It’s called the good old boy system. You don’t really believe that anything serious is going to happen do you? It’s the revolving door that at work and the government agencies are rewarded to turn it’s head.
I was reading something by Noah Smith the other day about the limits of data collection available from what he termed “natural experiments” — an example he posed: what possible loss of employment takes place — or would take place — if the minimum wage is — or were — raised in different increments.
This started me thinking that the question of how much specific wage change may cause how much specific employment change — along with what trade off between wage increase and employment loss on a sliding scale would be acceptable to employees — is rarely if ever articulated by economists. For instance, would a 10% wage boost be reasonable — nay, attractive to employees — with a trade off for 2% job loss.
This scaled concept needs to be articulated almost every time — and if objections to practicality of academic researchers “guesstimating” about this arise they should at least be stated and probably some such framework should at least be hazarded.
Within this framework should be delineated the different sales — and therefore employment — effects at different low wage businesses depending on differing labor costs. Walmart with 7% labor costs will feel much less impact on prices (not necessarily on sales) of a large wage raise than than McDonald’s with 33% ($15 raise prices there 25%).
What got me started on “mathiness” was my reading a couple of days ago a couple of samplings of economists views of the possible employment effects of raising the fed min — mostly of the eco 101 variety. I suspected that if whether the min was $5.15 or $11.15, they would be saying exactly the same things. I suspected they toke whatever the min is presently as some kind of “natural” starting point — close enough anyway. I didn’t think most progressives had any idea or even any curiosity about how $7.25 came to be in 2015.
Is the current labor price just a little low because of past moderate neglect — or is today’s price world-turned-upside-down low because of decades of mad, mad neglect — just to state the outside ranges? Employees in Fight-For-Fifteen have no “mathi” idea for their price points either — or do they? They are in touch at least intuitively with how much their wage demands would push prices up in different businesses — and at least intuitively with how customers will react.
The chart below should have no trouble answering the range of neglect question (not that it will necessarily get past ivory tower intuition). In a nutshell: LBJ’s 1968 min wage was $11 an hour — per capita income has about doubled since. http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.60&year1=1968&year2=2015
On what logical basis are gov min wage raises, when they do come, stretched out forever — that’s what five years feels like to Great Wage Depression victims. If a union thought the consumer would pay $15 ,would it stretch out a wage hike forever?
There is the possibility that raising wages an average 50% for the 45% of employees who take 10% of overall income (plausible representation of $15 federal minimum wage) would actually increase employment at their level — as 5% of overall income were shifted to them from the 55% who now take 90% — and they spent (do spend) disproportionately in lower wage businesses. “Mathi” analysis called for here? 🙂
* * * * * * * * * *
yr..per capita…real…nominal…dbl-index…%-of
(2013 dollars)
“For instance, would a 10% wage boost be reasonable — nay, attractive to employees — with a trade off for 2% job loss.”
Dean Baker wrote that minimum-wage jobs tend to have high turnover, so if there were a job loss due to higher a minimum wage, it would mean workers spend a little longer between jobs. If so, they would almost certainly make more with the minimum wage increase, as the increased wage would be higher than the loss due to longer unemployment. So it’s not “ask for more and risk unemployment,” but “ask for more and spend slightly more time between jobs.”
What is the empirical support for the claim that minimum wages have any effect on jobs?
I find that heterodox economic thinking universally has a “one assumption rule” whereby all critiques of the orthodox necessarily fall short because they attack only one assumption deep.
How would an actual scientist establish that two things are related in the first place? Not by theory. That’s back ass-wards. First you note the correlation between smoking and cancer and that’s what gives you the idea to look for a causal mechanism.
Here’s another angle: economists like to talk about markets “clearing.”
How’s about a labor market that clears out native born employees who wont work for several dollars off LBJ’s minimum wage/twice the per capita income later — only to be replaced by desperate foreign born employees? Don’t hear economists discuss the implications of that, ever. Never.
In Chicago, fast food has been strictly the domain of Mexican and Indian born employees in my observation. Now, at $10/hr there is one young Am-born kid in my Micky’s.
