A dozen servers at a Bangor steakhouse were relieved when the Maine legislature reversed plans to impose a high employer-paid wage on tipped workers. “I don’t need to be ‘saved,’ and I’ll be damned if small groups of uninformed people are voting on my livelihood,” said one. “James Dill, a college professor and the Democratic state senator from Maine’s 5th District, received hundreds of emails and phone calls from unhappy servers, he said. He initially voted for the ballot referendum because he supports a higher minimum wage. After the outcry, he signed onto a Republican measure to lower the tipped wage down again.” [Caitlin Dewey, Washington Post “Wonkblog”]
A working paper for the National Bureau of Economic Research by a University of Washington team — the same team hired by Seattle to evaluate its minimum-wage experiment — just found serious ill effects:
This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.
A Jonathan Meer post reprinted by Alex Tabarrok spells out just how bad that news is:
– The numbers of hours worked by low-wage workers fell by *3.5 million hours per quarter*. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.
– The losses were so dramatic that this increase ‘reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.’ On average, low-wage workers *lost* $125 per month….
I know that so many people just desperately want to believe that the minimum wage is a free lunch. It’s not. These job losses will only get worse as the minimum wage climbs higher, and this team is working on linking to demographic data to examine who the losers from this policy are. I fully expect that these losses are borne most heavily by low-income and minority households.
But there’s more. When Seattle’s City Hall got word the adverse study was coming from members of its own research team, it quickly commissioned a pro-labor group at Berkeley to do a counter-study looking at restaurants and concluding that everything was peachy keen [Seattle Weekly] “Does City Hall really want to know the consequences, or does it want to put blinders on and pat itself on the back?” [Seattle Times editorial]
One other takeaway from the NBER: the low-wage-earner losses weren’t in restaurant jobs, which are far less mobile. Few Seattle city residents will switch to suburban eateries for everyday dining, even in response to relative shifts in cost or quality. But many blue-collar and clerical jobs can migrate to suburbs or locations farther away than that. In short, beware of restaurant-sector-only studies of local minimum wage effects, which will typically understate damage to hours worked.
More: Ben Casselman and Kathryn Casteel, Five Thirty-Eight; Max Ehrenfreund/Washington Post; Michael Saltsman/Forbes (“New Report Marks The Beginning Of The End For ‘Fight For $15′”); Ryan Bourne, Cato.
- Rhode Island bill would lock in existing public employee union benefits until new contract reached. Why bargain in good faith? [Providence Journal editorial]
- NYC Mayor De Blasio signs “Fair Work Week” package imposing on fast-food and retail employers various constraints typical of unionized workplaces; meanwhile, court strikes down 2015 NYC law imposing punitive terms on nonunion but not union car washes [Seth Barron, City Journal; Ford Harrison on new legal package]
- How reliable a guide is Paul Krugman on the minimum wage? [Scott Sumner and commenters] “Thing is, there has been an awful lot more empirical research on the effects of minimum wage increases than this one paper by Card and Krueger.” [Thomas Firey, Cato] “New Paper Shows Workers Commute Away From Minimum Wage Rises” [Ryan Bourne, Cato]
- House hearing: “Illinois worker recounts ordeal to decertify union” [Sean Higgins, Washington Examiner]
- New Mexico: “‘Ban the box’ issue not so clear cut” [Joel Jacobsen, Albuquerque Journal]
- In which Jonathan Rauch and I for once disagree, but still a good survey of ideas for reinventing unionism (works councils, Andy Stern/Eli Lehrer, Ghent, etc.) [The Atlantic]
Worries “that many delivery jobs would disappear” are cited among the reasons San Francisco Supervisor Norman Yee is sponsoring a ban on delivery robots in the city, prompting this response:
San Fran economics, in 3 steps!
Step 1: Pass $15 minimum wage.
Step 2: Robots take delivery jobs.
Step 3: Ban robots to save delivery jobs. https://t.co/Uj21cnvKuQ
— Michael Saltsman (@Mike_Saltsman) May 31, 2017
Commenters have several suggestions for Steps 4 and beyond, including (@railboss): “Complain there aren’t any decent restaurants anymore with reasonably priced food or that deliver.”
