Raising the minimum wage

[Urbane]

I'm in favour of raising the minimum wage but I want to see it done in a way that won't be counterproductive. Here's an excerpt from a credible study on the subject and a link to the full article:

When Seattle officials voted three years ago to incrementally boost the city's minimum wage up to $15 an hour, they'd hoped to improve the lives of low-income workers. Yet according to a major new study that could force economists to reassess past research on the issue, the hike has had the opposite effect.
https://www.washingtonpost.com/news/won ... b61a182cf2

[Poindexter]

There have been two studies done so far and the one from Berkley had shown positive results. Neither the study you refer to or the Berkley study have been peer reviewed but I too am in favour of raising the minimum wage so look forward to seeing which study proves correct.

The problem it appears is in the way the numbers are separated to indicate the true effect of the wage hike.

“The key challenge this study faces is how to separate the normal shift that’s happening in a booming labor market — where low-wage jobs disappear and are replaced by higher-wage jobs — from an actual increase in the minimum wage,” said Ben Zipperer, an economist at the liberal Economic Policy Institute. “This study exhibits signs that it’s not able to do it.”

https://www.google.ca/amp/s/mobile.nyti ... e.amp.html

[JLives]

Here's an important consideration to this study:

And critics of the research pointed out what they saw as serious shortcomings. In particular, to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. Skeptics argued that omission could explain the unusual results.

[Urbane]

In looking at this latest study I see this:

The University of Washington authors held one significant advantage over other economists studying the issue: detailed data on hours and earnings for workers affected by the increase.

This data allowed the researchers to measure the effects of the minimum wage on workers in all industries rather than relying on restaurants as a stand-in, a common technique. It also allowed them to measure a change in hours worked, a potentially more complete indication of the effect of a minimum-wage increase than the employee head count that many studies use.

And this:

The University of Washington researchers found that the minimum-wage increase resulted in higher wages, but also a significant reduction in the working hours of low-wage earners. This was especially true of the more recent minimum-wage increase, from as high as $11 an hour to up to $13 an hour in 2016. In that case, wages rose about 3 percent, but the number of hours worked by those in low-wage jobs dropped about 9 percent — a sizable amount that led to a net loss of earnings on average.

I'm sure more studies are needed. My gut feeling is that raising the minimum wage too quickly would put a strain on businesses that already have tight margins. I can certainly see how a business might have to cut hours to make up for higher per-hour costs. Again, I am in favour of the minimum wage going up but not to the detriment of businesses and of workers.

[Urbane]

Here's an important consideration to this study:



And critics of the research pointed out what they saw as serious shortcomings. In particular, to avoid confusing establishments that were subject to the minimum with those that were not, the authors did not include large employers with locations both inside and outside of Seattle in their calculations. Skeptics argued that omission could explain the unusual results.

Yup. Could be a factor for sure. More studies to come. For now, I have to think that the most recent study is the most credible though. And it just makes sense that upping the minimum wage will have a ripple effect all the way up and that in turn will prompt some businesses to cut the number of hours. Again, I'm in favour of raising the minimum wage but at the right pace.