Minimum Wage

$15 Minimum Wage Could Kill Up to 5 Million Jobs

Forward comrades to the unemployment lines and soup kitchens!

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15minimumUniversityofDallas
University of Dallas

In my column, Minimum Wage and Magical Thinking, I reported on a couple of recent studies that tried to estimate what the effect of raising the minimum wage on employment would be. A 2014 study in the Journal of Labor Research calculated that raising the national minimum wage from $7.25 to $10.10 as promoted by President Obama would result in the loss of between 550,000 to 1.5 million jobs. A second National Bureau of Economic Research study estimated that as a consequence of raising the minimum wage from $5.15 to $7.25 the U.S. economy had up to 1.4 million fewer jobs than it would otherwise have had.

Earlier this year, the Democratic Party Platform adopted a plank in favor of mandating a $15 per hour national minimum wage.

In today's New York Times, Stony Brook University economist Peter Salins declares that this is a recipe to further impoverish the already poor. From his op/ed:

One of the more conservative estimates, issued by the Congressional Budget Office in 2014, projected that 500,000 jobs could be lost if the federal minimum wage were raised to $10.10 (the level then recommended by President Obama), though it acknowledged the losses could be lower. By my own estimation, based on a model of the national labor market developed by Jonathan Meer of Texas A&M University and Jeremy West of M.I.T., raising the minimum wage to $15 could reduce the total number of jobs nationally by three million to five million (emphasis added).

He further points out that the folks newly unemployed as a result of this kind of economic central planning will be ineligible for earned income tax credits (since they have no income). In addition, their unemployment benefits, which will be lower than what they were earning before being tossed out of their jobs, will run out in half a year or so. And since the new minimum wage is now too high to justify the hiring of low-skilled workers, their chances of getting at a new job are virtually non-existent. He concludes that proponents of the $15 minimum wage …

…are likely to visit grievous harm on some of the very individuals and families they claim to be helping. By blithely discounting the economic realities of the labor market in many parts of the country, the proponents of such increases risk putting millions of Americans in low-skill jobs out of work, thus making them ineligible for the tax credit and possibly in danger of destitution.

Absolutely right. Salins' alternative is an expansion the earned income credit; a topic for another time.

NEXT: California Senate Choices Got You Down? Check Out These Ballot Initiatives Instead.

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  1. By blithely discounting the economic realities of the labor market in many parts of the country, the proponents of such increases risk putting millions of Americans in low-skill jobs out of work

    But, muh FEELZ!

    1. I stopped in the club house at the turn on Saturday and picked up a bottle of soda and a packet of peanuts. The teen behind the counter said “4 dollars”. I handed over 4 bills and said “I remember when you could feed a family of four at McDonald’s for 4 bucks”. She stared back. I said “Seriously.” She just continued to stare.

      Two thoughts. I don’t remember being that stupid when I was a teen. I can’t believe I am so old, I am starting to blurt out “I remember when . . . . . . . “

      1. She was thinking “whatever, gramps, just give me the money and get out”.

        1. most likely

      2. Ballpark food has always been overpriced.

    2. But inequality!.

      We can have no equality until all business owners and jobs are terminated.

  2. Five million new dependents to be managed and controlled.

    1. It’s some of the most racist kind of policy-making. Saw off the bottom rungs of the economic ladder so that people without skills that are worth the demanded wage can’t reach them.

      It’s also age discrimination. If you’re young, there aren’t any jobs for you to gain any work experience with. It used to be that teenagers could get a summer job, but not anymore. Those jobs are filled by adults all too often anymore and that leads for greater calls for a “living wage” at positions that used to be considered temporary. Teenagers can’t vote against this even if they wanted to, and they’re often just as bad at economics as the general populous and impressionable to boot.

      Finally, it encourages replacing human labor with automation. Why should fast food places pay employees when people already are fine with using kiosks for lots of other things?

      I used to think that progs were just willfully ignorant about economics and stupid. Nowadays I’m leaning more towards malice. They have to know by now how disastrous this kind of thinking is. Give someone a Swedish bankers’ prize and they’ll advocate shitty economics that oppress people in order to make things so bad that the government will claim that nationalization is the only remedy.

  3. Forward comrades to the unemployment lines and soup kitchens!

    That would be funny, if it wasn’t so true.

  4. Even the supporters know deep down that it is a bad thing. Witness Seattle and its magical thinking on the minimum wage. Even they went with only $15/hour and not $25-$30-$50/hour and even then it’s over a 5 yr period for small business. When supporters are asked that if this is such a great thing, why wait 5 years all you get is crickets and some mumbling about Kochsucking Teathuglicans. When you ask which ones sit on the Seattle City Council, all you get is more incoherent mumbling.

