Min Wage increase kills a SF small business

[1prophet]

Just think of all the textile mills and coal mines we've put out of business by banning child labor! First you ban kids from working when they're 5, what's next, banning working till they're 95? Well who's going to work then!?! Clearly labor laws are all-or-nothing, and any bad effect of regulations (no matter how much good is also accomplished) means we need to scrap them entirely.

Regulations should apply not just to companies in the US but companies wanting to do business or sell products/services in the US, meaning you can't move your plant overseas to avoid labor, OSHA, environmental costs and pay near slave wages and pollute indiscriminately while selling your product stateside and enjoying the enormous difference in profit.

Then we can have an honest discussion on regulations because the pretend liberals won't be able to avoid the increase in prices by buying cheap foreign made goods while pushing for higher minimum wages and more regulations.

 

[bshole]

For those that couldn't be bothered to read about it and just posted the usual political party message:


If those numbers are correct it the claim the new min wage drove them out of biz could be legit.

Fern

Yea and if YOU had bothered to read the whole article, you would see that:

The blog post went on to say that the Borderlands café business will stay open and should have “no difficulty at all” with the new minimum wage because it will be able to raise prices as needed. The bookselling business is different, the blog post argued, because book prices are set by the publishers and clearly printed on the books:

So no, the business was not killed.... just the UNPROFITABLE part of it. So the part that was paying SHITTY wages is gone, the part that remains will be paying BETTER wages.

Why the fuck should there be $10/hr jobs in the 21st century? That is like 50 cent/hr jobs in the 1970s....

 

[glenn1]

You can set the minimum wage to whatever you like and even pass a "living wage" if you want, but don't be surprised if the demand for labor drops. If you'd rather have a handful of $15/hour jobs and lots of unemployed rather than a $x/hour job and less unemployed that's a choice you can make. But only problem is that cities like SF expect federal taxpayers to pick up the slack with unemployment, etc. to mitigate the impacts of their stupid policies. Make welfare and unemployment totally a state/local function and let SF and Texas do whatever the hell they want with their wages and other labor policies and people to self-sort themselves into an area with their preferred economic model.

 

[thraashman]

Yea and if YOU had bothered to read the whole article, you would see that:



So no, the business was not killed.... just the UNPROFITABLE part of it. So the part that was paying SHITTY wages is gone, the part that remains will be paying BETTER wages.

Why the fuck should there be $10/hr jobs in the 21st century? That is like 50 cent/hr jobs in the 1970s....

Because conservatives think it better the poor stay poor and if possible all die to put more foie gras onto the plates of their god-king rich masters. I'm sure if you read the newly printed Republican version of the Bible you'll find those passages about how Jesus got down on his knees and gave blow jobs to the rich money lenders he found in the temples.

 

[realibrad]

Because conservatives think it better the poor stay poor and if possible all die to put more foie gras onto the plates of their god-king rich masters. I'm sure if you read the newly printed Republican version of the Bible you'll find those passages about how Jesus got down on his knees and gave blow jobs to the rich money lenders he found in the temples.

You realize that a minimum wage job does not displace a higher paying job right?

Its not like opening a McDonalds suddenly takes away programming jobs.

 

[blastingcap]

You can set the minimum wage to whatever you like and even pass a "living wage" if you want, but don't be surprised if the demand for labor drops.

If you look at the research that's been done on this topic, the results are inconclusive as to whether raising the minimum wage increases unemployment rate. If it were a strong effect, then it'd show up more clearly in the data.

 

[realibrad]

If you look at the research that's been done on this topic, the results are inconclusive as to whether raising the minimum wage increases unemployment rate. If it were a strong effect, then it'd show up more clearly in the data.

Depends on what you mean by inconclusive. Minimum wage jobs make up about 2.6% of all wage and salary workers. http://www.pewresearch.org/fact-tank/2014/09/08/who-makes-minimum-wage/

Raising the minimum wage mainly effects minorities and teens. Once they drop out of the labor force, they are not counted as "unemployed" because they do not search for new employment. A High School teen who was working for a few bucks will simply drop out and not look for work until after school. The only real arguments for the pro minimum wage side is that it makes people more productive because the pay makes them happier. That is a pretty weak argument, because there is not a great way to measure that, other than asking people how they feel.

