That’s the latest from the, ahem, entirely unbiased and not partisan at all folks at Berkeley. Raising the minimum wage to $13 for burger flippers just doesn’t change the number of burger flippers employed at all. This is not what we’d expect to find, simply not what we would at all. It’s thus incumbent upon people like me – us if you prefer – to try to explain why they’ve not found the effect we think there should be.
Just to recap. We do think that people buy less of something as it becomes more expensive. Thus we expect people to use less labour was wages rise. There’s not an economist on the planet who is willing to deny that as a general concept. The question here is whether this is true in the sort of society we are at the sort of wages we’re talking about.
We study the restaurant industry in the US because some 50% of the people who make minimum wage are in that sector, and also some 50% of the people in the sector make minimum wage. So, if there are going to be effects then this is the industry we’d expect to see them in.
One more thing. Low minimum wages have no effect on anything because no one does earn really low wages. High minimum wages – again, every economist would agree that $100 an hour right now today is going to affect things – have large effects. Which leads to us having to define low and high. A useful rule of thumb from previous studies is that up to perhaps 45 to 50% of median wage there’s not much effect. Mostly because not many people make less than that so there’re few people or jobs affected. Over 50% of median wage we expect to see effects, large enough that we can measure. US median wage (note, median, mean for full year full time is more like $25 an hour) for all workers is some $17 an hour, meaning that at $8.50 and above we’d expect to start seeing some effects. Wage rises to $13, yes, we’d expect effects. Even though the median wage in places like Seattle is higher than that national one.
OK, so, this is a bit of a blow then:
The Bay Area has seen an explosion of fast-casual restaurants in recent years, as restaurant owners have trimmed staff and pointed to rising minimum wage as a key reason for developing new business models. But a new UC Berkeley study finds that the rise in minimum wage actually hasn’t led to significant job losses in the Bay Area restaurant industry — nor any significant growth.
Well, if it’s true then yes, that’s a bit of a problem for that theory and set of observations, that we should be seeing effects.
There are now 10 large cities, seven states and many smaller localities transitioning to minimum wages between $12 and $15 an hour. And as these policies continue to spread throughout the nation and businesses are required to increase their workers’ pay, some people are concerned employment rates will drop.
A report released Thursday by the University of California—Berkeley’s Center on Wage and Employment Dynamics (CWED) shows that, at least at the city level, that hasn’t been the case.
One possible answer is that anything which comes out of this bit of Berkeley isn’t going to be unbiased. Michael Reich and his team have written a number of the studies which support the idea of raising such wages in the first place. They’re not now going to diss their own work, are they? But then of course it’s equally true to say that if they’re telling the truth then that’s not going to change before and after, is it? Having actually read some of their reports recommending the rises, spotting some of the tricks used, I tend toward the former explanation but you’d be entirely fair to accuse me of simple sour grapes as a result.
So, any good reasons why not to accept this result?
Researchers stated that with the change in the number of restaurant jobs ranging from a decline of 0.3 percent to an increase of 1.1 percent, they did not “detect significant negative employment effects” to Bay Area restaurants as a knock-on effect from the big minimum wage increases.
CWED cited 17 recent studies of wages and employment that also found “little to no detectable negative effects” of minimum wage increases on restaurant employment, but acknowledged that “many restaurant studies, including ours, do not have data on hours of employed workers.”
Ah, now that is a problem. As the report itself states:
Many restaurant studies, including ours, do not have data on hours of employed workers. But a new
comprehensive study (Cengiz et al. 2018) of all of the 138 federal and state minimum wage increases
since 1979 is able to estimate effects on total work hours. Cengiz et al. do not detect employment or
hours changes, whether they examine all industries or restaurants only.9 These results support our
focus on employment outcomes here.
Hmm. The problem here being that the University of Washington study, the one everyone else is trying to refute, found something interesting. The minimum wage rise in Seattle didn’t lead to a fall in jobs so much. But it did lead to a fall in hours for those who kept their jobs. So much so that incomes fell, incomes being the thing we’re actually worried about.
So, this study comes to a different result simply because it’s not even trying to look at the thing – hours – which produces the inconvenient result for those who advocate higher minimum wages. But, you know, people will insist this shows that they don’t have any negative effects for even if Berkeley is resolutely non-partisan in their approach and findings that’s not true of those who will use them. After all, it is fairly important to know the hours worked as well as the pay per hour to be able to calculate income, isn’t it?