Tag: not

New UW Report Finds Seattle’s Minimum Wage Doing Modestly Well For Some Low-Wage Workers

Recently a few friends of mine have linked to this article, which summarizes a new University of Washington study about the Seattle minimum wage increase. The article headline reads, “New UW Report Finds Seattle’s Minimum Wage Is Great for Workers and Businesses.” My friends like to add snarky comments feigning surprise, implying that of course the minimum wage is great for workers and businesses.

SMH.

1. The “of course” intuition runs in the opposite direction.

Demand curves almost always slope downward so our naive intuition would be that business will shed low-wage workers because they cost more under a minimum wage regime. It was only after David Card and Alan Krueger’s 1993 paper (and the subsequent papers that utilized a similar difference-in-difference strategy*) that economists had hard evidence that small minimum wage increases might not reduce employment.

*Difference-in-Difference is an easily understood technique in which you compare the starting and ending points of two different rates to see how they performed relative to one anther. My mile time was 11 minutes last year, but now it’s 10 minutes. Your mile time was 11:30, but now it’s 9 minutes. I improved by one minute, but you improved by two minutes and thirty seconds. One minute and thirty seconds is the difference between our individually differenced before and after times, which is where the technique gets its name (difference is just another word for subtraction).

Suppose we’re genetically similar, say, for example, that we’re twins. We now know that the difference in our mile time improvements over the past year was due to our different training regimens and not genetics and — setting aide the fact that we only have a sample size of two — we now have proof that your workout regimen is better (at least for people that share similar genes).

The attractive thing about difference-in-difference experiments is that they don’t use any fancy math: the results are both easy to calculate and easy to understand. If you can find two people — or groups, or cities, or things — that are similar and can track their performance over time all you have to do at the end is subtract a couple of times and you have a statistically valid result.

2. The headline and content of the article sorely misrepresents the results of the study.

The article’s author cites only the Seattle increase portion of the difference-in-difference approach. It’s the equivalent of me citing my increased mile time and telling you how great my workout plan is without telling you that my twin did much better with a totally different workout plan. Most of the increase in employment and business success was due to the recent strength of the Seattle economy. An acquaintance that recently started at Amazon told me they just had their largest orientation ever, 600 new employees.

Ultimately the authors conclude with this finding:

The major conclusion one should draw from this analysis is that the Seattle Minimum Wage Ordinance worked as intended by raising the hourly wage rate of low-wage workers, yet the unintended, negative side effects on hours and employment muted the impact on labor earnings.

The authors don’t find that the minimum wage increase was “great” for businesses, but instead mostly a wash. There was a small, 0.7 percentage point, increase in the rate of business closure. The authors also note that:

A higher minimum wage changes the type of business that can succeed profitably in Seattle, and we should thus expect some extra churning. Our results are consistent with those of Aaronson, French, and Sorkin (2016), who conclude that minimum wage laws prompt increases in both entries and exits (particularly in chains), with closures coming from more labor intensive industries and establishments, and more openings occurring in more capital intensive industries.

I think this structural realignment is foreboding for the future of Seattle’s low-wage workers. The minimum wage currently stands at “only” $11 and we’re a year into the experiment. What happens in seven years and an additional $7 in hourly pay? There could be serious negative structural adjustments to low-wage industries.

So what about the workers themselves? The best estimate is that the minimum wage decreased low-wage employment by 1 percentage point. Far from “great.” The workers that were still employed did experience modest gains in material well-being:

Seattle’s low-wage workers who kept working were modestly better off as a result of the Minimum Wage Ordinance, having $13 more per week in earnings and working 15 minutes less per week.

One has to ask themselves if the minimum wage was so great why didn’t low-wage workers flood into the Seattle area? On the contrary the authors find the following:

…we conclude that the Seattle Minimum Wage Ordinance reduced the probability of low-wage workers continuing to work in the Seattle (rather than elsewhere in the state) by 2.8 percentage points.

So bad was the misrepresentation of this article, which my friends footnote with duh-obviously-the-minimum-wage-is-great style comments, that Jake Vigdor, the lead author of the study, himself responded in the comments section:

As director of the Seattle Minimum Wage Study, it is my sad duty to report that this article grossly mischaracterizes the tenor of our report. I encourage readers to refer directly to that report:https://seattle.legistar.com/View.ashx?M=F&ID=4579065&GUID=39743A75-1D9F-4C32-B793-2F699D51B0F7

 

3. An argument against the minimum wage is not an argument to condemn the poor.

The minimum wage is only one poverty reduction strategy. Many economists are in favor of small increases in the minimum wage because there is a lot of evidence that suggests the impact on employment is small or non-existent (or even slightly positive). But many economists are quite nervous or ambivalent about $15 minimum wage increases. As this Forbes headline notes, “Even Alan Krueger Thinks That A $15 An Hour Minimum Wage Is Too High.” And Alan Krueger helped pioneer the argument in favor of the minimum wage!

See this poll and this poll for reference.