- Fever finally breaks on a bad idea? Mayor Catherine Pugh vetoes Baltimore council $15 wage bill [Eric Boehm] Ohio Gov. John Kasich signs bill preventing localities from setting higher minimum wages than state [Cleveland Plain Dealer, Jon Hyman]
- Minimum wage hikes may cause workers to shift preference among industries by flattening pay differentials that correspond to amenity level [Ryan Bourne, Cato] “San Diego’s new minimum wage already may be killing jobs” [Dan McSwain, San Diego Union-Tribune]
- “Contrary to often asserted statements, the preponderance of the evidence still points toward a negative impact of permanently high minimum wages.” [Jesus Fernandez-Villaverde, University of Pennsylvania, via Jeffrey Miron, Cato]
- Allegation: timekeeping software used by employers defeats wage and hour regulation [Elizabeth Tippett, Charlotte Alexander, and Zev Eigen, Yale Journal of Law and Technology via Workplace Prof]
- Women’s attitudes on gender pay gap vary greatly depending on whether they are asked about society in general, or their own workplace [Emily Ekins]
- Dark side of Progressive Era: advocates backed minimum wage precisely in order to remove lowest skilled workers from productive economy [Emily Skarbek and Amy Willis, EconLog, citing Thomas C. Leonard, Journal of Economic Perspectives] Motivation of squeezing out immigrants has not gone away [David D’Amato on Twitter]
My chapter on labor and employment law in the new 8th Edition Cato Handbook for Policymakers has caused a riffle or two of reaction, what with its proposals to repeal the NLRA, ADEA, FMLA, and a bunch of other laws (and that’s just the start, really). Robin Shea and Jon Hyman both respond with posts on the theme of what would happen if they ran the world, could push a button, or were monarch for a day. Their responses are good-tempered in both agreement and disagreement, which cannot be said for all the corresponding fun had once the list started circulating over on Twitter.
If my chapter doesn’t manage to flood the outrage zone completely for committed supporters of current law, the handbook’s chapter on the minimum wage can help provide further stimuli. It’s written by Thomas Firey.
- Bad idea keeps spreading: “Philadelphia to Prohibit Asking Job Applicants About Their Prior Wage History” [Ford Harrison] Bill introduced in Maryland legislature [Danielle Gaines, Frederick News-Post on HB 398]
- “New York (State and City) Imposes New Rules for Freelancers, State Contracts” [Daniel Schwartz]
- On the minimum wage, lame reporting and motivated reasoning make war on Econ 101 [David Boaz and Ryan Bourne, Cato]
- In final Obama days, EEOC finalizes rules toughening affirmative action requirements for federal agency employers regarding workers with disabilities [Joe Seiner, Workplace Prof]
- Study: Indictments of union officials correlate with close election outcomes [Mitch Downey via Tyler Cowen]
- “Ohio again tries to restore sanity to its bonkers employment discrimination law” [Jon Hyman]
- “The Gathering Storm in State Pensions” [Cato Podcast with Peter Constant] “Los Angeles’ Pension Problem Is Sinking The City” [Scott Beyer]
- “DC’s Paid Family Leave Bucks the Trend — and Economics” [Ike Brannon, Cato]
- Federalist Society lawyers convention panel on gig economy moderated by Third Circuit U.S. Court of Appeals Judge Thomas Hardiman and with panelists Randel K. Johnson (U.S. Chamber), Bill Samuel (AFL-CIO), Mark Floyd (Uber), and Mark Brnovich (Attorney General, Arizona);
- “How to Avoid Discrimination in Hiring, While Complying with [Export Security Control] Laws” [Ashley Mendoza and Alfredo Fernandez via Daniel Schwartz]
- “The case for non-compete agreements” [David Henderson]
- “This economic reasoning is right/For Zero, not for Fifteen, should we fight.” A minimum wage sonnet [Sasha Volokh]
“After minimum-wage hike, hundreds of Arizona companies serving people with disabilities to face a funding crisis” [Arizona Republic]
- Following election results, lawprofs’ idea of persuading SCOTUS to kill state right-to-work laws is looking kinda dead [James Sherk, National Review] Sixth Circuit panel, reversing decision below, says law authorizes Kentucky counties to enact county-wide right-to-work statutes [Lexington Herald-Leader]
- “Congressional Budget Office: Canceling overtime rule would boost family earnings” [Sean Higgins, Washington Examiner]
- “Another Lesson from Bastiat: So-Called Employment Protection Legislation Is Bad News for Workers” [Daniel Mitchell, Cato citing NBER working paper by Gilbert Cette, Jimmy Lopez, and Jacques Mairesse]
- Claim: lawmakers can “give” private employees paid parental leave and “there’s no added cost to employers” [Kate Ryan, WTOP citing views of Montgomery County, Maryland council member Tom Hucker]
- All California janitors must now take training against sexual harassment, on rationale of preventing rape [L.A. Times]
- A “complicated, highly regulated industry”: “Why Are Companies Abandoning On-Site Day Care?” [Rebecca Greenfield, Bloomberg] And: “Childcare costs skyrocket after minimum wage hike passes” [Alyssa Donovan, KXLY; Spokane, Wash.]