America had nothing for me
Mexico City, January 26, 2018 --- Ariel Rodriguez tells the Washington Post that he and his family are now home in Mexico City. He finished a B.A. Degree after 10 years working and studying in the United States. He spoke of Trump and his “negative rhetoric about undocumented people” and enforcement agents, sometimes separating children who were full US citizens from parents.” … “I was reminded daily that I did not belong – reminded by the news, reminded by Trump supporters chanting about the wall, reminded by the president himself. … “The way I see it, this loss is mutual: I lost the chance to have a life in America. America has lost the chance to have me.”
Lawrence, Massachusetts, February 17, 1912 --- Italian textile mill worker Arturo Massavi told a reporter today he is leaving the United States to return home to Italy. “We were urged to come here by posters spread throughout Italy by the American Woolen Company, describing how mill owners will treat us like their own children. … We were treated like dogs. Our Italy is bad but your country’s textile mills are worse.”
You figure it out!
Friday, January 26, 2018
Sunday, January 21, 2018
Fight the Gas Tax
Fight the Gas Tax
The Chamber of Commerce announced last week that it wants to have an additional $.25 a gallon gas tax to fund “infra structure” projects. This comes almost immediately after the same Chamber of Commerce and its corporate members and promoters engineered giant multi-billion dollar corporate tax cuts and more multi-billion dollar personal income tax cuts. Both changes deliberately intend to transfer billions of dollars to the rich who earn their income with dividends and capital gains rather than wages.
A $.25 a gallon tax is steeply regressive and guarantees those with modest wage income will pay a higher percentage of their income in gas tax than the rich with their bloated incomes and new lower tax rates. It punishes and penalizes the working class who get to work driving and rarely have alternatives in public transportation. It further lines the pockets of contractors to pour cement with profits from cost plus work awarded by an indulgent Congress.
It is especially depressing coming as it does immediately after billions of dollars of favors already bestowed on the rich in a lopsided economy already burdened with a crude income inequality. It suggests there is no limit to how far, or how often, the privileged rich will to push the working class into a lower economic status.
I think of Republicans as no more than a band of pickpockets.
The Chamber of Commerce announced last week that it wants to have an additional $.25 a gallon gas tax to fund “infra structure” projects. This comes almost immediately after the same Chamber of Commerce and its corporate members and promoters engineered giant multi-billion dollar corporate tax cuts and more multi-billion dollar personal income tax cuts. Both changes deliberately intend to transfer billions of dollars to the rich who earn their income with dividends and capital gains rather than wages.
A $.25 a gallon tax is steeply regressive and guarantees those with modest wage income will pay a higher percentage of their income in gas tax than the rich with their bloated incomes and new lower tax rates. It punishes and penalizes the working class who get to work driving and rarely have alternatives in public transportation. It further lines the pockets of contractors to pour cement with profits from cost plus work awarded by an indulgent Congress.
It is especially depressing coming as it does immediately after billions of dollars of favors already bestowed on the rich in a lopsided economy already burdened with a crude income inequality. It suggests there is no limit to how far, or how often, the privileged rich will to push the working class into a lower economic status.
I think of Republicans as no more than a band of pickpockets.
Tuesday, January 9, 2018
Fast-food and the Risk to Jobs
Fast-food and the Risk to Jobs
A recent Washington Post article [Caitlin Dewey, “For fast-food franchises, price cuts hard to digest” WP 12-29-17] describes the problems corporate franchisers like Subway and McDonalds cause their franchise holders by declaring promotional discounts on key parts of their menu. Discounts please the board of directors who want more revenue but squeeze the profits out of franchisees that face rising costs.
From 2015 to 2016 jobs at food services and drinking places increased by 367.9 thousand jobs as reported by the U.S. Bureau of Labor Statistics. Full service restaurants and fast food restaurants had a combined 309 thousand new jobs, which were split almost evenly between them. Except for a slight pause during the 2008-2010 recession these jobs have increased every year since 1990. Full service restaurants have 5.4 million jobs; limited service fast food 4.3 million jobs. That would be consistent with the article’s citation from the U.S. Department of Agriculture data reporting 18 thousand new fast food restaurants between 2009 and 2014.
There was no mention of the risk to the economy if restaurant and fast food expansion comes to a halt. Those 367.9 thousand new jobs I mentioned above make up just under 15 percent of the country’s new jobs for the year.