Taxi driving. I started out making $50 a night in a car service in the Bronx in 1976 — $210 a night in today’s dollars. Grueling work but worth it. Down to $150 by 1980 after double-didget inflation whence I moved to Chicago — same pay; just as hard. Today I suspect our victims make less than $100 a night which if you figure in time and a half over eight hours (most work 6 days I’m sure) amounts to about $7 an hour, no benefits, no vacation. Did I mention that per capita income climbed 66% since I started hacking in the Bronx — most gains going to the income level who use cabs?
What, if anything, do our progressive pros think about “clearing out”? I would say you should test the market to discover the most the consumer will pay (I cab driver) — no matter who the employees are. Probably pay the same to any employees. Currently depending on the most desperate employees to keep prices lower (for who?). What do academics think. Do they ever think about any of this?
PS. Another thing academics used to take seriously on the verbal level: EITC. But, mathiness says EITC only transfers one-third of one percent of GDP in a labor market where 45% are making less than what the minimum wage could minimally be. How much is that supposed to impact overall so-called “inequality” (a.k.a., the Great Wage Depression)?
We recently acquired a company. The company operates a factory in a Central American country. The factory is located in a tax favored business development center near the country’s capital. During the time we were on site prior to purchase we heard from the plant operating manager that turnover was basically unsustainable in this factory. We witnessed nearly every work station having two people at it (one in their two month “training” period, not actually generating any product). The average new employee lasted a few months.
The previous company owner apparently was participating in an informal agreement with the other employers at the business park to index wages on a set scale. The plant operating manager had found from observation that employees making a certain amount of money or above basically were no longer part of the turnover problem. The obvious solution to the problem was to just pay them more. But for whatever reason the previous company didn’t want to do it. Wages in Central America are not very high, even in this country which is considered one of the more successful ones. The improvement in not needing to have as many replacements sitting at desks should have more than covered the increase, not to mention the quality and yield increases that you should have derived from it.
Employers frequently do not act in their best interests on wages.
Further reflections on an earlier exchange of comments about Ta-Nehisi Coates’s Atlantic piece on mass incarceration. Coates comes to the conclusion that the end of mass incarceration would have to come to terms with — and redress — past injustices and the inequalities that result from them. In a word, reparations.
I’m not sure at the moment I can make any policy suggestions. I can only marvel at the hubris of “liberal” policy technocrats who regard white supremacist as emanating from “impeccably respectable circles” and credulity of journalists who recite as “undisputed data” calculated frauds, voluminously refuted by prominent scientists. There isn’t really much scope for policy reform is such a cesspool of “public opinion.” There are too many shills and accomplices. The complicity is too all encompassing.
This will not end well.
The “joke”, of course, is that the con-men dazzle the rubes with “statistics” that credentialed Americans have learned to worship and obey without comprehension. Number, weight and measure! Statistical significance! One phantasmagorical standard deviation from the mean of the reference population. Economic growth! Perpetual motion! I.Q.! Snake oil.
“Each era finds an improvement in law for the benefit of mankind.” Gideon
Or does it?
“the end of mass incarceration would have to come to terms with — and redress — past injustices and the inequalities that result from them. In a word, reparations.” In whose dreams and what might full and unadulterated reparations be? Yes they toss a few dollars your way; but, these meager dollars do not replace justice for the falsely accused. The issue may be mass incarceration; but, I see it as; what leads up to the imprisonment as more the issue. The same as Gideon being denied a lawyer, those of little means or of social standing are denied the same in access to justice. ~85% of justice is through the use of plea-bargaining as few can afford an attorney and public defenders are over burdened and under paid. Sitting in court one day, I learned the ritual from a long time judge talking to each defendant as he read them their rights just before the plea bargain. And the Public Defender? Never raised an argument for lesser sentence or fine. If you reject the plea bargain and fight back, justice becomes even harsher as they now have to work to convict you. Incarceration is just a symptom of the problem.
If you make it out on parole, you get a tether for $13/day or ~$10,000 over two years. You will go to classes as taught by a psychologist for one year at $10/class even though a prison psychiatrist say you do not need the classes. And people wonder why so many end up back in prison? If you do not pay, they extend your parole. If you flunk your class, you go back to prison. At minimum wage, you make $18,000/year and the state takes $5,000 of the top after taxes. Who could afford parole?
