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How taxpayers subsidize low-wage workers

REUTERS/Brendan McDermid
The Berkeley study found that front-line fast-food workers earn a median salary of $8.69 per hour and that 87 percent do not receive health-care benefits through their employer.

This is one in a series of articles funded by a grant from the Northwest Area Foundation.

When consumers step up to the counter and order one of McDonald’s “Extra Value” meals, they probably think they’re getting a good deal. Most of them never consider how much they are paying in taxes to subsidize the labor force preparing and serving those meals.

A study completed last fall by researchers at the University of California-Berkeley concluded that front-line fast-food workers earn so little that 52 percent of them are enrolled in one or more public assistance programs. The cost to the taxpayers – nearly $7 billion a year.

“The taxpayer costs we discovered were staggering,” said Ken Jacobs, chair of UC Berkeley’s Center for Labor Research and Education and co-author of the report. “People who work in fast-food jobs are paid so little that having to rely on public assistance is the rule, rather than the exception, even for those working 40 hours or more a week.”

The study is being used to bolster the argument for an increase in the minimum wage at both the federal and state levels.

While proposals to raise the federal minimum wage appear unlikely to advance in the politically divided Congress, there’s a strong chance that the DFL-controlled House and Senate this session will approve an increase in Minnesota’s $6.15 minimum hourly wage – a rate that hasn’t been raised since 2005.

The federal minimum of $7.25 per hour kicks in for most Minnesota hourly workers employed by businesses that have at least $500,000 in annual receipts or are engaged in interstate commerce. An estimated 83,000 Minnesota hourly workers earn the federal minimum or less.

The Berkeley study found that front-line fast-food workers earn a median salary of $8.69 per hour and that 87 percent do not receive health-care benefits through their employer. Many also work less than 40 hours a week. “As a result, annual earnings in the fast-food industry are well below the income needed for self-sufficiency,” it said.

The study most likely understates the degree to which taxpayers subsidize low-wage workers. It was limited to the cost of four major public-assistance programs:  medical assistance, food stamps, Temporary Assistance to Needy Families and the Earned Income Tax Credit, a refundable credit to working people with low and moderate incomes.

It did not include the cost of housing assistance, child-care assistance, free school lunches and other programs also available to low income families.

Wages and public assistance connection

The Children’s Defense Fund of Minnesota has an online model that allows researchers and policymakers to examine the interaction between wages and public-assistance programs that provide a measure of economic stability for working families.

It shows that a family of four with two adults working 40 hours a week at the federal minimum wage would earn $30,160 a year. Various tax credits and public-assistance programs would boost that figure by about $10,600. (This does not include the cost of medical assistance, which would be another $19,440 a year, according to the Minnesota Department of Human Services.)

Such a family also would qualify for federal housing assistance of about $170 a month, although they might have a long wait. The Metro Housing and Redevelopment Authority, the largest in the state, provides federal housing vouchers to some 6,800 families. But the agency has a waiting list of 1,200 families with an estimate wait of seven to nine years, and it hasn’t even accepted applications since 2007. Other local agencies that administer federal housing vouchers have similar waiting lists.

Minimum Wage: Too low or too costly?Elaine Cunningham, director of the Bridge to Benefits program for the Children’s Defense Fund, says the public assistance available to the family of four described above does no more than fund what she calls a “bare bones budget.”  She says that budget does not include utilities not part of the family’s monthly rent, school expenses, entertainment, Internet or cellphone service, or debt payments.

Raising the state minimum wage to $9.50 an hour, as House DFLers propose, would provide nearly enough income for such family to make ends meet. The family no longer would be eligible for nutrition or housing assistance, would pay higher co-payments for child-care assistance and would receive smaller tax credits. (Senate DFLers last session resisted raising the hourly minimum above $7.75.)

Nan Madden, director of the Minnesota Budget Project, a liberal-leaning research and advocacy group, says raising the hourly minimum to $9.50 would reduce reliance on public assistance and promote greater self-reliance.

“It’s a strong societal value that if you work hard, you should be able to make ends meet,” Madden says. “That’s not the case for people who are working at these very low wages.”

Chamber of Commerce position

The Minnesota Chamber of Commerce and other business groups say they support raising the state’s minimum wage to the current $7.25 federal minimum, but they favor retaining a lower rate for workers under 18 and oppose the House idea of indexing the minimum wage to the rate of inflation (thereby providing for automatic increases in future years).

