Coyote Blog

Apparently when prices for things are arbitrarily doubled, the demand for them goes down.  

On Monday, about 175 employees of the buffet restaurant in the slot-machine and electronic gambling casino in Ozone Park learned that the restaurant had been closed and that their jobs no longer existed. The casino had received plaudits when, in late October, a labor arbitrator issued a ruling that doubled the average pay of workers.

...

“Everything is done,” said Mariano Cano, 45, a server at the buffet for the past two years. “They just threw us out like dogs. They just gave us a couple of dollars to shut up, and that’s it.”

In October, Mr. Cano’s pay went from just over $5 an hour, plus tips for the drinks he delivered to the tables and dishes he cleared, to around $12, because of the living wage agreement.

This is one of those regulatory overreach paired with corporate cronyism stories, so I won't express any sympathy for the business involved -- it is earning huge rents from insider political deals it cut, and though the NYT does not explain it very well, my sense is that the arbitration requirement on wages was part of that political deal.

But it is amazing to me how much the Left has simply hypnotized itself into believing that minimum wage increases don't affect employment.  If we go back a number of months and look at the article where the NYT announced the arbitration decision, there is not one single mention that there might be some job security issues with forcing a doubling of wages.

Jeannine Nixon looked as if she had hit the jackpot. Ms. Nixon, a customer relations representative at  in Queens, had just learned that she would be making $40,000 a year, up from $22,300.

“It’s life-changing,” Ms. Nixon, her voice cracking, said on Thursday. “I can finally feel relieved.”

It is amazing to me that it did not even occur to any at the NYT to think that a doubling of worker pay might be anything but a pure bonanza.  I suppose they were blinded by a sense that casino margins were so high (though I find that the public consistently overestimates margins of many businesses, confusing revenues with profits).  Even if the casino is wildly profitable, one had to consider that all activities in the casino were not equally profitable.   Restaurants often have thin margins and 20-30% labor costs.  There is simply no room for doubling them in a business that typically has single digit margins at best (in fact, most restaurants lose money).

There are a number of reasons why people can fool themselves into thinking that minimum wage increases have no effect on employment

1. The biggest reason is that only about 3% of American workers earn the minimum wage.  So even a large drop in minimum wage job prospects, say by 10%, might only affect total US employment by a few tenths of a percent, a number that might not be seen in the general economic noise.
2. Minimum wage increases are typically implemented in small steps and announced well in advance.  Looking at employment the day after vs. the day before the actual date of change likely misses most of the effect.  For example, California announced almost a year in advance that minimum wages were going up by 25% in July of 2014.  Our company closed one operation and made substantial reductions in our work force in response, but we made these changes in December 2013, months before the change actually took effect.

Which makes this article in the Arizona Republic by Ronald Hansen one of the worst, most facile bits of economic analysis I have ever seen.

But, at the most basic level, there is good reason to think the minimum wage doesn’t kill jobs.

The minimum wage has gone up 22 times since it was instituted in 1938. There is complete seasonally adjusted data from the U.S. Bureau of Labor Statistics available for 21 of those hikes.

In 15 of those 21 cases, the U.S. economy added jobs in the year after the minimum wage went up.

On 11 occasions, it added more jobs after the hike than it did in the year before the raise went into effect.

This alone suggests that raising the minimum wage isn’t an automatic drag on employment growth.

This is simply absurd for all the reasons I listed above.   I understand how I might find this kind of "analysis" in the comments section of the Daily Kos, but how does one get this past an editor?