Wednesday, July 15, 2009

Speaking Up For Poorest, Least Skilled Americans


WALL STREET JOURNAL -- Here's some economic logic to ponder. The unemployment rate in June for American teenagers was 24% (see chart above), for black teens it was 38%, and even White House economists are predicting more job losses. So how about raising the cost of that teenage labor?

Sorry to say, but that's precisely what will happen on July 24, when the minimum wage will increase to $7.25 an hour from $6.55. The national wage floor will have increased 41% since the three-step hike was approved by the Democratic Congress in May 2007. Then the economy was humming, with an overall jobless rate of 4.5% and many entry-level jobs paying more than the minimum. That's a hard case to make now, with a 9.5% national jobless rate and thousands of employers facing razor-thin profit margins.

If Congress were wise and compassionate, it would at least suspend the wage hike for one or two years until the job market recovers. We know this Congress won't do that, but someone has to speak up for the poorest, least skilled Americans.

32 Comments:

At 7/15/2009 9:52 AM, Anonymous John said...

The reality is that for all their intentions (good or otherwise) politicians rarely help the poor. And ironically, although Democrats claim to be the advocates of the poor, they often seem to harm the poor more than the Republicans.

I don't know this to be fact, but I suspect that American minimum wage laws have contributed to international outsourcing.

 
At 7/15/2009 10:03 AM, Blogger Tom said...

An example of the perfectly awful effects of do-gooder government, slamming those they pretend to help.

They are the economic ignoranti.

 
At 7/15/2009 10:09 AM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/15/2009 10:09 AM, Anonymous bhuddamonk said...

Its sucks that teens are unemployed but would you rather have thier parents not have jobs? I don't quite understand the logic. Also your requesting that the minimum wage not increase? How is that ever a good thing?

 
At 7/15/2009 10:37 AM, Anonymous Anonymous said...

Of course the Great Recession had no impact on teen employment.

It had to be all due to the rise in the minimum wage.

 
At 7/15/2009 11:24 AM, Blogger misterjosh said...

Your post makes sense intuitively, but I would expect min wage hikes to correspond fairly significantly to increases in teen unemployment, and I'm just not seeing that. I suspect that if it did you would have a neat chart showing that.

Min wage more than doubled between 1970 and 1980, and teen unemployment went from it looks like 13 to about 16. I know this doesn't account for inflation, but the monetary base didn't DOUBLE in those 10 years.

In the end, the minimum wage in the US is really close to the equilibrium point anyway, and Congress' actions neither help nor substantially harm teen employment.

The real evil of Min wage increases is that it makes the plebs THINK that these politicians care about their welfare when in the end they only care about themselves.

 
At 7/15/2009 11:36 AM, Anonymous Robert Miller's Man Friend said...

Robert Miller is really right on. I like the tough talk.

 
At 7/15/2009 12:25 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/15/2009 1:21 PM, Blogger Les Cargill said...

But is there really any evidence that minimum wage laws change employment at all? The majority of "McJobs" pay more than minimum wage, anyway.

 
At 7/15/2009 2:22 PM, Blogger Michael Hayhurst said...

It is not the minimum wage rate which correlates to the teen employment rate which can be seen here:

http://1.bp.blogspot.com/_Zh1bveXc8rA/SElnEQ0cfKI/AAAAAAAAARU/6O7FZJ0wnf4/s1600-h/Clipboard02.jpg

It is in fact the overall business cycle which best correlates to the teenage unemployment rate. Seen Here:

http://3.bp.blogspot.com/_Zh1bveXc8rA/SElnNJQLAkI/AAAAAAAAARc/Bu6ckUnWj6E/s1600-h/Clipboard01.jpg

Furthermore the minimum wage has in fact not kept up with inflation thus invalidating your argument. This can be seen here:

http://2.bp.blogspot.com/_Zh1bveXc8rA/SEqNL9HiT0I/AAAAAAAAARs/sWZms2tezBI/s1600-h/Clipboard03.jpg

 
At 7/15/2009 4:30 PM, Blogger PeakTrader said...

I agree with Michael.

Alan Krueger and David Card in "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania" found no evidence that rises in minimum wages have reduced employment.

 
At 7/15/2009 4:47 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/15/2009 5:59 PM, Blogger PeakTrader said...

Robert Miller, economics has often proved conventional wisdom wrong. To say the study has been "debunked," when it hasn't been debunked, and given many economists, including Nobel laureates, increasingly support the study and similar studies, suggests you're closed minded.

