Tuesday, February 14, 2012

NY Times on the Minimum Wage: 1987 vs. 2012

New York Times editorials on raising the minimum wage:

"Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or - better yet - help them acquire the skills needed to earn more on their own.

An increase in the minimum wage to, say, $4.35 would restore the purchasing power of bottom-tier wages. It would also permit a minimum-wage breadwinner to earn almost enough to keep a family of three above the official poverty line. There are catches, however. It would increase employers' incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired.

The idea of using a minimum wage to overcome poverty is old, honorable - and fundamentally flawed. It's time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little."

2. From 2012, "Raise New York's Minimum Wage":

"It is time for New York to raise its minimum wage enough to help more than 600,000 struggling workers. Assembly Speaker Sheldon Silver is vigorously pushing a bill to raise the minimum to $8.50 an hour immediately and to adjust it each year for inflation. This should not be a controversial measure. 

Gov. Andrew Cuomo supports an increase, as does Mayor Michael Bloomberg. Only Republican state senators are resisting, using the same stale argument that a minimum wage increase is bad for business. The Senate Republican leader, Dean Skelos, argues that the measure “could be a job killer rather than a job promoter.” That contention has been proved wrong time and again."

MP: How to explain this regression in economic reasoning over the last 25 years at the New York times? Paul Krugman joined the NY Times in 1999? Economic amnesia? None of the current editorial staff ever took high school or college economics?

Related: See Don Boudreaux's response to the most recent NY Times editorial.  

57 Comments:

At 2/14/2012 9:50 PM, Blogger jorod said...

We need a minimum wage so all the ne'er do wells and losers can have careers.

 
At 2/14/2012 10:59 PM, Blogger Hydra said...

There are some people I don;t think should have jobs, and we are better off if they don't.

If the post is correct, the minimum wage guarantees that losers and ne'er do wells won't have jobs. It does not guarantee them careers.

I once worked in a yard where there was a crane with brakes that squealed. Some well meaning idiot maintenace guy greased the brakes to stop the noise and nearly got some people killed.

This is a non-issue for me. The minimum wage should be set high enough for people to make a living that is slightly above minimums.

If one has to toil away the entiere day in order to earn exactly enough to get to the next day, where is the profit in that? How can such a person ever get ahead. even a little?, Let alone enough to pay into his own retirement account and his own health savings account.

Any business that operated that close to the edge would go out of business, and workers are no different. We cannot expect them to work at no profit, as a charity supporting the businesses that [sort of] pay them.

That is going to leave a lot of people that businesses cannot employ, and so be it. Those people may very well be better off with [considerably] less money than minimum wage, if it means they don't have to travel, hire child care, work under probably the worst conditions, and come home exhausted.

I don't have a problem with a) paying the most worthless to stay out of the way, and not screw things up, or b) giving the marginal ones a better chance than working for subsitence, such that they have time for their families and maybe their own improvement.

Yes, I get it. There is plenty of food in the forest, but I put food out for the birds. The birds flock to the bird welfare, because it is easier than pecking termites out of a dead locust tree.

But guess what? Only the biggest and strongest and most aggressive get the seed, the weaklings get run off. When I put that food out there, it sets a "minimum wage" one that is higher than the level of subsistence, and only the best birds earn it.

I am OK with that.

 
At 2/15/2012 3:24 AM, Blogger PeakTrader said...

Minimum wage trends:
Understanding past and contemporary research
October 24, 2006

The belief that raising the minimum wage causes job loss was more commonly accepted by economists decades ago, but high-quality research by leading academic economists has forced the economic community to re-evaluate these arguments.

In lieu of negative employment effects, economists are frequently citing higher productivity, decreased turnover, lower recruiting and training costs, decreased absenteeism, and increased worker morale as ways in which employers may be able to offset some of the costs of a wage increase.

Former Federal Reserve Vice Chairman and current Princeton economist Alan Blinder commented, “My thinking on this has changed dramatically. The evidence appears to be against the simple-minded theory that a modest increase in the minimum wage causes substantial job loss.”

 
At 2/15/2012 6:15 AM, Blogger rjs said...

a few questions:

if workers pay is cut in half, how are you going to raise adequate revenue to service the debt?

if workers pay is cut in half, how far will housing prices fall to if interest rates ever rise? what will happen to the banks & other holders of the related MBS?

if workers pay is cut in half, how will households ever repair their overextended balance sheets? what would happen to retail demand?

if workers pay is cut in half, how will anyone afford sending their children to college? all you profs will be out of a job...

 
At 2/15/2012 7:22 AM, Blogger Ironman said...

The NYT editorial writers know full well what the impact of a minimum wage increase would be. Perhaps they're really calling for it as a politically "safe" way to change certain current political leadership....

 
At 2/15/2012 9:40 AM, Blogger Paul said...

This comment has been removed by the author.

 
At 2/15/2012 9:41 AM, Blogger Paul said...

"Any business that operated that close to the edge would go out of business and workers are no different. "

Or the business might transition to a higher profit enterprise as it matured and worked its way up the learning curve.

And workers are no different.

 
At 2/15/2012 9:52 AM, Blogger Jon Murphy said...

All minimum wage does is guarantee that those without the skill set to earn a certain wage (in this case, $8.50) will be unemployed.

 
At 2/15/2012 11:09 AM, Blogger morganovich said...

rjs-

"if workers pay is cut in half, how are you going to raise adequate revenue to service the debt?"

a nonsense question. they are only talking about minimum wage workers, who pay no income tax anyway. but profits and output would rise and welfare rolls would shorten, both of which would lessen deficits. so, it's a federal fiscal win, not a loss.

"if workers pay is cut in half, how will households ever repair their overextended balance sheets? what would happen to retail demand?"

again, this is only for minimum wage earners. and the creation of more jobs would mean more earners and that those currently not working would have income not coming out of my pocket.

besides, why it is the government's job manage your finances?

you're missing the key trade off here.

if the price of labor is given an artificial low bound, then "overpaid" jobs wind up rationed.

you can have 1 job at 8.50, or 2 or maybe even 3 at $5. in all likelihood, eliminating a minimum wage would actually increase overall wages paid as lots of jobs would come back onshore and would be allowed to pay a teen $6/hr to mow your lawn or whatever.

"if workers pay is cut in half, how will anyone afford sending their children to college? all you profs will be out of a job..."

you think a minimum wage earner can afford to send their kids to college now? on 17k a year? does not seem likely.

(8.50 X 40 hours/week X 50 weeks/year = $17k/year)

 
At 2/15/2012 12:04 PM, Blogger NormanB said...

The NYT can't keep their own ship afloat so how can they be giving economic advice to anyone? And if Krugman is the smartest man in America (his arrogance is overwhelming) why hasn't he figured out the NYT's problem?

 
At 2/15/2012 1:42 PM, Blogger fallingman said...

As if you need research to tell you that the minimum wage is an insane idea that punishes the very people it's supposed to help.

A classic case of politicians promising their ignorant constituents something for nothing for political gain while they systematically undermine the vitality of the system...when they're not busy looting it, that is.

 
At 2/15/2012 2:12 PM, Blogger juandos said...

"This is a non-issue for me. The minimum wage should be set high enough for people to make a living that is slightly above minimum"...

Well then hydra you need to start a business and pay minimally useful people that as yet defined minimum wage...

California has one of the highest state minimum wage rates, and the San Francisco minimum wage of $9.92 per hour is the highest minimum wage in the United States. Unlike many other states, tipped employees in California are also entitled to the full minimum wage of $8.00 per hour. As of January 1st, 2012, the San Francisco minimum wage will be raised to $10.24 per hour - the first city in the United States to have a minimum wage over $10.00 per hour...

No wonder businesses are fleeing California...

2012 New California Employment Laws

Gov. Brown's cap-and-trade spending plan angers businesses

 
At 2/15/2012 2:40 PM, Blogger Traveler said...

Minimum wage in Australia is $14.00 per hour, or $29,120m per year. Nice, but a Crispy Cream doughnut that costs 99 cents here is $2.50 there and a Big Mac is $5.00.

It has to be that way so business can stay afloat with that minimum wage. It has happened here in the past as well

 
At 2/15/2012 3:52 PM, Blogger PeakTrader said...

Traveler, a higher minimum wage can be paid for by excess profits, compensation of top management, and other highly paid employees (along with "higher productivity, decreased turnover, lower recruiting and training costs, decreased absenteeism, and increased worker morale").

Otherwise, why don't we import millions of Chinese, who make $0.25 an hour in China, and pay them $2 an hour to work in the U.S.?

If they're killed or injured, we'll import new ones.

 
At 2/15/2012 4:32 PM, Blogger Mike said...

Peak,
It's clear that you've never had to hire unskilled "warm bodies" for a job with your own money. I think the economist you quoted may want to take a class while he's at Princeton...he may be right that the available data show less than 'significant' job loss, but the loss is often hidden by greatly reduced competition from smaller companies.

Did you really just ask why we can't import people to work for the wages they can scrape by on in other countries? We have companies now that can't get enough legal workers for $8+/hour jobs.

 
At 2/15/2012 5:33 PM, Blogger PeakTrader said...

Mike, in the late '90s, we had to hire bag ladies and guys who slept in parks for "warm bodies" to process paperwork at Janus Funds.

That was shortly after the federal minimum wage was raised.

The country was at full employment in the mid-2000s also, i.e. below 5% unemployment.

 
At 2/15/2012 5:51 PM, Blogger Mike said...

Peak,
I don't understand your point. So you were forced to pay somebody MUCH more than they were worth and you think that's a good reason to have an even higher standard? I'll assume you don't own Janus Funds so it wasn't your money.... Believe it or not, there are a lot of businesses smaller than Janus that have finite revenue.

BTW, If you think processing important paperwork is a job for those with just more than a pulse, how would you hire for standing with a sandwich board?

 
At 2/15/2012 6:05 PM, Blogger Ron H. said...

Peak: "Traveler, a higher minimum wage can be paid for by excess profits, compensation of top management, and other highly paid employees (along with "higher productivity, decreased turnover, lower recruiting and training costs, decreased absenteeism, and increased worker morale")."

Makes sense to me. LOL

What do you think stockholders will say about that "excess profits" idea, and what will those companies do when their top managers are hired away by competitors willing to pay them more?

Surely you aren't suggesting government price controls on all wages and profits, are you?

"Otherwise, why don't we import millions of Chinese, who make $0.25 an hour in China, and pay them $2 an hour to work in the U.S.?"

This is just a test, right? You really do know the answer to that question, don't you?

"If they're killed or injured, we'll import new ones"

That worked in the 19th century, but it might not be as popular now.

 
At 2/15/2012 6:12 PM, Blogger Ron H. said...

Peak: "In lieu of negative employment effects, economists are frequently citing higher productivity, decreased turnover, lower recruiting and training costs, decreased absenteeism, and increased worker morale as ways in which employers may be able to offset some of the costs of a wage increase."

I don't know what economists you are citing here, but you do understand that employers are already free to pay more for those positive results if they perceive a benefit to doing so. Do they need government bureaucrats to instruct them in good business practices, and force them to do what's in their own best interest?

 
At 2/15/2012 6:12 PM, Blogger PeakTrader said...

Mike, you stated: "...(the job) loss is often hidden by greatly reduced competition from smaller companies."

At full employment, there are no hidden job losses.

The minimum wage has been a low standard.

Would you pay a teen or a low skilled immigrant less than $10 for mowing your lawn or shoveling snow for an hour?

 
At 2/15/2012 6:28 PM, Blogger PeakTrader said...

Ron says: "That worked in the 19th century, but it might not be as popular now."

It seems, some people believe it's a good idea.

 
At 2/15/2012 6:28 PM, Blogger Ron H. said...

"Would you pay a teen or a low skilled immigrant less than $10 for mowing your lawn or shoveling snow for an hour?"

The answer is, I would pay them what is required to get them to do the job. If I have to advertise my need for mowing and shovelling, I'm likely to pay more than if a different person hits my door every day offering to mow or shovel snow.

the going rate is probably about $10/hr, but if I must pay $20/hr, I may decide to do it myself, as I also benefit from the exercise.

Anything between $10 and $20 may cause me to demand less mowing and shoveling. In other words, less employment for those doing those jobs.

And, if minimum wage is below market rate, what is its purpose?

Why is it you don't think the market can price unskilled labor correctly when it works so well for other prices?

 
At 2/15/2012 6:28 PM, Blogger Mike said...

Peak,

"Full employment", as I'm sure you're aware, doesn't exist. However, I've never seen a low-unemployment situation in which wages didn't rise above the minimum for entry level positions. So I still don't understand your point.

The hidden jobs to lose do not ever materialize in that environment. We're talking about entry level jobs that are filled with young people who may not have any job experience and haven't entered the work force. How do you tally job losses from companies that never opened, Peak?

To answer your question, yes. Of course. You wouldn't? If I'm given an opportunity to pay somebody $6 or $10 for the same job how on earth would I be smarter by paying more?...Why don't I just give the nice grocer $8 for a box of cereal? I like the guy at the gas station, I should totally up my offering to $5 a gallon....wow.

 
At 2/15/2012 6:35 PM, Blogger PeakTrader said...

Ron says: "Why is it you don't think the market can price unskilled labor correctly when it works so well for other prices?"

If you don't like the price of filet mignon, you can buy prime rib.

If you don't like the wages of the employer, you can starve or work.

 
At 2/15/2012 6:40 PM, Blogger PeakTrader said...

Mike, that's why we need a minimum wage, because people like you will pay a teen or unskilled immigrant $2 for an hour of work.

 
At 2/15/2012 6:51 PM, Blogger Mike said...

Well, Peak,
Thank God for the morally confused folks like you who have the balls to tell the job giver and the job taker how they must handle their transaction. The meddlers always have some insane sense of superiority that makes them believe they're smarter than the people they are hurting...the obvious problem is that they aren't even smart enough to see the big picture and hang their hat on rhetoric in order to absolve themselves.

 
At 2/15/2012 7:09 PM, Blogger MikeK said...

If you don't like the price of filet mignon, you can buy prime rib.

If you don't like the wages of the employer, you can starve or work.

Doesn't that assume there is only 1 employer? Or are there no other substitutes such as working for ones self?

 
At 2/15/2012 7:11 PM, Blogger MikeK said...

If you don't like the price of filet mignon, you can buy prime rib.

If you don't like the wages of the employer, you can starve or work.

Doesn't that assume there is only 1 employer? Or are there no other substitutes such as working for ones self?

 
At 2/15/2012 7:28 PM, Blogger Mike said...

MikeK,
"Doesn't that assume there is only 1 employer? Or are there no other substitutes such as working for ones self?"

I hope you aren't asking Peak that question. He doesn't understand that there are few operating costs that are the same for small business as they are for large... one being labor and that's set at an artificial level.
Competition is for suckers.

 
At 2/15/2012 8:08 PM, Blogger sethstorm said...


"The Right Minimum Wage: $0.00":

The path to slavery by virtue of giving businesses more ability to drive down wages.

As for the "untrackable" economy, offer no protection unless it wishes to become trackable, or that someone wishes to whistleblow on "untrackable" activity.

Raise it above the perceived productivity and take away the ability for business to evade with fewer hires, and more will get hired.

 
At 2/15/2012 8:14 PM, Blogger sethstorm said...


Doesn't that assume there is only 1 employer?

One employer or one type of employer that will accept.



Or are there no other substitutes such as working for ones self?

That's like shoving a square peg into a round hole. Neither works, and it is arrogant to presume that everyone is meant to be an entrepreneur while plenty do excellent as a part of an already-existing employer.

 
At 2/15/2012 8:20 PM, Blogger sethstorm said...


To answer your question, yes. Of course. You wouldn't? If I'm given an opportunity to pay somebody $6 or $10 for the same job how on earth would I be smarter by paying more?

