That's the notion that is put forth by the progressive conservative. He claims that higher wages for low-paid workers causes their jobs to be replaced by automation. I don't buy it. The notion that any jobs that can be automated have not already been automated doesn’t pass a giggle test. *Everybody* who relies on low-wage labor has experimented with automation. But in the end, a robot simply doesn’t work as a “sandwich artist” or a waiter or hamburger flipper or whatever. The robots simply aren’t flexible enough or reliable enough for these kinds of jobs. We are still many decades away from robots that can replace human beings in most low-wage jobs.
He notes that cities that have passed these "living wage" laws have experienced a decline in low-wage manufacturing employment. The question is whether “living wage” ordinances caused the job declines, or whether the job declines were already happening. For example, the city of San Francisco has a “living wage” ordinance and has experienced the loss of its low-paying garment manufacturing jobs. But it is not the living wage ordinance that caused the loss of jobs, it was the rapidly soaring real estate prices which basically priced out all the garment manufacturing because the owners of the warehouses where the garment manufacturing was taking place sold them out to real estate developers who in turn put residential lofts or commercial R&D spaces in their place. All that their “living wage” ordinance has done is insure that the people who are “sandwich artists” or waiters or etc. get paid more. And meanwhile, San Francisco is still “the” place to live and work in the Bay area — last year SF hit its highest population ever.
In short, I don’t think the data supports his position. We have ample data on minimum wage hikes. What that data shows is that immediately after a minimum wage hike there is a short drop in economic activity as the effects ripple through the economy, but within two years of a minimum wage hike the extra money going to lower income people results in higher employment and income growth compared to any two-year period that does not include a minimum wage hike. When you consider that we have no shortage of investment capital at the moment, redistributing money from the investment side to the consumption side via a minimum wage hike makes sense. Poor people spend any extra money to buy stuff they couldn’t buy when they were poorer, things like better quality food, clothes that don’t come from the Salvation Army rack, etc. Rich people invest any extra money they make, which is good if your economy lacks investment capital — but that is not the case right now.
As for the notion that minimum wage causes loss of jobs, that doesn’t pass the giggle test either. You go to any business, they are already operating with as few people as possible. It’s called competition — any business that relies on low-paid workers is under extreme pressure to reduce its (man-power) hours in order to compete with other businesses that rely on low-page workers and thereby maximize their profits. If they could reduce the number of workers any further, they would have already done so. They *can’t* fire somebody, because if they do, they can’t stay open. The reason there is a momentary dip in the months immediately after the minimum wage hike is that it takes a bit of time for the hike to ripple through the economy. The restaurants hike their prices to pay the higher wages (because they have no choice, they can’t fire anybody because then the tables would go un-bussed and patrons would go un-served), which reduces demand, so they cut their hours to match the reduced demand. But then people get accustomed to the higher prices, negotiate their own pay raises at their own higher salary levels, and the demand goes back up even further than it was to begin with because the workers at the restaurant can now afford to buy an occasional restaurant meal.
This is what the data shows — within two years, the economic activity will be higher than would have happened without the minimum wage hike. I see no reason why this doesn’t apply to any other sort of “minimum wage”, all that a “living wage” is, is a minimum wage by another name. And we have a *ton* of data on minimum wages showing that it doesn’t cause the effects he claims, regardless of any theoretical bullshit to the contrary. The numbers don't lie -- minimum wage increases don't cause a loss of low-wage jobs. Sorry, theoretical bullshit artists. Facts is facts.
Note that this positive effect of shifting money from investment to consumption would not apply in an economy that lacked investment capital. But one of the side-effects of running these giant trade deficits is that all those dollars have to go somewhere — they can’t just be sunk into the depths of the Pacific Ocean. And where they’re coming is right back here to fund investment in new technologies, or to purchase factories to ship to China, or whatever.
- Badtux the Economics Penguin
Ever since Washington, the elites have bemoaned the cost of labor and the fact that nobody will work for free.
ReplyDeleteMold
I think that the family of four living wage now is at about 30 bucks an hour. Single people making that must be living pretty damn well.
ReplyDeleteI suppose that they would tend to not agree though, being as they like being spoiled.
For the first part of my response, please see this.