Parole agents and the boards are just another court. Anyhoo, my $.02.
Well written rebuttal to one poster. Wish you had written it here.
Thornton: “What is the empirical support for the claim that minimum wages have any effect on jobs?”
There is none and never will be. Empirical support? Ceteris paribus, anything is whatever the hegemonic made-up model says it is.
If the minimum wage was raised to a million dollars an hour, prices and wages and profits and levels of employment would all have to adjust… somehow or other.
I have asked the same question, in other forms, as does Thornton in the past. I have not yet seen an answer in support of the contention that raising wages reduces jobs. Cost of labor may be a factor in determining the viability of a business plan, but cost of labor is not a determinant of the amount of labor needed for production. Do employers hire more labor than is required to conduct their businesses? Not likely. The task determines the required amount of labor. The cost is secondary to that need. The suggestion that higher wages will reduce employment is a canard, and corporate America will always find economic “experts” to perpetuate that lie.
The 3rd Q is over. The Atlanta Fed has updated its estimate for 3Q GDP to just 0.9%.
The Atlanta Fed’s estimate is based on numbers that will be revised (up or down), but in the past it has been a good indicator of what the 3Q GDP flash report will be.
If the estimate holds, the economy is under performing expectations by a wide margin.
I wonder if Yellen takes note of the data. She reiterated her pledge to increase % rates by year-end in a speech last week.
Speaking of markets clearing…
DeLong posts his syllabus for Econ 101. He spends the first several lectures talking about the price of apples at an apple cart. The intersection of supply and demand. [Never mind that “demand” is fundamentally an action and as a noun can only exist in time (there can be no static demand curve because demand doesn’t exist at any given moment in time, only between two moments).]
.
My first job was at a grocery store. To this day, every time I smell rotting produce I’m transported back to the dumpster behind the store and the smell of rotting apples that got thrown away… behind the apple cart.
.
So one week with a real job is all it takes to learn that from the second he opens his mouth, the very first second, Brad DeLong is a brilliant man who has devoted his life to having no idea what he is talking about.
.
There’s a reason why there are very few women in economics.
“….DeLong posts his syllabus for Econ 101. He spends the first several lectures talking about the price of apples at an apple cart….”
Be careful. Reading stuff like that is a fast track to brain damage.
After I read any kind of paper containing formal economics , I have to get good and drunk so as to wipe away the memories that would ultimately lead to brain dysfunction. It’s hell on my liver , but I’ve decided that between the two organs , I prefer a well-functioning brain.
I know , I should just stop reading those econ papers. It’s not so simple once you’re hooked , thus my warning to you. I haven’t yet figured out what it is that keeps drawing me back…
Now, little boy lost, he takes himself so seriously [‘must read”]
He brags of his misery [why, oh why, can’t we have a better…], he likes to live dangerously [‘smackdown”]
And when bringing her name up
He speaks of a farewell kiss to me
He’s sure got a lotta gall to be so useless and all
Muttering small talk at the wall while I’m in the hall
How can I explain?
Oh, it’s so hard to get on
And these visions of Johanna, they kept me up past the dawn
Sometimes it seems like Elizabeth Warren is the only person in Washington that’s willing to hold the elite to account :
“Brookings fellow resigns after Senator Warren accuses him of conflicts”
http://www.reuters.com/article/2015/09/30/us-brookings-warren-resignation-idUSKCN0RU00B20150930
Bravo , Liz. Wish we had a hundred more like you.
It’s called the good old boy system. You don’t really believe that anything serious is going to happen do you? It’s the revolving door that at work and the government agencies are rewarded to turn it’s head.
Maybe she can be the first aboriginal president.
LACK OF “MATHINESS” IN LOW WAGE “THINKING”
I was reading something by Noah Smith the other day about the limits of data collection available from what he termed “natural experiments” — an example he posed: what possible loss of employment takes place — or would take place — if the minimum wage is — or were — raised in different increments.
This started me thinking that the question of how much specific wage change may cause how much specific employment change — along with what trade off between wage increase and employment loss on a sliding scale would be acceptable to employees — is rarely if ever articulated by economists. For instance, would a 10% wage boost be reasonable — nay, attractive to employees — with a trade off for 2% job loss.
