Higher min wage ===> fewer jobs

Investment Analysis Clubs Macro Economic Trends and Risks
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The previous thread on this topic became too long; it is found here:

A paper researching the effect of California’s $20 fast food minimum wage by Clemens et al.

“…we find that employment in California’s fast food sector declined by 2.7 percent relative to employment in the fast food sector elsewhere in the United States from September 2023 through September 2024.”

“Adjusting for pre-AB 1228 trends increases this differential decline to 3.2 percent, while netting out the equivalent employment changes in non-minimum-wage-intensive industries further increases the decline. Our median estimate translates into a loss of 18,000 jobs in California’s fast food sector relative to the counterfactual.”

That loss of 18K jobs represents about a 3% loss in fast-food employment.

DB2

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Higher min wage also leads to higher inflation.
Businesses will not sell a product or a service at a loss.

Those who pretend to fight for poor people are the ones who are crushing them.

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Just for symmetry, do they comment on states which have not raised the minimum wage?

I ask because the McDonald’s around here have installed kiosks, there is no human at the counter, and it’s devilishly hard to find someone to refresh the ketchup dispenser when it’s out.

I notice fewer and fewer humans at the Dairy Queen where I occasionally stop to get a Blizzard®, and the waitresses at our sushi place have gone from two to one.

On the other side of the ledger, there is now a raft of people walking around Kroger in crisp Kroger uniforms doing shopping for other people and carrying the goodies out to their cars, and these are all new people, and Kroger is unionized, so presumably the wages are decent.

Anyway, this one statistic in isolation is meaningless; my theory is that it’s possible your authors have identified a trend in the fast food industry which is happening regardless of changes in the minimum wage laws.

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The new paper’s methods are elaborate but essentially treat California’s abrupt $4 hike as a natural experiment. The authors compared fast-food employment in the state with various control groups—such as fast-food jobs in other states and other types of jobs within California. The roughly 3% employment decline is fairly consistent across these different approaches.

Students of basic economics should not be surprised. When employers are forced to pay more for labor, they tend to buy less of it.

As noted in the previous thread, there are tradeoffs. The new study estimates that, in California’s case, 29% to 49% of wage gains were offset by job losses.

DB2

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Speaking of which, on my way home from a car show, I stopped at a Mickey D’s to get a drink to work on during the 2 hour drive home. The register did not say “closed”. There was no sign saying “please use the kiosk”. In past years, that store had a rack of cups next to the kiosk, so, if the register was closed, I could pay at the kiosk, grab a cup, fill it, and be on my way. Now, that rack of cups is gone. So, I stood at the register, waiting, for about 15 minutes, as staff hustled back and forth on the other side of the counter. Finally gave up and left. I knew better than to try the Mickey D’s in Albion, because they were even worse about ignoring customers. I went to the Arby’s in Albion, and had supper, then refilled the cup, so I had something to sip on while I drove the remaining 90 minutes home.

What really amazes me is Mickey D’s has the worst fast food, of the majors. Why are their stores so busy?

Steve

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Then we shouldn’t have anyone working because if you look at minimum wages in California in 1950 the minimum wage was .75 cents and in 2024 it was $16.00 dollars an hour. These type of papers are written by Corporations trying to keep wages down so that people have to live in poverty. Just think how many jobs you could have if you were willing to work for .75 cents an hour. Whoo Hooo I have 20 jobs, but there isn’t enough hours in the day to work.

The problem with this study is exactly what Goofy pointed out. When people can automate, it doesn’t matter how cheap the labor is, they will automate. Fewer people working more profits, it is simple as that and the study can’t take that effect into the study.

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You probably meant 75 cents.

It is not all or nothing; it is just that the more one has to pay for something (in this case, labor) the less one buys. Very common sense.

As noted, there are tradeoffs in the labor market (as there always are in life). The people who have a job get more money but fewer of them are hired.

And that depends upon the cost to automate. If it cost you $10 million to purchase a burger-flipping machine then you would be very unlikely to automate. If it cost you $1000 then you would purchase the machines this afternoon.

DB2

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You probably meant machine, (since we seem to be correcting grammar and spelling now)

If it cost $10 million, then 16 dollars an hour doesn’t seem that much, does it? They are building robots for a reason. Pundits and researchers are saying ai and robots are coming after your jobs. Do not be surprised if we see massive layoffs in the future no matter how cheap the labor. You just can’t out work a machine.

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Isn’t machine what I used?

Grammar and spelling is important (my mother was an English teacher). However, in economics numbers are even more important. There is a two-orders-of-magnitude difference between .75 cents and 75 cents.

Could well happen and is perhaps the goal. That was part of the utopian thinking back in the '60s and '70s. Here’s an excerpt from Teg’s 1994 by Theobald and Scott (1972):

Data is used to plot the steps which must be taken in order to most effectively fulfill the goals already agreed upon by society. Thus, for example, the unemployment rate today serves as an indicator of the divergence between the present situation and the desired situation. A high level of unemployment is considered unfavorable at the present time and the society, in general, agrees that it is desirable to reduce unemployment unless other goals are more urgent.