Bill Blazar, senior vice president of the chamber, acknowledges that the taxpayers may, in effect, be subsidizing businesses that have low-wage workers.

But he adds: “I think a lot of employers who are providing what are best characterized as entry-level jobs feel that they are actually doing a couple of things that are of long-term social benefit. They are introducing one generation after the next to the world of work. Most employers don’t want to hire someone who will always be a minimum wage person. They want somebody who is going to do a good job who will merit a better job at a higher wage, either that or the employee will go elsewhere.”

Blazar also is skeptical that raising the minimum wage will actually reduce the state’s current cost for public assistance programs. One reason is that raising the minimum wage could force employers to cut their workforce or the number of hours for some employees.

The nonpartisan Congressional Budget Office recently estimated that raising the federal minimum wage to $10.10 per hour would lift 900,000 families out of poverty, but also eliminate 500,000 jobs.

In addition, about a third of the state’s minimum-wage workers are in the 15-24 age bracket and many of them probably are not drawing  public assistance.

Business groups say they also fear raising Minnesota’s minimum wage above $7.25 would harm Minnesota’s competitive position with respect to its border states, all of which are at the federal minimum.

“If we go to $9.50 an hour, and our neighboring states stay at $7.25, you could see a lot of commerce move across the border,” says Dan McElroy, president of Hospitality Minnesota, which represents the state’s restaurant, lodging and resort industries. “ He says restaurant prices in Minnesota  already are 12 to 15 percent higher than in Wisconsin and North Dakota because this state does not include tips in the calculation of the minimum wage for servers.

Economist Arthur Rolnick supports raising the minimum wage if there are no other options, but his first choice would be to increase the Earned Income Tax Credit for low-wage families. “Raising the minimum wage costs jobs,” says Rolnick, former vice president for research at the Federal Reserve Bank of Minneapolis.  “The Earned Income Tax Credit provides incentives for businesses to hire more workers.”

Comments (39)

  1. Submitted by Ray Schoch on 03/03/2014 - 09:47 am.

    Myopic

    The Chamber of Commerce position that businesses paying starvation wages are actually performing a public service would be funny if it weren’t so blatantly pernicious for both the workers and the society. Next we’ll be hearing from Tom Emmer – again – about the restaurant servers who make $100,000 a year and more, as if it were A) true; and B) the norm among restaurant servers.

    The Chamber’s long-standing hostility to workers is widely known outside of corporate board rooms. Too many Minnesota employers speak and behave as if they’re somehow doing employees a favor by paying them for their effort when, in fact, without those employees and that effort, the employer has no service or tangible good to offer the market, and would her/himself be looking for work. When employees don’t have enough money to purchase the goods and services being produced by the society, keeping wages low is the economic policy equivalent of suicide.

    Meanwhile, I’d be interested in finding out how many residents of the Twin Cities regularly drive to Wisconsin to save 12% to 15% on their dinner tab.

  2. Submitted by James Hamilton on 03/03/2014 - 10:10 am.

    A few points.

    Mr. Blazar said “I think a lot of employers who are providing what are best characterized as entry-level jobs feel that they are actually doing a couple of things that are of long-term social benefit. They are introducing one generation after the next to the world of work. Most employers don’t want to hire someone who will always be a minimum wage person. They want somebody who is going to do a good job who will merit a better job at a higher wage, either that or the employee will go elsewhere.”

    Assuming for the moment that most employers’ thought processes are as sophisticated as Mr. Blazar suggests (an assumption not warranted by my more than 45 years in the job market, as both employer and employee) the key point in the fast food industry and other industries in which the majority of workers are paid minimum wage is that the overwhelming majority have no option but to go elsewhere to improve their earnings. This problem is compounded by the fact that employees are essentially unskilled when they do leave, equipped only to work in another, minimum wage position in the same industry.

    As for Mr. McElroy’s concern that “If we go to $9.50 an hour, and our neighboring states stay at $7.25, you could see a lot of commerce move across the border”: my local McDonald’s isn’t going anywhere, so long as it has a customer base here willing to buy its products. Neither is any other service industry which by its very nature must locate within the population it seeks to serve.

    It’s clear that we, the tax-paying consumer, ultimately bear the burden of ensuring the welfare of low income workers. We can do that in the grossly inefficient manner of our present collection of jerry-rigged social services, or we can address it by requiring that employers bear a greater share of the true of obtaining their own labor. I’ll pay a bit more for my burger and hotel room up front, thanks.