 

[blastingcap]

Depends on what you mean by inconclusive. Minimum wage jobs make up about 2.6% of all wage and salary workers. http://www.pewresearch.org/fact-tank/2014/09/08/who-makes-minimum-wage/

Raising the minimum wage mainly effects minorities and teens. Once they drop out of the labor force, they are not counted as "unemployed" because they do not search for new employment. A High School teen who was working for a few bucks will simply drop out and not look for work until after school. The only real arguments for the pro minimum wage side is that it makes people more productive because the pay makes them happier.

http://www.washingtonpost.com/blogs...conomists-are-so-puzzled-by-the-minimum-wage/

 

[realibrad]

http://www.washingtonpost.com/blogs...conomists-are-so-puzzled-by-the-minimum-wage/

So you link to a reporter? "Brad Plumer is a reporter at the Washington Post writing about domestic policy, particularly energy and environmental issues."

Find some people who are economists, not a reporter who blogs.

Most of that Blog post is stuff that any economist would rip apart.

 

[blastingcap]

So you link to a reporter? "Brad Plumer is a reporter at the Washington Post writing about domestic policy, particularly energy and environmental issues."

Find some people who are economists, not a reporter who blogs.

Most of that Blog post is stuff that any economist would rip apart.

Did you even read the article? You do know that blog had links to economic studies and other articles that mention studies by name so you can look them up yourself, right? You know what a link is right?

Studies are all over the map and yes I think the results are inconclusive. The Card and Krueger studies were particularly famous for showing some interesting results.

 

[realibrad]

Did you even read the article? You do know that blog had links to economic studies and other articles that mention studies by name so you can look them up yourself, right? You know what a link is right?

Studies are all over the map and yes I think the results are inconclusive. The Card and Krueger studies were particularly famous for showing some interesting results.

Then why not post those links, instead of posting a reporters blog?

Ill read them, but it may take a while. Ill ask though, have you read them? Usually when I do this, I find that the papers dont say what people think they do.

 

[blastingcap]

Then why not post those links, instead of posting a reporters blog?

Ill read them, but it may take a while. Ill ask though, have you read them? Usually when I do this, I find that the papers dont say what people think they do.

I often prefer linking to newspapers because they make a point of making complicated points more understandable to the layperson and in a concise manner, unlike the "TL;DR" walls of text that you sometimes get in more technical papers or studies themselves.

I have an economics degree among other things. Please don't talk down to me, especially when you admitted you did not even read the article.

Look, the studies are legitimately conflicting and ambiguous on the subject of minimum wage and yes I've read some of the studies myself. I suspect that the effects are pretty weak for small jumps but larger jumps like $10.74 to $15 may have more of an effect. I'm sure some econ professors and grad students are already studying the effects of SF min wage hikes. It'll be interesting to see their results over the next several years.

 

[realibrad]

I often prefer linking to newspapers because they make a point of making complicated points more understandable to the layperson and in a concise manner, unlike the "TL;DR" walls of text that you sometimes get in more technical papers or studies themselves.

I have an economics degree among other things. Please don't talk down to me, especially when you admitted you did not even read the article.

Look, the studies are legitimately conflicting and ambiguous on the subject of minimum wage and yes I've read some of the studies myself. I suspect that the effects are pretty weak for small jumps but larger jumps like $10.74 to $15 may have more of an effect. I'm sure some econ professors and grad students are already studying the effects of SF min wage hikes. It'll be interesting to see their results over the next several years.

The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms' overall costs and only modest relative to the wages paid to low-wage workers. In the traditional discussion of the minimum wage, economists have focused on how these costs affect employment outcomes, but employers have many other channels of adjustment. Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.[/B]

That seems to be the main article that the Reporter used.

I highlighted the part that I think is most important. So, because you have an economics degree, I can ask questions more directly.

Do believe profits and prices are set by the company/employer, or do you think they are set to the maximum the market will allow?

You would not expect a firm to pay a wage higher than the productivity. Wages are not arbitrary. If a wage is low, why do you suspect it is that way?

Your argument is that wages are lower than they should be relative to the productivity of the worker. Why has demand for labor not meant that a firm would be willing to take underpaid labor for themselves?

 

[blastingcap]

That seems to be the main article that the Reporter used.

I highlighted the part that I think is most important. So, because you have an economics degree, I can ask questions more directly.

Do believe profits and prices are set by the company/employer, or do you think they are set to the maximum the market will allow?

You would not expect a firm to pay a wage higher than the productivity. Wages are not arbitrary. If a wage is low, why do you suspect it is that way?

Your argument is that wages are lower than they should be relative to the productivity of the worker. Why has demand for labor not meant that a firm would be willing to take underpaid labor for themselves?