The fast-food industry fusses about wage costs going up over the last ten years, 2006-2016, and higher minimum wages in 29 states, but occupational employment survey data shows modest increases. The hourly median wage for fast food cooks (#35-2011) over the same 10 year period increased from $7.41 to $9.55 and hour. If the 2006 wage of $7.41 increased at exactly the rate of inflation until 2016 it would be $8.82 an hour instead of $9.55. Fast food cooks got an annual average of 2.57 percent increase in wages when the inflation rate was 1.76 percent a year. The modest increase in buying power from 2006 to 2016 applies to the median wage, which may not be the starting wage in an industry with a high turnover rate.
Looking at the state files I find only one state, Washington, with a median wage for fast food cooks more than $12 an hour, which represents 1 percent of national employment of fast food cooks.
Three states Hawaii, Massachusetts and North Dakota have a median wage for fast food cooks more than $11 an hour and less than $12 and hour, which represents 2.1 percent of fast food cooks.
Five states with Alaska, California, DC, Oregon and Vermont have a median wage for fast food cooks more than $10 an hour and less than $11. California has 19.8 percent of nationwide fast food cooks with a median wage of $10.54 an hour.
Twenty-five states pay more than $9 and less than $10, which is 40.8 percent of nationwide jobs for fast food cooks; the remaining 17 states pay less than $9 an hour, which is 31.4 percent of the national jobs for fast food cooks.
The WP article reports that year over year sales at fast food restaurants and fast-casual chains have fallen dramatically over the past two years, suggesting saturation levels of new chains and franchisees. Rather than have price cutting promotions they might consider raising prices. Remember price cuts can only increase revenue if sales increase by a larger percentage than the price decrease, no guarantee in market filled with new competition.
During the ten years from 2006 to 2016 the number of fast food cooks declined from 612 thousand to 513 thousand in 2016, helping to increase the surplus of labor for low wage jobs. The news media likes to report on job growth and lately about a shortage of jobs without mention that so many new jobs have low wages, especially in fast food. The fast food industry could change that given those higher wages franchisees now have to pay. Instead of helping to contribute new jobs in low wage occupations, the fast food industry may not generate new jobs at all.
A recent Washington Post article [Caitlin Dewey, “For fast-food franchises, price cuts hard to digest” WP 12-29-17] describes the problems corporate franchisers like Subway and McDonalds cause their franchise holders by declaring promotional discounts on key parts of their menu. Discounts please the board of directors who want more revenue but squeeze the profits out of franchisees that face rising costs.
From 2015 to 2016 jobs at food services and drinking places increased by 367.9 thousand jobs as reported by the U.S. Bureau of Labor Statistics. Full service restaurants and fast food restaurants had a combined 309 thousand new jobs, which were split almost evenly between them. Except for a slight pause during the 2008-2010 recession these jobs have increased every year since 1990. Full service restaurants have 5.4 million jobs; limited service fast food 4.3 million jobs. That would be consistent with the article’s citation from the U.S. Department of Agriculture data reporting 18 thousand new fast food restaurants between 2009 and 2014.
There was no mention of the risk to the economy if restaurant and fast food expansion comes to a halt. Those 367.9 thousand new jobs I mentioned above make up just under 15 percent of the country’s new jobs for the year.
The fast-food industry fusses about wage costs going up over the last ten years, 2006-2016, and higher minimum wages in 29 states, but occupational employment survey data shows modest increases. The hourly median wage for fast food cooks (#35-2011) over the same 10 year period increased from $7.41 to $9.55 and hour. If the 2006 wage of $7.41 increased at exactly the rate of inflation until 2016 it would be $8.82 an hour instead of $9.55. Fast food cooks got an annual average of 2.57 percent increase in wages when the inflation rate was 1.76 percent a year. The modest increase in buying power from 2006 to 2016 applies to the median wage, which may not be the starting wage in an industry with a high turnover rate.
Looking at the state files I find only one state, Washington, with a median wage for fast food cooks more than $12 an hour, which represents 1 percent of national employment of fast food cooks.
Three states Hawaii, Massachusetts and North Dakota have a median wage for fast food cooks more than $11 an hour and less than $12 and hour, which represents 2.1 percent of fast food cooks.
Five states with Alaska, California, DC, Oregon and Vermont have a median wage for fast food cooks more than $10 an hour and less than $11. California has 19.8 percent of nationwide fast food cooks with a median wage of $10.54 an hour.
Twenty-five states pay more than $9 and less than $10, which is 40.8 percent of nationwide jobs for fast food cooks; the remaining 17 states pay less than $9 an hour, which is 31.4 percent of the national jobs for fast food cooks.
