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4 ways employers respond to Minimum Wage Laws( Besides Layoff)

KLATTU

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Cut Hours Rather Than Workers
Make Employees Work Harder
Cut Other Elements of Remuneration
Hire Fewer People, More Robots

Economists Grace Lordan and David Neumark analyze how changes to the minimum wage from 1980 to 2015 affected low-skill jobs in various sectors of the US economy, focusing particularly on "automatable jobs – jobs in which employers may find it easier to substitute machines for people,” such as packing boxes or operating a sewing machine. They find that across all industries they measured, raising the minimum wage by $1 equates to a decline in "automatable" jobs of 0.43 percent, with manufacturing even harder hit.

They conclude that

groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase.

Minimum wage hikes are bad public policy. Economics, like all social sciences, has difficulty testing its models against data, but even where
we can, the evidence bears this out.

4 Ways Employers Respond to Minimum Wage Laws (Besides Laying Off Workers) - Foundation for Economic Education

Comments?
 

Well to point out.. Unemployment in 1980 was about 7.5%

And in 2015 it was 5%

And now in 2018 about 4%.

Doesn't seem that minimum wage increases are hurting employment....
 
jaeger19 said:
Well to point out.. Unemployment in 1980 was about 7.5%

And in 2015 it was 5%

And now in 2018 about 4%.

Doesn't seem that minimum wage increases are hurting employment....
Click to expand...

those numbers are irrelevant. You know better.
 

If you can't afford to do business, move elsewhere.
 
KLATTU said:
Cut Hours Rather Than Workers
Make Employees Work Harder
Cut Other Elements of Remuneration
Hire Fewer People, More Robots


Comments?
Click to expand...

The fifth one: Offshoring when possible. For example, call centers.
 
jet57 said:
If you can't afford to do business, move elsewhere.
Click to expand...

Many have taken such advice. US-based companies are seemingly everywhere in Monterrey.
 
jet57 said:
If you can't afford to do business, move elsewhere.
Click to expand...

People who otherwise would be both willing and able to conduct business in the US, who would provide jobs at a wage many would accept should pack up and leave because you are of the opinion that the deal is not good enough?
 
nekrodev said:
Who would've guessed
Click to expand...

Everyone has a preferred political stance and everyone has the same tendency to pursue confirmatory evidence more so than to explore more fully the space of counterargument. But if you insist on a different outlet, the NY Time did opine in this same direction very many moons ago:
The Right Minimum Wage: $0.00 - The New York Times.

This notwithstanding, we have access to their articles on the matter. Given that it was introduced by the OP, it might be worthwhile to comment on the content instead of complaining it comes from the FEE.

If you want to look at papers going in the opposite direction, we have a very famous Card and Krueger paper which doesn't find much impact in the fast-food industry. Card also has a paper published in 1992 concluding similarly. To the credit of the FEE, however, it did raise an important point that is seldom covered: employers can respond in very many ways to a minimum wage hike.
 
jaeger19 said:
Well to point out.. Unemployment in 1980 was about 7.5%

And in 2015 it was 5%

And now in 2018 about 4%.

Doesn't seem that minimum wage increases are hurting employment....
Click to expand...
Why would it? Most of the jobs created are at more then minimum wage. According to the Bureau for Labor Statistics only about 2-3% of all workers earn the federal minimum wage. And they tend to be young, unattached, part timers. They likely move up the wage ladder as they grow skills and experience. One of the results of the current booming economy is a growth of wages - year over year gains of over three percent are being reported with the lowest earners seeing some of the best gains.
 
Minimum wage jobs tend to be in fields that cannot easily be automated, down sized, or off shored. If you own a restaurant you cannot have the tables waited on by robots and bused in Bangladesh. If you reduce the number of employees, customers will get tired of waiting to be served, so they will dine somewhere else.

Consequently, restaurant owners have no choice but to pay more when the minimum wage rises.
 

Why would an employer cut hours? Do you mean cut the hours they're open or cut each employee's hours and hire another one?

Whatever. This is all the same crapola that gets spread against unions, too. For some reason- and I've got a good guess what that reason is- people will allow themselves to be persuaded to vote against their own self-interest, vote for the interests of
others.
 
i prefer debt free post secondary education / job training to just lifting the wage floor significantly. i do support a minimum wage tied to inflation, and the $2.13 an hour tip scam should be made illegal. by tying it to inflation, i mean that it goes up automatically, and congress does nothing, which they are very good at. however, if we make it fifteen bucks, then those currently making fifteen bucks will now be making minimum wage, which will amount to about what it is right now shortly. it's a better idea to educate and train people.
 