    Two things I would like to see:

    1. A list of those employers paying less than the federal minimum wage and their explanations of how they can justify an hourly wage as low as $6.15; and

    2. A compendium of those who oppose an increase in the state and/or federal minimum wage who also oppose the very existence of the governmental programs that keep their employees alive.

    In closing, a note on the tip credit:

    Tips are income. Service employees move from employer to employer in large part because of the potential for an increase in tips. It is illogical to exclude tip income from the equation when determining the minimum wage, even though under our current circumstances it means that many service workers will see no increase in income after a hike in the minimum wage. They will be in no different position than any other employee already earning more than the new minimum. They lose nothing. They simply don’t get more.

  3. Submitted by Tim Milner on 03/03/2014 - 10:35 am.

    Its clear that

    the MinnPost community is overwhelmingly in favor of the increase in minimum wage and will continue to publish frequent article supporting that position.

    If only it were so clear.

    Could we discuss this instead?

    http://www.cbo.gov/publication/44995. Here is the executive summary of this 43 page document published by the Congressional Budget Office.

    “Increasing the minimum wage would have two principal effects on low-wage workers. Most of them would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.”

    From the same report, a number of other tidbits – both good and not so good.

    People receiving the higher minimum wage are very likely to spend all their additional income on goods and services injecting more non governmental dollars into the economy.

    Firms that can will likely pass along the cost of the increase in minimum wages to consumers. Those that can’t increase prices are likely to cut labor spending by reducing non wage income (benefits).

    Substitution effect (i.e. – replacing workers with machines) will be more favorable as the cost of capital (and capital payback) and cost of labor become closer.

    The increase in minimum wages is likely to have little, if no, effect on Federal deficits as the smaller amounts being spent on those earning the increased minimum wage is predicted to be mostly offset by those priced out of the work force who will need more (and likely longer) government support.

    Wages in all labor categories tend to increase with a change in minimum wage as businesses look to maintain the wage differentiation between workers performing different tasks/having different skills. (In fairness, this is the point that worries me the most in the business that I own. I pay far above current minimum wages with excellent benefits. But if the minimum wages gets over $10, I will need to restructure the whole labor scale to properly differentiate starting workers wages from those who have worked for a few years. That has the potential to cost me some serious labor dollars in a market that is very price sensitive)

    There is a lot more in this report. Points for some serious discussion on the pros and cons on proposed increases in minimum wages.

    But if you’re looking for sources to cheerlead the raise in the minimum wage, you will need to find other, more partisan sources. Because the CBO see it as a very murky decision with many pluses as minuses.

    • Submitted by Clayton Haapala on 03/03/2014 - 11:32 am.

      Effects on price-sensitive markets

      Please provide an example of a market where your competitors’ costs wouldn’t also rise, where it would be difficult to raise prices. Not saying that situation doesn’t obtain, I just want to be better informed. Is it competition with imports?

      • Submitted by Tim Milner on 03/03/2014 - 01:08 pm.

        Easy

        I have a number of clients who supply manufactured metal parts to end users (think end users companies like Polaris, John Deere, etc) that can just as easily purchase the parts from China. (and in many cases do)

        So its our costs (for our labor, benefits, material, energy, transportation, logistics, etc) against theirs. If one of my costs goes up and theirs does not, I (and my customers) are at a competitive disadvantage. Unless I can come up with efficiencies that save money elsewhere.

        What is so ironic – after seeing so much manufacturing get shifted overseas in the previous 15 years – we have been seeing more and more manufacturing come back to the US firms in the last few years as overseas costs have risen (some labor, but mostly transportation/logistics). But with all the associated cost heading out way from healthcare changes, minimum wages, taxes – we are poised to make ourselves uncompetitive once again.

        • Submitted by Clayton Haapala on 03/03/2014 - 01:38 pm.

          Trade policy

          So, if we actually had a trade policy….

          • Submitted by John Appelen on 03/03/2014 - 06:37 pm.

            Trade War?

            So you would recommend that we start a trade war, and deny American’s the low cost high quality products that they are addicted to?

            Or am I misinterpretting your comment.