The WP article reports that year over year sales at fast food restaurants and fast-casual chains have fallen dramatically over the past two years, suggesting saturation levels of new chains and franchisees. Rather than have price cutting promotions they might consider raising prices. Remember price cuts can only increase revenue if sales increase by a larger percentage than the price decrease, no guarantee in market filled with new competition.
During the ten years from 2006 to 2016 the number of fast food cooks declined from 612 thousand to 513 thousand in 2016, helping to increase the surplus of labor for low wage jobs. The news media likes to report on job growth and lately about a shortage of jobs without mention that so many new jobs have low wages, especially in fast food. The fast food industry could change that given those higher wages franchisees now have to pay. Instead of helping to contribute new jobs in low wage occupations, the fast food industry may not generate new jobs at all.
Monday, December 4, 2017
A Tax Bill to Depress the Economy
A Tax Bill to Depress the Economy
The so-called tax bills just passed by the House and Senate will depress the economy, which is easy to understand.
Governments rapidly return all of their tax money to the economy for salaries, schools, health care, defense contractors, road building and plenty more. They tend to put tax money into the spending stream as it arrives generating spending for, and income to, millions of people widely dispersed in all the states. Federal tax money tends to be spent in the United States and therefore supports the domestic economy.
To cut taxes by billions and billions to enrich a small number of people and corporations with no need to return that buying power to the spending stream guarantees a slowdown. A look at annual Corporate 10K reports often finds billions sitting as cash in liquid accounts. Corporations are slow to return revenues and profits to the spending stream and they have no obligation to spend in the United States. Tax money that once supported our domestic economy will end up going abroad.
The rich speculate in stocks and real estate and trendy collectibles and bid up the price of things that already exist, all of which creates nothing much for employment or the economy. Recall the Credit Default Swaps and Collateralized Debt Obligations after the Bush era tax cuts, and the depression that followed.
Claims that tax breaks to the rich creates a bigger supply of capital to finance investments ignores the need for demand and the mass buying power that cannot exist in a country with the crude and extreme inequality of the United States and tax bills to make it worse.
The bloated and privileged rich can do nothing to benefit the country or the economy buying the Congress and helping themselves to the country’s buying power. Some of us think the wealthy and the Congress have a responsibility to support the welfare of the larger society. Instead they act like marauders and midnight looters, pillaging and laying to waste.
The so-called tax bills just passed by the House and Senate will depress the economy, which is easy to understand.
Governments rapidly return all of their tax money to the economy for salaries, schools, health care, defense contractors, road building and plenty more. They tend to put tax money into the spending stream as it arrives generating spending for, and income to, millions of people widely dispersed in all the states. Federal tax money tends to be spent in the United States and therefore supports the domestic economy.
To cut taxes by billions and billions to enrich a small number of people and corporations with no need to return that buying power to the spending stream guarantees a slowdown. A look at annual Corporate 10K reports often finds billions sitting as cash in liquid accounts. Corporations are slow to return revenues and profits to the spending stream and they have no obligation to spend in the United States. Tax money that once supported our domestic economy will end up going abroad.
The rich speculate in stocks and real estate and trendy collectibles and bid up the price of things that already exist, all of which creates nothing much for employment or the economy. Recall the Credit Default Swaps and Collateralized Debt Obligations after the Bush era tax cuts, and the depression that followed.
Claims that tax breaks to the rich creates a bigger supply of capital to finance investments ignores the need for demand and the mass buying power that cannot exist in a country with the crude and extreme inequality of the United States and tax bills to make it worse.
The bloated and privileged rich can do nothing to benefit the country or the economy buying the Congress and helping themselves to the country’s buying power. Some of us think the wealthy and the Congress have a responsibility to support the welfare of the larger society. Instead they act like marauders and midnight looters, pillaging and laying to waste.
Saturday, November 25, 2017
Job Rights and Sexual Harassment
Job Rights and Sexual Harassment
The recent spate of sexual harassment charges against a growing number of men by a growing number of women derives directly from the U.S. history of labor relations. Notice the majority of charges occur as part of employment and while on the job. The harassers tend to be past middle aged white men accustomed to giving authoritarian orders to people who have no job rights.
As I recall from my high school history, it was all white men who wrote our constitution. In spite of the “all men are created equal” stuff in the Declaration of Independence, their constitution left women out entirely and then created a whole under class of people with no rights at all; slaves they were called. We did have a great civil war to end slavery, but authoritarian white male privilege and notions derived in part from dictatorial authority over slave women, who I have read, were subjected to some grimy and disgusting sexual abuse. Unlike slaves you can quit your job, but in the United States employees work at will; anyone can be dismissed at any time and without cause or explanation. If you dare to study closely your job rights under U.S. state and federal law be sure to compare them with slavery.