Here's a survey of economists:

Until the 1990s, economists generally agreed that raising the minimum wage reduced employment. This consensus was weakened when some well-publicized empirical studies showed the opposite, but others consistently confirmed the original view. Today's consensus, if one exists, is that increasing the minimum wage has, at worst, minor negative effects.[60]

According to a 1978 article in the American Economic Review, 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers.[61]

A 2000 survey by Dan Fuller and Doris Geide-Stevenson reports that of a sample of 308 American Economic Association economists, 45.6% fully agreed with the statement, "a minimum wage increases unemployment among young and unskilled workers", 27.9% agreed with provisos, and 26.5% disagreed. The authors of this study also reweighted data from a 1990 sample to show that at that time 62.4% of academic economists agreed with the statement above, while 19.5% agreed with provisos and 17.5% disagreed. They state that the reduction on consensus on this question is "likely" due to the Card and Krueger research and subsequent debate.[62]

A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. Whaples found that 37.7% of respondents supported an increase in the minimum wage, 14.3% wanted it kept at the current level, 1.3% wanted it decreased, and 46.8% wanted it completely eliminated.[63]

Surveys of labor economists have found a sharp split on the minimum wage. Fuchs et al. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996. Their 65 respondents split exactly 50-50 when asked if the minimum wage should be increased. They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%), but on value differences such as income redistribution.[64] Klein and Dompe conclude, on the basis of previous surveys, "the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members."[65]

In 2007, Daniel B. Klein and Stewart Dompe conducted a non-anonymous survey of supporters of the minimum wage who had signed the "Raise the Minimum Wage" statement published by the Economic Policy Institute. They found that a majority signed on the grounds that it transferred income from employers to workers, or equalized bargaining power between them in the labor market. In addition, a majority considered disemployment to be a moderate potential drawback to the increase they supported.[66]

From Wikipedia under Minimum Wage

 
At 7/15/2009 6:24 PM, Blogger sethstorm said...


The reality is that for all their intentions (good or otherwise) politicians rarely help the poor.

Especially so when they are in the pay of some firm like Grigsby & Cohen; they probably have forgotten how to advocate the employment of citizens.

 
At 7/15/2009 6:49 PM, Blogger sethstorm said...


A. Are they so dogmatic in their beliefs they refuse to see evidence their innovations are more harmful than good?

Well, given who pays the politician, they see it as channeling the dogma of their client, not their constiutency.



B. Are they mentally ill?

Unlikely, unless we start seeing the DSM IV used as a political weapon. There's nothing like the ability to end the argument with an ability to commit your opposition to re-education.


C. Do they actually intend to cause this harm?

In the case of Grigsby & Cohen, they simply just don't question it. In the case of NASSCOM of India, they advocate it. In the case of work moving to China, they are actually causing it.


I don't know this to be fact, but I suspect that American minimum wage laws have contributed to international outsourcing.

Hardly.

I'd call it a lack of regulation against evading the payment/employment of these workers, combined with a surplus of lobbyists from regimes that have no business with interfering with our government. Create some "shortages" in IT, add in some jobs nobody can fill, and mix in some politicians willing to be the "enemies foreign and domestic". What you get is a coordinated attack on US interests by hostile foreign interests.

 
At 7/15/2009 7:40 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/15/2009 7:44 PM, Blogger Craig said...

Also your requesting that the minimum wage not increase? How is that ever a good thing?

When it results in fewer minimum-wage jobs being offered.

 
At 7/15/2009 8:09 PM, Anonymous Γερώνυμος Αμάτι Nώνυμος said...

"
wage cuts.

7/15/2009 12:25 PM
Blogger Les Cargill said...

But is there really any evidence that minimum wage laws change employment at all? The majority of "McJobs" pay more than minimum wage
"

If this is predominantly true then perhaps minimum wage could be helpful in giving advantage to small business which is exempt from the law. Last I checked, if you hire less than 25 employees then you can neglect the cut off point. Small business does generate more jobs proportionately. But what would be much more helpful? Stop FICA collections until employment picks up. SS is a true pain in the butt for employee, employer, economist, and our national security which has to run on the energy of our economy.

And teens don't deserve to waste what little time we get in this life. Summer is a miserable time to have nothing to do but get ready for the following school year. You don't want to spend your best summer in library.

 
At 7/16/2009 4:45 AM, Anonymous Ian Random said...

I remember a documentary on Oregon and it's minimum wage. They interviewed a restaurant owner and she said that she wasn't going to expand in Oregon. I also heard a business owner who said that he'd love to hire someone to file at $5/hour, but at the higher price he'd just assume do it himself.

 
At 7/16/2009 6:45 AM, Blogger OBloodyHell said...

> Of course the Great Recession had no impact on teen employment.

It had to be all due to the rise in the minimum wage.


DOH!!! You have found us out!! We are soooo stupid for having argued EXACTLY THAT. You are an ECONOMIC GENIUS!! Will you provide us with an address so that we can send you our money to invest for us? Please?


/snark off

You are a friggin' MORON, as usual. Are we surprised? We are not.

At what point in there is that making the claim that the current situation *at this point* is the sole fault of the minimum wage?

Granted, the reason it is 100% *worse* for teens is partly because of that, but that's not explicitly stated in there nor relevant to its central point.

The point is that artificially jacking up the price GIVEN THIS BAD ECONOMIC SITUATION is hardly going to have a positive effect. It is going to make already seriously depressing numbers get even worse.