What do you think of physics models that start off with assumptions like "assume there is no friction/air resistance..."?

Economics models assume way too much, from instant reactions to fully rational decisionmakers. The fundamental assumptions of such models need to be reworked hence why we have seen more and more joint efforts that cross disciplines, e.g., economics and psychology.

The article highlighted several reasons why at least in the short term, employment could be stickier than anticipated.

Look at exchange rates, it takes a while for prices to change and even then sometimes prices don't change much because overseas suppliers pocket the difference or absorb the reduced profits.

Same with inflation.

I would expect min wage effects to not be entirely felt in the short to medium term, perhaps in the long term, but the problem with long term studies is how much noise there is. It's not trivial to design a good study on the long term effects of min wage increases.

But see, OP's article was on a SHORT TERM effect on a specific "business" that had a doomed business model that blamed the min wage when it had a lot of OTHER problems. Maybe the min wage was the last nail in the coffin, but it wasn't the only nail nor the largest.

 

[werepossum]

For those that couldn't be bothered to read about it and just posted the usual political party message:



If those numbers are correct it the claim the new min wage drove them out of biz could be legit.

Fern

Oh, I have little doubt the story is legitimate; there are many such stories. But these are marginal businesses, those just barely hanging on or perhaps more often just returning what the owner considers an acceptable return. If the owner is netting $50k for his time (basically buying himself a job) and with the new minimum wage would be netting a projected $40k, he might well elect to shut down and take a job working for someone else (assuming he has marketable skills) or leave the area for a cheaper area.

Lol! Minimum wage increases to $15 by 2018. Saying minimum wage killed a business when that minimum wage hasn't even kicked in is laughable.

Not only that but an owner who doesn't think San Francisco residents would be will to pay a 20% increase in prices on books! is the most retarded thing I've ever heard. How much are these books? $5-15 equals $1-3 increase. Good lord people are retarded!

For the first point, why would you feel that a business owner should stick around to lose money if he can't come up with a profitable business model? That would be stupid. For the second, people are not necessarily willing to pay more money just because you want or need more money. As prices go up, volume goes down, inevitably. People (even San Francisco liberals) do not have unlimited means or unlimited willingness to support local businesses, and if his book store must increase prices by 20% while Amazon needs to increase prices 2% (or not at all, assuming Amazon would not be stupid enough to build a warehouse in San Francisco) then some people will buy on line or simply not buy at all.

If by "attempting to adjust its business model" you mean raising prices, then ya, that is the next logical step.

That's certainly one step, but not the only one. Cutting labor by other means (e.g. via automation, staffing more lightly, or dropping hours with few sales) is another. Moving to a cheaper location would be a third. None of these are necessarily easy and none are without their down sides, but a business which gives up because one cost increases is either a business already of the margin of viability or a business poorly run. I'll give these folks the benefit of the doubt and assume they have evaluated all their options and there truly is no way for them to survive this increase, but that simply defaults to the first.

It continually amazes me that the left assumes business always have extra money to absorb whatever the liberals wish to inflict on them, but let's not go the other extreme and accept that a perfectly sound business has been destroyed by a minimum wage hike. Perfectly sound businesses can make adjustments by raising prices and/or adjusting business practices. That is what drives inflation and tends to depress employment. Doesn't mean that raising minimum wage is necessarily a bad thing, it just means that as with all tools and actions it's an imperfect means of achieving the stated goal.

 

[realibrad]

What do you think of physics models that start off with assumptions like "assume there is no friction/air resistance..."?

Economics models assume way too much, from instant reactions to fully rational decisionmakers. The fundamental assumptions of such models need to be reworked hence why we have seen more and more joint efforts that cross disciplines, e.g., economics and psychology.

The article highlighted several reasons why at least in the short term, employment could be stickier than anticipated.

Look at exchange rates, it takes a while for prices to change and even then sometimes prices don't change much because overseas suppliers pocket the difference or absorb the reduced profits.

Same with inflation.

I would expect min wage effects to not be entirely felt in the short to medium term, perhaps in the long term, but the problem with long term studies is how much noise there is. It's not trivial to design a good study on the long term effects of min wage increases.

But see, OP's article was on a SHORT TERM effect on a specific "business" that had a doomed business model that blamed the min wage when it had a lot of OTHER problems. Maybe the min wage was the last nail in the coffin, but it wasn't the only nail nor the largest.

I agree with most of what you said. The issue is with this statement...

If it were a strong effect, then it'd show up more clearly in the data.

