer workers will be affected. If the labor market is tight enough, and almost no one is getting a wage even close to the floor, raising the floor a little may have no detectable effect at all—like a law mandating breathing.


Now, suppose legislators more or less understand this (or that key constituencies pressure them to act like they do). You’d then expect that states with high unemployment rates and low wages to be least likely to raise their minimum wage, since it would have a relatively large adverse effect for them. And you’d expect states with low unemployment and high wages to be most likely to raise their minimum wage, since it is least likely to make a difference for the worse. And so you end up with high unemployment states with low minimum wages, and low unemployment states with high minimum wages.


Now, I have no idea whether this reasoning in fact explains the pattern Klein observes. But then, neither does he. He’s just a victim of confirmation bias, seeing what he wants to see in an inkblot of ambiguous data. But the pattern he points to might be evidence in favor of the idea that minimum wages increase unemployment. Hardly a debate stopper, is it? Perhaps Klein will grant reasonable people the privilege to continue disagreeing.


It’s worth nothing that Klein admits “And yes, if you jack the wage up to $16 an hour, jobs will be lost. But up to $7 over a period of years?” So what weird science reveals the “no effect” point between $7 and $16? $16 an hour? Unemployment for sure. But not at $7! So what about $8? How about $12? $15.75?


Of course, a bump up to $7 will push fewer people out of the legal labor market than a bump up to $16. But why Klein thinks that a bump up to $7 will push zero people out, when he has already conceded the general point, is mysterious.

WW

Winged Wheeler

Minimum Wage: From the Horse’s Mouth | Cato @ Liberty


Via the admittedly pro-business Employment Policies Institute, a funny anecdote regarding this whole minimum wage debate:


The generally accepted leading advocacy group for so-called “living wage” laws around the country is the Association of Community Organizations for Reform Now, or ACORN. In its Resource Guide for activists, written by David Reynolds of the Wayne State University Labor Studies Center, ACORN casts aside concerns about minimum wage laws resulting in fewer jobs for low-wage workers, scoldingBut in 1995, ACORN actually went to court in California in an attempt to exempt ACORN from that state’s minimum wage and overtime laws. Why? Well, according to ACORN’s brief in an appeal of the ruling against them…The U.S. Chamber of Commerce couldn’t have said it any better.


If ACORN says it, it must be true.


WW

Winged Wheeler

Minimum Wage Hike a Disadvantage for Unskilled Workers

Today the federally-mandated minimum wage increases to $7.25 per hour, a 10.7% increase from the previous $6.55 per hour. What effect will the higher wage have on employment and compensation for unskilled workers? That’s a controversial issue.
About a year ago, Angry Bear wrote: MP: Let’s assume that there is no correlation between: a) changes in the minimum wage and b) the teenage unemployment rate. That is not the same thing as saying that “the minimum wage has no negative effect on teenage employment.” Here’s why:
Even if the same number of teenage and unskilled workers are employed after a hike in the minimum wage, reflected in NO change in the teen jobless rate (and this is probably not accurate), there are many other adjustments that employers could and will make to offset the monetary increase in hourly labor costs:
1. Fewer Hours - unskilled workers might still be employed, but at a reduced number of hours (the BLS counts workers as “employed” even if they work 1 hour per week, so reduced hours wouldn’t show up in unemployment rates). Full-time workers now become part-time workers. Overtime hours could be eliminated. Full-time restaurant workers now are forced to work a split-shift (e.g. 11 a.m. - 2 p.m. and 5 p.m. - 8 p.m.). Therefore, we would expect a negative relationship between increases in the minimum wage and HOURS WORKED, even if there was no change in either employment levels or the unemployment rate for unskilled workers.
2. Reduced Benefits - employers can easily adjust “total compensation” for unskilled workers and offset higher monetary wages by: a) no longer providing free or discount uniforms and forcing employees to now pay for uniforms, b) no longer providing free or discount food at restaurants, c) reducing or eliminating “employee discounts” on the employer’s merchandise, d) eliminating paid holidays, e) eliminating scholarship programs, f) eliminating group discounts available through large companies like McDonald’s, g) eliminating employer sponsored or subsidized health care benefits, h) eliminating bonuses, i) eliminating company-sponsored holiday parties, etc.
For example, see the list of benefits here for hourly McDonald’s workers in Canada (I couldn’t find a comparable list for the U.S., but I assume the benefits would be pretty similar here), and you’ll see that are at least ten non-monetary benefits offered to even unskilled minimum wage workers at McDonald’s that could be adjusted in the face of higher monetary wage costs resulting from legislated minimum wage increases.
Bottom Line: Demand curves slope downward, and the market for unskilled workers is no exception. Employers WILL respond to increases in the minimum wage, in many ways that will NOT show up in the teenage unemployment rate, but still to the DISADVANTAGE of unskilled workers. The most likely outcome from an increase in the minimum wage to $7.25 per hour will probably be some combination of both increased unemployment for unskilled workers and reductions in compensation.
As Jeff Jacoby reminds us: