Wednesday, September 30, 2015

Missing "MATHINESS" in minimum wage discussions


Re: Where Does the Minimum Wage Max Out? - EconoSpeak
http://econospeak.blogspot.com/2015/10/where-does-minimum-wage-max-out.html

AT LAST! Someone actually thinks of (thinks out) the practical trade off between the size of a minimum wage raise and the possible cost in jobs. IOW, if the wage rose 100% (which $15 today would in many places) and employment in that category (below 45 percentile) dropped even disastrously, 25%, labor would still be way ahead. Average raise across the 45% would be 50%.


Noto bene: $15, five years from now is $13.50.

Differential minimum wage depending on local living costs? As hinted just above, a higher wage ($15) in, say, South Carolina could mean the same overall amount of money going to the same overall demographic cohort (low-wage workers) -- but many would get more while a some got nothing (at least in their personal short run). So in a way that could count as A WASH. OTH, a differential would encourage $15 jobs in Ohio to move to $12 South Caroling -- A GIANT LABOR DEFICIT; another version of the race-to-the-bottom.
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This scaled concept needs to be articulated almost every time -- and if objections to practicality of academic researchers "guesstimating" about this arise they should at least be stated and probably some such framework should at least be hazarded.


Within this framework should be delineated the different sales -- and therefore employment -- effects at different low wage businesses depending on differing labor costs. Walmart with 7% labor costs will feel much less impact on prices (not necessarily on sales) of a large wage raise than than McDonald's with 33% ($15 raise prices there 25%).
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There is the possibility that raising wages an average 50% for the 45% of employees who take 10% of overall income (plausible representation of $15 federal minimum wage) would actually increase employment at their level -- as 5% of overall income were shifted to them from the 55% who now take 90% -- and they spent (do spend) disproportionately in lower wage businesses.
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I read a couple of days ago of some samplings of economists views of the possible employment effects of raising the fed min -- mostly of the eco 101 variety. I suspected that if whether the min was $5.15 or $11.15, they would be saying exactly the same things. I suspected they took (take) whatever the min is presently as some kind of "natural" starting point -- close enough anyway. I didn't think most of these progressives had any idea or even any curiosity about how $7.25 came to be in 2015.


Is the current labor price just a little low because of past moderate neglect -- or is today's price world-turned-upside-down low because of decades of mad, mad neglect -- just to state the outside ranges? Employees in Fight-For-Fifteen have no "mathi" idea for their price points either -- or do they? They are in touch at least intuitively with how much their wage demands would push prices up in different businesses -- and at least intuitively with how customers will react.

The chart below should have no trouble answering the range of neglect question (not that it will necessarily get past ivory tower intuition). In a nutshell: LBJ's 1968 min wage was $11 an hour -- per capita income has about doubled since.
http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.60&year1=1968&year2=2015
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yr  per capita    real     nominal  dbl-index   %-of
(2013  dollars)
 

68    15,473    10.74      (1.60)        10.74      100%
69-70-71-72-73     [real, low point- 8.41]
74    18,284      9.47      (2.00)        12.61          
75    18,313      9.11      (2.10)        12.61
76    18,945      9.44      (2.30)        13.04        72%
77                                                    [8.86]
78     20,422     9.49      (2.65)        14.11
79     20,696     9.33      (2.90)        14.32
80     20,236     8.78      (3.10)        14.00     
81     20,112     8.61      (3.35)        13.89        62%
82-83-84-85-86-87-88-89               [6.31]
90     24,000     6.79      (3.80)        16.56  
91     23,540     7.29      (4.25)        16.24        44%
92-93-94-95                                    [6.51]
96     25,887     7.07      (4.75)        17.85
97     26,884     7.49      (5.15)        19.02        39%
98-99-00-01-02-03-04-05-06          [5.97]
07     29,075     6.59       (5.85)       20.09
08     28,166     7.10       (6.55)       19.45
09     27,819     7.89       (7.25)         9.42        40%
10-11-12                                          [7.37]  

13     28,829     7.25       (7.25)       19.32        38%