    1. When supporters are asked that if this is such a great thing, why wait 5 years all you get is crickets and some mumbling about Kochsucking Teathuglicans. When you ask which ones sit on the Seattle City Council, all you get is more incoherent mumbling.

      If you really want to watch some heads explode, suggest tying it to inflation or Federal spending. Since the government is in control of all the money, why do they keep printing so much more for all the rich people?

    2. Depending on who you ask, Republicans(1), free-market ideologues(2), neoliberals(3), or anarcho-capitalist Randians(4) destroyed this country.

      (1) = Despite not holding power in many of the worst parts of the country for several decades or more
      (2) = Also, the lizard people
      (3) = Okay, this one actually has some merit, insofar as neoliberalism (= not capitalism, fascism, or Marxism) has been the status quo for 50+ years, but given that most people who complain about it would prefer fascism or Marxism, “destroyed” here is quite relative
      (4) = This just seems to be JFree’s pet begaboo, I guess because Alan Greenspan once said, long before he had any power, positive things about Ayn Rand

    3. In all seriousness, a good question is, why did the Seattle City Council do it? The only answers I can come up with are
      1) Deep down, they kind of do know it’s going to cause problems, and/or
      2) Even if they don’t think it’s going to cause problems, they have to throw small business owners a bone if they want to maintain any support at all.

  5. Oh, please. More of that Somalian libertarianism on display here.

    The economy is doing grrrreat! Obama said so.

    Minimum wage is the right thing to do.

    1. “[X] is the right thing to do”

      Yeah, that may be my new favorite phrase to hate.

      1. Hating that phrase is the right thing to do!

        1. [Narrows gaze at Switzy]

    2. Yeah, sure. The fact that everyone I know have seen any raises for the last 3 years totally obliterated by the increase in health care premiums is just an illusion in the imagination of knuckle dragging teabillys in flyover. I got it, I feel much better now. Thank you, Obama, oh great one who’s knows all, because you read the newspapers.

  6. blithely discounting the economic realities

    Progressives in a nutshell.

  7. The model in this study confirms my previously held beliefs, so I believe it over other models which are obviously false and biased because they do not confirm my beliefs.

    1. Look, there are studies that confirm everyone’s beliefs, so if we’re forced to take them in aggregate we come away knowing nothing and…

      Wait…

      1. No need to wait, you’re right. I can show you pretty much all the studies you want to see, right now, both agreeing and disagreeing with anything you can imagine. Coffee is bad, coffee is good, red wine is good, red wine is bad, ad infintium. Check the funding source, that is all.

    2. The Federal Reserve did a review of the most recent economic literature last year. Guess what they found?

      A consensus in the latest and best models that, yes, higher minimum wage costs jobs. And, it may have an even larger impact that the earlier research suggested. They basically said the revisionism is bunk.

      So, you can quibble over how much. Anyone saying it won’t cost jobs is a fucking liar or an idiot.

      1. The thing that you empathy challenged glibertarians don’t take into account, is that sure you’re going to make a lot more people unemployed, but now those people can become poets and artists.

        1. #joblocked

  8. Reason staff probably should also point out that both parties voted to let Puerto Rico lower its minimum wage (for the younger people)!

  9. Why have Straffinrun’s posts disappeared?

    Staffers, we can be shockingly shameless and persistent. Don’t challenge us to make a meme of this. Let’s have some transparency.

    1. What’re you talking about? Staffinrun’s comments have become entirely transparent.

    2. You’ll probably get better results if you email them.

      1. Although a Bailey post is more likely to get a response than most other posts.

    3. Someone said something about that last night. What is going on? Is this a joke?

  10. “Forward comrades to the unemployment lines and soup kitchens!”

    And the voting booth!

  11. Let’s see,that will raise wages for everyone making 8.9.10.11.12.13 and 14 dollars an hour.The people making 15 already will want a raise.And of course,small businesses will not be able to absorb the cost in many cases.Math is hard.If you want to wipe out jobs for teens and many unskilled or first time workers this is the way to do it.

    1. Small businesses absorbing the cost is another important point. Big business will be able to cope. So if you want more Walmarts and Starbucks, and fewer corner coffee shops and mom and pop grocery stores, by all means, support a minimum wage increase.

      1. Not even. You won’t get more Walmarts or Starbucks, you’ll just get a lot less of everything else. Walmart might be able to keep the existing stores open, but they won’t be building new ones any time soon.

        1. Thing is,Walmart has huge sales numbers,but their profit is like 3 percent.And McDonald’s and the like are mostly locally owned,Their a small business.Are all Starbucks company owned? Oh,and how about the guy that has a diner,or Italian joint, or Mexican or Asian? The best of those here in my area are single owner,small businesses.