ReplyDeleteFor the rest, we’ve got some ground to cover…
First off, you’re contention that I claim “..that higher wages for low-paid workers causes their jobs to be replaced by automation,” is somewhat misleading. Automation is a small, small part of the equation. What I said is that it leaves them vulnerable to technological advances. No, you won’t see any robots in the sandwich shop, but what you might see is a business investing in higher-priced pre-cut meat, enabling them to cut a couple prep-workers off their 1st shift. Or you might see a warehouse go from a manual inventory system to one that relies on scan guns and enables them to cut a few bodies. Or you might see them decide to install a couple simple roller lines or conveyor belts. I’ve seen all of the above happen when companies were forced to choose between increased wages or investing in new equipment. Also, your claim that every company that could invest in technology has already done so is false. There are lots of companies that choose to spend money on employees over technology for one very good reason: employees can be laid off. Once you have machines, you’re stuck with them. But sometimes a forced wage hike makes the risk of purchasing technology seem worth it.
Your next contention that a living wage hike is the same as a minimum wage hike is incorrect. The whole reason for the difference in terminology is that a living wage hike is meant to be higher than minimum wage and therefore more able to be ‘lived’ on. So all of your data on minimum wage effects is inapplicable. While you were referencing these inapplicable minimum wage statistics you were also ignoring the data I produced from a study of actual living wage laws in California and their 6 – 8% negative effect on the lower-skilled job market.
There are a host of other problems with these laws, such as the likelihood that young employees will benefit more from them than older employees with families. There is also the fact that in nearly every jurisdiction in which they have been inacted, the only companies forced to comply were those that did business with the local govt. The laws are full of loop-holes because civic leaders know that widespread adoption of this legislation is impossible, but small-scale adoption wins votes. So also, when you reference SF and point to the lack of impact from living wage legislation, you aren’t mentioning that only a select few businesses are even at the mercy of these laws.
The last point I would like to make is that the main thing people should draw from this discussion is that lower-skilled workers are in a vulnerable spot for many, many reasons, technology being just one of these. The best protections these workers can give themselves is to gain skills and move ahead in the job market.
P.S. I saw the 'right-wing stupidity' tag on this post. Seems a little petty, doesn't it?
ReplyDeletePC, the online references I saw saying that the living wage was a bad evil thing were all right wing "think tanks" (a.k.a., propaganda factories for the unelected elite who actually rule us). Thus the tag "right wing stupidity".
ReplyDeleteI am unclear on the difference between a "minimum wage" and a "living wage". *AS IMPLEMENTED*, a "living wage" has in practice been implemented as a minimum wage hike.
I would warn you that anecdotal evidence is worthless statistically. For every person you find who smoked cigarettes for 80 years and died of old age at age 100, I can find you 1,000 people who smoked cigarettes for 40 years and died of lung cancer at age 60. You may find me some anecdotes about a warehouse that added some automation that it had already been long-considering because competitors were becoming more efficient due to that same automation, but that doesn't prove anything, any more than the fact that George Burns smoked for 80 years without getting cancer means anything about the safety of cigarettes and cigars. What you have to do is look at employment long-term in order to see whether there is a long-term effect of a minimum wage hike. Everybody knows you can smoke cigarettes for a few months and not get cancer. What, however, is the long term effect? The long term effect, we've found, is an increase in economic activity due to the extra consumption allowed by the extra money going to minimum wage earners and those immediately above minimum wage who get pay hikes to deal with the price hikes needed to pay the higher minimum wage, and therefore higher employment of low-wage workers in order to cope with the increased economic activity. You can find an anecdotal story here and there, but statistically speaking, they are outliers, sort of like the George Burns of economic activity.
- Badtux the Economics Penguin
PC, the online references I saw saying that the living wage was a bad evil thing were all right wing "think tanks" (a.k.a., propaganda factories for the unelected elite who actually rule us). Thus the tag "right wing stupidity".
ReplyDeleteWhen all else fails, liberals always seem to fall back on that one don't they? Discredit the source, then we can bury our heads in the sand!The fact is that Joel Kotkin has written for a variety of both conservative and liberal publications and he is affiliated with the new America Foundation, which has a very diverse staff. If you check his sources, they are mostly non-profit groups that are doing studies for various municipal governments.
Regarding anectdotal references, yes, i will agree that they are not the best evidence to support a point. So then why do most of your rebuttals discuss SF? there are a couple other cities in the U.S.
I am unclear on the difference between a "minimum wage" and a "living wage".
That much is clear. Living wages in most places they have been implemented are almost twice the federal minimum wage. No minimum wage hike has amounted to that. So when you keep quoting the effects of minimum wage hikes, you still aren't grapsing the conversation.
The supposed promise of 'living wage' laws create a dillusional atmosphere where low-skilled workers think they can stay at their jobs and rise into the middle class. 'Minimum wage' hikes are smaller and fortunately don't fool anyone.