This scaled concept needs to be articulated almost every time — and if objections to practicality of academic researchers “guesstimating” about this arise they should at least be stated and probably some such framework should at least be hazarded.
Within this framework should be delineated the different sales — and therefore employment — effects at different low wage businesses depending on differing labor costs. Walmart with 7% labor costs will feel much less impact on prices (not necessarily on sales) of a large wage raise than than McDonald’s with 33% ($15 raise prices there 25%).
What got me started on “mathiness” was my reading a couple of days ago a couple of samplings of economists views of the possible employment effects of raising the fed min — mostly of the eco 101 variety. I suspected that if whether the min was $5.15 or $11.15, they would be saying exactly the same things. I suspected they toke whatever the min is presently as some kind of “natural” starting point — close enough anyway. I didn’t think most progressives had any idea or even any curiosity about how $7.25 came to be in 2015.
Is the current labor price just a little low because of past moderate neglect — or is today’s price world-turned-upside-down low because of decades of mad, mad neglect — just to state the outside ranges? Employees in Fight-For-Fifteen have no “mathi” idea for their price points either — or do they? They are in touch at least intuitively with how much their wage demands would push prices up in different businesses — and at least intuitively with how customers will react.
The chart below should have no trouble answering the range of neglect question (not that it will necessarily get past ivory tower intuition). In a nutshell: LBJ’s 1968 min wage was $11 an hour — per capita income has about doubled since.
http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.60&year1=1968&year2=2015
On what logical basis are gov min wage raises, when they do come, stretched out forever — that’s what five years feels like to Great Wage Depression victims. If a union thought the consumer would pay $15 ,would it stretch out a wage hike forever?
There is the possibility that raising wages an average 50% for the 45% of employees who take 10% of overall income (plausible representation of $15 federal minimum wage) would actually increase employment at their level — as 5% of overall income were shifted to them from the 55% who now take 90% — and they spent (do spend) disproportionately in lower wage businesses. “Mathi” analysis called for here? 🙂
* * * * * * * * * *
yr..per capita…real…nominal…dbl-index…%-of
(2013 dollars)
68…15,473….10.74..(1.60)……10.74……100%
69-70-71-72-73
74…18,284…..9.43…(2.00)……12.61
75…18,313…..9.08…(2.10)……12.61
76…18,945…..9.40…(2.30)……13.04……..72%
77
78…20,422…..9.45…(2.65)……14.11
79…20,696…..9.29…(2.90)……14.32
80…20,236…..8.75…(3.10)……14.00
81…20,112…..8.57…(3.35)……13.89……..62%
82-83-84-85-86-87-88-89
90…24,000…..6.76…(3.80)……16.56
91…23,540…..7.26…(4.25)……16.24……..44%
92-93-94-95
96…25,887…..7.04…(4.75)……17.85
97…26,884…..7.46…(5.15)……19.02……..39%
98-99-00-01-02-03-04-05-06
07…29,075…..6.56…(5.85)……20.09
08…28,166…..7.07…(6.55)……19.45
09…27,819…..7.86…(7.25)……19.42……..40%
10-11-12
13…29,209…..7.25…(7.25)……20.20?……36%?
“For instance, would a 10% wage boost be reasonable — nay, attractive to employees — with a trade off for 2% job loss.”
Dean Baker wrote that minimum-wage jobs tend to have high turnover, so if there were a job loss due to higher a minimum wage, it would mean workers spend a little longer between jobs. If so, they would almost certainly make more with the minimum wage increase, as the increased wage would be higher than the loss due to longer unemployment. So it’s not “ask for more and risk unemployment,” but “ask for more and spend slightly more time between jobs.”
Mike B,
Yet one more angle that is never considered — at least not out loud — by want-to-be progressive economists.
What is the empirical support for the claim that minimum wages have any effect on jobs?
I find that heterodox economic thinking universally has a “one assumption rule” whereby all critiques of the orthodox necessarily fall short because they attack only one assumption deep.
How would an actual scientist establish that two things are related in the first place? Not by theory. That’s back ass-wards. First you note the correlation between smoking and cancer and that’s what gives you the idea to look for a causal mechanism.
Here’s another angle: economists like to talk about markets “clearing.”