Privileged white men of authority hate any communitarian self help efforts like labor unions and they have successfully neutralized those efforts since 1789. Remember Trump bragged about groping married women before the election. Sexual harassment will continue unabated in the current environment of labor law. Well defined job rights remain as an essential precursor to ending, or even reducing, sexual harassment.
The recent spate of sexual harassment charges against a growing number of men by a growing number of women derives directly from the U.S. history of labor relations. Notice the majority of charges occur as part of employment and while on the job. The harassers tend to be past middle aged white men accustomed to giving authoritarian orders to people who have no job rights.
As I recall from my high school history, it was all white men who wrote our constitution. In spite of the “all men are created equal” stuff in the Declaration of Independence, their constitution left women out entirely and then created a whole under class of people with no rights at all; slaves they were called. We did have a great civil war to end slavery, but authoritarian white male privilege and notions derived in part from dictatorial authority over slave women, who I have read, were subjected to some grimy and disgusting sexual abuse. Unlike slaves you can quit your job, but in the United States employees work at will; anyone can be dismissed at any time and without cause or explanation. If you dare to study closely your job rights under U.S. state and federal law be sure to compare them with slavery.
Privileged white men of authority hate any communitarian self help efforts like labor unions and they have successfully neutralized those efforts since 1789. Remember Trump bragged about groping married women before the election. Sexual harassment will continue unabated in the current environment of labor law. Well defined job rights remain as an essential precursor to ending, or even reducing, sexual harassment.
Monday, October 16, 2017
Trump and NAFTA
Trump and NAFTA
Trump will have to fight the most powerful interests of corporate America to end NAFTA, which he now threatens to do. Any study of NAFTA since its inception in 1993 finds direct benefits to the growth of U.S. Domestic Production(GDP), not to mention the benefits to Canada and Mexico. It is unnecessary to cite studies since there are many and they all find benefits.
In the initial years NAFTA eliminated thousands of jobs. The U.S. textile industry nearly disappeared after NAFTA. In North Carolina, for example, there were 288 thousand jobs in 1990 in textile mills and apparel manufacturing. By the end of 2016 it was 42 thousand. Across the country these same industries had 1.629 million jobs in 1990; by 2016 it was 359 thousand. In the cut and sew industry alone jobs dropped from 749 thousand in 1990 to only 105.8 thousand by 2016.
Much of the NAFTA related job loss occurred before NAFTA generated a significant increase in trade along with new production and investment. Over the 24 years of NAFTA new trade related production expanded U.S. GDP and generated replacement jobs. Whether the new jobs generated because of NAFTA are more than jobs lost because of NAFTA is irrelevant to the current Trump demand. Current NAFTA trading does support U.S. establishment employment in 2017, which guarantees killing NAFTA will cut jobs and do noticeable harm to employment.
Corporate America will not be happy to see an end to NAFTA, but the job loss will be a minimal concern in NAFTA matters. They have always had the money and clout to get their way, but corporate nerves do get frayed with Trump bluster. If Trump cared about the working class and acted as a leader, he would ignore the NAFTA fight and work to change the horrendous federal personal income tax that bores down so heavily on wage earners. He would work to revise and enforce the Fair Labor Standards Act to raise the minimum wage and guarantee overtime pay for all and a few more.
If corporate America cared about the working class and acted as leaders who cared about Americans, they would acknowledge Congress and President Clinton did them a favor with NAFTA back in 1993 and then support sharing some of the benefits with the working class.
By now, the end of 2017, Trump policies all demand and intend to destroy something - Obama Care, climate accords, Iran nuclear deals, TPP, NAFTA, – except taxing, spending and Federal Reserve policy keep going on as before. He hasn’t destroyed the economy … yet.
Trump will have to fight the most powerful interests of corporate America to end NAFTA, which he now threatens to do. Any study of NAFTA since its inception in 1993 finds direct benefits to the growth of U.S. Domestic Production(GDP), not to mention the benefits to Canada and Mexico. It is unnecessary to cite studies since there are many and they all find benefits.
In the initial years NAFTA eliminated thousands of jobs. The U.S. textile industry nearly disappeared after NAFTA. In North Carolina, for example, there were 288 thousand jobs in 1990 in textile mills and apparel manufacturing. By the end of 2016 it was 42 thousand. Across the country these same industries had 1.629 million jobs in 1990; by 2016 it was 359 thousand. In the cut and sew industry alone jobs dropped from 749 thousand in 1990 to only 105.8 thousand by 2016.
Much of the NAFTA related job loss occurred before NAFTA generated a significant increase in trade along with new production and investment. Over the 24 years of NAFTA new trade related production expanded U.S. GDP and generated replacement jobs. Whether the new jobs generated because of NAFTA are more than jobs lost because of NAFTA is irrelevant to the current Trump demand. Current NAFTA trading does support U.S. establishment employment in 2017, which guarantees killing NAFTA will cut jobs and do noticeable harm to employment.
Corporate America will not be happy to see an end to NAFTA, but the job loss will be a minimal concern in NAFTA matters. They have always had the money and clout to get their way, but corporate nerves do get frayed with Trump bluster. If Trump cared about the working class and acted as a leader, he would ignore the NAFTA fight and work to change the horrendous federal personal income tax that bores down so heavily on wage earners. He would work to revise and enforce the Fair Labor Standards Act to raise the minimum wage and guarantee overtime pay for all and a few more.
If corporate America cared about the working class and acted as leaders who cared about Americans, they would acknowledge Congress and President Clinton did them a favor with NAFTA back in 1993 and then support sharing some of the benefits with the working class.
By now, the end of 2017, Trump policies all demand and intend to destroy something - Obama Care, climate accords, Iran nuclear deals, TPP, NAFTA, – except taxing, spending and Federal Reserve policy keep going on as before. He hasn’t destroyed the economy … yet.
Wednesday, October 11, 2017
Minimum Wages in Seattle
“Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.” Ekaterina Jardim, Mark C. Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor, Hilary Wething, National Bureau of Economic Research, June 2017
In yet another study of the minimum wage six authors tell readers they intend to evaluate the wage, employment and hours effects of a first and second phase in of the Seattle Minimum wage ordinance. The first phase raised the minimum wage from $9.47 an hour to $11.00 an hour on April 1, 2015. The second phase raised the wage from $11.00 an hour to $13.00 an hour on January 1, 2016. They analyze “employment in all sectors paying below a specified real hourly rate.”
The paper’s opening sentence starts with the standard obsessions economists always cite against minimum wages: “Economic theory suggests that binding price floor policies, including minimum wages, should lead to a disequilibrium marked by excess supply and diminished demand.” Economists predict a raise in the minimum wage will reduce employment of those earning a wage lower than the minimum wage. The see cause and effect as part of their doctrine.
They conclude the first phase effect was smaller than the second phase, which second phase caused a decrease in hours worked in low wage employment by 9 percent while the wage of low-wage workers’ was about 3 percent so that the cost of this wage hike outweighed its benefits for these workers. They conclude the minimum wage hurts low wage labor because hours lost makes a loss bigger than the gain from higher wages.
People leave jobs and lose jobs for many reasons, especially in low wage employment where turnover rates can be high. If the Seattle minimum wage causes employers to decrease employment, it could be useful to go out and ask these low wage employers if they recently off employees and was that because of the higher minimum wage. Typically Economists resort to analysis using large data sets filled with severe shortcomings like the Seattle study I review here.
Their data set comes from Washington’s Employment Security Division, which is produced as part of national Unemployment Insurance(UI) system administered by each state. Old timers refer to it as ES 202 data, or just “the 202” data. It is compiled and used by the Bureau of Labor Statistics in their benchmark revision of the Current Employment Survey.
ES 202 data is reported by single or multi establishment within county and Metropolitan Statistical areas coded by industry using the governments North American Industry Classification System(NAICS). Public reports of the data have monthly employment and payroll totals, but there are no occupations reported and names of employers or employees remain suppressed and confidential.
The authors inform readers that the Employment Security Division provided them the total hours worked in addition to the employment and payroll totals. Further the Employment Security Division partitioned the Seattle-Bellevue-Evertt Washington Metropolitan Division data to break out Seattle as a special and private favor to them, perhaps from their connection with the University of Washington. Because their data is a special favor and confidential the authors were required to sign a document promising not to release the data under threat of legal action against them. Therefore no one else gets to look at the data; they provide only a summary of aggregated data by quarter in their Table 3 on page 45.
They state “This unique data set allows us to measure the AVERAGE wage paid to each worker in each quarter. We compute an hourly wage rate as total quarterly payroll divided by quarterly hours worked, which corresponds to average hourly earnings. They call these numbers a realized hourly wage rate. Therefore they use an average wage of thousands of employees, an amount no one actually earns. Actual wages paid to employees will be above and below the average.
In addition their data excludes those working at establishments with more than one location. These include a variety of chain stores and franchise restaurants in Seattle and the surrounding county and metropolitan areas. Seattle’s minimum wage for a business with 500 or more employees such as McDonald’s or Costco was $13.50 an hour during the time when smaller single establishment business had an $11 an hour minimum wage. The employees included in the study had a strong incentive to move out of small business and into the large businesses excluded from the study.
In addition they define low skill employment as those working with an average hourly wage rate of $19 an hour or less. While they give an excuse for doing this, they do so without knowledge of the occupations of the employees included in the sample or the skills, experience or education needed in the unknown occupations that justify such a decision. An establishment with an average wage of $19 an hour will have many earning wages above $19 an hour, which could be occupations that need college degree skills.
In their methodology at page 16 the authors admit the hazards of their partition at $19. They write “The proxy for low-skilled employment will produce accurate estimates of the impact of minimum wage increases to the extent that a wage threshold accurately partitions the labor market into affected and unaffected components.” Their partition comes at an AVERAGE wage causing some who work with an actual wage above $19 an hour to be included in the below $19 partition while others will be in the below $19 partition who have wages above the $19 partition. There can be no assurance the 9 percent decline in total hours they cite ever worked an hours below the minimum wage or lost their job because of it.
Further they state “[The threshold wage] will overstate employment reductions if the threshold is set low enough that the minimum wage increase causes pay for some work to rise above it. This concern is particularly relevant given previous evidence of "cascading" impacts of minimum wage increases on slightly higher-paying jobs.” The previous evidence of “cascading impacts” comes from several Neumark and Wascher studies and a book, one of which is reviewed on this link at
http://americanjobmarket.blogspot.com/2017/10/minimum-wages-in-seattle.html. The cascading impact terminology refers to people who lose their below minimum wage job, but rather than be out of work they apply for and find work at a higher wage.
As I have suggested before people who lose their minimum wage job do not disappear, but begin looking for other jobs in other occupations with wages higher in the wage distribution. Forced to leave a sub-minimum wage job the newly unemployed increase the supply of labor in other occupations where they moderate wages in higher wage occupations and add to employment. The authors might recognize the millions of opportunities to move from low wage to higher wage employment by looking at wage distributions by occupation reported by the U. S. Bureau of Labor Statistics in their Occupational Employment Survey.
Their Summary of data in Table 3 supports this view. The table has three columns for total jobs, total hours and total payroll and a fourth column has computed average wages. The rows are for each quarter from the second quarter of 2014 to third quarter of 2016. The first column of each category has only those employers with employees that have an average monthly wage of $13 an hour or less. The second has only those employers with employees that have an average monthly wage of $19 an hour or less. The third set has an average monthly wage for all employers and employees.
These partitions allow a further partition into two additional columns through subtracting the less than $13 column from the less than $19 column, which leaves only those establishment employers with an average wage greater than $13 an hour and less than $19 an hour. Further subtraction leaves another column of only those employers with an average wage of $19 or more. Every employee and his or her employer is part of one and only one mutually exclusive column of the data.
These columns have the “cascading effects” but they show the benefit of the Seattle Minimum wage. In the second quarter of 2014 those working at establishments with an average wage less than $13 an hour total 39,807. By the third quarter of 2016 the total falls to 23,232, a loss of 16,575 working at establishments with an average wage less than $13 an hour.
Over that two year and one quarter period a low inflation rate combined with the higher minimum wage would tend to reduce people working at establishments that have an average wage below $13 an hour. Economists like to suggest that is a bad result caused by the minimum wage, but during the same period those working at establishments with an average wage above $13 and below $19 increased from 53,152 to 63,610, a gain of 10,548 jobs at above the minimum wage. Those working at establishments with an average wage above $19 increases from 199,681 to 249,675, a gain of 49,994 jobs. These are exactly what to expect if the minimum wage benefits low wage workers. In Seattle wage workers seek employment in other establishments in occupations that pay above the minimum wage.
In their 2008 book Neumark and Wascher Minimum Wages, cited by the authors in their Seattle study write on page 116, “. . . as we emphasized earlier in this chapter the potential for minimum wage increases to affect wages higher in the wage distribution is also important in assessing the effects of minimum wage policy.” It is. That is where the benefits of the minimum wage will be and that is where they are in Seattle.
This paper has no right to be a part of the public debate on minimum wages because it makes no attempt to persuade a general audience and cannot be read except by those with experience in the specialized terminology of the economics fraternity. It uses suppressed data and undefined insider terms from other studies such as region fixed effect, period fixed effect, treatment effect, idiosyncratic shock among other terms.
