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https://www.bendbulletin.com/business/6503418-151/study-minimum-wage-increases-in-6-cities-working:
The minimum wage increases that started four years ago in Seattle are spreading across the country, but economists continue to study — and disagree about — the impact.
The latest look at increased wage floors in six U.S. cities, including Seattle, finds that food-service workers saw increases in pay and no widespread job losses. That reinforces the conclusions the same group of University of California, Berkeley, researchers reached in 2017 after studying just in Seattle.
This time, the Berkeley researchers examined Seattle; San Francisco; Oakland, California; San Jose, California; Chicago; and Washington, D.C., where minimum wages at the end of 2016 ranged from $10 to $13.
"We find that they are working just as the policymakers and voters who enacted these policies intended," said Sylvia Allegretto, co-author of the report and co-chair of Berkeley's Center on Wage and Employment Dynamics. "So far they are raising the earnings of low-wage workers without causing significant employment losses."
abstract https://www.nber.org/papers/w25043
(Score: 5, Interesting) by Anonymous Coward on Thursday September 27 2018, @02:26PM (7 children)
We're not in a period of economic growth in any real sense. I'm not sure why people think we are. The government dumped a ton of money into the stock market by giving all those corporations tax breaks that they primarily used to buy their own stock. The people actually doing the work who normally would be spending the money still don't have any, even in places where the minimum wage did rise, it wasn't by enough to make much of a difference. Housing here in Seattle is still very much out of reach for many minimum wage earners even at $15 an hour. And I'm not talking buying a house either, in many cases the cost of renting is also out of reach.
And no, minimum wage does not cause inflation. I'm not entirely sure where people get that idea. Businesses can't arbitrarily raise their prices just because the cost of doing business got more expensive. What causes inflation is changes in the money supply, like when say neoliberal politicians decide they want to bail out wall street and the bankers by increasing the supply of money beyond the rate of economic growth.
(Score: 0) by Anonymous Coward on Thursday September 27 2018, @07:01PM
If we're not, then why is Barry trying to take credit for the 4% GDP?
(Score: 0) by Anonymous Coward on Thursday September 27 2018, @07:04PM (3 children)
You're not quite right. Close, but not quite.
It's quite possible for prices to rise during a contraction in the money supply, and it's inclined to reduce the rate of consumption, and hence the velocity of money, and hence further contract the effective money supply. This actually exacerbates effective inflation, because each price quote is a higher proportion of the available money in the economy.
What tends to confuse people about this (well, students) is that they forget that there's lag in processes, so it doesn't all take effect at once.
Example:
Greaseblocks, Inc., a fast food franchise, pays its workers a dollar more per hour. Intuitively, this would increase the cyclical rate of cash in the economy, because you have more money reaching the workers, who, being largely impoverished, immediately spend the money. However, each block of grease now costs a few cents more to make ends meet for the business. In addition, there's a fair chance that a lot of that additional pay (in today's economy) goes to servicing debts or deferred maintenance, such that the actual ripple effect of that increased flow of cash is quite small - this isn't a perfect market we're talking about, after all. However, Greaseblocks, Inc.'s turnover edges down (because of increased prices) thereby contracting the velocity of cash by that amount, and shrinking the business's margins. This has all sorts of consequences that I won't get into right now (such as reduced access to capital, expansion, and employment of further workers) but there's no particular reason to believe that any cash stream hitting the workers will inherently, on balance, benefit the economy as a whole.
However, regardless of the effect on the economy as a whole, you have at least one product (actually two: the labour of the workers and the greasy blocks themselves) that has a raised price. This is a measurable form of inflation. The conventional argument is then that businesses will drop their prices and people will accept lower wages, but the actual measured result is that wage earners at least exhibit strong resistance to wage reduction, and that businesses aren't wild about price reductions, as opposed to selling commodities in smaller bags and similar tricks.
The perverse result is that prices, even if stagnant, can rise as a proportion of available money in the economy, and depending upon the mood of the public, this can actually have a ratcheting effect on people still in the economy, while dropping out more and more people as the newly indigent.
This is one of the leading theories behind stagflation, for what it's worth.
(Score: 2) by deimtee on Friday September 28 2018, @12:05AM (2 children)
You seem to believe that Greaseblocks inc is a marxist enterprise that charges costs plus a small markup for its products. No business does this.
Prices are unrelated to costs except for the condition that Σprices must exceed Σcosts. (or the company will go broke.)
In a non-competitive area their costs are likely to be a small fraction of what they charge.
In your example greaseblocks(tm) will retail for the amount that maximizes profits. That may be slightly over production costs, especially in a high volume competitive market. but if they could charge a few cents more they would, even before their costs went up.
If you cough while drinking cheap red wine it really cleans out your sinuses.
(Score: 1) by ChrisMaple on Friday September 28 2018, @03:27AM
You appear to think that companies know what price levels will maximize their profits. It is to laugh.
Big, complex companies are run by people with a variety of motives. Profit is the motive that economists point at, and politicians tend to point at the profit motive also. There's more going on.
(Score: 0) by Anonymous Coward on Friday September 28 2018, @07:10AM
Fast food is a high volume, very low margin industry. They charge a small markup over their (tightly controlled) costs because if they don't, they tend to lose business and go down. So, yes, that's a business that counts its costs very carefully, and then charges a rate that is marginally over that.
No marxism needed.
Now if we're talking about bespoke luxury meals handcrafted by world-class molecular gastronomy experts, sure, the market will bear a hell of a markup. But that isn't anything resembling a minimum wage fast food mill the likes of which was examined in Seattle.
(Score: 3, Touché) by Taibhsear on Thursday September 27 2018, @07:10PM
Tell that to my landlord.
(Score: 3, Interesting) by crafoo on Thursday September 27 2018, @07:17PM
Precisely.
In fact, due to the major productivity gains over the last few decades, there is a mile of daylight between "labor costs too much, have to SHUT DOWN!", and say, doubling each employee's take home pay.