            • Submitted by Jon Lord on 03/04/2014 - 10:34 am.

              a trade agreement

              We’ve had a trade agreement with China for many years now. That’s where most of our ‘low cost high quality products’ come from these days. We’ve got more than one trade agreement, with other countries, but you know that. Are we going to break those agreements for ‘low cost high quality American products’? Check to see where your shoes are made. Look at your computer parts and see where they are made. They might be and are sold here by American owned businesses but they are made in…countries other than America.

              Due to a glut of low paying jobs and a lack of employment opportunities here, especially in the manufacturing field, we’ve come to rely more and more on subsidizing low-wage workers if they are going to be able to purchase ‘low cost high quality products’, not made in America, but sold here.

              I think about the 3 ‘low cost high quality’ lamps I purchased here in America made in China that lasted each less than two years. I have yet to become addicted to those lamps although I do need to buy more as they fail. That’s not a true addiction however. A ‘forced addiction’ maybe.

              • Submitted by John Appelen on 03/06/2014 - 03:30 pm.

                Trade agreement

                Yes I am aware we have trade agreements around the world. I was more curious what Clayton thought we should do differently per his comment.

                Maybe these lamps would be better… Though I am sure some of the components were built elsewhere.
                http://www.lampsusa.com/Made-In-USA.aspx

                Chickens or Eggs:
                Low Wage caused Buy Cheap Foreign
                Buy Cheap Foreign caused Low Wage

  4. Submitted by Clayton Haapala on 03/03/2014 - 11:41 am.

    Taxpayer subsidies…

    … Are like excise taxes, and everybody hates those. They amount to hidden costs. In these cases, the costs to taxpayers are flowing to shareholders as profits. Really, how is that different than using prison labor like in Shawshank Redemption?

    Another point from the article is that 2/3 of minimum wage workers are older than age 24.

    • Submitted by Tim Milner on 03/03/2014 - 01:16 pm.

      From the same CBO report

      ….Congressional Budget Office showed that raising the minimum wage from $7.25 to $10.10 would lift 900,000 people out of poverty but still leaving 45 million people in poverty.

      While even 1 fewer person/family in poverty is important, I have to ask if there isn’t a better way considering the pros and cons of the minimum wage proposal effecting less than 2% of all those in poverty.

      The tax payers are still paying the vast majority of the costs – no matter what.

  5. Submitted by John Appelen on 03/03/2014 - 06:30 pm.

    Thank Heavens

    We apparently can quantify what the low wage earners are costing our society. That is actually a good thing. We as a society can choose to support them and know what it costs.

    Whereas by raising the minimum wage, we will push up all of our costs and hide what society is paying for these low wage earners. Also, it will increase the justification for automation, off shoring, etc.

    And the Liberal folks here should find this much better than an increased minimum wage. The increased minimum wage and the ripple increases will be paid for by everyone including the people you aim to help. (ie regressive tax) Whereas these government programs are mostly paid for by the middle and upper income folks. (ie progressive taxes)

    This is an ironic turn of events.

  6. Submitted by Tom Anderson on 03/03/2014 - 06:32 pm.

    How do taxpayers

    Subsidize no-wage workers? Seems like some wage being paid by someone other than taxpayers would be a good thing.

  7. Submitted by John Appelen on 03/03/2014 - 06:35 pm.

    Kudos to Tim and a Question

    I really like the comments Tim left above. I am in the manufacturing business also, so I can understand them and they are true. Here is the question I am hoping a pro-minimum wage increase supporter can answer.

    Hi,
    So I will ask you a question that I typically get no answer to on this site.

    If we raise the cost of doing business in America by arbitrarily raising salaries above what the market can justify, will this encourage American consumers to buy more or fewer US products and services?

    My simple belief is that until Americans consumers are willing to pay more for American goods and services. It is going to be real hard to pay more to American workers…

    In summary, raising the costs will encourage more American’s to buy more foreign goods and services, because in relative terms they will be even cheaper yet… Let’s hope that wages in China, Vietnam, etc increase even faster…

  8. Submitted by Ilya Gutman on 03/03/2014 - 07:48 pm.

    There are no subsidies

    Businesses paying minimum wages are not subsidized by the taxpayer – they would be paying what the market dictates no matter what. Without government assistance, the people on the minimum wage would earn the same but live much worse, just like in the 20’s and 30’s, but that would be the only change. And if those two things are connected, how come we do not see proposals to combine a raise in mandatory minimum wage with reduction in social programs?

    For more discussion on this topic, please see my today’s article in Community Voices section.

    • Submitted by Sean Olsen on 03/04/2014 - 11:21 am.