How’s about a labor market that clears out native born employees who wont work for several dollars off LBJ’s minimum wage/twice the per capita income later — only to be replaced by desperate foreign born employees? Don’t hear economists discuss the implications of that, ever. Never.
In Chicago, fast food has been strictly the domain of Mexican and Indian born employees in my observation. Now, at $10/hr there is one young Am-born kid in my Micky’s.
Taxi driving. I started out making $50 a night in a car service in the Bronx in 1976 — $210 a night in today’s dollars. Grueling work but worth it. Down to $150 by 1980 after double-didget inflation whence I moved to Chicago — same pay; just as hard. Today I suspect our victims make less than $100 a night which if you figure in time and a half over eight hours (most work 6 days I’m sure) amounts to about $7 an hour, no benefits, no vacation. Did I mention that per capita income climbed 66% since I started hacking in the Bronx — most gains going to the income level who use cabs?
What, if anything, do our progressive pros think about “clearing out”? I would say you should test the market to discover the most the consumer will pay (I cab driver) — no matter who the employees are. Probably pay the same to any employees. Currently depending on the most desperate employees to keep prices lower (for who?). What do academics think. Do they ever think about any of this?
PS. Another thing academics used to take seriously on the verbal level: EITC. But, mathiness says EITC only transfers one-third of one percent of GDP in a labor market where 45% are making less than what the minimum wage could minimally be. How much is that supposed to impact overall so-called “inequality” (a.k.a., the Great Wage Depression)?
We recently acquired a company. The company operates a factory in a Central American country. The factory is located in a tax favored business development center near the country’s capital. During the time we were on site prior to purchase we heard from the plant operating manager that turnover was basically unsustainable in this factory. We witnessed nearly every work station having two people at it (one in their two month “training” period, not actually generating any product). The average new employee lasted a few months.
The previous company owner apparently was participating in an informal agreement with the other employers at the business park to index wages on a set scale. The plant operating manager had found from observation that employees making a certain amount of money or above basically were no longer part of the turnover problem. The obvious solution to the problem was to just pay them more. But for whatever reason the previous company didn’t want to do it. Wages in Central America are not very high, even in this country which is considered one of the more successful ones. The improvement in not needing to have as many replacements sitting at desks should have more than covered the increase, not to mention the quality and yield increases that you should have derived from it.
Employers frequently do not act in their best interests on wages.
“Unstandard Deviations”
http://econospeak.blogspot.com/2015/09/unstandard-deviations.html
Further reflections on an earlier exchange of comments about Ta-Nehisi Coates’s Atlantic piece on mass incarceration. Coates comes to the conclusion that the end of mass incarceration would have to come to terms with — and redress — past injustices and the inequalities that result from them. In a word, reparations.
I’m not sure at the moment I can make any policy suggestions. I can only marvel at the hubris of “liberal” policy technocrats who regard white supremacist as emanating from “impeccably respectable circles” and credulity of journalists who recite as “undisputed data” calculated frauds, voluminously refuted by prominent scientists. There isn’t really much scope for policy reform is such a cesspool of “public opinion.” There are too many shills and accomplices. The complicity is too all encompassing.
This will not end well.
The “joke”, of course, is that the con-men dazzle the rubes with “statistics” that credentialed Americans have learned to worship and obey without comprehension. Number, weight and measure! Statistical significance! One phantasmagorical standard deviation from the mean of the reference population. Economic growth! Perpetual motion! I.Q.! Snake oil.
Sandwichman:
“Each era finds an improvement in law for the benefit of mankind.” Gideon
Or does it?
“the end of mass incarceration would have to come to terms with — and redress — past injustices and the inequalities that result from them. In a word, reparations.” In whose dreams and what might full and unadulterated reparations be? Yes they toss a few dollars your way; but, these meager dollars do not replace justice for the falsely accused. The issue may be mass incarceration; but, I see it as; what leads up to the imprisonment as more the issue. The same as Gideon being denied a lawyer, those of little means or of social standing are denied the same in access to justice. ~85% of justice is through the use of plea-bargaining as few can afford an attorney and public defenders are over burdened and under paid. Sitting in court one day, I learned the ritual from a long time judge talking to each defendant as he read them their rights just before the plea bargain. And the Public Defender? Never raised an argument for lesser sentence or fine. If you reject the plea bargain and fight back, justice becomes even harsher as they now have to work to convict you. Incarceration is just a symptom of the problem.