          1. Are all Starbucks company owned?

            I believe they are, yes.

            1. Thank you.

          2. Small business that isn’t “boutique” or connected by cronyism to local government will generally be fucked. I didn’t mean to imply otherwise; in fact, I hinted as much (“a lot less of everything else”).

            I was only pointing out that even large companies don’t generally benefit from everything being more a lot more expensive, even if the competition is driven out as a consequence.

        2. And Amazon is already automating their warehouses. Robots don’t have kids, get “sick: the day before long holiday weekends or demand free tampons.

          1. And the SEIU can’t organize them.

      2. You might actually get more mom and pop stores: Mom or Pop is a sole proprietor, not subject to the minimum wage laws. But they sure won’t be hiring any outside help.

  12. It’s amazing how fast this idea came about and how fast it’s been enacted in large swaths of the country. Just four years ago, nobody was talking about $15/hour seriously. Obama didn’t even bring it up against Romney.

    1. Just a few years ago, you would have been called names by min-wage proponents for talking about $15/hour. The most polite response would have been to say you weren’t being “serious” about the matter. They only wanted modest increases! Yet, it went from an unfair caricature to actual policy lightning fast.

      1. There’s no way it gets implemented nationwide anytime soon, though. It’s going to bruise the economies of most major cities, but it would destroy most rural/small town economies. How could you run a fast food joint in the middle of Mississippi with a 15$ minimum wage? You can’t. So, long before it passes at the national level it will be fully implemented in places like Seattle, the results will be obviously negative and the movement will die for at least a decade.

        ::crosses fingers::

        1. How could you run a fast food joint in the middle of Mississippi with a 15$ minimum wage? You can’t.

          Do you think anybody who matters cares about that? Because I’m pretty sure they don’t.

          1. Those are substandard jobs anyway. Your betters have done you the favor of eliminating that choice entirely.

    2. Inflation, you know.

      1. Appeasement. Panem et circenses.

        1. Where the bread will be made by people making a lot less than minimum wage in “sweatshops”, and the circus performers will all be “volunteers” and “interns”. Progress!

    3. Meh, the MW comes up every few years when it’s discovered that the old minimum wage doesn’t feel like enough. I do agree that this one is quite different because the boost from the current, existing MW to $15 is significant, where the boost from say, $3.35hr to $3.85 an hour sort of felt more incremental and cost-of-livingish.

      This may be the last gasp of pubsec unions (the only unions left with any major clout) because $15 Now has SEIU fingerprints all over it.

  13. Unemployment is irrelevant next to workers making a living wage!

    1. Economics is a Koch-funded conspiracy!

      1. Reality is oppressive!

    2. “Unemployment is irrelevant next to workers making a living wage!”

      And if your business can’t afford to pay a living wage, you should go out of business. Thereby paying your former employees the real minimum wage.

  14. Come to think of it,maybe the idea is to wipe out fast food jobs,for the children.

  15. Of course minimum-wage proponents love the poor, look how many more of them they think there ought to be!

  16. Sure, but did you know that 101 percent of the income in this country goes to just the richest 3.1415926535 percent of people, dogs and ferrets?

    MONEY IS A HUMAN RIGHT

    /bernie

  17. Coming soon,a maximum wage,for fairness.

    1. A maximum wage for non-profit hospital executives is on our ballot this November in AZ. Its union-sponsored horseshit, that caps wages at what the President of the US makes.

      Why it would only apply to non-profits is never explained.

      Now, if they were to cap it at what the President makes in cash comp and fringe benefits, it would be a non-starter, seeing as every time the President hops on AF1 he spends more than most execs make in a year.

      1. democracy in action.

      2. I am the kwisatz haderach.

      3. Likely because the government already has far more legal control over a non profit than a private for profit business and so it works as a good labor union incremental approach where they get the cap on non profit CEO’s capped now then in a few years make up some numbers showing how wonderful that has worked while they try to expand it to other areas.

      4. Why it would only apply to non-profits is never explained.

        Because they feel like public entities. Seriously.

    1. That’s brilliant satire. Thanks for sharing the link!

  18. Ron, the intention of raising the minimum wage is to bring people out of poverty and not lose any jobs. I think you had better do more research.

    1. I guess delusion is a kind of intention.

    2. I think you should take a basic math and econ course.

    3. That’s right, Adam, nobody on a libertarian website has ever given this any thought. The word of a drive-by troll carries so much weight.

    4. Links to proven studies and data showing that this effect has actually been witnessed over a period of time. In the real world.

      No links to Mother Jones, please. Links to real fact based data, only.