      You don’t need to reduce social programs via law if the minimum wage rises. If people make more money, they rise above the income thresholds for the respective programs.

  9. Submitted by Paul Udstrand on 03/04/2014 - 10:25 am.

    Smoke and mirrors…

    The vast majority of minimum wage workers are in the service industry, not manufacturing. John’s parts are not being manufactured by minimum wage workers, and restaurants can’t move to China and sell food in Bloomington MN. No trade wars will result from a living wage.

    Look, it’s actually very simple, most people think that employers should bear the cost of paying their employees, not taxpayers. And most people are right because that’s more fair, and its more economically transparent.

    As for this projection that 400,000 jobs might be elminated, this sounds eerily like the predictions that employers would switch to part time employees in response to Obamacare. Jobs aren’t a zero sum game, if the economy is growing modestly it can easily absorb that initial job loss and come out on the other side with a more affluent work force that’s growing the economy.

    I keep seeing these claims that another $3.25 an hour is going to trigger inflation of some kind that will cancel out the wage gains. The thing is I’m not seeing any data of any kind to support that. Since everyone has accountants that are more than capable of running the calculations I tend to think it’s a straw man. Anyone can calculate how more $3.25 an hour would cost, and then how much they’d have to raise prices to pay for it, and that’s assuming that raising prices an inevitable and exclusive response.

    This isn’t about inflation it’s about trickle down economics. This is simply about executive, investors, and owners wanting more profit dollars in their pockets and less profit dollars in their employees pockets. It’s not even about business because what’s good for employees isn’t necessarily bad for business. Over compensated owners and executives aren’t better for a business than properly compensated employees.

    This is class war pure and simple. Look: the same people who decry living wages as an assault on the American way of life are the very same people who fight for never-ending cuts if not outright elimination of social safety nets and government programs, school budgets, and health care that these minimum wage workers rely on. These are also the same people who attack labor unions thereby preventing workers from even negotiating better wages and work environments. This has nothing to do with being “fair”. This is about stomping on millions of workers so the top 10% or less can put more money in their own pockets. Trickle down economies work, they just don’t work for the vast majority of people. Left to their devices owners and executives will simply trickle less and less down.

    I remind everyone, all economies redistribute wealth, and all governments redistribute wealth. The only question is to whom and how much does a given economy redistribute. What we now know is that economic disparity at the levels we see now is actually bad for the economy in the sense that it destabilizes markets and triggers frequent and deeper recessions.

    • Submitted by John Appelen on 03/04/2014 - 05:41 pm.

      Subsidizing who?

      “Most people think that employers should bear the cost of paying their employees, not taxpayers.”

      This is an interesting concept, who is society subsidizing? Based on Paul U.’s statement, he believes: 1. Society is subsidizing the businesses by paying their expenses. (ie neutral to regressive tax?)

      Of course that is only 1 paradigm. Here are 2 others for your consideration.

      2. Society is subsidizing the poor who are unwilling to work hard to improve their income earning potential. (ie progressive tax)

      3. Society is subsidizing all of us by keeping our “Service/Product Industries” less expensive. And they are doing this at the expense of the tax payers. (ie progressive tax)

      Paul,
      I agree that it will mostly impact the service industries directly. Yet the manufacturing personnel have to eat somewhere. Also, I think you are unaware of how much low end manufacturing occurs in the small rural towns. One such facility in Madison SD makes uniforms and other clothing for the military and other customers that demand high domestic content. I am pretty sure there are similar facilities in MN.

      • Submitted by Paul Udstrand on 03/05/2014 - 04:07 pm.

        And there you have it…

        “2. Society is subsidizing the poor who are unwilling to work hard to improve their income earning potential. (ie progressive tax)

        3. Society is subsidizing all of us by keeping our “Service/Product Industries” less expensive. And they are doing this at the expense of the tax payers. (ie progressive tax)”

        This resistance to living wages isn’t about economics, it’s about contempt for the poor.

        By the way, as a matter of fact society does subsidize all of us, regardless of minimum wages. Yet most people still think that employers should be responsible for paying their employees.

      • Submitted by Lauren Hebert on 03/07/2014 - 08:58 pm.

        Hmmmm…

        Concerning # 2 “Society is subsidizing the poor who are unwilling to work hard to improve their income earning potential.”