Business predictably opposes an increase in the minimum wage. It raises costs for businesses that depend on low wage employment and thereby pressures owners and managers to experiment with prices, jobs and work schedules. It might in some situations reduce long term profits, but that does not mean a higher minimum has no benefits to labor or the larger economy from those who will have more buying power.
Academic economists work under pressure to confirm market theory. When they do what is good for their career, the news media and the public seize on the conclusions and nothing else. They evaluate the conclusions based on academic credentials not the credibility of the work.
In Seattle I read the mayor and city council ignored the hecklers and went ahead with the next phase of their minimum wage program; they raised the minimum wage to $15 an hour. If I could get the suppressed employment data I could determine the benefits to labor and the economy I predict will continue.
In yet another study of the minimum wage six authors tell readers they intend to evaluate the wage, employment and hours effects of a first and second phase in of the Seattle Minimum wage ordinance. The first phase raised the minimum wage from $9.47 an hour to $11.00 an hour on April 1, 2015. The second phase raised the wage from $11.00 an hour to $13.00 an hour on January 1, 2016. They analyze “employment in all sectors paying below a specified real hourly rate.”
The paper’s opening sentence starts with the standard obsessions economists always cite against minimum wages: “Economic theory suggests that binding price floor policies, including minimum wages, should lead to a disequilibrium marked by excess supply and diminished demand.” Economists predict a raise in the minimum wage will reduce employment of those earning a wage lower than the minimum wage. The see cause and effect as part of their doctrine.
They conclude the first phase effect was smaller than the second phase, which second phase caused a decrease in hours worked in low wage employment by 9 percent while the wage of low-wage workers’ was about 3 percent so that the cost of this wage hike outweighed its benefits for these workers. They conclude the minimum wage hurts low wage labor because hours lost makes a loss bigger than the gain from higher wages.
People leave jobs and lose jobs for many reasons, especially in low wage employment where turnover rates can be high. If the Seattle minimum wage causes employers to decrease employment, it could be useful to go out and ask these low wage employers if they recently off employees and was that because of the higher minimum wage. Typically Economists resort to analysis using large data sets filled with severe shortcomings like the Seattle study I review here.
Their data set comes from Washington’s Employment Security Division, which is produced as part of national Unemployment Insurance(UI) system administered by each state. Old timers refer to it as ES 202 data, or just “the 202” data. It is compiled and used by the Bureau of Labor Statistics in their benchmark revision of the Current Employment Survey.
ES 202 data is reported by single or multi establishment within county and Metropolitan Statistical areas coded by industry using the governments North American Industry Classification System(NAICS). Public reports of the data have monthly employment and payroll totals, but there are no occupations reported and names of employers or employees remain suppressed and confidential.
The authors inform readers that the Employment Security Division provided them the total hours worked in addition to the employment and payroll totals. Further the Employment Security Division partitioned the Seattle-Bellevue-Evertt Washington Metropolitan Division data to break out Seattle as a special and private favor to them, perhaps from their connection with the University of Washington. Because their data is a special favor and confidential the authors were required to sign a document promising not to release the data under threat of legal action against them. Therefore no one else gets to look at the data; they provide only a summary of aggregated data by quarter in their Table 3 on page 45.
They state “This unique data set allows us to measure the AVERAGE wage paid to each worker in each quarter. We compute an hourly wage rate as total quarterly payroll divided by quarterly hours worked, which corresponds to average hourly earnings. They call these numbers a realized hourly wage rate. Therefore they use an average wage of thousands of employees, an amount no one actually earns. Actual wages paid to employees will be above and below the average.
In addition their data excludes those working at establishments with more than one location. These include a variety of chain stores and franchise restaurants in Seattle and the surrounding county and metropolitan areas. Seattle’s minimum wage for a business with 500 or more employees such as McDonald’s or Costco was $13.50 an hour during the time when smaller single establishment business had an $11 an hour minimum wage. The employees included in the study had a strong incentive to move out of small business and into the large businesses excluded from the study.
In addition they define low skill employment as those working with an average hourly wage rate of $19 an hour or less. While they give an excuse for doing this, they do so without knowledge of the occupations of the employees included in the sample or the skills, experience or education needed in the unknown occupations that justify such a decision. An establishment with an average wage of $19 an hour will have many earning wages above $19 an hour, which could be occupations that need college degree skills.