      1. CARD-KREUGER, BITCH!

        (ignore the part where they never address total employment or labor mobility…)

        1. Or the fact that neumark found their study to be seriously flawed.

    5. Guess it’s time for the commentariat’s annual sarcometer recalibration.

  19. Let’s stop pissing around already. Let’s make it $50 an hour. Then we can go full on Venezuela. Forward to the soup kitchens, comrades! Then blame capitalism because there’s no soup!

    1. Eff $50, why not $500? In just a few weeks I could pay off my mortgage.

  20. As I regularly point out, the minimum wage was designed by Progressives as a racist, sexist eugenics plot that was intended to kill jobs for blacks, the disabled, and women. A higher wage for white men was also intended, but disemploying others was a core feature.

    1. [sticks fingers in ears] La, la, la, la…I can’t HEAR you. /progs

    2. But that’s not what they intend today, so naturally that won’t be the effect!

      Somehow we still have so much institutional racism that we have to preserve affirmative action more than 50 years after desegregation, but not so much that any policy which limits the economic or other opportunities of individuals will ever have a disproportionate impact across racial lines. Because intentions.

  21. It will move the newly unemployed over onto welfare, thereby buying a huge number of new voters to expand the ‘free shit’ offerings.

    1. It also helps prove how terrible capitalism is, and thus shows the need for more socialism!

  22. I just heard about this new robot burger joint on the radio this morning:

    http://www.techinsider.io/mome…..ing-2016-6

    1. Imagine getting your order right every time and you’re sure the bot didn’t spit in your food. What is not to like?

  23. And the party who pretends to care about the old an poor refuse to acknowledge that this makes things worse for anyone on a fixed income – old people and people on welfare. Of course, these people refuse to acknowledge the reality of rising prices due to those wage increases.

    Onwards to Venezuelan-style shortages.

    1. Jerry Brown did admit that it will make things worse for those groups. But said it’s the moral thing to do. As someone said above, prog logic, it’s somewhere out there in the aether, floating above the turtles that are holding everything up.

    2. Time to dig up a bit more of the back yard and put in a couple more rows of potatoes.

  24. Being a lefty rag, the Chron backed the increase to $15 in SF, but it seems, well…

    “Raising the minimum wage gives employers incentives to produce what they can with fewer unskilled workers, which leads to lower employment, he said.
    “The adjustment is not so much through firing people but through slower hiring,” Neumark said.
    Neumark has published dozens of research articles about minimum wage and testified before Congress on the topic. His research shows that minimum wage disproportionately affects employment opportunities for unskilled workers because they tend to have higher job turnover.”
    http://www.sfchronicle.com/bus…..335408.php (may be pay-walled)

    Oh, well, they’re poor anyway and vote the D ticket, so who cares?

    1. The current model of the Democratic party would completely collapse without a permanently dependent underclass.

  25. Good thing we have the government to provide goods and services for free to everyone.

  26. The local supermarkets have been paying most of that now for entry level work for a couple of years and they still can’t get anyone to work. Perhaps we’ve created a system where you can be better off sitting at home on the dole than out working for your bread? Now, how could we solve that?

  27. It will cost about 330 billion dollars, the average incomer doesn’t mind an additional 300$ a month of taxation.
    30 million, 33% of employees, work under ‘Public Employee’ models. Fed, State and local governments, and Teacher, Firemen. In some locales even garbage men.. under Union representation. What do they all have in common? Contracts based on minimum wage
    Privately employed with no Union representation don’t have this luxury

    Public Employees are paid with taxation
    The ‘Minimum wage increase’, increases wages for 30Xs as many as are making “Minimum Wage”, and everyone has to pay for it

    Everyone would agree that wages have been stagnate for decades, essentially this Wage Increase is for Dem Voters, and some 70% of the citizenry has to pay for that raise.. during a weak economy
    One can guess 30% of America will vote for the Minimum wage increase, after all, they get the same raise even if already making far beyond minimum wage
    Some will vote for the raise, never expect to see taxation raised, while believing the hype, at a ratio of 30 to one, they are helping hamburger flippers.

    “public employees’ use to follow the private sector.. after all, they are EVERYONES employees… no longer.
    Now we are all employees of Public workers.
    This tells us the old paradigm where one ‘could always go to work for the government’, if one wasn’t all that competent or bright.. is going away, replaced with, “go to work for the government’ or continue to lose spending power and net incomes.

  28. Make the minimum wage a function of the cost to incarcerate or publicly provide the minimum cost of living in a region. IE average cost of room and board for 1 person. Break this into a 40 hours a week for the hourly wage. This would increase the ability of low income individuals to access opportunities in higher education or other pursuits and decrease the profit in jailing non-violent law offenders. As for the argument that we would lose jobs…the money for lower income needs are coming from somewhere. Would you rather pay for it with taxes or give them the opportunity to work for their livelihood.

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