        I’m willing to bet most low wage workers “work” harder and longer than you or I do. Some of them do have higher, un-realized potential but many of them are also working at their potential. Our society used to revere a “hard-working man” and we rewarded him with an understanding that his employer had a duty to pay him a living wage and afford him the dignity that was his due. Now we so often denigrate these folks for not “improving.”

        We have made an icon of our industriousness into a “precariot.”

        • Submitted by John Appelen on 03/10/2014 - 11:12 am.

          Worked There Done That

          I was a McDonald’s worker at one time. And once in awhile it was hard work, like when those buses would show up. However most of the time it was very low effort/low stress.

          These types of jobs are not meant to be a career unless you want to move into Supervisory, Trainer or Management. But they make great jobs for young and part time workers.

          And most mechanic, assembly and manufacturing jobs that are harder work do pay more. Now how do we get more of those jobs back here?

  10. Submitted by Steve Rose on 03/04/2014 - 02:40 pm.

    Not all service work is immune to automation

    The benefits of a minimum wage hike get overstated because minimum wage earner are not isolated from all of the others in the economy who would also get a wage hike. Due to the wage hike, the minimum wage earner must bring his earnings to an economy where thing cost more due to increased labor expense. Others in the economy earning more than minimum wage will find themselves at the wage minimum in a more expensive economy. This will happen to a lot of workers if there is a $3 wage hike; it is a regressive tax.

    Not all service work is immune to automation. Around town, Cub Foods, Rainbow Foods, Home Depot, CVS Pharmacy, and others have replace peopled with self-service check-outs. The stores I have frequented still have more manned stations than automated stations. Watch for that to flip with a big wage hike. The McDonald’s Restaurant at LAX has self- service order and checkout; watch for them to fine tune and expand that concept.

    • Submitted by Sean Olsen on 03/04/2014 - 04:09 pm.

      Self-service checkouts have appeared even though the minimum wage is near historical lows from an inflation-adjusted perspective and at a historical low as a percentage of average hourly income. The reality is that automation has been happening for decades and the level of the minimum wage has little to do with it.

      • Submitted by Steve Rose on 03/04/2014 - 04:33 pm.

        The Industrial Revolution

        Yes, automation has been accelerating, unabated, since the beginning of the industrial revolution. Raising the minimum wage $3+ changes the justification calculation for installing more self service order and check-out stations. This is how some jobs will be lost with an increase of the minimum wage.

        • Submitted by Sean Olsen on 03/05/2014 - 08:34 am.

          Sure, raising the minimum wage changes the payoff somewhat and maybe accelerates some of those decisions. The question, as with all economic decisions, is whether the overall benefit is worth the change.

    • Submitted by Paul Udstrand on 03/04/2014 - 04:33 pm.

      Non sequiters

      Steve, you tell us keeping the minimum wage where it’s at will prevent automation and then you point to multiple examples of automation that occurred despite those minimum wages. You see the problem with your reasoning? Obviously automation isn’t function of minimum wages, no matter how little these companies pay their employees, they still automate.

      Job loss and creation is a different topic.

      And again, you guys keep claiming that this modest increase in wages for a small portion of our labor force is going trigger life changing inflation that will cancel out wage hikes. But for some reason you’re still not telling us exactly how much more our tacos will cost?

      • Submitted by Steve Rose on 03/04/2014 - 05:48 pm.

        No, no problem with reasoning; sequiter actually

        I will repeat for you, “Watch for that to flip with a big wage hike.” A number example, if you will. Now there are 4 automated check-outs and 12 manned check-outs. With a flip, there would be 12 automated check-outs and 4 manned check-outs. The purchase and installation of more automation will be justified by the increased cost of labor it will replace. You may pretend or hope that this will not occur, but it will.

        The CBO seems to concur that jobs will be lost; replacement by automation is but one source of job loss due to a minimum wage hike.

      • Submitted by Tom Anderson on 03/04/2014 - 06:37 pm.

        For the record

        Will you state that the tacos won’t cost us a cent more?

  11. Submitted by Paul Udstrand on 03/05/2014 - 10:34 am.

    For the record?

    You seem to confusing me with your straw man Tom, I fully expect my taco will cost a few cents more, I’m not going to stop buying tacos… and neither are you. And if you think you can get your car washed cheaper in Bangladesh, or your house cleaned in China, or your Walmart groceries from Taiwan, you’re in for a rude awakening.