Strong is subjective, and does not mean important. As you said, the noise in the data makes it very hard to see much. But, the reason for that is largely because researchers are trying to measure something that is a very small part of the economy. The implication of your statement will typically be read to say that minimum wage increases don't have a negative effect. The logic behind why minimum wage increases are a net negative are very sound. When we know that the data is not strong, but the data we do have shows something inconclusive, then its more likely a problem with the data.

I think you would agree that wages are a function of supply of labor vs demand of labor. So if the supply at any given time is constant, and wages are low, its because demand is low. If demand is low, then its because companies cannot make a profit off of the available labor.

I think we would both agree that underemployment is very high among teens and minorities.

Do you think the minimum wage has a net negative effect on employment?

 

[SMOGZINN]

Small businesses have certain advantages over larger businesses.

This used to be true. My family has run small businesses for the last 3 generations and I have seen first hand that these advantages simply are not as important as they once was.

They are much more nimble,

Not anymore. Now being nimble is more about having the ability to take advantage of the different labor prices in developing nations then it is about being able to quickly react to a changing market (especially since market changes are now mostly driven by large marketing campaigns that big business tend to know about, and a small business will be caught flat footed on). Advantage: big business.

can have much more direct relationships with customers

This was the real main advantage of small businesses, and really the only one that some businesses, especially in service markets, can still compete with. But the Web has reduced this advantage a lot. Now a big company can put up a website that can inform their customers nearly as well, and a lot cheaper, than employees at a small company. The customer can learn all about the products, even talk to a expert, and buy the product, without ever having to go out his door. For now there are still a lot of people that would rather go to a store and find someone that knows what they are talking about, but a good knowledgeable employee costs the small business more making it harder to leverage this benefit, and as more people become web savvy this is changing. Advantage: Tie (but moving towards big business)

and can better cater to niche markets.

This is flat out wrong. No matter how niche the market is Amazon has ma and pop beat in both selection, price, and availability. The only thing that a small business might be able to bring to a niche market is knowledge and experience, but the trend is that people go to small business for their knowledge and experience and then buy from Amazon, who often can most often undercut the small businesses prices by a significant amount. Advantage: big business. (by a huge margin)

 

[First]

Minimum wage laws don't have a much of a positive or negative effect on growth or jobs one way or the other; the reduction in employment from employees being let go by these low-wage businesses is generally offset by the increase in economic activity from the millions more minimum wage workers' disposable incomes going up, which of course spurs economic growth from their increased spending. So the negatives and positives of minimum wage generally cancel each other out.

What isn't really disputed is that standards of living rise when minimum wages rise. That's why it's generally a no-brainer.

 

[Jaepheth]

So just adopt/foster a bunch of children and have them work the family business for free.

Cheap labor shortage: solved
Surplus unwanted child problem: solved
Modern day school kids unable to sympathize for Dickens' characters: solved


It's a perfect solution!

 

[Matt1970]

Why the fuck should there be $10/hr jobs in the 21st century? That is like 50 cent/hr jobs in the 1970s....

Actually $10 in 2014 is the equivalent to $1.64 in 1970. Min wage in 1970 was $1.60

 

[Atomic Playboy]

Actually $10 in 2014 is the equivalent to $1.64 in 1970. Min wage in 1970 was $1.60

$1.45 per this link. But that still works out to $9.22 an hour in 2014 dollars; we're damn near $2.00 under that at the Federal level. Sounds like raising the minimum wage is overdue.

 

[Matt1970]

$1.45 per this link. But that still works out to $9.22 an hour in 2014 dollars; we're damn near $2.00 under that at the Federal level. Sounds like raising the minimum wage is overdue.

I think min wage should at least keep up with inflation.

 

[Sonikku]

But you're paying them more money to do the same work!!

 

[rudeguy]

Why the fuck should there be $10/hr jobs in the 21st century? That is like 50 cent/hr jobs in the 1970s....

Actually no. You are lying again.

But you've already openly stated that you think its fine to lie to further your agenda. So why should we be surprised?

 

[marincounty]

If you can't pay minimum wage in SF you don't really have a business. Sf economy is booming right now and it is a very expensive city to do business in. The taxes and fees put on business in SF are insane, plus the crazy rents. I would think long and hard if were going to open any business in SF. It better be very profitable to make it there.

My buddy has a family business in SF and I think they start employees at $18 per hour so they can attract employees that are competent and willing to work.
They also had one of their most profitable years in 2014.
But McDonald's has restaurants in SF that I assume are profitable, so it is possible to survive paying crap wages to employees.