So they don't backstab you during their employment.


you can have 1 job at 8.50, or 2 or maybe even 3 at $5. in all likelihood, eliminating a minimum wage would actually increase overall wages paid as lots of jobs would come back onshore and would be allowed to pay a teen $6/hr to mow your lawn or whatever.

I always wanted to know the wonders of slavery, especially when I have three masters at my back instead of one! (/sarcasm)

 
At 2/15/2012 8:23 PM, Blogger William Bruce said...

Intended as elucidating hypothetical for discussion:

Should low-skilled individuals be prevented by law from "exploiting" themselves through self-employment if incapable of earning a legislatively determined "living wage" through such self-employment?

Please discuss, free to ignore any pompously deployed scare quotes.

 
At 2/15/2012 8:41 PM, Blogger sethstorm said...


Should low-skilled individuals be prevented by law from "exploiting" themselves through self-employment if incapable of earning a legislatively determined "living wage" through such self-employment?

Self-employment is a very high-churn, low-reward, task as opposed to directly hired, long-term work. Too few people derive any reward from it.

 
At 2/15/2012 9:09 PM, Blogger Ron H. said...

Peak: "If you don't like the price of filet mignon, you can buy prime rib.

If you don't like the wages of the employer, you can starve or work.
"

If the employer doesn't like the price I'm asking he can hire someone who will work cheaper. If there IS no one cheaper, he will have to pay my price or go out of business.

Again, what is it about the labor market that you believe is different from any other market?

Supply & demand, right?

An artificial floor on the price of filet mignon means demand will be lower. I may still buy it, but I may buy less. An artificial floor on the price of labor means demand will be lower. I may still hire, but I may hire less, and the quality of that labor must be higher.

 
At 2/15/2012 9:21 PM, Blogger sethstorm said...


I may still hire, but I may hire less, and the quality of that labor must be higher.

Not if the law says otherwise.

 
At 2/15/2012 9:28 PM, Blogger Ron H. said...

Peak: "Mike, that's why we need a minimum wage, because people like you will pay a teen or unskilled immigrant $2 for an hour of work."

Will a teen or unskilled immigrant work for $2/hr? You apparently don't often hire unskilled labor.

Drive by home Depot and ask day laborers what they are asking for unskilled work.

 
At 2/15/2012 9:32 PM, Blogger Ron H. said...

"Not if the law says otherwise."

That's stupid even for you.

Do you think an employer should be required to hire some certain number of workers at a mandated price, whether or not they need any workers

 
At 2/15/2012 10:08 PM, Blogger sethstorm said...


Will a teen or unskilled immigrant work for $2/hr? You apparently don't often hire unskilled labor.

Drive by home Depot and ask day laborers what they are asking for unskilled work.

Stand within earshot, and have the authorities on speed dial along with someone to record identifying details should anything less than legal be witnessed.

 
At 2/15/2012 10:11 PM, Blogger Ron H. said...

"Stand within earshot, and have the authorities on speed dial along with someone to record identifying details should anything less than legal be witnessed."

LOL, You're a riot!

Sometimes this blog gets kind of gloomy, but we can always count on sethstorm for comic relief.

Thanks, seth.

 
At 2/16/2012 10:59 AM, Blogger morganovich said...

ron-

"Do you think an employer should be required to hire some certain number of workers at a mandated price, whether or not they need any workers"

are you seriously asking seth that question?

of course he believes that. his core belief seems to be inentitlement to a high paying low skilled job in the fascist states of sethmerica.

and yet given the opportunity to put his money where his mouth is, he buys non us clothes and audio video equipment because he likes the cost/benefit.

the words "entitled hypocrite" barely start to scratch the surface of the problem.

 
At 2/16/2012 1:31 PM, Blogger Mike said...

Neither Seth nor Peak have ever hired anyone with their own money but love to give us advice on the topic. I'm guessing they would also have to agree that unpaid internships need to be outlawed...of course, I'm joking...their hypocrisy knows no bounds.

 
At 2/16/2012 1:40 PM, Blogger Ron H. said...

morganovich

"are you seriously asking seth that question?"