    Steve, give it up. Employers automate regardless of minimum wage rates, period. And if anything accelerates automation it’s higher paid manufacturing jobs. According to your logic ultimately slave labor would be necessary to slow down automation. Note: Slave labor didn’t stop anyone from inventing the Cotton Gin and deploying it.

  12. Submitted by Paul Udstrand on 03/05/2014 - 08:55 am.

    And about those job loss estimates…

    Here’s what the CBO actually says:

    “Once fully implemented in the second half of
    2016, the $10.10 option would reduce total employment
    by about 500,000 workers, or 0.3 percent, CBO projects.
    As with any such estimates, however, the actual losses
    could be smaller or larger; in CBO’s assessment, there is
    about a two-thirds chance that the effect would be in the
    range between a very slight reduction in employment and
    a reduction in employment of 1.0 million workers”

    Note the qualification, this is not a solid prediction of job loss the range could be anything from zero to a million. Meanwhile the White House point out:

    “CBO’s estimates of the impact of raising the minimum wage on employment does not reflect the current consensus view of economists. The bulk of academic studies, have concluded that the effects on employment of minimum wage increases in the range now under consideration are likely to be small to nonexistent. CBO also agrees that the employment effect could be essentially zero, but their central estimates are not reflective of a consensus of the economics profession.”

    Please forgive the cross posting.

    • Submitted by Steve Rose on 03/05/2014 - 12:22 pm.

      Give it up?

      No need nor reason to give up on the truth.

      Being in the automation business, I see the calculations that are used to justify investment in automation systems. Labor costs are a primary factor in the calculations; if increased, they could tip the scales from no-go to go. Unfortunately, businesses don’t automate just because it is cool or futuristic, they need it to break even and then to pay.

      The White House seems to be tight with the CBO, as long as their finding are well aligned with the
      White House agenda or can be spun to appear so. When the White House does not like the color of the CBO picture, they break out the squishy words and phrases, including “consensus” (invoked twice in your White House quote), “bulk of academic studies”, “likely to be small”, “could be essentially”, “central estimates”. It is laughable that you would cut and paste such a nothing quote.

      According to the U.S. Bureau of Labor Statististics, 2014 is the starting out to be the fifth consecutive year of less than 59% employment. I guess another million workers is no big deal.

      http://data.bls.gov/timeseries/LNS12300000

  13. Submitted by Paul Udstrand on 03/05/2014 - 03:03 pm.

    Yes, give it up…

    Obviously labor costs are a factor in automation, the point is, and maybe you missed this in your calculations… labor costs are always a factor in automation regardless of how high or low they are, hence your repeated claim that a modest hike in minimum wage labor costs will cause automation that would otherwise not occur has no basis in fact.

    Ultimately your logic just dictates a race to the bottom for American workers lest they be automated out of jobs. Good luck with that argument.

    What’s funny is how tight you are with the CBO as long as you think they’re data supports your argument. It’s all CBO this and CBO that and then when it turns our your pointing to one paragraph in a 49 page report and a prediction that the authors themselves explicitly state they have no confidence in, suddenly the CBO is a bunch of lackeys for the White House.

    • Submitted by Steve Rose on 03/05/2014 - 08:32 pm.

      Follow your own advice

      Or stop giving unsolicited advice.

      You state that “labor costs are always a factor in automation regardless of how high or low they are.”

      Let’s dwell on that thought for a moment.

      These justification calculations come to a bottom line, and that bottom line is greatly influenced by how high or how low that labor cost factor is. If a retail outlet is deciding how many of their order and check-out stations will be automated and how many will be manned by an employee, that labor factor will hold some sway.

      “What’s funny is how tight you are with the CBO as long as you think they’re [sic] data supports your argument.” With this statement, you have accurately described your earlier quote (re-quoted by me above) of the White House. I quoted the CBO on jobs, and I never called them or inferred that they are a bunch of lackeys for the White House.”

      • Submitted by Paul Udstrand on 03/06/2014 - 12:09 pm.

        Never said…

        Steve: ” I quoted the CBO on jobs, and I never called them or inferred that they are a bunch of lackeys for the White House.”

        Since we can all read what you actually wrote there’s not much point in telling us you didn’t write it.

  14. Submitted by Steve Rose on 03/06/2014 - 11:50 am.

    Still can’t find it?

    I see that you can cut and paste.

    Cut and paste the quote in which I called the CBO lackeys for the White House, so that we can all read what I actually wrote.

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