 

4. Shouldn’t we read things before we comment about them?

This echos my thoughts in an early post about things I do and don’t hear in Seattle.

Why I’m not voting for president, but plan on complaining anyway

“If you don’t vote you don’t have the right to complain,” the saying goes. Alas, I don’t plan on voting, but I have no problem complaining anyway.

Of course the word “right” here is not used to denote a legal construct, but rather a cosmic one. A sort of you-got-what’s-coming-to-you quid pro quo. You didn’t marry LeeAnne so now you have no right to complain about being 35 and alone, or so my mother tells me.

But just as surely as cosmic rights exist, we’re all guilty of violating them everyday, especially when it comes to complaining when perhaps we know better. I might, for instance, procrastinate on the job by harassing my friends to “get out the vote” only to later complain about having to work late. Or I might refuse to take public transportation and then complain about all the traffic I have to sit in. And don’t get me started on all the wasted time we spend lamenting our relationship misadventures, so often the result of our own design.

So for starters even if I have no right to complain about who’s president if I didn’t vote, I’m going to complain anyway because that’s what we humans do. It happens in all kinds of settings, why should politics be any different? Indeed, it’s notable that you never hear the phrase “If you don’t vote you have no right to celebrate.” It seems there is something deeply human and seductive about complaint.

But, the example above regarding public transportation points out another flaw in the not-voting-equals-no-complaining calculus. Even if you decided to take the bus instead of drive it wouldn’t really do anything to mitigate the amount of traffic in your city. It’s not your single car that’s causing congestion after all. You should feel guiltless when complaining about traffic because – unless you happen to be the head of your city’s transportation department – there is quite literally nothing you as an individual can do to reduce traffic even if, paradoxically, you happen to be part of the problem.

By now you have likely unveiled my public-transportation-is-really-voting allusion. I’m sure you’ve heard it before, but stick with me for a moment. That’s right, I’m sorry people but your vote just doesn’t matter.  Let me clarify. Your vote actually does matter in all kinds of important ways. It allows you to express your preferences through our democratic process, to align yourself with politicians you believe to be sensible if not always wholly upstanding, to signal to the world how civic minded you are as you stroll into the afterwork cocktail party with an “I voted” sticker affixed to your lapel. It’s just that your vote doesn’t matter for the outcome of the election itself.

I hesitate to call this position anything other than fact. It has been shown both by mathematical calculations and by historical evidence. In truth the probability of an election being decided by your vote alone is not absolutely zero. The probability that you’ll be struck by lightening isn’t zero either, but you should probably go about living as if it were.

Why should my right to complain hinge on something so superfluous as a vote?

“But what about Florida?” you ask. Yes, in 2000 the U.S. presidential election was decided by a mere 537 votes. These five hundred votes might as well have been five million though because both numbers are larger than zero, the count difference it would take for your vote to decide the election.

“But what if everyone thought the way you do?,” you retort. Well, in that case we’d be in trouble. But everyone doesn’t think the way I do, which is why this piece is likely to draw your ire. If you’re the type of person that organizes the masses to get out and vote then you might matter a lot for an election, but your vote matters very little.

And while we’re at it — no, not voting is not the same thing as voting for Donald Trump. You can bet if Drumpf becomes president I’ll do plenty of complaining, not least because I don’t want my next trip to the White House to involve being blinded by the sun’s reflection off a gold-plated North Lawn.

The situation is even rosier for the would-be kvetch though because not only does voting not matter, but the president doesn’t matter that much either. Now comes the exciting part because I get to reference my favorite kind of bias, aptly-titled “leadership attribution bias.” In short, the president is a manager like any other: they get all of the credit when things go well and none of the blame when things go poorly. A cheap shot I know.

When you credit (or blame) the president you’re really referencing U.S. political institutions more broadly, and you have even less control over those than you have over who the next president is. The president is buffeted by all kinds of institutional and political forces: House and Senate constituencies, tit-for-tat political horse trading, the actions of both rouge and friendly nations, state and local policy, regulatory agencies, the judiciary, and the vacillating will of the American public to name a few.

The average American political scientist thinks the president matters much less than the average American citizen. Maybe they’re out of touch or overly wonkish, or maybe they’re better at understanding the complexities and constraints of the modern American presidency.

I haven’t even mentioned the fact that one might be disinclined to vote simply because none of the candidates in our not-so-diverse, two-party system fit the bill. Now that’s something to complain about.

Nor am I fond of the idea of absorbing the marginal voter into the presidential election decision simply because it’s everyone’s civic duty to vote. If someone is ignorant, let them abstain. It’s probably better than tackling a crash course in U.S. politics days before an election. And while you’re at it, when they’re forced to switch healthcare providers let them complain. The distance between their abstention and healthcare troubles is lightyears.

There are plenty of reasons not to vote. And there are certainly plenty of reasons to complain about policy outcomes. Abstention may seem foolish because it puts a decision that could be ours in the hands of another. But if we have a cosmic right to anything, it’s to complain despite our own foolishness.

[Relax. It’s intentionally incendiary people.]