If you make it out on parole, you get a tether for $13/day or ~$10,000 over two years. You will go to classes as taught by a psychologist for one year at $10/class even though a prison psychiatrist say you do not need the classes. And people wonder why so many end up back in prison? If you do not pay, they extend your parole. If you flunk your class, you go back to prison. At minimum wage, you make $18,000/year and the state takes $5,000 of the top after taxes. Who could afford parole?
Parole agents and the boards are just another court. Anyhoo, my $.02.
Well written rebuttal to one poster. Wish you had written it here.
Thornton: “What is the empirical support for the claim that minimum wages have any effect on jobs?”
There is none and never will be. Empirical support? Ceteris paribus, anything is whatever the hegemonic made-up model says it is.
If the minimum wage was raised to a million dollars an hour, prices and wages and profits and levels of employment would all have to adjust… somehow or other.
I have asked the same question, in other forms, as does Thornton in the past. I have not yet seen an answer in support of the contention that raising wages reduces jobs. Cost of labor may be a factor in determining the viability of a business plan, but cost of labor is not a determinant of the amount of labor needed for production. Do employers hire more labor than is required to conduct their businesses? Not likely. The task determines the required amount of labor. The cost is secondary to that need. The suggestion that higher wages will reduce employment is a canard, and corporate America will always find economic “experts” to perpetuate that lie.
The 3rd Q is over. The Atlanta Fed has updated its estimate for 3Q GDP to just 0.9%.
The Atlanta Fed’s estimate is based on numbers that will be revised (up or down), but in the past it has been a good indicator of what the 3Q GDP flash report will be.
If the estimate holds, the economy is under performing expectations by a wide margin.
I wonder if Yellen takes note of the data. She reiterated her pledge to increase % rates by year-end in a speech last week.
Fed Atlanta link:
https://www.frbatlanta.org/cqer/research/gdpnow.aspx?panel=1
Yellen’s speech:
https://www.bostonglobe.com/business/2015/09/24/janet-yellen-umass-say-rate-increase-likely-before-end-year/hE0CWKh1AkWgCtyd8kqk5J/story.html
Ya think these people should get reparations? http://www.washingtonpost.com/sf/national/2015/09/12/an-american-void/
@Little John
.
No
Speaking of markets clearing…
DeLong posts his syllabus for Econ 101. He spends the first several lectures talking about the price of apples at an apple cart. The intersection of supply and demand. [Never mind that “demand” is fundamentally an action and as a noun can only exist in time (there can be no static demand curve because demand doesn’t exist at any given moment in time, only between two moments).]
.
My first job was at a grocery store. To this day, every time I smell rotting produce I’m transported back to the dumpster behind the store and the smell of rotting apples that got thrown away… behind the apple cart.
.
So one week with a real job is all it takes to learn that from the second he opens his mouth, the very first second, Brad DeLong is a brilliant man who has devoted his life to having no idea what he is talking about.
.
There’s a reason why there are very few women in economics.
“….DeLong posts his syllabus for Econ 101. He spends the first several lectures talking about the price of apples at an apple cart….”
Be careful. Reading stuff like that is a fast track to brain damage.
After I read any kind of paper containing formal economics , I have to get good and drunk so as to wipe away the memories that would ultimately lead to brain dysfunction. It’s hell on my liver , but I’ve decided that between the two organs , I prefer a well-functioning brain.
I know , I should just stop reading those econ papers. It’s not so simple once you’re hooked , thus my warning to you. I haven’t yet figured out what it is that keeps drawing me back…
Now, little boy lost, he takes himself so seriously [‘must read”]
He brags of his misery [why, oh why, can’t we have a better…], he likes to live dangerously [‘smackdown”]
And when bringing her name up
He speaks of a farewell kiss to me
He’s sure got a lotta gall to be so useless and all
Muttering small talk at the wall while I’m in the hall
How can I explain?
Oh, it’s so hard to get on
And these visions of Johanna, they kept me up past the dawn