Of course, you would have to have A-1 lick of common sense to see such a brain-dead obvious notion such as that: "jack up the price, sales go down." This is just as true for labor as it is for any other salable good.

And being a total libtard moron, we know you fail to possess "A-1 lick of common sense" -- it's in your union rules, isn't it?

Something like "libtard candidate must voluntarily consent to substantial trepanning prior to consideration of application for membership." And, from your endless brain-dead parroting of libtard talking points despite continual disproof of their rational, you still manage to fail to get a clue in the least.

Q.E.D. -- you have undergone trepanning. Hard to imagine such density and inability to learn jack (to say nothing of the above example demonstrating almost ZERO reeading comprehension on your part) without such an event.

 
At 7/16/2009 6:54 AM, Blogger OBloodyHell said...

> I know this doesn't account for inflation, but the monetary base didn't DOUBLE in those 10 years.

You're kidding, right?

Look at the stock market and say that.

Look at the 1980 to 1990 segment (note that that is a logarithmic scale)

Or this explicit statement:

However, for the rest of the 1980s, the Dow made a profound 228% increase from the 838 level to 2,753; despite the market crashes and other political distractions

Duh and QED: Yes. The economy DID double. And as business income rose, so too did said business capacity for hiring workers at previously submarginal wages.

 
At 7/16/2009 7:08 AM, Blogger 1 said...

Obviously there are folks out there even the ease of access to information can't or won't do a bit of homework...

"Also your requesting that the minimum wage not increase? How is that ever a good thing?"...

"Of course the Great Recession had no impact on teen employment"...

"But is there really any evidence that minimum wage laws change employment at all?"...

There is so much delusional babbling emanating from sethstorm it's hard to pick one nugget out of that mother lode...

I do note that none of these people seem to brag about 'how they'll help out potential employers with the rise in the minimum wage'...

These people refuse to ask the most basic question, "who pays?"...

Here's something those that really care can start with to educate themselves about the downsides of mandatory minimum wage...

Kristen Lopez Eastlick of the EPI has the following: Dude, where’s my summer job?

 
At 7/16/2009 7:10 AM, Blogger OBloodyHell said...

> Michael Hayhurst blathered...

Look, dummy. Posting up some unattributed BS charts doesn't prove a point. There is no source for that data, no information about how it was calculated or gathered. You could have made it up, or your source could have made it up (with or without your knowledge) or could have twisted the data or used completely invalid methodology to produce it.

Ergo, it's a complete waste of time. Either list off your source for said data or get a clue and be quiet.

 
At 7/16/2009 7:17 AM, Blogger OBloodyHell said...

> including Nobel laureates, increasingly support the study and similar studies, suggests you're closed minded.

Given that a liberal shill like Paul Krugman has won the Nobel, I have to say that claiming it as a credential is hardly supportive. For all except the hard sciences, the Nobel has become nothing but a mindless exercise in libtard mutual back-patting. One need only look at the so-called "Peace Prize" for blatant proof of that...

 
At 7/16/2009 10:24 AM, Anonymous gettingrational said...

@ Γερώνυμος Αμάτι Nώνυμος,

In the state of Washington there is no minimum employee count for the enforcement of minimum wage.

In addition to minimum wage there is the Prevailing Wage law that says that all public works project workers be paid at least the county prevailing wage. Thus, you never see a young person even holding the stop or slow sign on a road project.

 
At 7/16/2009 10:39 AM, Anonymous Anonymous said...

A 10% increase in the minimum wage at a time when wages are stagnant or falling and when unemployment is fast approaching the highest levels since WW2. Of course, this will damage the economy.

 
At 7/16/2009 4:54 PM, Blogger misterjosh said...

Another criticism of "Krueger and Card" that I have not seen yet is that they confined their study to fast food. Such a narrow focus is susceptible to otherwise minor distorting effects.


e.g. Maybe all the teenies who aren't working are now hanging out at the McD's spending their parents' money.

 
At 7/16/2009 4:54 PM, Blogger misterjosh said...

Another criticism of "Krueger and Card" that I have not seen yet is that they confined their study to fast food. Such a narrow focus is susceptible to otherwise minor distorting effects.


e.g. Maybe all the teenies who aren't working are now hanging out at the McD's spending their parents' money.

 
At 7/16/2009 8:08 PM, Blogger PeakTrader said...

Robert Miller, the study you cited was directly challenged by Krueger and Card in a Reply (The American Economic Review in Dec 2000). The study concluded the increase in the minimum wage either had no effect on employment or a small positive effect.

 
At 7/16/2009 8:22 PM, Blogger PeakTrader said...

So, it seems, your study has been "debunked." Also, the median labor economist (in the survey I cited above) said raising the minimum wage reduces employment 1%, which is a small negative effect.

 
At 7/17/2009 5:32 AM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 7/19/2009 1:48 PM, Anonymous Mike W said...

Similar happenings in the UK:

http://www.businessweek.com/globalbiz/content/jul2009/gb20090717_313852.htm

 

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