In construction, your larger competitors might move past $15 causing you to lose employees to them. So your solution is to hire those coming to you who are illegal immigrants. So soon, you are under cutting them on bids, forcing them to hire cheap immigrants themselves. Gradually, the industry becomes whored out. (Housing in particular)

Thats why illegals are important to the economy. Advancement in the workforce is a myth for the average immigrant.
 

The biggest on is automation, another poster here posted this "If you own a restaurant you cannot have the tables waited on by robots and bused in Bangladesh. If you reduce the number of employees, customers will get tired of waiting to be served, so they will dine somewhere else. "

But even that depends on the type of restaurant, you may very well reduce staff. In some fast food places you order at a kiosk, pay at the kiosk, you pickup your food. So behind the counter instead of having 3 people you have one, and one person busing the tables. Heck they have almost perfected the burger machine the cook and assembles your burger. I can buy pizza made in front of me out of a machine, (I really want to try that one) I can and have bought french fries out of a machine.
 

Ummm, the other choice they will have is to get out of the business.
 

In many places Jobs that cannot be outsourced (eg tipped workers and farm workers) get a lower minimum wage than other workers.
 
jet57 said:
If you can't afford to do business, move elsewhere.
Click to expand...

Bernie Sanders is cutting his employees' hours to meet an "effective rate" of $15/hr. See how gaming the system works?
 
eman623 said:
In many places Jobs that cannot be outsourced (eg tipped workers and farm workers) get a lower minimum wage than other workers.
Click to expand...

It's only been that way for 80 years right?
 

My parents did just fine in the work place.
 

Let's accept the economic arguments against higher MW. I know a few labor economists and they agree, but mostly because it's an inefficient way to help the poor. Your linked NYT article explains the MORE efficient ways to help the poor:


Fine with me. So those opposed to increasing the MW should support some or all those efforts. But they don't.

So in politics the choice is generally vote for people who will increase spending to benefit the poor AND raise the MW, versus those who would keep the MW where it is and vote to cut the kind of spending that helps the poor. Trump and the GOP oppose increases in the MW and favor cuts to social spending like EBT, which Trump recently proposed changes to that would kick 3 million or so off the rolls. Trump and the GOP propose to eliminate the ACA, and replace it with nothing. The GOP states opposed Medicaid expansion targeted at the poor. Etc.

The point is we can agree that the MW is inefficient, bad policy, but then the alternative if you're worried about people making MW and stuck in poverty is to raise their wages by other means. If we do that, OK, we can have a $0.00 minimum wage. Some countries in Europe have no MW or low ones. That works for them because they have UHC and generous social spending programs for the poor that make up for the low wages.

FWIW that editorial also mentions education and training:


Which is understandable in many ways, because having higher skilled workers doesn't mean much if there are still a bunch of low skill jobs that need doing, and there are lots of them. Plus, the half the country that is by definition in the lower half of the skills/intelligence/aptitude will never succeed as coders or engineers or doctors, the very high skill occupations that command high wages.

But if you want to have higher skilled workers, then we have to pay for the education, and I'm glad Tennessee offers free community college and technical training to every resident, and free college for many residents. Liberals support that as well, but it's conservatives who remain mostly opposed to them, because they cost money.

TL/dr, the argument isn't really MW or not, but how to best take care of those at the bottom. If it's not MW increases, that's fine, we have to maintain or increase other spending in lieu of higher MW. But that's socialism!! etc... in politics for the right, and we can't do that.
 
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Did they track whether the changeover to automation was causally linked to the increase or whether the technology just became available. Technologies like the container ship made offshoring profitable. Businesses would have taken advantage of it regardless of American wages. No American can feed their landlord on $5/day much less feed themselves.

AI is going to replace workers. As soon as it becomes available in the industry in question.

I'm not convinced that minimum wage increases have that much to do with it.

At the end of the day its just capitalism trading one commodity for a cheaper one.
 
TheEconomist said:
People who otherwise would be both willing and able to conduct business in the US, who would provide jobs at a wage many would accept should pack up and leave because you are of the opinion that the deal is not good enough?
Click to expand...

Lots of folks in the third world "accepting" wages far lower than the local equivalent of American minimum wages for skilled labor.

They "accept" these wages because starvation is the alternative.

Many Americans "accept" wages below what it costs to live because they can take advantage of our safety nets.

So places like Walmart are literally being subsidized by taxpayers.
 

22 million people just got huge raises from state minimum wage hikes. 50% or more.

This almost certainly accounts for the 1% or so over inflation we are now seeing.
 

They actually try to claim that it was union wages that sent our jobs overseas.

When at $5/hr for unskulled american labor you can get 8 semi-skilled laborers for 14-16 hrs. With no labor burden.

American workers could never compete with that.

Have you noticed the meme from the right that it was just the left that outsourced our jobs?
 
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