No, not really. Sometimes I just have to ask if it's possible I could have misread, one of his more ridiculous comments. Mostly I'm inclined to ignore him.

As I said, it's comic relief.

 
At 2/16/2012 1:41 PM, Blogger Mike said...

Seth,

"So they don't backstab you during their employment."

You know nothing about managing low or no skilled labor. I'll let you in on a secret, you'll get stabbed in the back just as easily from the $10 hire...I tend to believe it's actually more often.

 
At 2/16/2012 2:09 PM, Blogger juandos said...

Peak going all sethstorm on us says: "Mike, that's why we need a minimum wage, because people like you will pay a teen or unskilled immigrant $2 for an hour of work"...

Who says these people are even worth $2.00/hour?

 
At 2/16/2012 3:55 PM, Blogger Mike said...

Oh, Juandos...
Don't bother. You're talking to a couple guys who have no knowledge or experience on the topic, zero ability to empathize with alternate situations, yet somehow they consider themselves enlightened.

Looks like we're seeing the products of youth soccer leagues that give everyone a trophy.

 
At 2/17/2012 2:44 PM, Blogger Charles Platt said...

The change in outlook on minimum wage at the NY Times was the original question, and is easily explained. Children who received appropriate indoctrination during high school and college matured, entered the job market, and eventually rose high enough to write editorials. This is just one of many indicators of the socialization of public education.

 
At 2/17/2012 2:45 PM, Blogger sethstorm said...


You know nothing about managing low or no skilled labor. I'll let you in on a secret, you'll get stabbed in the back just as easily from the $10 hire...I tend to believe it's actually more often.

Perhaps it's the way they're being treated.

That, and I would want to see the end of unpaid internships. Too much opportunity for abuse.


Who says these people are even worth $2.00/hour?

So they're only fit to be slaves?

Morganovich:
If employers weren't asking for things they wouldn't do themselves, there would be no problem. If anything, they're the ones that are more fitting to your accusations you have about me.

 
At 2/17/2012 3:01 PM, Blogger sethstorm said...

This comment has been removed by the author.

 
At 2/17/2012 3:06 PM, Blogger sethstorm said...


Looks like we're seeing the products of youth soccer leagues that give everyone a trophy.

No, just someone that sees businesses having an increased contempt for those that hold US citizenship.

 
At 2/17/2012 3:34 PM, Blogger juandos said...

"Looks like we're seeing the products of youth soccer leagues that give everyone a trophy"...

Now that's funny mike!

Very good!

sethstorm says: "So they're only fit to be slaves?"...

No one is forcing them to work somewhere where the owner of the business (you know, the person betting his/her wealth on an investment) thinks they're worth $2.00/hour or less...

 
At 2/17/2012 4:42 PM, Blogger sethstorm said...

This comment has been removed by the author.

 
At 2/17/2012 4:43 PM, Blogger sethstorm said...

This comment has been removed by the author.

 
At 2/17/2012 4:45 PM, Blogger sethstorm said...


No one is forcing them to work somewhere where the owner of the business

Apparently you're not familiar with the concept of duress. Or the logical constructs that prove force exists.



(you know, the person betting his/her wealth on an investment) thinks they're worth $2.00/hour or less...

They're wrong for wanting a slave's wage for these people. You are specifically saying that the businessperson thinks that freedom is too good for such people.

You are making an argument against freedom for those that are seeking work, because they are supposedly not worth it.

 
At 2/18/2012 3:25 AM, Blogger Ron H. said...

"That, and I would want to see the end of unpaid internships. Too much opportunity for abuse."

In reality there is no such thing as an unpaid internship. There are just some in which no money changes hands.

 
At 2/18/2012 3:28 AM, Blogger Ron H. said...

"If employers weren't asking for things they wouldn't do themselves, there would be no problem."

Do you mean that if I hire high rise building window washers I should be willing to do it myself?

 
At 2/26/2012 12:56 AM, Blogger Chris Ganiere said...

We should only raise the minimum wage for illegal workers. $50 / hour minimum wage for non-citizens.

 

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