Data about unemployment is therefore used in a particular way because society generally shares the goal of full employment. The same data would be used very differently if the society believed that its appropriate long-range goal were full unemployment rather than full employment.

DB2

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You forgot your coma, somebody didn’t listen to their mother. They are very important for clarity and to allow other people to troll you on the internet. :nerd_face:

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Grammar and spelling are important.

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I’m slippin into a comma.

:diamond_with_a_dot:
ralph,

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Now that is how you do it. LOL

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If accurate, that would be significant. Here’s another paper -

"In the first nine months of its existence, the California fast-food minimum wage policy has worked as intended. It has significantly increased the pay of fast-food workers. It has not had a negative effect on fast-food employment and the number of fast-food restaurants, and it has generated very modest price increases.

These results would be surprising in the theoretical world of perfectly competitive labor markets, where employed workers always have the option to move to a comparable job with another employer and employers can hire all the workers they want at the going wage. In such a world, increases in the price of labor reduce the demand for labor. However, as numerous studies have found, real world labor markets are far from competitive, low-wage labor markets especially so. In real world labor markets, frictions restrict the mobility of labor and employers must increase pay if they want to hire more workers.

In the real world, employers possess the power to set wages below the level that would obtain if the labor market was perfectly competitive. They use that power, even if the consequences include less attractive jobs, high employee turnover rates and difficulties filling their job vacancies. Minimum wage increases then make these jobs more attractive, reduce employee quits and reduce costly job vacancies.

As many previous studies have shown, these cost offsets, together with moderate price increases, explain why minimum wage policies such as the $20 fast-food standard, do not reduce employment."

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Problem with socialism is it does not work.

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Problem with Fascism is it does not work. There fixed it for you.

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People work harder when they are paid fairly.

Yes, there is evidence suggesting that California has experienced a loss of fast-food jobs due to increased automation and other productivity gains, potentially exacerbated by the $20 minimum wage law for fast-food workers. While some argue that the minimum wage law has not led to significant job losses and may have even increased employment in the sector, other studies and data indicate job losses, particularly when compared to the rest of the United States.

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Makes me wonder if we are watching a welfare baby call out the “Moochers”.

The biggest homophobes are often gay. That sort of thing.

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The irony is people who marched, fawned, and voted for pedophiles. It’s almost like that is what they want for their Leader. Good job.

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This is not the first of its kind study, although the results are different. The one we’re taught about in school is comparing philadelphia and nj. Right across the river from each other. With many people commuting daily from one to another and ease transaction (can stop at burger king on the other side of the river on my way home if cheaper, or can take a better paying job 5 more minutes away, or we’ll just build a burger king across state lines etc).

A significant study on the impact of minimum wage increases, particularly in the Philadelphia area, was conducted by David Card and Alan Krueger. They examined the effects of New Jersey’s 1992 minimum wage hike, which raised the rate to $5.05, on the fast-food industry. This study became a foundational piece of research in the “new minimum wage research” that challenged the traditional economic view that higher minimum wages lead to job losses.

Here’s a more detailed breakdown:

  • The Study:

Card and Krueger compared employment levels in fast-food restaurants in New Jersey (where the minimum wage increased) with those in Pennsylvania (where the minimum wage remained unchanged).

  • The Methodology:

They used a “quasi-experiment” approach, leveraging the natural variation in minimum wage laws between the two states.

  • The Findings:

Initially, their study suggested that the minimum wage increase in New Jersey did not lead to a decrease in employment, and in some cases, even resulted in a slight increase in jobs, particularly in the fast-food industry.

  • Impact:

This study, and subsequent ones by Card and Krueger, significantly influenced the debate on minimum wage, shifting the consensus among some economists. They challenged the prevailing view that minimum wage hikes inevitably lead to job losses.

  • Later Rebuttals:

While the Card-Krueger study was influential, some economists have questioned their findings, pointing to potential issues with the data and methodology. For example, a later study suggested that the original study might have been influenced by a single Pennsylvania Burger King franchisee, and that the findings may not be generalizable to other industries.

  • Philadelphia’s Context:

Philadelphia, as part of Pennsylvania, is subject to the state’s minimum wage, which is currently $7.25 per hour, matching the federal minimum. The city lacks the ability to set its own minimum wage higher than the state level, which means the minimum wage in Philadelphia is effectively lower when adjusted for the city’s higher cost of living.

  • Self-Sufficiency:

A study from Pew showed that Philadelphia’s minimum wage, when adjusted for the cost of living, is among the lowest of major US cities. This means that it is difficult for minimum wage workers in Philadelphia to meet basic living expenses.

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