New York Times Admits “Higher Minimum Wage May Have Losers”

The New York Times would like for you to know that, after attending the annual meeting of the American Economic Association where they sat in on multiple presentations on the economic impacts of minimum wage, they can now confirm what most of us have known for most of our adult lives, namely that basic economic supply/demand models actually work.

Apparently, the NYT was pleasantly surprised when the first presentation suggested that higher minimum wage didn’t actually result in job losses, just lower hours, but then quickly realized it’s basically the same thing.

At first glance, the findings were consistent with the growing body of work on the minimum wage: While the workers saw their wages rise, there was little decline in hiring. But other results suggested that the minimum wage was having large effects. Most important, the hours a given worker spent on a given job fell substantially for jobs that typically pay a low wage — say, answering customer emails.

 

Mr. Horton concluded that when forced to pay more in wages, many employers were hiring more productive workers, so that the overall amount they spent on each job changed far less than the minimum-wage increase would have suggested. The more productive workers appeared to finish similar work more quickly.

Unfortunately, the second study left a bit less to the imagination.  After studying “tens of thousands of restaurants in the San Francisco area,” researchers
Michael Luca of Harvard Business School and Dara Lee Luca of Mathematica Policy Research found that many lower rated restaurants have a unique way of dealing with minimum wage hikes: they simply go out of business.

A second study presented at the conference suggests another way that employers may respond to a rising minimum wage: simply going out of business.

 

The husband-and-wife research team of Michael Luca of Harvard Business School and Dara Lee Luca of Mathematica Policy Research identified the ratings of tens of thousands of restaurants in the San Francisco area on the website Yelp and found that many poorly rated restaurants tend to go out of business after a minimum-wage increase takes effect.

Finally, confirming what we’ve noted multiple times (and basic common sense for that matter), Zane Tankel, an owner of several dozen Applebee’s restaurants in the New York City area, informed the startled New York Times that higher minimum wage simply improves the ROIC profile of capital investments thereby speeding up employee replacement projects….shocking.

Zane Tankel, chief executive and equity partner in a group that owns and operates several dozen Applebee’s restaurants in the New York City area, said replacing low-skilled workers with higher-skilled ones after the state’s recent minimum-wage increases is “not something that we try to do.”

 

Mr. Tankel argued that differences in the productivity of low-level workers in his industry are not very big. “It’s just a lot more money for the exact same job description,” he said. He is accelerating automation in his restaurants, including tablet devices for ordering certain items and payment, to offset the costs of the higher minimum.

With that, here are some charts illustrating where the most minimum wage workers will lose their jobs over the coming years:

Min Wage

Min Wage

 

And while California and Washington DC have already won their “Fight for $15”, here’s where all the other states stand in their efforts to crush low-income workers.

Min Wage


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