In their methodology at page 16 the authors admit the hazards of their partition at $19. They write “The proxy for low-skilled employment will produce accurate estimates of the impact of minimum wage increases to the extent that a wage threshold accurately partitions the labor market into affected and unaffected components.” Their partition comes at an AVERAGE wage causing some who work with an actual wage above $19 an hour to be included in the below $19 partition while others will be in the below $19 partition who have wages above the $19 partition. There can be no assurance the 9 percent decline in total hours they cite ever worked an hours below the minimum wage or lost their job because of it.
Further they state “[The threshold wage] will overstate employment reductions if the threshold is set low enough that the minimum wage increase causes pay for some work to rise above it. This concern is particularly relevant given previous evidence of "cascading" impacts of minimum wage increases on slightly higher-paying jobs.” The previous evidence of “cascading impacts” comes from several Neumark and Wascher studies and a book, one of which is reviewed on this link at
http://americanjobmarket.blogspot.com/2017/10/minimum-wages-in-seattle.html. The cascading impact terminology refers to people who lose their below minimum wage job, but rather than be out of work they apply for and find work at a higher wage.
As I have suggested before people who lose their minimum wage job do not disappear, but begin looking for other jobs in other occupations with wages higher in the wage distribution. Forced to leave a sub-minimum wage job the newly unemployed increase the supply of labor in other occupations where they moderate wages in higher wage occupations and add to employment. The authors might recognize the millions of opportunities to move from low wage to higher wage employment by looking at wage distributions by occupation reported by the U. S. Bureau of Labor Statistics in their Occupational Employment Survey.
Their Summary of data in Table 3 supports this view. The table has three columns for total jobs, total hours and total payroll and a fourth column has computed average wages. The rows are for each quarter from the second quarter of 2014 to third quarter of 2016. The first column of each category has only those employers with employees that have an average monthly wage of $13 an hour or less. The second has only those employers with employees that have an average monthly wage of $19 an hour or less. The third set has an average monthly wage for all employers and employees.
These partitions allow a further partition into two additional columns through subtracting the less than $13 column from the less than $19 column, which leaves only those establishment employers with an average wage greater than $13 an hour and less than $19 an hour. Further subtraction leaves another column of only those employers with an average wage of $19 or more. Every employee and his or her employer is part of one and only one mutually exclusive column of the data.
These columns have the “cascading effects” but they show the benefit of the Seattle Minimum wage. In the second quarter of 2014 those working at establishments with an average wage less than $13 an hour total 39,807. By the third quarter of 2016 the total falls to 23,232, a loss of 16,575 working at establishments with an average wage less than $13 an hour.
Over that two year and one quarter period a low inflation rate combined with the higher minimum wage would tend to reduce people working at establishments that have an average wage below $13 an hour. Economists like to suggest that is a bad result caused by the minimum wage, but during the same period those working at establishments with an average wage above $13 and below $19 increased from 53,152 to 63,610, a gain of 10,548 jobs at above the minimum wage. Those working at establishments with an average wage above $19 increases from 199,681 to 249,675, a gain of 49,994 jobs. These are exactly what to expect if the minimum wage benefits low wage workers. In Seattle wage workers seek employment in other establishments in occupations that pay above the minimum wage.
In their 2008 book Neumark and Wascher Minimum Wages, cited by the authors in their Seattle study write on page 116, “. . . as we emphasized earlier in this chapter the potential for minimum wage increases to affect wages higher in the wage distribution is also important in assessing the effects of minimum wage policy.” It is. That is where the benefits of the minimum wage will be and that is where they are in Seattle.
This paper has no right to be a part of the public debate on minimum wages because it makes no attempt to persuade a general audience and cannot be read except by those with experience in the specialized terminology of the economics fraternity. It uses suppressed data and undefined insider terms from other studies such as region fixed effect, period fixed effect, treatment effect, idiosyncratic shock among other terms.
Business predictably opposes an increase in the minimum wage. It raises costs for businesses that depend on low wage employment and thereby pressures owners and managers to experiment with prices, jobs and work schedules. It might in some situations reduce long term profits, but that does not mean a higher minimum has no benefits to labor or the larger economy from those who will have more buying power.
Academic economists work under pressure to confirm market theory. When they do what is good for their career, the news media and the public seize on the conclusions and nothing else. They evaluate the conclusions based on academic credentials not the credibility of the work.
In Seattle I read the mayor and city council ignored the hecklers and went ahead with the next phase of their minimum wage program; they raised the minimum wage to $15 an hour. If I could get the suppressed employment data I could determine the benefits to labor and the economy I predict will continue.
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